AU 60 FINAL EXAM PRACTICE ACTUAL EXAM
|COMPLETE 150 QUESTIONS WITH CORRECT VERIFIED
ANSWERS |PRE-EVALUATED A+
The common distinction between field underwriters and corporate underwriters is that line
underwriters - ANSWER-Implement the steps in the underwriting process. Corporate underwriters assist
underwriting management with formulating underwriting policy.
Which one of the following statements is correct with regard to regulation and insurers' operations? -
ANSWER-Solvency regulation indirectly influences underwriting by limiting new business for insurers.
Underwriting regulations seek to ensure correct classification of insureds because - ANSWER-
Misclassification can result in inadequate premiums and drain an insurer's surplus.
The primary benefit of using the services of an independent contractor who specializes in risk control
work to inspect properties, rather than the insurer's risk control representative? - ANSWER-Quicker
response
John is a risk management specialist for XYZ Company. John examines XYZ's financial statements on a
quarterly basis. Which one of the following best describes a reason for this analysis? - ANSWER-A review
of the financial statements helps John to determine XYZ's insurance needs.
, Cost of goods sold appears on the income statements of manufacturing and retail entities. Which one of
the following statements best describes cost of goods sold - ANSWER-Cost of goods sold reports
expenses after an inventory item is sold.
Which one of the following types of analysis helps an underwriter identify abnormal values reported by
an organization? - ANSWER-Vertical analysis
Liquidity ratios are used to determine a company's ability to pay off its short-term debts. Typically, the
higher the value of the ratio, - ANSWER-The larger the margin of safety the company possesses to cover
its short-term debts.
Which one of the following ratios indicates the adequacy of a company's working capital to meet its
current financial obligations? - ANSWER-Current ratio
The most recent financial statements for Buddy's Burger Hut reveal the following:
Cash$50,000 Equipment$25,000 Inventory$15,000 Accounts Receivable$2,500 Cost of Goods
Sold$125,000 Marketable Securities$5,000 Current Liabilities$50,000
Based on this information, Buddy's Burger Hut's Acid-Test Ratio is - ANSWER-Buddy's Burger Hut's Acid-
Test Ratio is 1.15. ($50,000 + $5,000 + $2,500) / $50,000 = 1.15
An organization that considers both key business risks and opportunities when formulating its business
strategies reflects its commitment to which one of the following? - ANSWER-Enterprise risk
management
William is a plumber. He has a contract with a home builder to install the bathrooms in a new housing
development. William will supply the materials and equipment. He will be paid a fixed fee per house and
must complete the job by an agreed deadline. Which one of the following best describes William's
relationship to the home builder? - ANSWER-Subcontractor
Which one of the following sources of underwriting information provides a hazard index by line of
insurance for the various classifications? - ANSWER-Best's Underwriting Guide
Jackson is a commercial lines underwriter. When evaluating an organization's location, one of the
factors that he considers is how susceptible the organization is to social inflation. Social inflation is
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