Question 1

Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Accepted Answer

A) True 
 B)False

Question 2

Aqua Sprinkler Systems experienced increasing sales for several years. The firm expanded its product offerings, and now serves both commercial and residential customers. Which of the following situations would be considered an uninsurable risk for Aqua Sprinkler Systems?

Accepted Answer

A)   a fire that destroys its warehouse
B)   employee sues company due to injury on the job
C)   equipment theft that causes work downtime
D)   drought-resistant grass technology that disrupts salesE) B) and C)
F) A) and B) D

Question 3

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

Accepted Answer

A)   avoiding the risk
B)   self-insuring against the risk
C)   reducing the risk
D)   loss-prevention programE) C) and D)
F) None of the above

Question 4

Organizations spend about ________ percent of gross domestic product on insurance premiums.

Accepted Answer

A)   2
B)   5
C)   10
D)   20E) B) and C)
F) All of the above C

Question 5

Pure risk involves the chance of either a profit or a loss.

Accepted Answer

A) True 
 B)False

Question 6

One way to lower the need for outside insurance is to self-insure.

Accepted Answer

A) True 
 B)False

Question 7

AutoPROs recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following?

Accepted Answer

A)   avoiding the risk
B)   self-insuring against the risk
C)   reducing the risk
D)   a loss-prevention programE) B) and C)
F) A) and D) C

Question 8

Outsourcing helps some companies avoid risk.

Accepted Answer

A) True 
 B)False

Question 9

________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.

Accepted Answer

A)   Health
B)   Professional liability
C)   Workers' compensation
D)   MalpracticeE) A) and B)
F) A) and C)

Question 10

Risk management involves minimizing the losses from unexpected events.

Accepted Answer

A) True 
 B)False

Question 11

Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas.

Accepted Answer

A) True 
 B)False

Question 12

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Accepted Answer

A) True 
 B)False

Question 13

Water sprinklers and smoke detectors can be used to minimize speculative risks.

Accepted Answer

A) True 
 B)False

Question 14

A firm that chooses to self-insure and cover losses out of its budget is said to

Accepted Answer

A)   fly blind.
B)   roll boxcars.
C)   go bare.
D)   internalize risk.E) B) and D)
F) All of the above

Question 15

Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.

Accepted Answer

A) True 
 B)False

Question 16

Explain the difference between speculative risk and pure risk. Which type of risk is of more concern to businesspeople?

Accepted Answer

Pure risk is of more concern to business...

Question 17

Health savings accounts are managed care plans that have a high deductible.

Accepted Answer

A) True 
 B)False

Question 18

Workers' compensation insurance is required in all states except Louisiana.

Accepted Answer

A) True 
 B)False

Question 19

A surety bond protects employers from employee dishonesty.

Accepted Answer

A) True 
 B)False

Question 20

An insurance policy is a written contract.

Accepted Answer

A) True 
 B)False

Exam 23: Managing Risk

Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Correct AnswerverifiedShow Answer

Aqua Sprinkler Systems experienced increasing sales for several years. The firm expanded its product offerings, and now serves both commercial and residential customers. Which of the following situations would be considered an uninsurable risk for Aqua Sprinkler Systems?

Correct AnswerverifiedD

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

Correct AnswerverifiedShow Answer

Organizations spend about ________ percent of gross domestic product on insurance premiums.

Correct AnswerverifiedC

Pure risk involves the chance of either a profit or a loss.

Correct AnswerverifiedShow Answer

One way to lower the need for outside insurance is to self-insure.

Correct AnswerverifiedShow Answer

AutoPROs recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following?

Correct AnswerverifiedC

Outsourcing helps some companies avoid risk.

Correct AnswerverifiedShow Answer

________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.

Correct AnswerverifiedShow Answer

Risk management involves minimizing the losses from unexpected events.

Correct AnswerverifiedShow Answer

Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas.

Correct AnswerverifiedShow Answer

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Correct AnswerverifiedShow Answer

Water sprinklers and smoke detectors can be used to minimize speculative risks.

Correct AnswerverifiedShow Answer

A firm that chooses to self-insure and cover losses out of its budget is said to

Correct AnswerverifiedShow Answer

Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.

Correct AnswerverifiedShow Answer

Explain the difference between speculative risk and pure risk. Which type of risk is of more concern to businesspeople?

Correct AnswerverifiedPure risk is of more concern to business...View AnswerShow Answer

Health savings accounts are managed care plans that have a high deductible.

Correct AnswerverifiedShow Answer

Workers' compensation insurance is required in all states except Louisiana.

Correct AnswerverifiedShow Answer

A surety bond protects employers from employee dishonesty.

Correct AnswerverifiedShow Answer

An insurance policy is a written contract.

Correct AnswerverifiedShow Answer

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D

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C

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C

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Pure risk is of more concern to business...
View Answer

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