Melanie Was Just Hired as the Risk Manager of JKL

question 60

Multiple Choice

Melanie was just hired as the risk manager of JKL Company.The company president asked her to make a thorough review of all of the company's loss exposures.Melanie noted that many employees were too heavily invested in stock issued by the company in their 401-k plan.Melanie suggested that the employees change some of their investment holdings to mutual funds that invest in stock issued by different companies.The risk control method that Melanie suggested is

• A)risk avoidance.
• B)duplication.
• C)diversification.
• D)separation.

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, showing how much contributes to fixed expenses and profits.

Sales Mix

Sales mix refers to the proportion of different products or services sold by a company, impacting its overall profitability and performance.

Fixed Costs

Expenses that remain constant regardless of business activity levels, including property leases and managerial salaries.

Contribution Margin Ratio

A financial metric that indicates what percentage of sales revenue remains after variable costs are subtracted to cover fixed expenses.