10
QuizMultiple Choice

Money and Credit Management — Test

Question 10 • CMS 2026-2027 Economics and Personal Finance INITIAL CREDIT

An entrepreneur keeps backup funds in a savings account so that if their business experiences a loss, they will be able to recuperate. What type of risk management is this an example of?

Answer
A
avoiding risk
B
sharing risk
C
maximizing risk
D
reducing risk

Explanation

Keeping backup funds does not prevent the business loss, but it helps limit the financial harm and recover afterward. That is reducing risk. Avoiding risk means steering clear of the risky activity, while sharing risk means transferring some of it to another party, such as an insurer.

AI-written and checked against the verified answer.

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