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 the context of TRIP financial analysis, 'risk cost' is BEST defined as:
Answer: The sum of retained losses, risk transfer costs, and risk management administrative expenses
Total cost of risk (TCOR) encompasses all costs related to managing risk: retained losses, insurance premiums, and administrative/program costs.
A transportation company issues $10M in bonds to finance new equipment. How does this transaction initially affect the balance sheet?
Answer: Assets increase $10M; liabilities increase $10M
Issuing bonds increases cash (an asset) by $10M and simultaneously creates a $10M long-term liability, keeping the accounting equation balanced.
Which reinsurance arrangement provides a transportation insurer protection against aggregate losses exceeding a defined threshold in any policy year?
Answer: Aggregate stop-loss reinsurance
Aggregate stop-loss reinsurance triggers when total losses for a period exceed a specified aggregate amount, protecting against adverse cumulative experience.
A transportation company's accounts receivable days outstanding increased from 32 to 58 days. A risk manager should be concerned because this may indicate:
Answer: Customers are paying more slowly, straining cash flow
Rising days sales outstanding (DSO) means customers are taking longer to pay, which can create cash flow pressure and increase bad debt exposure.
Under a large deductible program, who pays claims on behalf of the insured and then seeks reimbursement up to the deductible amount?
Answer: The insurer, with subsequent reimbursement from the insured
In large deductible programs, the insurer pays all claims and then invoices the insured to reimburse losses falling within the deductible layer.
Which financial planning document translates a transportation company's strategic goals into projected revenues, expenses, and cash flows for an upcoming fiscal year?
Answer: Annual operating budget
The annual operating budget converts strategic objectives into detailed financial projections, serving as the primary tool for resource allocation and performance measurement.
A risk manager is evaluating a $500,000 investment in a driver safety technology system. If the system reduces annual claim costs by $120,000, what is the approximate payback period?
Answer: 4.2 years
Payback period equals the initial investment divided by annual savings: $500,000 / $120,000 = approximately 4.2 years.