Practice Test

Question 4 • Personal Finance and Economics

What does purchasing insurance for a business reveal about the business owner’s attitude toward financial risk?

Answer

It shows that the owner expects financial risk and is eliminating it by making an insurance company liable.

It shows that the owner acknowledges the financial risks and is willing to pay every month to transfer the risk to an insurance company.

It shows that the owner is willing to share ownership of the business to reduce financial risk.

It shows that the owner is willing to budget for short-term financial risks to avoid long-term risks.

Explanation

Buying insurance shows that the owner recognizes possible financial losses and pays premiums so the insurance company takes on some of the financial consequences if a covered loss occurs. The owner does not eliminate the risk entirely; the policy transfers specified financial risks to the insurer. Therefore, B is correct.

AI-written and checked against the verified answer.

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