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LOMA 291 Module 4 Exam with complete solutions
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LOMA 291 Module 4 Exam with complete solutions
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LOMA 291 Module 4 Exam with completesolutions
At a typical insurance company, which of the following areas are part of financial operations? Choose all that apply.
a. Accounting and financial reporting
b. Treasury operations
c. Information technology
d. Investment operations
e. Internal audit - Answer -A, B, D, & E- All of these areas—except for information technology—are part of a typical insurance company's financial operations. Although the IT department plays an essential role in maintaining the quality of the data provided to financial managers, it is not technically part of financial operations.
Board and Executive Roles
The financial management function - Answer -Provides information to stakeholders
Ensures that financial obligations are met
Ensures compliance with complex financial regulations
Generates adequate returns for the company's owners and customers
Role of the Board of Directors - Answer -- Investment committee: The investment committee sets Forthright's investment policy and oversees investment operations.
- Audit/risk committee: The audit/risk committee directs Forthright's audit and internal control function.
The role of the Ceo - Answer -I approve our budget numbers. Then I manage our resources—in line with budget guidelines and all current laws and regulations.
Technically I'm responsible for directing financial objectives and strategies, but I delegate most of these responsibilities to senior financial officers.
However, make no mistake, the buck stops here! We are a publicly held company. Investors, customers, and regulators can, and should, hold me responsible for our financial results.
The role of the CFO - Answer -As CFO, I report to Grace Avon, our CEO. I work closely with company directors to develop corporate goals and strategies. I coordinate, monitor,
and direct Forthright's financial activities. That covers a lot of territory. In the financial world, information quality and accuracy are critically important—I work closely with IT to make sure we get that right. That information has to be communicated to company managers and external parties. When we need to raise funds—that's also my job.
Last, but not least, strong financial controls and measurement tools are absolutely essential.
Financial Management Operating Units - Answer -Specific job titles and organizational structures vary according to a company's unique needs, but all insurers must perform certain core financial functions, as shown below.
An organization chart. Under Financial Operations are Accounting and Financial Reporting, Treasury Operations, and Investment Operations. Separate is Internal Audit.
An insurance company's investment committee directs the company's internal audit and
control function.
a. True
b. False - Answer -A company's internal audit and control function is directed by the audit/risk committee. The investment committee sets the company's investment policy and oversees investment operations.
Let's look at how Forthright Financial organizes its financial operations, starting with its accounting and financial reporting function.
accounting - Answer -A system or set of rules and methods for collecting, recording, analyzing, summarizing, and reporting financial information.
financial reporting - Answer -The process of presenting financial data about a company's financial position, operating performance, and flow of funds.
The controller - Answer -responsible for the timely and accurate collection and reporting
of all of Forthright's financial data
The accounting function:
Records, tracks, and reports on financial transactions
Coordinates the budget process and oversees expense analysis
Prepares financial statements and reports for external users
Gathers, records, analyzes, and distributes financial information to company managers
Of the following stakeholders, select the ones Forthright would consider to be internal users of its accounting information. Choose all that apply.
a. Regulators
b. Rating agencies
c. Board of directors d. Policyowners
e. Managers
f. Investors
g. Taxing authorities - Answer -C & E - Internal users work inside the company and make decisions about the company's operations. External users are outside the company and use the company's financial information primarily to make investment, regulatory, and other decisions about the company.
user information needs (managers) - Answer -Managers within the organization may use accounting information to
Assess their departments' day-to-day operations
Judge whether they are meeting their financial goals
Plan for future needs
external policy owner - Answer -As a policyowner, I want to know that Forthright will have enough money to pay its bills. I want to be sure that it is financially stable. Will Forthright be able to pay my claim 25 years from now?
external investor - Answer -I'm considering buying shares of Forthright's corporate stock. I want to know how profitable the company is and how financially stable it is. What kind of return can I expect on my investment?
external regulator - Answer -As a regulator, my role is to protect the interests of consumers who have purchased insurance policies. I want to know that an insurer can honor its obligations to policyholders at all times. My focus is on the company's ability to
pay its bills rather than its ability to make a profit. Is Forthright making sound business decisions so that it will remain solvent?
financial accounting - Answer -The field of accounting that focuses primarily on reporting a company's financial accounting information to meet the needs of the company's external stakeholders.
- regulators
- creditors
- investors
- rating agencies
- tax authorities
Management accounting - Answer -The field of accounting that focuses primarily on reporting and presenting a company's financial information to meet the needs of the company's internal users.
- managers
financial statements - Answer -Standardized summary reports of a company's major monetary events and transactions.
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