Hernando and Margarita Have Decided to Take Out an Umbrella

question 96

Multiple Choice

Hernando and Margarita have decided to take out an umbrella policy from an insurance company. The main reason they would probably want to do this would be to:

• A) protect against major disasters, which are known as "rainy days."
• B) ensure that any children they have will be guaranteed the right to buy insurance at some future date.
• C) save money by having one company provide a variety of different types of coverage.
• D) take out one life insurance policy that covers both of them.

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Definitions:

Contribution Margin

The contribution margin represents the portion of sales revenue that is not consumed by variable costs and is available to cover fixed costs and generate profit.

Variable Cost

Business expenditures that adjust based on the activity level of the enterprise.

Operating Cash Flow

The cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations.

Required Rate

The minimum annual percentage return that an investment must earn to be considered acceptable to an investor, also known as the required rate of return.