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
In transportation insurance, 'incurred but not reported' (IBNR) reserves are set aside to cover:
Answer: Losses that have occurred but have not yet been reported to the insurer
IBNR reserves account for losses that occurred during the policy period but where the insurer has not yet received a claim notification.
A transportation company has an operating ratio of 96%. This means:
Answer: The company earns $0.04 of operating profit per dollar of revenue
An operating ratio of 96% means operating expenses consume 96 cents of every revenue dollar, leaving 4 cents as operating profit.
Which concept describes the maximum total cost of risk a transportation company is willing to absorb before purchasing excess or umbrella coverage?
Answer: Self-insured retention (SIR)
A self-insured retention (SIR) is the dollar amount below which the insured bears all costs before the insurance policy responds.
Depreciation expense on a trucking fleet affects which financial statements?
Answer: Income statement and balance sheet
Depreciation reduces asset book value on the balance sheet and simultaneously reduces net income on the income statement as a non-cash expense.
A transportation risk manager is comparing a $1M umbrella policy at $15,000 annual premium vs. self-insuring that layer. Which factor is LEAST relevant to this decision?
Answer: The CEO's personal credit score
The CEO's personal credit score has no bearing on corporate risk financing decisions; the other factors directly affect the cost-benefit analysis.
When performing a cost-benefit analysis for a transportation safety program, the risk manager should include all of the following EXCEPT:
Answer: Historical sunk costs already spent on prior programs
Sunk costs are irrelevant to forward-looking cost-benefit analyses because they cannot be recovered regardless of the decision made.
A motor carrier's balance sheet shows $2M in stockholders' equity and $6M in total debt. Its debt-to-equity ratio is:
Answer: 3.0
Debt-to-equity equals total debt divided by stockholders' equity: $6M / $2M = 3.0, meaning the company has $3 in debt for every $1 of equity.