Best answer: What is the one type of insurance that every business needs to have?

1. Professional liability insurance. Professional liability insurance, also known as errors and omissions (E&O) insurance, covers a business against negligence claims due to harm that results from mistakes or failure to perform. There is no one-size-fits-all policy for professional liability insurance.

What is the one type of insurance that every business needs to have quizlet?

What is the one type of insurance that every business needs to have? … Worker’s compensation insurance is required by law, but the number of employees needed for coverage varies from state to state.

Why should you fund projects internally with cash from profits as opposed to debt or equity financing when possible?

Why should you fund projects internally with cash from profits, as opposed to debt or equity financing, when possible? You can avoid costs of debt such as interest and risk of default. You can retain all of your assets. You can maintain decision-making and ownership of your company.

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What capital budgeting method is calculated by investment cost divided by annual net cash flows?

Payback technique

It is calculated by dividing the capital investment by the net annual cash flow.

Which of the following is the least effective effort in collecting overdue receivables?

Which of the following is the least effective effort in collecting overdue receivables? Send overdue accounts to collections and cancel customer credit immediately. When considering the sales cycle’s impact on cash flows in a manufacturing business offering credit, which of the following statements is false?

Which type of insurance protects a person or property from accidental injury?

Liability insurance provides protection against claims resulting from injuries and damage to people and/or property. Liability insurance covers legal costs and payouts for which the insured party would be found liable.

What is the difference between general liability insurance and product liability insurance quizlet?

Business owners purchase general liability insurance to cover legal hassles due to accident, injuries and claims of negligence. … Product liability insurance protects against financial loss as a result of a defect product that causes injury or bodily harm.

What is better debt or equity?

The main benefit of equity financing is that funds need not be repaid. … Since equity financing is a greater risk to the investor than debt financing is to the lender, the cost of equity is often higher than the cost of debt.

How can a company raise funds internally?

Internal sources of finance

There are several internal methods a business can use, including owners capital , retained profit and selling assets . Owners capital refers to money invested by the owner of a business. This often comes from their personal savings.

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How does using internal sources affect the overall finance of your business?

It reduces the overall cost of most projects.

If you use internal sources of finance for the purchase, you pay the expense and that completes the transaction. Then you can repay the cost monthly, if needed, from other budget lines.

What is capital budgeting method?

Capital budgeting is a method of estimating the financial viability of a capital investment over the life of the investment. … Capital budgeting involves identifying the cash in flows and cash out flows rather than accounting revenues and expenses flowing from the investment.

What are the types of capital budgeting?

The Capital Budgeting Types is as follows :

  • 1) Expansion and Diversification – …
  • 2) Replacement and Modernization – …
  • 3) Mutually Exclusive Investments – …
  • 4) Independent Investments – …
  • 5) Contingent investments – …
  • 6) Research and Development Projects –

What is capital budgeting in financial management?

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.

Is the most important yet least productive asset that a small business owns?

Cash is the most important, yet least productive, asset that a small business owns. Businesses must have enough cash to meet their obligations or run the risk of declaring bankruptcy.

What is the average collection period?

The average collection period refers to the length of time a business needs to collect its accounts receivables. … The average collection period is determined by dividing the average AR balance by the total net credit sales and multiplying that figure by the number of days in the period.

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What strategies can businesses implement to avoid cash flow shortages?

However, there are a number of strategies for dealing with short-term cash shortfalls.

Reducing costs

  • taking no unnecessary money out of the business while its cash flow is limited.
  • opting to lease or hire-purchase new premises or machinery rather than buy outright and incur more debt.
  • delaying any increases in salaries.