Practice Test Geeks(CIA) Certified Insurance Appraiser Practice Test
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Financial Analysis & Reporting Flashcards

7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. An insurance appraiser is reviewing a property's income statement. Which metric best represents the property's ability to generate profit after all operating expenses but before interest and taxes?

    Answer: Operating Income (EBIT)

    Operating Income (EBIT) measures profitability after operating expenses but before interest and tax deductions, making it the best measure of core operational performance.

  2. A commercial property generates $500,000 in gross rental income. After vacancy losses of $25,000 and operating expenses of $175,000, what is the Net Operating Income (NOI)?

    Answer: $300,000

    NOI = Gross Income − Vacancy Losses − Operating Expenses = $500,000 − $25,000 − $175,000 = $300,000.

  3. When analyzing an insured property's financial statements for a business interruption claim, which document most directly shows daily cash inflows and outflows?

    Answer: Statement of cash flows

    The statement of cash flows directly tracks actual cash inflows and outflows during a period, making it essential for business interruption analysis.

  4. A property owner files a loss-of-rents claim. The appraiser finds that comparable properties in the area have a 6% capitalization rate and the property's NOI is $90,000. What is the indicated property value?

    Answer: $1,500,000

    Value = NOI ÷ Cap Rate = $90,000 ÷ 0.06 = $1,500,000.

  5. In insurance appraisal, 'accounts receivable coverage' protects a business primarily against which type of loss?

    Answer: Destruction of records making collections uncollectable

    Accounts receivable coverage protects against loss when records are destroyed by a covered peril, preventing the business from proving and collecting amounts owed.

  6. Which financial ratio is most useful for an appraiser assessing a manufacturer's ability to meet short-term obligations when inventory is considered illiquid?

    Answer: Quick ratio

    The quick ratio (current assets minus inventory, divided by current liabilities) excludes inventory, providing a stricter measure of short-term liquidity.

  7. Under US GAAP, how should an insurance company report an incurred but not reported (IBNR) reserve on its balance sheet?

    Answer: As a liability in the loss reserve section

    IBNR reserves represent estimated future claims obligations and are recorded as liabilities on the insurer's balance sheet under loss reserves.