Deck 18: Credit and Insurance

Question 1

Installment credit customers are usually required to pay an interest charge for the privilege of making monthly payments that may run for several years or more.

Answer 1

True

Question 2

Under a debit card system, computers transfer the amount of the purchase electronically from the customer's bank account to the retailer's bank account.

Answer 2

True

Question 3

Through the use of debit cards and credit cards, the amount of cash and the number of checks handled are greatly increased.

Answer 3

False

Question 4

Information stored on a smart card cannot be changed.

Question 5

A 65-year-old person who has a good credit history and who requests credit terms for six months can be denied credit solely on the basis of age under the Equal Credit Opportunity Act.

Question 6

A business must notify an applicant within 30 days of the decision made on the application for credit.

Question 7

In collecting past-due accounts, the longer the account is overdue, the less likely it is that the money will ever be collected.

Question 8

With installment credit plans, the final collection step may be to repossess the merchandise purchased on the installment plan.

Question 9

When credit sales stop increasing but account receivables are gradually growing larger, it is an indication that the business is not collecting payments from customers quickly enough.

Question 10

When bad debts decrease, a firm's cash flow decreases.

Question 11

Insurance limits the financial losses a business might suffer from uncontrollable events.

Question 12

It is not difficult for a business to predict the types of losses it is likely to suffer and the amount of those losses in a given year.

Question 13

Because risks cannot be predicted, insurance rates cannot be set very accurately.

Question 14

It is legal for insurers to cancel most property and liability insurance contracts if they believe the risk has increased.

Question 15

If a deductible is included in an insurance contract, the premium will be higher than if it has no deductible.

Question 16

Insurers cannot protect businesses from risks such as rising employment rates or high inflation.

Question 17

The goal of an HMO is to reduce health insurance costs by treating people only after they become sick.

Question 18

Insurance companies will typically not pay disability claims unless the injured employee is unable to perform any work for the company.

Question 19

Liability insurance protects against loss from injury to people that results from the use of a company's products.

Question 20

Insurance policies typically do not cover losses or liability resulting from international operations.

Question 21

A major advantage for a store of setting up its own credit card operation is

A) lower costs compared to bank credit cards
B) the convenience of being able to manage the operation itself
C) the opportunity to provide mail advertising to cardholders with their monthly statements
D) the ease of collecting payments directly from customers

Question 22

A small business that chooses to accept credit cards may develop an agreement with an intermediary called a

A) factor
B) credit clearinghouse
C) credit union
D) merchant account provider

Question 23

A revolving credit plan involves all of the following except

A) allowing credit customers to make purchases on account at any time
B) allowing credit customers to make purchases on account up to a specified dollar limit
C) allowing credit customers to make a stated number of payments over a fixed period
D) allowing credit customers to pay off the full amount by the end of the billing period without a finance charge

Question 24

Cars and other large purchases are often made with

A) installment credit
B) store credit cards
C) debit cards
D) a check

Question 25

Debit card transactions involve all of the following except

A) paying for purchases on-site at stores
B) writing checks
C) paying bills by phone from a checking account
D) making cash withdrawals from ATMs

Question 26

A nonprofit organization looking for a fundraising opportunity might consider offering supporters

A) an affinity credit card
B) a co-branded credit card
C) a nonprofit credit card
D) a revolving credit card

Question 27

Smart cards can be used for all of the following except

A) to record medical information
B) to pay bus fares
C) to check account balances
D) to remind you of your personal identification number

Question 28

If the amount of accounts receivable for a business steadily decreased over the last six months, but its credit sales remained about the same, bad debt losses are likely to

A) increase
B) decrease
C) stay about the same
D) eventually bankrupt the company

Question 29

The process called aging of accounts refers to

A) accounts receivable
B) debit card balances
C) profit and loss statements
D) accounts payable

Question 30

One of the four Cs of credit measures earning power and potential to pay and is called

A) capital
B) character
C) capacity
D) condition

Question 31

To protect against the loss of important business records, a business should

A) maintain all records on a computer rather than on paper
B) store copies of records at a separate location
C) ask customers to keep their receipts
D) all of the responses

Question 32

Insurance companies can estimate the losses that will occur in one year by

A) totaling all premiums collected
B) asking customers to keep records of their losses for the year
C) reviewing the amount of losses for many years using historical records
D) making an educated guess

Question 33

The rates insurance companies must charge to cover costs and make a reasonable profit are calculated by

A) insurance brokers
B) actuaries
C) bankers
D) insured parties

Question 34

In order to insure any kind of property, a person or business must

A) pay a full year's premium in advance
B) have an insurable interest in the property
C) include a deductible in the insurance policy
D) have gone at least one year without a loss

Question 35

Why would an insured person choose to pay a higher deductible?

A) To raise the value of benefits.
B) To reduce premiums.
C) To reduce coverage.
D) To raise the price of premiums.

Question 36

All of the following are noninsurable risks except

A) changes in consumer taste
B) poor decision making from management
C) damage a building might suffer in a flood
D) changes in economic conditions

Question 37

The beneficiary of a life insurance policy is

A) the insured
B) the insurance company
C) the person who makes the payments on the policy
D) the person who receives the life insurance money

Question 38

Fire insurance, business income insurance, and burglary and robbery insurance are types of

A) comprehensive insurance
B) liability insurance
C) no-fault insurance
D) property insurance

Question 39

A company that transports large amounts of money between a business and a bank would be required to have insurance protection called

A) malpractice insurance
B) bonding
C) disability insurance
D) no-fault insurance

Question 40

While driving a company delivery truck, a driver drove off the driveway at a customer's warehouse and damaged a sign.The cost of repairing the sign will likely be covered by

A) business interruption insurance
B) collision insurance
C) comprehensive insurance
D) vehicle liability insurance

Question 41

Match each item with the correct statement below.

-A measure of a person's or business's sense of financial responsibility or belief in the obligation to pay debts.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 42

Match each item with the correct statement below.

-A measure of an individual's or business's ability and willingness to repay a loan.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 43

Match each item with the correct statement below.

-A measure of the credit applicant's current financial worth or ability to pay based on assets.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 44

Match each item with the correct statement below.

-A private company that acts as an intermediary between businesses and one or more credit card companies to establish and maintain credit services.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 45

Match each item with the correct statement below.

-An assessment of the economic environment that affect credit decisions.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 46

Match each item with the correct statement below.

-Insurance that offers payments to employees who are no longer able to work because of accidents or illnesses.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 47

Match each item with the correct statement below.

-Insurance that provides protection against the expenses of health care.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 48

Match each item with the correct statement below.

-Person who receives a life insurance payment on the death of an insured person.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 49

Match each item with the correct statement below.

-Plastic card with an embedded microprocessor that can store and process a large amount of information that can be read by computers.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card

Question 50

Match each item with the correct statement below.

-The possible financial loss that the policyholder will suffer if the property is damaged or destroyed.

A)acquiring bank
B)Actuary
C)Beneficiary
D)Capacity
E)Capital
F)character
G)conditions
H)creditworthiness
I)debit card
J)disability insurance
K)health insurance
L)insurable interest
M)merchant account provider
N)smart card