22
QuizMultiple Choice

Personal Finance — Test

Question 22 • Personal Finance and Economics

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
sharing risk
B
reducing risk
C
maximizing risk
D
avoiding 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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