FIN 341 EXAM 1 COMPREHENSIVE EXAM 2026
QUESTIONS AND ANSWERS GRADED A+
◉ Commercial Risks. Answer: Risks faced by firms- property
(buildings, inventory), liability (defective products, cyber issues),
loss of income (due to shutdowns), foreign loss exposure,
government exposures
◉ Cost of Risk = sum of:. Answer: Risk prevention costs +
Opportunity costs +
Expenses from financing potential losses +
Cost of unreimbursed losses
◉ Risk Control. Answer: Techniques aimed to reduce frequency or
severity of loss
Avoidance
◉ Loss Prevention. Answer: Activities to reduce FREQUENCY of
losses
◉ Loss Reduction. Answer: Activities to reduce SEVERITY of losses
(Duplication, Separation, Diversification)
, ◉ Risk Financing. Answer: Refers to techniques that provide for the
funding of losses
◉ Retention. Answer: Means that firm retains all or part of the
losses that can result from a given risk
◉ Active Retention. Answer: Means that individual is AWARE of the
risk and deliberately plans to retain all or part of it
-Best for when no other transfer is available, the worst possible loss
is not serious, loss is highly predictable, firm has financial stability in
terms of liquidity and leverage
◉ Passive Retention. Answer: Means risks may be unknowingly
retained because of ignorance, indifference, or laziness
◉ Self Insurance. Answer: Special form of planned retention by
which all or part of a given loss exposure is retained by the firm
◉ Non Insurance Transfer. Answer: Transfers the risk to another
party
-Hold harmless clause
QUESTIONS AND ANSWERS GRADED A+
◉ Commercial Risks. Answer: Risks faced by firms- property
(buildings, inventory), liability (defective products, cyber issues),
loss of income (due to shutdowns), foreign loss exposure,
government exposures
◉ Cost of Risk = sum of:. Answer: Risk prevention costs +
Opportunity costs +
Expenses from financing potential losses +
Cost of unreimbursed losses
◉ Risk Control. Answer: Techniques aimed to reduce frequency or
severity of loss
Avoidance
◉ Loss Prevention. Answer: Activities to reduce FREQUENCY of
losses
◉ Loss Reduction. Answer: Activities to reduce SEVERITY of losses
(Duplication, Separation, Diversification)
, ◉ Risk Financing. Answer: Refers to techniques that provide for the
funding of losses
◉ Retention. Answer: Means that firm retains all or part of the
losses that can result from a given risk
◉ Active Retention. Answer: Means that individual is AWARE of the
risk and deliberately plans to retain all or part of it
-Best for when no other transfer is available, the worst possible loss
is not serious, loss is highly predictable, firm has financial stability in
terms of liquidity and leverage
◉ Passive Retention. Answer: Means risks may be unknowingly
retained because of ignorance, indifference, or laziness
◉ Self Insurance. Answer: Special form of planned retention by
which all or part of a given loss exposure is retained by the firm
◉ Non Insurance Transfer. Answer: Transfers the risk to another
party
-Hold harmless clause
