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.

Read the first 7 Financial Analysis & Reporting flashcards as text

  1. An appraiser is determining the replacement cost of a building destroyed by fire. The original cost was $800,000, accumulated depreciation is $200,000, and the current replacement cost new is $1,100,000. What is the Actual Cash Value (ACV)?

    Answer: $825,000

    ACV = Replacement Cost New × (1 − Depreciation %) = $1,100,000 × (1 − 200/800) = $1,100,000 × 0.75 = $825,000.

  2. A retailer's gross profit margin dropped from 42% to 35% after a flood damaged inventory. Which financial analysis technique best isolates the impact of the flood on profitability?

    Answer: Trend analysis using prior three years' data

    Trend analysis using multiple prior years normalizes seasonal variation and establishes a baseline, best isolating the flood's discrete impact on profitability.

  3. For a business interruption claim, the 'period of restoration' is most accurately defined as:

    Answer: The time required to repair or replace damaged property with reasonable speed

    The period of restoration covers the time needed to repair or replace property with due diligence and dispatch, limiting the insurer's exposure to a reasonable recovery timeline.

  4. An appraiser calculating extra expense coverage should include which of the following costs incurred after a covered loss?

    Answer: Temporary relocation costs necessary to continue business operations

    Extra expense coverage reimburses necessary temporary costs, such as relocation, that allow the business to continue operations during the restoration period.

  5. Which depreciation method results in the highest book value of assets in the early years of an asset's life?

    Answer: Straight-line

    Straight-line depreciation spreads cost evenly, resulting in the highest book value in early years compared to accelerated methods that front-load depreciation.

  6. When an appraiser reviews a hotel's revenue report to quantify a business interruption loss, which metric is the most comprehensive indicator of overall performance?

    Answer: Revenue Per Available Room (RevPAR)

    RevPAR combines both occupancy rate and ADR into a single metric, making it the most comprehensive measure of a hotel's revenue-generating performance.

  7. A co-insurance clause requiring 80% coverage penalizes an insured who carries only 60% of the required insurance. If the property value is $1,000,000 and the loss is $200,000, how much will the insurer pay?

    Answer: $150,000

    Payment = (Insurance Carried ÷ Insurance Required) × Loss = ($600,000 ÷ $800,000) × $200,000 = 0.75 × $200,000 = $150,000.