Quiz 2

Question 1

revenues

Answer 1

total amount of income from sales

Question 2

alt term for revenue

Answer 2

top line / total sales

Question 3

alt term for income

Answer 3

profit / earnings

total left after expenses

Question 4

direct loss

Answer 4

loss resulting from physical damage to property

Question 5

indirect loss (consequential)

Answer 5

loss as a result of direct loss (consequential)

Question 6

risk transfer

Answer 6

risk mgmt technique that passes risk to another party

Question 7

business income (interruption) insurance

Answer 7

protects against loss of income due to suspension of ops by physical damage only

Question 8

objective of risk management

Answer 8

ensuring losses do not prevent the business from operating effectively or maximizing wealth of owners

Question 9

alt term for direct loss

Answer 9

damage, physical

Question 10

alt term for business income insurance

Answer 10

business interruption insurance

Question 11

is physical damage required for business income insurance to come into effect

Answer 11

yes

Question 12

3 definitions of risk

Answer 12

uncertainty
possibility of financial loss
possibility of an undesired outcome

Question 13

loss control

Answer 13

risk management technique that seeks to reduce the possibility that a loss will occur and reduce the severity of those that do occur

Question 14

financial goal of a business

Answer 14

maximize the wealth of the owners

Question 15

type of risk management technique utilized when insurance is purchased

Answer 15

risk transfer

Question 16

do companies share information about insured people

Answer 16

yes, insurance score because of SSN

Question 17

what is BOP

Answer 17

business owners policy

business property and business liability insurance into one business insurance policy

Question 18

4 common oversights business owners make per Bob

Answer 18

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

Question 19

should you be honest about your business with your insurance agent

Answer 19

yes, totally

Question 20

does being dishonest cost you in the long run

Answer 20

yes, can result in failed claims, denial of ins, or higher rates

Question 21

will a business pay higher premiums without general liability insurance in its first year of operations

Answer 21

yes, will carry penalties

Question 22

does cyber liability insurance cover the cost of fixing problems that lead to the data breach at the company

Answer 22

yes

Question 23

does cyber liability insurance cover business interruption

Answer 23

yes

Question 24

whether cyber-liability insurance coverage is becoming more important over time, or less important

Answer 24

more important, data breaches are not covered under general

Question 25

whether insurance companies' payments for claims under cyber-liability insurance are rising, or falling

Answer 25

rising exponentially

Question 26

whether premiums are cyber-liability coverage are expensive, or inexpensive

Answer 26

very cheap

Question 27

5 policies the typical business owner should purchase, according to Bob

Answer 27

``` General Liability Property Insurance Business interruption Workers Comp Product/Professional Liability ```

Question 28

when a business should begin to have coverage under a general liability policy

Answer 28

Day 1

Question 29

will the ins company provide legal help with covered incidents on general liability ins

Answer 29

Usually the company has a team of lawyers on retainer

Question 30

what are general liability premiums based on

Answer 30

net revenue or square footage of the business

Question 31

type of policy that covers employees injured on the job

Answer 31

workers comp

Question 32

type of business that needs products liability coverage

Answer 32

manufacturers

Question 33

type of business that needs professional liability coverage

Answer 33

those that offer advice

Question 34

policies a BOP includes

Answer 34

Property and General Liability

Question 35

4 mistakes business owners make with insurance according to Bob

Answer 35

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

Question 36

should you purchase from a web site with one policy or a professional that offers multiple company rates

Answer 36

no

Question 37

whether it is a good idea to ask other business owners for referrals to insurance professionals

Answer 37

yes, those that are happy usually have better coverage

Question 38

what can happen (2 things) to a business that does not implement loss control recommendations made by its insurance carrier

Answer 38

penalties and higher premiums | claims not approved/less insurance available

Question 39

how often you should speak with your insurance professional, according to Bob

Answer 39

6 months ideally yearly at minimum

Question 40

whether it's better if you want to speak on a regular basis with your professional, or better if you won't want to

Answer 40

better if you want to, you should want to update instead of thinking it is stressful

Question 41

3 benefits of borrowing from friends and family, as discussed in class

Answer 41

may be your business's only way to borrow ability to tailor terms to your needs lower interest rates

Question 42

stage in the life-cycle in which borrowing from family and friends is common

Answer 42

startup / survival

Question 43

how the borrower benefits from a non-amortizing loan vs. an amortizing loan

Answer 43

requires lower payments for a higher lump sum to repaid at the maturity date, non-am have a lower debt service requirement

Question 44

the loan amount that requires use of the IRS minimum interest rate in loans between family members

Answer 44

the current IRS minimum rate

Question 45

whether the IRS minimum interest rate is higher, or lower, than the rate on bank loans

Answer 45

no banks loans are usually higher, based on US treasuries

Question 46

2 potential causes of damaging your personal relationship with a family member or friend that you borrow from

Answer 46

losses from lending to you, you didn't repay them | tax implications

Question 47

2 ways that other (non-lending) family members or friends may be affected when you borrow from a family member or friend

Answer 47

could feel resentful or entitled to reciprocation

Question 48

whether the lender (family member or friend) must pay income tax on the interest you pay them

Answer 48

yes if loan, gift not deductible

Question 49

whether the lender can deduct the amount loaned to you if you do not repay the loan

Answer 49

yes the amount of the money loaned

Question 50

whether a tax deduction increases tax, or decreases tax

Answer 50

decreases

Question 51

whether gift tax applies to gifts to charities, or to individuals

Answer 51

only gifts to individuals not charities

Question 52

who pays gift tax, the donor or the recipient of the gift

Answer 52

paid by the donor not the recipient

Question 53

whether gift tax is paid by the poor, the middle-class, or the wealthy

Answer 53

only by the very wealthy

Question 54

whether filing a gift tax return may be required even if no gift tax is owed

Answer 54

yes, talk to a tax attorney

Question 55

be able to state 2 guidelines to follow when borrowing from family and friends, as discussed in class

Answer 55

only borrow money that your friends and family can afford to lose put the loans in writing similar to a loan agreement

Question 56

benefits of documenting a loan from a family member or friend (including benefits for the family member or friend who loaned you the money)

Answer 56

documents that this is a loan not a gift, not subject to gift tax prevents misunderstandings on terms and payments

Question 57

imputed interest

Answer 57

interest income the lender must add to their tax return if the actual rate on the loan is less than the IRS minimum

Question 58

proceeds

Answer 58

money obtained from an event or activity