Quiz 2 Flashcards
revenues
total amount of income from sales
alt term for revenue
top line / total sales
alt term for income
profit / earnings
total left after expenses
direct loss
loss resulting from physical damage to property
indirect loss (consequential)
loss as a result of direct loss (consequential)
risk transfer
risk mgmt technique that passes risk to another party
business income (interruption) insurance
protects against loss of income due to suspension of ops by physical damage only
objective of risk management
ensuring losses do not prevent the business from operating effectively or maximizing wealth of owners
alt term for direct loss
damage, physical
alt term for business income insurance
business interruption insurance
is physical damage required for business income insurance to come into effect
yes
3 definitions of risk
uncertainty
possibility of financial loss
possibility of an undesired outcome
loss control
risk management technique that seeks to reduce the possibility that a loss will occur and reduce the severity of those that do occur
financial goal of a business
maximize the wealth of the owners
type of risk management technique utilized when insurance is purchased
risk transfer
do companies share information about insured people
yes, insurance score because of SSN
what is BOP
business owners policy
business property and business liability insurance into one business insurance policy
4 common oversights business owners make per Bob
not getting coverages day 1 of business
homeowners policy does not cover business use
not purchasing general liability ins in 1st year
not using cyber liability ins for online data
should you be honest about your business with your insurance agent
yes, totally
does being dishonest cost you in the long run
yes, can result in failed claims, denial of ins, or higher rates
will a business pay higher premiums without general liability insurance in its first year of operations
yes, will carry penalties
does cyber liability insurance cover the cost of fixing problems that lead to the data breach at the company
yes
does cyber liability insurance cover business interruption
yes
whether cyber-liability insurance coverage is becoming more important over time, or less important
more important, data breaches are not covered under general
whether insurance companies’ payments for claims under cyber-liability insurance are rising, or falling
rising exponentially
whether premiums are cyber-liability coverage are expensive, or inexpensive
very cheap
5 policies the typical business owner should purchase, according to Bob
General Liability Property Insurance Business interruption Workers Comp Product/Professional Liability
when a business should begin to have coverage under a general liability policy
Day 1
will the ins company provide legal help with covered incidents on general liability ins
Usually the company has a team of lawyers on retainer
what are general liability premiums based on
net revenue or square footage of the business
type of policy that covers employees injured on the job
workers comp
type of business that needs products liability coverage
manufacturers
type of business that needs professional liability coverage
those that offer advice
policies a BOP includes
Property and General Liability
4 mistakes business owners make with insurance according to Bob
Not being fully honest with agent
getting instant quote rather than using an agent
not listening to agent recos or having a business operation prone to losses or theft (messy/insecure)
failing to adjust policies with growth
should you purchase from a web site with one policy or a professional that offers multiple company rates
no
whether it is a good idea to ask other business owners for referrals to insurance professionals
yes, those that are happy usually have better coverage
what can happen (2 things) to a business that does not implement loss control recommendations made by its insurance carrier
penalties and higher premiums
claims not approved/less insurance available
how often you should speak with your insurance professional, according to Bob
6 months ideally yearly at minimum
whether it’s better if you want to speak on a regular basis with your professional, or better if you won’t want to
better if you want to, you should want to update instead of thinking it is stressful
3 benefits of borrowing from friends and family, as discussed in class
may be your business’s only way to borrow
ability to tailor terms to your needs
lower interest rates
stage in the life-cycle in which borrowing from family and friends is common
startup / survival
how the borrower benefits from a non-amortizing loan vs. an amortizing loan
requires lower payments for a higher lump sum to repaid at the maturity date, non-am have a lower debt service requirement
the loan amount that requires use of the IRS minimum interest rate in loans between family members
the current IRS minimum rate
whether the IRS minimum interest rate is higher, or lower, than the rate on bank loans
no banks loans are usually higher, based on US treasuries
2 potential causes of damaging your personal relationship with a family member or friend that you borrow from
losses from lending to you, you didn’t repay them
tax implications
2 ways that other (non-lending) family members or friends may be affected when you borrow from a family member or friend
could feel resentful or entitled to reciprocation
whether the lender (family member or friend) must pay income tax on the interest you pay them
yes if loan, gift not deductible
whether the lender can deduct the amount loaned to you if you do not repay the loan
yes the amount of the money loaned
whether a tax deduction increases tax, or decreases tax
decreases
whether gift tax applies to gifts to charities, or to individuals
only gifts to individuals not charities
who pays gift tax, the donor or the recipient of the gift
paid by the donor not the recipient
whether gift tax is paid by the poor, the middle-class, or the wealthy
only by the very wealthy
whether filing a gift tax return may be required even if no gift tax is owed
yes, talk to a tax attorney
be able to state 2 guidelines to follow when borrowing from family and friends, as discussed in class
only borrow money that your friends and family can afford to lose
put the loans in writing similar to a loan agreement
benefits of documenting a loan from a family member or friend (including benefits for the family member or friend who loaned you the money)
documents that this is a loan not a gift, not subject to gift tax
prevents misunderstandings on terms and payments
imputed interest
interest income the lender must add to their tax return if the actual rate on the loan is less than the IRS minimum
proceeds
money obtained from an event or activity
