For P&C insurers, if the combined ratio is more than 100 percent, that firm A) could not have been profitable. B) must have been profitable. C) may have been profitable if investment returns were high enough. D) was profitable if the LAE was low enough.
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- Unity Insurance Company (UIC) has an operating ratio of 0.98, a combined ratio of 1.02, and a loss ratio of 0.77. Considering these ratios, which one of the following statements is true for UIC? OA. UIC's favorable financial basis expense ratio is offsetting losses, allowing an underwriting profit. B. UIC is collecting enough premium to allow a profit from its underwriting operations. C. UIC's investment income is offsetting losses and expenses from its underwriting operation, allowing an operating profit. D. UIC is collecting enough premium exclusive of investment income to allow an operating profit. QUESTIWhich of the following statements are true about the interest-burden ratio? Check all that apply: It can be expressed as EBIT/Interest Expense. If the company has no financial leverage, the interest-burden ratio will be equal to 0. A company with higher financial leverage will have a lower interest-burden ratio. If the company has no financial leverage, the interest-burden ratio will be equal to 1. It can be expressed as Net profits/Pretax profits.(i). Debt investments not plan to sell reported at a. amortized cost. b. fair value. c. the lower of amortized cost of fair value. d. net realizable value. (ii). which of the following caa be reported at fair value? a. Debt investments. b. Equity investments. c. Both debt and equity investments: d None of these answers' choices are correct.
- Underwriting risk results when the premiums generated on a given insurance product line are insufficient to cover all of the following EXCEPT: a.All of the above. b.Increased premiums. c.Increased expenses. d.Increased claims.Which of the following statements are true about the interest-burden ratio? Check all that apply: If the company has no financial leverage, the interest-burden ratio will be equal to 1. A company with higher financial leverage will have a lower interest-burden ratio. if the company has no financial leverage, the interest-burden ratio will be equal to 0. It can be expressed as Net profits/Pretax profits. It can be expressed as EBIT/Interest Expense.Which of the following is correct about the effect of a deductible with respect to the price of an insurance policy? O A policy with a deductible will raise the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will lower the premium. This will make the overall cost of insurance higher for policyholders who do not have a claim, but lower for those with high claims O A policy with a deductible will raise the premium. This will make the overall cost of insurance lower for policyholders who do not have a claim, but higher for those with high claims O A policy with a deductible will lower the premium. This will make the overal cost of insurance lower for policyholders who do not have a claim, but higher for those with high claims
- When the market value of a companys available-for-sale securities is lower than its cost, the difference should be: a. shown as a liability. b. shown as a valuation allowance added to the historical cost of the investments. c. shown as a valuation allowance subtracted from the historical cost of the investments. d. No entry is made, the securities are shown at historical cost.1. The interest cost component of the net defined benefit cost is determined using a. the settlement rate of interest. b. the rate of return on high quality corporate bonds c. both a and b. d. neither a or b. 2. Financial reporting standards for pension currently in effect a. allow both the accrued benefit and projected benefit methods. b. allow only the accrued benefit method/ projected unit credit method. c. allow only the projected benefit method. d. do not allow either the accrued benefit or projected benefit methods. 3. Which of the following is not correct? a. PAS 19 does not include any provisions for the recognition of an additional minimum liability. b. PAS 19 does not allow for the recognition of a net pension asset equal to the computed surplus in some circumstances. c. PAS 19 requires the 10% corridor amount in calculating the amortization of deferred gains and losses. d. PAS 19 requires settlement gains and…Analyze the truth of this statement: Under the cost method of accounting for investments, a dividend received is treated as a reduction in the book value of the investment. Group of answer choices This statement is true. This statement is false. There is not enough information to determine the truth of this statement. There is no such thing as a cost method.
- Compare and contrast the net income margins of both Company A and B. Do you think the company with the lower net income margin is in absolute financial distress? Explain.1."Other things being equal, do both companies appear to have the ability to meet their obligations as measured by the debt to equity ratio?2.Based solely on the times interest earned ratios, do you reach the same conclusion as in Requirement 1?3.Is the margin of safety provided to creditors by Discount Goods improving or declining in recent years as measured by the average times interest earned ratio?" Please do not copy and paste some other solutions from here.Why is the acid test ratio a more rigorous test of short-term solvency than the current ratio? A. The quick ratio eliminates prepaid expenses for the denominator.B. The quick ratio eliminates prepaid expenses for the numerator.C. The quick ratio eliminates inventories from the numerator.D. The quick ratio considers only cash and marketable investments as current assets.E. The quick ratio eliminates revenue from the numerator.