1.06 Business Risk

People who go into business know that the business may not succeed. This possibility is referred to as business

• risk

• retention

• downsizing

• economizing.

The general classifications of business risks are

• hazard, operational, strategic, and financial.

   

• competitive, strategic, financial, and operational.

   

• production, hazard, operational, and strategic.

   

• strategic, production, competitive, and hazard

A hurricane that destroys a business is an example of a(n) __________ risk.

• hazard

• operational

   

• financial

•   strategic

A garden store customer tripped over a plant, fell, and sued the store for damages. This is an example of a(n) __________ risk.

• hazard

•   strategic

   

• operational

•   financial

A union strike that stops production at a manufacturing plant is a(n) __________ risk.

• operational

   

• financial

•   strategic

•   hazard

What category of business risk includes production problems and incompetent employees?

•   Operational

   

• Hazard

•   Strategic

•   Financial

When a rival’s product on the market reduces sales of your company’s product, your company is experiencing strategic risk caused by

• competition.

•   regulatory and political issues.

   

•   obsolescence.

• changing customer needs.

Financial loss from investing time and money to comply with accounting standards is an example of which strategic risk?

• Regulatory and political issues

•   Reputation damage

•   Changing customer needs

•   Obsolescence

Which of the following is a pure business risk:

• Robbery

•   Obsolescence

•   Competition

•   Inflation

Which of the following is an example of a business risk that cannot be covered by insurance:

• Increase in interest rates

•   Goods lost in transit

•   Destruction of building by fire

•   Injury of employee on the job