Financial Risk Management Quiz 1 (15 MCQs)

Quiz Instructions

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1. The first step in a risk management program is to

Correct Answer: C) Identify the risks and potential losses.

2. The types of risks that can be insured are risks.....

Correct Answer: D) Pure.

3. Insurance is a risk management method.....

Correct Answer: A) Risk Transfer.

4. ..... is the use of common stock and/or retained earnings to raise long-term funding.

Correct Answer: C) Equity financing.

5. ..... are the major source of long-term debt financing for most corporations.

Correct Answer: D) Bonds.

6. ..... insurance covers losses resulting from damage to people or property when the insured party is judged responsible.

Correct Answer: C) Liability.

7. The recommended amount of Emergency Fund for married couples (no children yet) is.....

Correct Answer: D) 9x monthly withdrawals.

8. How may a company transfer risk to another firm?

Correct Answer: C) Insurance.

9. The three general categories of responsibilities of the financial manager are

Correct Answer: A) Cash-flow management, financial control, and financial planning.

10. The principle that safer investments tend to offer lower returns while riskier investments tend to offer higher returns is called

Correct Answer: D) Risk-return relationship.

11. ..... is long-term borrowing from sources outside of the company.

Correct Answer: C) Debt Financing.

12. Which of the following best describes health insurance?

Correct Answer: D) Insurance covering losses resulting from medical and hospital expenses as well as income lost from injury or disease.

13. The correct order of the financial planning pyramid.....

Correct Answer: C) Cash flow, risk management, investing, retirement, wealth distribution.

14. ..... is a short-term security, or note, containing a borrower's promise to pay.

Correct Answer: A) Commercial paper.

15. Death protection with a certain period of time, no cash value, the simplest and most affordable is the characteristic of life insurance.....

Correct Answer: B) Term life.