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 transportation company's loss ratio is 72% and its expense ratio is 31%. Its combined ratio is:
Answer: 103%
The combined ratio equals the loss ratio plus the expense ratio: 72% + 31% = 103%.
In transportation financial planning, 'working capital' is defined as:
Answer: Current assets minus current liabilities
Working capital equals current assets minus current liabilities and measures a company's short-term financial health and operational liquidity.
Which risk financing technique transfers risk to a third party while allowing the insured to retain a portion of the loss through a deductible?
Answer: High-deductible insurance policy
High-deductible policies transfer catastrophic risk to the insurer while the insured self-funds losses up to the deductible amount.
A fleet manager is evaluating whether to lease or purchase vehicles. Which financial concept determines the true cost of each option over time?
Answer: Net present value analysis
NPV analysis discounts all future cash flows for each option to their present value, enabling a true apples-to-apples financial comparison.
Under GAAP accounting, transportation companies must recognize a loss reserve when a liability is:
Answer: Probable and the amount can be reasonably estimated
GAAP (ASC 450) requires loss accrual when a liability is probable of occurring and the amount can be reasonably estimated.
A risk manager negotiates a retrospective rating plan where the minimum premium is $80,000 and the maximum is $200,000. If actual losses are $10,000, the company pays:
Answer: $80,000 (the minimum premium)
In retrospective rating, the minimum premium is the floor the insured pays regardless of how low actual losses are.
Which financial statement would a risk manager review to understand a transportation company's cash generation from its core operations?
Answer: Statement of cash flows — operating activities
The operating activities section of the cash flow statement shows cash generated or consumed by core business operations, separate from investing and financing.