Risk Management Quiz (C)

Incorporating, paying down debt and liability insurance provides a means to ________.

• Increase profits

• Reduce risks

• Lower expenses

• Increase working capital

An economic device whereby an individual substitutes a certain cost (premiums) for an uncertain financial risk is known as ________.

• Diversification

• Insurance

• Risk management

• Uncertainty

Where the probability of an event occurring cannot be empirically determined is known as ________.

• Uncertainty

• Insurance

• Diversification

• Hedging

Engaging in several enterprises to protect against risk is known as ________.

• Uncertainty

• Hedging

• Diversification

• Risk management

The act of managing or controlling exposure to risk in order to meet present objectives is known as ________.

• Risk management

• Hedging

• Diversification

• Insurance

A young family that just purchased a home with borrowed money should consider which risk management tool?

• Diversification

• Hedging on future trading

• Life insurance

• Estate plan

Liability insurance is used to protect against ________.

• Crop loss

• Hail damage

• Legal action

• Livestock death loss

Risk management is a process by which a business ________.

• Identifies potential risk exposure

• Prioritizes the risk faced by the business

• Develops a plan to mitigate the exposure

• ALL of the above

Which of the following is NOT a market risk?

• Changes in input prices

• Changes in production prices

• Not being able to gain access to a market for a specific specialty crop

• Changes in cost of production per unit due to yield changes

The production of several special soybean varieties is an example of what type of risk management strategy?

• Specialization

• Diversification

• Hedging

• Contracting