CPCU 540 EXAM 2024 WITH 100% CORRECT ANSWERS
Why is it so important for a corporation to adopt a code of ethics? - correct answer✔✔ . A code of ethics provides a means of actively managing ethics in the workplace.The treasurer of a corporation has decided to implement changes to the corporation's capital structure for the coming fiscal year. She plans to raise more capital through long-term debt, rather than alternate sources. With the implementation of these changes, she expects the total value of the corporation to - correct answer✔✔ Remain the same.Which one of the following is a consequence of focusing on the maximization of profits? - correct answer✔✔ Electing accounting treatments that make financial statements less useful to potential investors (A consequence of focusing on the maximization of profits is electing accounting treatments that make financial statements less useful to potential investors.The Sarbanes-Oxley Act of 2002 - correct answer✔✔ Created a board to regulate public accounting firms that audit publicly traded corporations.Which one of the following statements is true? - correct answer✔✔ Fair value leads to values that are consistent with economic income.Assets on the balance sheet are classified as current and noncurrent. Which one of the following is classified as a noncurrent asset? - correct answer✔✔ A copyright that expires in 10 months Liabilities are claims against the organization's assets. Which one of the following best describes a current liability? - correct answer✔✔ Unpaid invoices from vendors 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? - correct answer✔✔ A review of the financial statements helps John to determine XYZ's insurance needs.The income statement provides a detailed explanation of the results of the organization's operations.Net income is found on the income statement as well as the - correct answer✔✔ Statement of changes 1 / 2
in shareholders' equity. (Net income is found on the income statement as well as the statement of changes in shareholders' equity.Efficiency ratios measure - correct answer✔✔ How well a company manages and uses its assets.Which one of the following statements about various schedules to the National Association of Insurance Commissioners (NAIC) Annual Statement is true? - correct answer✔✔ At the bond's amortized cost (Under SAP, a bond is valued on an insurance company's balance sheet at the bond's amortized cost.Which one of the following statements concerning interest rate compounding periods is most accurate?
- correct answer✔✔ The effective annual interest rate is always greater than or equal to the stated
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annual interest rate.Crude Oil Company is considering an investment of $270,000 to replace the outdated clean air system at its refinery. The new equipment will generate a savings of $70,000 per year for each year of its six-year life. Crude's cost of capital is 12%. What is the present value of the cash inflows from the proposed investment, ignoring income taxes? - correct answer✔✔ $287,798 (The NPV formula shows the sum of the PVs of the inflows for each year: [C 1 ÷ (1 + r)1 ] + [C 2 ÷ (1 + r)2 ] + [C 3 ÷ (1 + r)3]+ etc. or roughly $62,500 + $118,500 + $168,000 + $213,090 + $252,860 + $288,390. Rounding differences depending on the calculation method will yield slightly different results. Some may recognize this as an annuity calculation.Sun Company's computer system must be replaced in five years at a cost of $100,000. The owners have placed $60,000 in an investment that pays 12 percent compounded quarterly and matures in five years.When this investment matures, how much additional money, if any, will Sun Company need to replace the computer system? - correct answer✔✔ $ 0 (FV = PV x (1+r)n. Use the FV factor from the table 3% over 20 periods to account for the quarterly compounding. $60,000 x 1.8061 = $108,366. This is greater than the $100,000 replacement cost, so $0 additional money is required.Which one of the following risk management techniques used by financial institutions to avoid credit risk has been known to lead to systemic risk? - correct answer✔✔ Selling of loans to other organizations (The selling of loans to other organizations led to the excessive systemic risk that was a major factor in the 2007-08 global financial crisis. Defaults by a significant number of borrowers led to a systemic credit crisis.