MGMT411 Chapter 4 Test Bank Questions and Answers 2023

1) Which of the following is a financial risk that may be faced by a business organization? A) injuries suffered by employees at the workplace B) lost income after a fire loss C) product liability risk D) currency exchange rate risk - -D -2) Which of the following statements about the scope of risk management is (are) true? I. Traditionally, risk management was limited in scope to speculative loss exposures. II. In the 1990s, some businesses began to expand the scope of risk management to include financial risks. A) I only B) II only C) both I and II D) neither I nor II - -B -3) Mid-States Beef is a commercial feedlot business. Currently, the company has over 10,000 cattle in feedlots. Mid-States is concerned that the price of corn, the grain fed to the cattle, will increase significantly. The risk that the price of corn may increase and harm the profitability of Mid-States Beef's operations is a(n) A) currency exchange rate risk. B) property risk. C) commodity price risk. D) interest rate risk. - -C -4) An integrated risk management program is a risk management program which combines A) pure and speculative risks. B) property and liability risks. C) personnel-related risk and property risk. D) direct and indirect loss risk. - -A -5) Regional Airline (RA) spends millions of dollars each year on jet fuel. The company also has significant liability exposures. RA can retain a large portion of its liability exposure if fuel costs are low. The company can pay high fuel costs if retained liability losses are low. RA cannot, however, absorb both high fuel costs and high retained liability claims. RA's insurer designed an insurance program where the insurer pays only if both contingencies (high fuel costs and high retained liability claims) occu