With Respect to Risk Response Strategies, Which of the Following

question 6

Multiple Choice

With respect to risk response strategies, which of the following would be a "risk avoidance" approach?

• A)XYZ company enters the market as a provider of car insurance to high credit risk clients; however, they diversify their portfolio by targeting 40% of their marketing efforts to traditional "safe credit" customers.
• B)LGW Communications employs a series of manual and automated controls to manage inventory shrinkage (inventory going missing due to damage or theft)in an effort to keep inventory costs in line with industry standards.
• C)JLW Industries is a holding company with a division that specializes in high-risk offshore oil drilling.Given the recent Gulf oil spill and vicious backlash from consumers and politicians, JLW decides to divest itself of the oil drilling division.
• D)XYZ company is concerned that they do not have the capability to bring a new product to market, so they enter into a joint venture with ABC company; XYZ will handle design and marketing of the new product, while ABC will handle manufacturing and logistics.

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Definitions:

T-Account

A visual representation of a general ledger account that helps in understanding the effects of transactions on account balances.

Account

A document detailing all dealings related to a specific element of the accounting formula.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to ensure equality.

Debit And Credit Balance

Accounting terms where debit balances typically exist in asset and expense accounts, and credit balances in liability, equity, and revenue accounts.