Deck 17: Small Business Protection: Risk Management and Insurance

Question 1

Although customers are,by definition,the "reason for being" of any business,they also are the source of considerable business risk.

Answer 1

True

Question 2

The best strategy for managing any risk is to develop a business environment that eliminates the probability of the event occurring.

Answer 2

False

Question 3

Disability insurance is the most highly desired form of insurance for most employees.

Answer 3

False

Question 4

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

Question 5

The most common form of employee theft is the pilfering of items of small value.

Question 6

General credit insurance is easily affordable.

Question 7

OSHA rules in most industries do not apply to firms with fewer than 50 employees.

Question 8

Risk is the probability that future states of being will be better than you expect.

Question 9

Separation of duties is a core management technique to safeguard money and other valuable assets of a business.

Question 10

A disadvantage of joint ventures is that a partner can lose more than its investment in the venture.

Question 11

The advantage with 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.

Question 12

Intellectual property is constantly under attack.

Question 13

Worker's compensation insurance is mandated by the legislatures of all the states and territories of the United States.

Question 14

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

Question 15

According to the Wells Report,the most costly employee frauds compared to total business assets occur in businesses with fewer than 20 employees.

Question 16

The Technical Assistance Program is specifically aimed at the needs of hotels,motels,restaurants,and other affected small businesses.

Question 17

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

Question 18

Errors and omissions insurance cover claims made by clients of attorneys,accountants,and other consultants.

Question 19

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.

Question 20

Identifying risks is the first task to be completed before a comprehensive insurance program can be developed for a business.

Question 21

_____ are programs or pieces of equipment called routers which serve as a barrier between your PC and the Internet.

A)Passwords
B)Firewalls
C)Spyware
D)Encryptions

Question 22

Which of these is NOT a strategy for dealing with compliance?

A)Staying small enough to remain below the thresholds for which these agencies' rules apply.
B)Indifference-not spending time on compliance and,if caught,closing the business.
C)Fighting for what you believe to be right.
D)Growing very large so that these regulations do not apply.

Question 23

Which of these acts provide training for workers who are injured on the job?

A)Age Discrimination in Employment Act
B)Americans with Disabilities Act of 1990
C)Civil Rights Act of 1991
D)Rehabilitation Act of 1973

Question 24

Restaurants,clothing retailers,barbers,and beauticians face relatively low risks of loss from nonpayment because

A)most customers prefer making upfront payments for such products and services.
B)few people have credit cards that have charge limits big enough to buy such things.
C)giving credit to customers increases sales.
D)the amount that any one customer charges is unlikely to be big enough to threaten the business if it is not paid.

Question 25

The most common form of _____ is the pilfering of items of small value,such as office supplies and small hand tools,or actions such as making copies for their children to use at school or otherwise using company resources to make personal items.

A)breach of trust
B)contract violation
C)property risk
D)employee theft

Question 26

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

A)managerial
B)key
C)owner
D)family

Question 27

Inventory can be stolen,spoiled,or become obsolete.Production machinery can break down.Furniture,office equipment,vehicles,and buildings can be damaged or destroyed by vandalism,accidents,fire,flood,or wind.All of these represent risks related to the

A)personnel of the business.
B)customers of the business.
C)property of the business.
D)goods of the business.

Question 28

Payments for injury or damage that occurs during the use of the business's products is referred to as

A)fringe benefits.
B)product liability.
C)customer service.
D)OSHA requirements.

Question 29

_____ are programs designed to report on your keystrokes or data,or give remote control of your PC to others.

A)Worms
B)Firewalls
C)Viruses
D)Spyware

Question 30

Certainly,the _____ your firm is,the _____ exposure you have to class action product liability suits.This is partly due to the fact that a small business has _____ customers who can claim harm.

A)smaller;greater;more
B)smaller;less;fewer
C)bigger;less;limited
D)bigger;more;limited

Question 31

A series of acts by Congress that prohibit discrimination on the basis of race,color,religion,sex,or national origin refers to the

A)Civil Rights Act of 1991.
B)ADEA of 1967.
C)Americans with Disabilities Act of 1990.
D)Rehabilitation Act of 1973.

Question 32

Age Discrimination in Employment Act makes it illegal to discriminate against people who are older than _____ years of age.

A)40
B)25
C)18
D)65

Question 33

Different risks in the business can be managed by doing all of these EXCEPT

A)making specific plans for and arrangements to deal with foreseeable events.
B)creating and enforcing an appropriate code of conduct for yourself and all employees.
C)actively working to create physical hazards in your workplace as a test.
D)ensuring that valuable assets are physically secure.

Question 34

Which one of these government agencies is created to enforce safety in the workplace?

