Cantanna Inc, is developing a pro forma income statement for the coming year. The chief financial officer estimates that fixed assets are $70,000,000 and that sales will be $300,000,000. If depreciation is historically 20% of fixed assets, what is the expected amount of depreciation for the upcoming year (in dollars)? A) $14,000,000 B) $20,000,000 C) […]
Jose and Maria would like “open-perils” coverage on their home and their personal property. Which unendorsed homeowners form provides this coverage? A) Homeowners 2 B) Homeowners 3 C) Homeowners 4 D) Homeowners 5 ANSWER Answer: D
Financing activities are concerned with: A) determining whether a company’s assets should be financed with debt or equity. B) managing a firm’s cash management procedures. C) managing a firm’s working capital. D) planning sales of a corporation’s equity capital. ANSWER A
Which of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy is true? A) The dwelling is covered on a named-perils basis. B) Personal property losses are settled on an actual cash value basis. C) Losses to the dwelling are always settled on an actual cash value basis. D) […]
Net working capital is equal to A) total assets minus total liabilities. B) total operating capital minus net income. C) current assets minus total liabilities. D) current assets minus current liabilities. ANSWER D
Assume that you expect to hold a $20,000 investment for one year. It is forecasted to have a year end value of $21,000 with a 30% probability; a year end value of $24,000 with a 45% probability; and a year end value of $30,000 with a 25% probability. What is the standard deviation of the […]
Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer? A) […]
Which of the following is an additional coverage provided under Section I of the Homeowners 3 policy? A) medical payments to others B) debris removal C) personal liability D) intentional property damage caused by an insured ANSWER Answer: B
A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm. The actual cash value of the loss was $9,000, but it will cost $12,000 to replace the roof. Ignoring any deductible, what will the insurer pay to settle […]
For a retailer with inventory to sell, the acid-test ratio will be A) less than the current ratio, thus providing a more stringent measure of liquidity. B) unimportant because it doesn’t include inventory. C) greater than the current ratio, thus providing a more stringent measure of liquidity. D) greater than the current ratio, thus providing […]
