Hector Had Been Asked to Serve on the Board of a Major

question 58

Multiple Choice

Hector had been asked to serve on the board of a major pharmaceutical firm.He reluctantly declined,citing the firm's lack of liability coverage for outside members of the board of directors.Hector's decision indicates that he:

• A)will self-insure against a loss from legal action taken against the pharmaceutical firm.
• B)feels that the potential loss from legal action against this firm is an uninsurable risk.
• C)insists that the firm follow the rule of indemnity.
• D)will manage his risk by avoiding the potential loss from a liability suit directed at the board of directors.

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Definitions:

Cash Balances

The amount of available cash in a company's accounts at any given time, used to meet short-term obligations.

EOQ Model

An inventory management formula that identifies the optimum order quantity to minimize both ordering and holding costs.

Constant Demand

A condition in which the demand for a product or service remains unchanged over a particular period of time.

Ordering Costs

The expenses directly tied to the creation and processing of an order.