Finance for Non-Finance Managers Risk Management and Internal Controls

Question 1

Which of the following best defines financial risk in a business context?

Accepted Answer

The possibility of a financial loss or adverse outcome due to uncertainty

Answer

The certainty that a company will lose money in the next quarter

Answer

The total amount of debt a company has on its balance sheet

Answer

The difference between projected and actual revenue

Question 2

What is the primary purpose of internal controls in an organization?

Accepted Answer

To safeguard assets, ensure accurate reporting, and promote operational efficiency

Answer

To maximize shareholder dividends

Answer

To replace the need for external audits

Answer

To reduce the number of employees in the finance department

Question 3

A company identifies that a single employee both approves purchase orders and processes payments. This violates which internal control principle?

Accepted Answer

Segregation of duties

Answer

Cost-benefit analysis

Answer

Management override

Answer

Dual authorization

Question 4

Which type of risk refers to the danger that a customer or counterparty will fail to meet their financial obligations?

Accepted Answer

Credit risk

Answer

Market risk

Answer

Liquidity risk

Answer

Operational risk

Question 5

What does a company's 'risk appetite' represent?

Accepted Answer

The level of risk a company is willing to accept in pursuit of its objectives

Answer

The total amount of losses a company has experienced in the past year

Answer

The number of risk events that occurred in a given period

Answer

The cost of insurance premiums the company pays annually

Question 6

Which of the following is an example of a risk TRANSFER strategy?

Accepted Answer

Purchasing insurance to cover potential losses

Answer

Discontinuing a risky product line

Answer

Investing in better safety equipment to reduce accidents

Answer

Accepting that some losses will occur and budgeting for them

Question 7

A risk assessment matrix is most commonly used to evaluate risks based on which two dimensions?

Accepted Answer

Probability of occurrence and potential impact

Answer

Revenue impact and market share

Answer

Employee count and geographic location

Answer

Duration of risk and industry sector