What Is the Primary Value of Insurance to Business Enterprise

question 20

Multiple Choice

What is the primary value of insurance to business enterprise?

• A) It removes all tort and contract liability risk.
• B) It provides a means to shift risk away from the business to an insurer.
• C) It shields directors and officers from personal liability.
• D) It imposes a duty of utmost good faith on the business enterprise.

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Definitions:

Net Income Before Taxes

The amount of profit a company has earned before any taxes have been deducted.

Equity for Common Stockholders

The portion of a company’s equity capital that is attributable to holders of common stock, representing their ownership interest.

Return on Total Assets

A financial ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets, indicating how efficiently a company uses its assets to generate earnings.

Net Income Before Interest and Taxes

Earnings of a company before interest and tax expenses are deducted; also known as operating profit.