A)EEOC
B)OSHA
C)SBA
D)IRS

Question 35

Misappropriation of business property by employees of that business refers to

A)OSHA violations.
B)employee theft.
C)loss of key employees.
D)noncompliance with ADA regulations.

Question 36

A business can protect itself from _____ by performing regular inspections and maintenance of the plumbing and fire suppression systems of its buildings.

A)floods
B)storms
C)hurricane
D)mudslides

Question 37

Generally speaking,_____ is the probability that future states of being will be worse than you expect.

A)risk
B)certainty
C)uncertainty
D)bankruptcy

Question 38

The risk from customers arise from

A)injuries suffered while on business property and injury from using the business' products.
B)mental anguish from higher prices and loss of customers due to limited service.
C)mental anguish from high prices and injuries from using the high-priced products.
D)injuries suffered while on business property and injuries suffered at business property owner's house.

Question 39

In 1964,EEOC established five protected classes.Which of these is NOT one of them?

A)Race
B)Color
C)Age
D)Religion

Question 40

The magnitude of losses resulting from _____ claims has increased greatly in recent years with an increase in class action lawsuits.

A)product liability
B)professional liability
C)premises liability
D)personal liability

Question 41

Developing and enforcing rules that prevent the employee responsible for the asset from being able to account for the asset is called

A)separation of duties.
B)asset liability.
C)adverse possession.
D)vendor fraud.

Question 42

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

A)Understate revenues and overstate deductible expenses
B)Reconcile the cash register tape to the cash register contents every day
C)Take cash from the businesses before it is recorded as revenue
D)Borrow from tax money in order to make payments to creditors

Question 43

Which is the number one method for fraud detection?

A)Internal audit
B)Internal control
C)Tip
D)External audit

Question 44

All of the following should be undertaken in order to ensure that an internal audit is effective EXCEPT

A)meet with whomever is going to conduct the internal audit in the presence of other members of the management.
B)write an engagement agreement with the auditor that clearly establishes the scope of work to be done.
C)provide sufficient authority to the auditor to ensure that he or she can accomplish the goals of the audit.
D)establish with the auditor that you and your board of directors have the final authority to review and approve the audit plan.

Question 45

The _____ likely an event is to occur,and the _____ the potential amount that the insurance company must pay,the _____ the price that you must pay for coverage.

A)more;lesser;lower
B)less;greater;higher
C)more;greater;higher
D)less;lesser;higher

Question 46

Employee contracts should include all of the following provisions EXCEPT

A)limit the employee's freedom to go into competition.
B)contain the employee's specific promise not to disclose sensitive or secret information.
C)offer punishments for providing inadequate termination notice.
D)cross training among employees.

Question 47

The best way to meet the basic laws of OSHA is to provide a place of employment that is free of recognized hazards and to

A)provide medical examinations.
B)outsource OSHA requirements.
C)hire external experts for actual assessments.
D)keep the employee size below 100 to avoid any OSHA requirement enforcement.

Question 48

Which of the following practices should be adopted to ensure that a computer is kept secure?

A)Using simple passwords
B)Changing passwords infrequently
C)Having a PC set to lock itself up after a few minutes of inactivity
D)Opening downloads from unexpected sources

Question 49

______ occurs when the 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.

A)Intellectual property violation
B)Separation of duty
C)Property liability
D)Adverse possession

Question 50

Which of these represents the problem with legal protection methods for intellectual property?

A)There is no governmental agency that will assist small business owners in maintaining their legal rights.
B)The cost of legal protection for intellectual property is so high that it is practically useless for a small business owner.
C)Legal protection methods for intellectual property are primarily "reserved" for large business with huge legal staff.
D)Legal protection methods can only be offered for tangible property and not intellectual property.

Question 51

This is a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.

A)Internal audit
B)Internal control
C)Tip
D)Whistle blowing rewards

Question 52

_____ are laws and regulations that specify the requirements of taxation.

A)Tax systems
B)Tax slabs
C)Tax codes
D)Tax guides

Question 53

Which of the following statements is true regarding the OSHA Act?

A)It covers employees in mining,transportation,and state and local governments.
B)OSHA offers consultation services to employers for a fee.
C)A business must report within twenty four hours any accidents that result in a fatality or in the hospitalization of three or more employees.
D)"Low- hazard" industries are exempt from the record keeping requirements of the regulations.

Question 54

Which is the primary method of ensuring honesty in employees?

A)Tips
B)External audit
C)Whistle blowing rewards
D)Internal control

Question 55

A(n)_____ is valuable process that can greatly help you with the issues of keeping risks at acceptable levels.It is strictly a management tool which is not provided to outsiders,it can be structured and conducted in any systematic manner you find acceptable.

