1. It is accurate to say that a company's value is at risk if its value can be affected by events beyond the control of managers.

True or False

2. Managers of Starbucks have identified climate change as a risk to coffee farmers and thus to the company's supply chain.

True or False

3. Market risk is the risk that prices and interest rates move in directions and by amounts that reduce the value of the enterprise.

True or False

4. Risk transfer is the same as risk elimination.

True or False

5. Since cash is the lifeblood of a business it is critical for management to know how much cash is moving into and out of a company and they should monitor this cash flow continuously to detect irregularities.

True or False

6. Starbucks (SBUX) buys all of its coffee beans on the spot market. Managers believe that price increases and price decreases average out over time and hedging with forward contracts is too costly.

True or False

7. The concentration of credit risk should be managed with exposure limits. If credit risk is too concentrated a single error in judgment in granting credit can wipe out a firm's economic capital.

True or False

8. When a household buys fire insurance it is transferring, the loss associated with a fire to an insurance company.

True or False