1' The major types of business risk include all of the following except

1
1. The major types of business risk include all
of the following except

• price risk
• diversification risk
• pure risk
• credit risk

2
Credit risk is

• the risk that a firms borrowers will not make
  promised payments.
• the risk that a firm will not be able to get
  credit from lenders.
• the risk that a firm will not have sufficient
  funds to make payments to their creditors.
• the risk due to changes in output and input
  prices

3
3. All of the following are types of price risk
except

• commodity price risk
• exchange rate risk
• stock price risk
• interest rate risk

4
4. Which of the following is not an example of a
direct loss from pure risk?

• loss of profit
• damage to assets
• cost of paying and defending liability claims
• employee turnover

5
Gallagher Winery is attempting to identify its
pure risks. Which of the following is an
example of an indirect loss for Gallagher?

• Loss of grapevines due to hail.
• Employee health problems due to insecticide
  usage.
• Loss of profit due to bad publicity about a
  liability claim.
• Cost of replacing equipment after a fire.

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6. Which of the following is not a method of loss
financing?

• diversification
• retention
• insurance
• hedging

7
7. Driving at lower speeds in order to reduce
the probability of having an automobile accident
is an example of

• loss financing
• loss control
• internal risk reduction
• hedging

8
8. What impact does routine inspection of
aircraft for mechanical problems have on the
risk of airplane crashes for United Airlines?

• reduced frequency of crashes
• reduced magnitude of loss if the crash occurs
• eliminate airplane crashes
• no impact on risk of airplane crashes

9
9. An advantage of centralizing the function of
risk management in the organization is

• Reduced concern for risk management by managers
  and employees in the firms various operating
  units.
• Reduced diversification.
• Economies of scale in arranging loss financing.
• Less effective interaction between the risk
  manager and senior management.

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10. Vickies Vanities, Inc. is a small boutique
that sells expensive designer clothing. Which
one of the following is not a pure risk to the
owner?

• losses due to theft of inventory
• loss of revenue due to recession
• liability claims for customer injury in the store
• risk of a liability claim for injury to an
  employee