Examlex
Which of the following statements regarding the use of retention is (are) true?
I.Retention is best used for loss exposures that have a low frequency and a high severity.
II.A financially strong firm can have a higher retention level than a firm whose financial position is weak.
Explicit Cost
The direct, out-of-pocket expenses incurred by a company or individual, contrasting with implicit costs which represent opportunity costs.
Sunk Costs
Expenses that have already been incurred and cannot be recovered, which should not affect future financial decisions.
Production Costs
The total expenses incurred in the process of producing goods or services, including raw materials, labor, and overhead.
Decision Making
The cognitive process of selecting a course of action from among multiple alternatives, often involving considerations of risk and benefits.
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