Financial Analysis & Planning Flashcards
7 cards from real TRIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Planning flashcards as text
A trucking company's combined ratio is 108%. What does this indicate about its underwriting performance?
Answer: The company is losing money on underwriting operations
A combined ratio above 100% means the insurer pays out more in losses and expenses than it collects in premiums, indicating an underwriting loss.
Which financial metric best measures how efficiently a transportation company converts revenue into net profit?
Answer: Net profit margin
Net profit margin (net income divided by revenue) directly measures how much profit is generated per dollar of revenue.
In transportation risk management, a 'captive insurance company' is primarily used to:
Answer: Self-fund retained risks through a company-owned insurer
A captive insurer is a subsidiary created by a parent company to underwrite its own risks, allowing it to retain premiums and manage exposures internally.
What is the primary purpose of an actuarial loss development triangle in transportation insurance?
Answer: To project how reported losses will grow to their ultimate settled values
Loss development triangles track how incurred losses change over successive evaluation periods, allowing actuaries to project ultimate loss amounts.
A motor carrier with $5M in assets and $3.5M in liabilities has a leverage ratio of:
Answer: 0.7:1
The debt-to-asset ratio is $3.5M / $5M = 0.70, meaning liabilities represent 70% of total assets.
Which budgeting approach requires transportation managers to justify all expenditures from zero each period rather than using the prior year as a baseline?
Answer: Zero-based budgeting
Zero-based budgeting starts from a 'zero base' each period, requiring justification for every expense rather than adjusting prior-year figures.
When evaluating a transportation company's liquidity, which ratio would MOST concern a risk manager if it fell below 1.0?
Answer: Current ratio
A current ratio below 1.0 means current liabilities exceed current assets, indicating the company may not meet short-term obligations.