ARM 401 - Chapter 9
Assets - correct answer-the resources an organization owns or uses to operate its business.
Balance Sheet - correct answer-a snapshot of a business's financial position at a particular
moment in time
Counterparty Risk - correct answer-The risk that the other party to an agreement will default.
Credit Risk - correct answer-The risk that customers or other creditors will fail to make
promised payments as they come due.
Current Assets - correct answer-cash and other assets that are expected to be converted to
cash within a year.
Depreciation - correct answer-an accounting term used to describe allocation of a noncurrent
tangible asset's value over its useful life.
Economic Capital - correct answer-The amount of capital required by an organization to
ensure solvency at a given probability level, such as 99 percent, based on the fair value of
its assets minus the fair value of its liabilities.
Enterprise Risk Management - correct answer-An approach to managing all of an
organization's key business risks and opportunities with the intent of maximizing shareholder
value. Also known as enterprise-wide risk management.
Exchange Rate Risk - correct answer-Uncertainty about an investment's value because of
potential changes in the exchange rate between currencies.
Fair Value - correct answer-The market value, either actual or estimated, of an asset or a
liability.
Forward Contract - correct answer-A contract that obligates one party to buy and another
party to sell a specific financial instrument or physical commodity at a specified future date
and price.
Generally Accepted Accounting Principles (GAAP) - correct answer-A common set of
accounting standards and procedures used in the preparation of financial statements to
ensure consistency of presentation and reported results.
Interest Rate Risk - correct answer-The risk that a security's future value will decline
because of changes in interest rates.
Liabilities - correct answer-the debts and obligations that represent claims against an
organization's assets.
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