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AU 60 FINAL EXAM
EXAM WITH CORRECT SOLUTIONS.
The common distinction between field underwriters and corporate underwriters is that line underwriters - correct answer- Implement the steps in the underwriting process.Corporate underwriters assist underwriting management with formulating underwriting policy.
Which one of the following statements is correct with regard to regulation and insurers' operations? - correct answer- Solvency regulation indirectly influences underwriting by limiting new business for insurers.
Underwriting regulations seek to ensure correct classification of insureds because - correct answer- Misclassification can result in inadequate premiums and drain an insurer's surplus.
The primary benefit of using the services of an independent contractor who specializes in risk control work to inspect properties, rather than the insurer's risk control representative?
- correct answer- Quicker response
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John is a risk management specialist for XYZ Company. John examines XYZ's financial statements on a quarterly basis.Which one of the following best describes a reason for this analysis? - correct answer- A review of the financial statements helps John to determine XYZ's insurance needs.
Cost of goods sold appears on the income statements of manufacturing and retail entities. Which one of the following statements best describes cost of goods sold - correct answer- Cost of goods sold reports expenses after an inventory item is sold.
Which one of the following types of analysis helps an underwriter identify abnormal values reported by an organization? - correct answer- Vertical analysis
Liquidity ratios are used to determine a company's ability to pay off its short-term debts. Typically, the higher the value of the ratio, - correct answer- The larger the margin of safety the company possesses to cover its short-term debts.
Which one of the following ratios indicates the adequacy of a company's working capital to meet its current financial obligations? - correct answer- Current ratio
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The most recent financial statements for Buddy's Burger Hut
reveal the following:
Cash$50,000 Equipment$25,000 Inventory$15,000 Accounts Receivable$2,500 Cost of Goods Sold$125,000 Marketable Securities$5,000 Current Liabilities$50,000 Based on this information, Buddy's Burger Hut's Acid-Test Ratio is - correct answer- Buddy's Burger Hut's Acid-Test Ratio is
1.15. ($50,000 + $5,000 + $2,500) / $50,000 = 1.15
An organization that considers both key business risks and opportunities when formulating its business strategies reflects its commitment to which one of the following? - correct answer- Enterprise risk management
William is a plumber. He has a contract with a home builder to install the bathrooms in a new housing development. William will supply the materials and equipment. He will be paid a fixed fee per house and must complete the job by an agreed deadline. Which one of the following best describes William's relationship to the home builder? - correct answer- Subcontractor
Which one of the following sources of underwriting information provides a hazard index by line of insurance for the various classifications? - correct answer- Best's Underwriting Guide
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