Moody's Practice Test 4

For what business is key person insurance likely most critical?

• Government agency.
• Small business.
• Publicly traded company
• University.

What is the focus of management risk?

• Capacity, integrity, depth and staying power.
• The competitive marketplace in which the borrower operates.
• Stronger than anticipated business performance.
• Loan structure.

Which option can mitigate work stoppages?

• Liability insurance.
• Alternative sources.
• Dependable suppliers.
• Good labour relations.

Which critical skill for executives deals with the creation and maintenance of loyal, satisfied customers, dependable suppliers and dedicated employees?

• Leadership.
• Knowledge.
• Communication.
• Commitment.

What would be an unusual use for the proceeds of key person insurance?

• Purchase heirs' interest in the business.
• Plant expansion.
• Pay off debt.
• Reduce debt.

Corporate governance provides a structure to determine business objectives and a means of achieving and monitoring their outcomes.

• false
• I am not sure
• true

Who is considered a principal party with respect to corporate governance?

• Banks.
• Management.
• Society at large.
• Suppliers.

Which of the following is not one of the five management responsibilities?

• Production.
• Sales.
• Staffing.
• Finance.

Why do management positions need to be properly staffed?

• To reduce the strain on working capital by controlling payroll expenses.
• To ensure that no employees leave for the competition.
• To ensure liquidity and solvency remain within lending guidelines.
• To prevent position overload and provide depth while minimising overhead expense.

Why is it useful to track and analyse a company’s operating expense percentage over a period of years?

• It reflects management’s ability to control expenses under varying conditions over time.
• It is the most critical indicator of a company’s ability to meet its obligations.
• Operating expenses always represent the biggest draw on a company’s cash flow.
• More than any other indicator, operating expense levels give us crucial insight into management integrity.