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CPCU 540 EXAM/306 QUESTIONS AND ANSWERS/A+ RATED
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CPCU 540 EXAM/306 QUESTIONS ANDANSWERS/A+ RATED
Capital budgeting - -The planning and managing of a corporation's long-term
investments
-Capital structure - -A corporation's mix of long-term debt and equity
-Fair value - -The market value, either actual or estimated, of an asset or a
liability
-Sarbanes-Oxley Act of 2002 - -A federal statutory law governing corporate
directors in the areas of investor protection, internal controls, and penalties,
both civil and criminal.
-Stakeholder - -Anyone with a financial interest in the corporation
-Statutory accounting principles (SAP) - -The accounting principles and
practices that are prescribed or permitted by an insurer's domiciliary state
and that insurers must follow
-Working capital - -A liquidity measure that is calculated by subtracting
current liabilities from current assets. It is used to determine a company's
ability to finance immediate operations (to buy inventory, finance growth,
and obtain credit)
-Accounting - -The classification, analysis, and determination of the
appropriate method of reporting the effects of the bookkeeping records in an
organization's financial statements
-Additional Paid-In-Capital (equation) - -(#shares x price per share) -
(#shares x par value)
-Assets Unique to Insurers - -Premium Receivables
Reinsurance recoverables
Deferred policy acquisition costs
-Balance sheet - -The financial statement that reports the assets, liabilities,
and owners' equity of an organization as of a specific date
-Balance Sheet Equation - -Assets - liabilities = shareholder's equity (net
worth)
, -Comprehensive income - -A measure of income that goes beyond that
reported on the income statement by including items such as unrealized
gains and losses
-Cost of Goods Sold - -Beginning inventory + additions to inventory - ending
inventory
-Current assets - -A balance sheet asset classification that includes case
and other assets that are expected to be converted into cash, sold, or
exchanged within the buisness's normal operating cycle, usually one year
-Current liabilities - -A balance sheet liability classification that includes
obligations whose payments are reasonably expected to require the use of
cash or the creation of other current liabilities within one year
-Depreciation expense - -An accounting method that spreads out the
expense of a purchase over the life expectancy of the item
-Financial statement - -A document that quantitatively presents an
organization's financial activities or status
-Form 8-K Required When... - -- Material definitive agreements entered
- Release of non-public information
- Creation of a direct financial obligation
- Change of independent auditor
- Departure or election of directors/principal officers
-Generally accepted accounting principles (GAAP) - -The rules and
procedures to be used in the preparation of an organization's financial
statements
-Gross Margin (equation) - -Gross profit / sales
-Gross margin (gross profit margin) - -The percentage of sales remaining
after deducting the cost of goods sold from sales, calculated by dividing
gross profit by sales
-Gross profit - -An income statement value that represents sales or
operating revenue minus the cost of goods sold
-Gross Profit (equation) - -Sales (operating revenues) - cost of goods sold
-Inventory - -An asset classification that consists of goods available for sale
to customers; for a manufacturing company, also includes raw materials and
finished goods
, -Liabilities Unique to Insurers - -Unpaid losses and loss adjustment
expenses
Unearned premium
-Major components of shareholder equity - -Paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock
-Marketable Securities - -An asset classification that includes temporary
investments that can easily be converted into cash
-Mark-up - -Gross profit expressed as a percentage of the cost of goods sold
-Net Income (equation) - -Revenue - Expenses (including depreciation) +
Gains - Losses - Taxes
-Notes to financial statements include - -- A brief description of the
company's operations
- Significant accounting policies and changes
- Detailed listing of long-term debt
- Loss contingencies and other commitments
- Financial information by business segment
- Any other explanations management deems necessary
-Operating income - -An income statement value that reflects income that
results from the normal operations of the business during the period covered
by the statement; calculated as the goss profit less selling, general, and
administrative expenses
-Operating Income (equation) - -Gross Profit - General Operating Expenses
-Other Comprehensive Income - -Change in unrealized value of investments
Foreign currency translations gains or losses
Changes in minimum pension liability
-Paid-in capital - -The total amount invested in an organization by the
owners (i.e. The amount raised through the sale of stock)
-Paid-In-Capital (equation) - -Par value + paid in capital over the par value
-Prepaid Expenses - -An asset classification that represents the amount that
has already been paid for services that have not been received or used
-Receivables - -An asset classification that consists of the amounts owed to
a company by customers and other outsiders
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