Chapter 10

Question 1

Business interruption

Answer 1

Loss of revenue that a business or another organization sustains because its operations are suspended as a result of physical injury to its property.

Question 2

Business income loss

Answer 2

A financial loss that occurs when tangible commercial property is damaged or destroyed, resulting in a loss of revenue or increased expenses during the time that the property is being replaced or repaired.

Question 3

Time element loss (indirect loss)

Answer 3

A loss that arises as a result of damage to property, other than the direct loss to the property.

Question 4

Forensic accountant

Answer 4

An expert at evaluating business income losses.

Question 5

Liabilities

Answer 5

Financial obligations, or debts, owed by a company to another entity, usually the policyholder in the case of an insurer.

Question 6

Assets

Answer 6

Types of property, both tangible and intangible, owned by an entity.

Question 7

Owner’s equity (net worth)

Answer 7

The balance sheet value that represents the difference between total assets and total liabilities as of the balance sheet date and that represents the value of the owner’s interest in the business.

Question 8

Expense directly related to sales

Answer 8

An expense that increases or decreases in direct relationship to sales, such as cost of goods sold.

Question 9

General operating expense

Answer 9

An expense that is necessary to run a business but bears no direct relationship to the volume of sales.

Question 10

Gross profit

Answer 10

An income statement value that represents sales or operating revenue minus the cost of goods sold.

Question 11

Gross margin (gross profit margin)

Answer 11

The percentage of sales remaining after deducting the cost of goods sold from sales, calculated by dividing gross profit by sales.

Question 12

Mark-up

Answer 12

Gross profit expressed as a percentage of cost of goods sold.

Question 13

Depreciation expense

Answer 13

An accounting method that spreads out the expense of a purchase over the life expectancy of the item.

Question 14

Net income

Answer 14

The difference between revenues (such as money received for goods or services) and expenses (such as in money paid for merchandise, rent, and insurance).

Question 15

Continuing expenses

Answer 15

Expenses that continue to be incurred during a business interruption.

Question 16

Extra expenses

Answer 16

Expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.

Question 17

Trend sheets

Answer 17

Spreadsheets that show a businesses historical gross revenue data in a series of days, weeks, months, quarters, or years.

Question 18

Reconciliation

Answer 18

The process of matching the net income and continuing expenses projections with the actual sales made and expenses incurred during the loss.