A)insurance program
B)internal audit
C)external audit
D)internal control

Question 56

The most common form of employee collusion is

A)selling trade secrets to competition.
B)the theft of cash and inventory.
C)lying about work hours and absences.
D)the fraud related to healthcare activities.

Question 57

A contract between two or more parties in which one party agrees,for a fee,to assume the risk of another is called

A)coverage.
B)insurance.
C)separation of duties.
D)OSHA enforcement.

Question 58

The greatest threat of loss from employee dishonesty occurs when

A)two or more employees collude.
B)employees lose their jobs.
C)employees are paid above market wages.
D)the owner establishes the culture of trust.

Question 59

Physically protecting your property from theft can be termed as

A)asset liability.
B)adverse possession.
C)separation of duties.
D)vendor fraud.

Question 60

Which of the following is stolen through false employee sales?

A)Cash
B)Identity
C)Inventory
D)Credit card

Question 61

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

A)to develop a financial plan.
B)to assess internal strengths.
C)to identify risks.
D)to provide a business succession plan.

Question 62

These are required by law and exist to provide social protection from harm caused to employees,customers,and uninvolved individuals.

A)OSHA enforcement
B)Coverages
C)Separation of duties
D)Insurance

Question 63

All of the following are occasions when risks can be insured EXCEPT

A)when the risk is calculable.
B)when the value of any loss is measurable in dollars.
C)when the pool of potential policyholders is of sufficient size.
D)when the policyholder has an insurable personal interest.

Question 64

This form of insurance is also called as a success protector policy.

A)Unemployment insurance
B)Worker's compensation insurance
C)General liability insurance
D)Product liability

Question 65

Which of these are also called dishonesty bonds?

A)Credit bonds
B)Rescue bonds
C)Surety bonds
D)Fidelity bonds

Question 66

Which of the following statements is true regarding credit insurance?

A)It covers normal losses from credit customers not paying their bills.
B)Typical covered events include recessions,wars,or trade embargos.
C)It requires the merchant to provide co-insurance in the amount of 10 to 20 percent of the credit loss.
D)It is available only for retailers.

Question 67

Identify the insurance that provides funds to pay the ordinary operating expenses of your business should it be forced to close temporarily because of an insured event.

A)Crime insurance
B)Theft insurance
C)Business interruption insurance
D)Bond insurance

Question 68

The cost of property insurance is determined largely by all of the following EXCEPT

A)the property's insurable value.
B)the amount of nondeductible loss.
C)the amount of co-insurance required.
D)the loss limits of the policy.

Question 69

Desired coverages beyond mandatory insurance include all of the following EXCEPT

A)general liability.
B)product liability.
C)malpractice coverage.
D)vehicle accident liability.

Question 70

Which of the following is an example of a special type of liability insurance that covers losses from harm caused during the performance of your profession?

A)Unemployment insurance
B)Errors and omissions insurance
C)Liability insurance
D)Worker's compensation insurance

Question 71

______ is a contract requirement that works to prevent property owners from deliberately underinsuring.

A)Deductible
B)Co-insurance
C)Insurable value
D)Separation of duty

Question 72

Co-insurance requires that the owner carry insurance in an amount equal to a stated minimum percentage of the market value of the property,most usually _____ percent.

A)50
B)60
C)70
D)80

Question 73

As a general rule,the _____ the deductible,the _____ the policy premium payments will be.

A)higher;lower
B)higher;higher
C)lower;higher
D)lower;lower

Question 74

_____ offers protection against losses from crimes committed against your business.

A)Felony insurance
B)Crime insurance
C)Security insurance
D)Safety insurance

Question 75

This type of bond is purchased only for the employer's benefit.

A)Credit bonds
B)Rescue bonds
C)Surety bonds
D)Fidelity bonds

Question 76

_____ exist to pay losses that are not covered by other liability insurance.

A)Malpractice insurance
B)Errors and omissions insurance
C)General liability insurance
D)Product liability insurance

Question 77

The most common mandatory insurance coverage includes

A)liability for damages caused by vehicle accidents.
B)maternity leave.
C)travel cancellation liability.
D)property damage at workplace by disgruntled employees.

Question 78

The amount of an asset for which a company will write an insurance policy is called

A)personal protection plan.
B)insurable value.
C)deductible.
D)co-insurance.

Question 79

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

A)insurable value
B)co-insurance
C)deductible
D)coverage

Question 80

Which among the following is a risk specific to dentists and physicians?

A)Business interruption
B)Malpractice claims
C)Errors and omissions claims
D)Product liability claims