Chapter 16 Quiz

Which of the following helps manage risks to physical assets of a business?

A manager's signature must be required to confirm that an item has been returned to its proper storage.

All businesses within an industry have to pay the same amount, as decided by the state, as unemployment insurance.

False

Everyone responds differently to risk. When it comes to business risk, small business owners are mostly risk seeking rather than risk averse.

False

Surety bonds repay employers for losses caused by dishonest or negligent employees.

False

The OSHA is a commission established to enforce the provisions of the Equal Employment Opportunity Act.

False

____ are used to pay losses that are not covered by other liability insurance.

General liability insurance

Which of the following steps would help decrease business risks?

Making specific plans for and arrangements to deal with foreseeable events

Which of the following should be undertaken in order to reduce a business's exposure to the risk of violating tax regulations?

Reconcile the cash register tape to the cash register contents every day

Which of the following is true of insurance?

The insurance company makes a profit by collecting premiums from many businesses for the same set of risks.

Which of the following is true of insuring the property of a business?

The value of the historical significance of a building often cannot be insured.

Joint ventures are partnerships through which two or more businesses combine to undertake a specific economic activity.

True

Managing risks to tools, equipment, inventory, and other physical assets is largely a function of developing and enforcing appropriate business policies and procedures.

True

Risk from loss of key personnel and former employees setting up competition against your business can be managed by negotiating employment contracts with those key employees.

True

Liability insurance protects a business against:

claims from harm caused by inadvertent consequences of actions of the business or its employees.

Fidelity bonds help to:

cover losses incurred by the employer due to employee embezzlement.

A(n) _____ is an amount of loss that is specifically excluded by the insurance contract.

deductible

Business risk is the probability that the future state of the business will be better than planned.

false

Copyrights, trademarks, and patents provide automatic full protection to small business owners.

false

The advantage of legal protection methods for intellectual property is that there are multiple government agencies in each area that will assist a small business owner in maintaining their legal rights.

false

Working proactively to ensure that your physical place of business is (1) free of potential hazards and (2) _______ will prevent on-premises injuries and violations of EEOC or OSHA rules.

secure from intruders

A _____ is an agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

surety bond

The first task to be completed before a comprehensive insurance program for a business can be developed is:

to identify risks

Business interruption insurance provides funds to pay the ordinary operating expenses of your business if it is forced to close temporarily because of an insured event.

true

Contractual provisions of insurance policies that specify what risks the insurance company is assuming are called coverages.

true

Employees whose experience and skills are critical to the success of a business are called key employees.

true

Today the biggest risk to most businesses comes from _____.

using computers

There are three general types of events that cause business risk. Which of the following is not one of those three general types of events?

Events related to the competitors of the business.

Adverse possession occurs when an owner of real property does not enforce property rights and allows a non-owner to use the property as if it were his or her own.

True

In managing risk from violation of tax regulations, small business owners should make paying taxes their first financial priority.

True