EC 003 Review

Question 1

A garden store customer tripped over a plant, fell, and sued the store for damages. This is an example of a(n) ____risk.

Accepted Answer

hazard

Question 2

When a business keeps a risk because management is unaware of it, the business is __________ the risk.

Accepted Answer

retaining

Question 3

Carefully selecting goods or services to sell is an example of handling business risks by __________ the risk.

Accepted Answer

preventing or controlling

Question 4

Financial loss from investing time and money to comply with accounting standards is an example of which strategic risk?

Accepted Answer

regulatory and political issues

Question 5

Careful screening of credit customers is an example of handling business risks through

Accepted Answer

prevention

Question 6

Contractual agreements such as guarantees, surety bonds, and leases are examples of business risks being handled through

Accepted Answer

transfer

Question 7

Requiring a contractor to purchase a surety bond is an example of handling business risk by __________ the risk.

Accepted Answer

transferring

Question 8

If a risk is small in terms of money, a business may decide to __________ the risk.

Accepted Answer

retain

Question 9

Having well-planned buildings and providing effective employee training are ways that a business can ____business risks.

Accepted Answer

prevent or control

Question 10

Mgmt decides to hold its meeting in one city rather than another because of crime. This is an example of _ the risk

Accepted Answer

avoiding

Question 11

The general classifications of business risks are

Accepted Answer

hazard, operational, strategic, and financial

Question 12

Businesses can protect themselves from the risk associated with lost shipments by

Accepted Answer

purchasing transportation insurance

Question 13

A hurricane that destroys a business is an example of a(n) __________ risk.

Accepted Answer

hazard

Question 14

A union strike that stops production at a manufacturing plant is a(n) __________ risk.

Accepted Answer

operational

Question 15

What category of business risk includes production problems and incompetent employees?

Accepted Answer

operational

Question 16

People who go into business know that the business may not succeed. This possibility is referred to as business

Accepted Answer

risk

Question 17

When a rival’s product reduces sales of your company’s product, your company is experiencing strategic risk caused by

Accepted Answer

competition

Question 18

Which of the following is an example of a business risk that cannot be covered by insurance:

Accepted Answer

increase in interest rates

Question 19

Which of the following is a pure business risk:

Accepted Answer

robbery

Question 20

The act of reducing or removing risks by shifting the risk factor to another person or business is referred to as _risk.

Accepted Answer

transferring

Questions 20