AU 60 Questions with Complete Solutions
An analyst is comparing the financial data of two companies that compete in the same industry,
Company A and Company B. Each of the two companies has the same return on assets ratio
(ROA), and the analyst wants to understand how each is using its resources to achieve this result.
Further analysis reveals that Company A has a lower asset turnover ratio than Company B. This
analysis indicates that
A. Company B is generating a higher level of sales in proportion to its assets than Company A.
B. Company A is generating a higher level of sales in proportion to its assets than Company B.
C. Company B is retaining a higher level of net income relative to sales than Company A.
D. Company A may or may not be retaining a higher level of net income relative to sales than
Company B. A. Company B is generating a higher level of sales in proportion to its assets
than Company A.
Which one of the following statements best describes the shareholders' equity section of the
balance sheet?
Select one:
A. Shareholders' equity is negative when liabilities exceed assets.
B. Shareholders' equity is an asset of the business entity.
C. Shareholders' equity is negative when the entity reports a net loss for the year.
,D. Shareholders' equity decreases by the amount of debt satisfied during the year. A.
Shareholders' equity is negative when liabilities exceed assets.
Which one of the following statements is correct with respect to field underwriters?
Select one:
A. Field underwriters select and rate new business. They are not generally involved in the
proposal or renewal process.
B. Field underwriters can offer valuable technical assistance to an insured's risk manager and to
the producer responsible for the account.
C. Field underwriters formulate underwriting policy and develop underwriting guides.
D. Field underwriters focus on risk characteristics and need not be knowledgeable about policy
forms and provisions. B. Field underwriters can offer valuable technical assistance to an
insured's risk manager and to the producer responsible for the account.
Suppose ABC Company comes to insurer XYZ. The underwriter wants to use a debt-to-equity
(D/E) ratio to help determine the extent to which ABC is financed through borrowings rather
than its own funds. Based on the financial information below, what is ABC's debt-to-equity ratio?
Long-term debt: $10 million Shareholder's equity: $30 million Total liabilities: $15 million Total
assets: $60 million
, Select one:
A. .33
B. .50
C. 3.0
D. 4.0 A. .33
Which one of the following statements is true regarding how advancements in technology have
changed the commercial insurance underwriter's job?
Select one:
A. Underwriters are using the data more to evaluate a portfolio or book of business, than an
individual risk.
B. The underwriting process has become more transactional.
C. Underwriters are spending less time cultivating relationships and trust with insureds.
D. With the abundance of data available, underwriters are spending more time evaluating an
account's data. A. Underwriters are using the data more to evaluate a portfolio or book of
business, than an individual risk.
An analyst is comparing the financial data of two companies that compete in the same industry,
Company A and Company B. Each of the two companies has the same return on assets ratio
(ROA), and the analyst wants to understand how each is using its resources to achieve this result.
Further analysis reveals that Company A has a lower asset turnover ratio than Company B. This
analysis indicates that
A. Company B is generating a higher level of sales in proportion to its assets than Company A.
B. Company A is generating a higher level of sales in proportion to its assets than Company B.
C. Company B is retaining a higher level of net income relative to sales than Company A.
D. Company A may or may not be retaining a higher level of net income relative to sales than
Company B. A. Company B is generating a higher level of sales in proportion to its assets
than Company A.
Which one of the following statements best describes the shareholders' equity section of the
balance sheet?
Select one:
A. Shareholders' equity is negative when liabilities exceed assets.
B. Shareholders' equity is an asset of the business entity.
C. Shareholders' equity is negative when the entity reports a net loss for the year.
,D. Shareholders' equity decreases by the amount of debt satisfied during the year. A.
Shareholders' equity is negative when liabilities exceed assets.
Which one of the following statements is correct with respect to field underwriters?
Select one:
A. Field underwriters select and rate new business. They are not generally involved in the
proposal or renewal process.
B. Field underwriters can offer valuable technical assistance to an insured's risk manager and to
the producer responsible for the account.
C. Field underwriters formulate underwriting policy and develop underwriting guides.
D. Field underwriters focus on risk characteristics and need not be knowledgeable about policy
forms and provisions. B. Field underwriters can offer valuable technical assistance to an
insured's risk manager and to the producer responsible for the account.
Suppose ABC Company comes to insurer XYZ. The underwriter wants to use a debt-to-equity
(D/E) ratio to help determine the extent to which ABC is financed through borrowings rather
than its own funds. Based on the financial information below, what is ABC's debt-to-equity ratio?
Long-term debt: $10 million Shareholder's equity: $30 million Total liabilities: $15 million Total
assets: $60 million
, Select one:
A. .33
B. .50
C. 3.0
D. 4.0 A. .33
Which one of the following statements is true regarding how advancements in technology have
changed the commercial insurance underwriter's job?
Select one:
A. Underwriters are using the data more to evaluate a portfolio or book of business, than an
individual risk.
B. The underwriting process has become more transactional.
C. Underwriters are spending less time cultivating relationships and trust with insureds.
D. With the abundance of data available, underwriters are spending more time evaluating an
account's data. A. Underwriters are using the data more to evaluate a portfolio or book of
business, than an individual risk.
