The free asset ratio (FAR) is a measure of an insurance company's financial strength. It is calculated by dividing the company's total assets by its policyholders' surplus.
The higher the ratio, the more financial cushion the company has to absorb losses. For example, a company with a FAR of 2.0 has twice as much in assets as it does in policyholders' surplus.
Insurance companies use the FAR to help them set premiums and determine how much coverage to provide. They also use it to assess the financial strength of other insurance companies.
How would you assess the return of financial assets explain with illustrations?
When assessing the return of financial assets, there are several key financial ratios that can be used in order to get a clear picture of the overall performance.
The first ratio to consider is the return on assets (ROA). This ratio measures the profitability of the company in relation to its total assets. A higher ROA indicates a more profitable company.
Next, the return on equity (ROE) can be used to assess the return of financial assets. This ratio measures the profitability of the company in relation to its shareholders' equity. A higher ROE indicates a more profitable company.
Finally, the return on investment (ROI) can be used to assess the return of financial assets. This ratio measures the profitability of the company in relation to its total investments. A higher ROI indicates a more profitable company.
Which ratio informs you of the extent to which you use borrowed funds to finance business resources? There is no one definitive answer to this question, as different businesses will use different financial ratios to evaluate their borrowing. However, some common ratios that may be used to assess the extent of borrowing include the debt-to-assets ratio and the debt-to-equity ratio. These ratios show the percentage of a company's assets or equity that is financed through borrowing, and can give insight into how reliant a company is on debt financing.
How do you analyze return on assets ratio?
The return on assets ratio (ROA) is a financial ratio that measures the profitability of a company in relation to its total assets. The ROA ratio is calculated by dividing a company's net income by its total assets.
A high ROA ratio indicates that a company is profitable and efficient in its use of assets. A low ROA ratio indicates that a company is not as profitable or efficient in its use of assets.
The ROA ratio can be used to compare the profitability of different companies. It can also be used to compare the profitability of a company over time.
When analyzing the ROA ratio, it is important to consider the industry average. Some industries have higher ROA ratios than others. For example, the average ROA ratio for the banking industry is 1.0%. This means that for every $1.00 of assets, the average bank earns $0.01 in net income.
When analyzing the ROA ratio, it is also important to consider the company's debt-to-equity ratio. A high debt-to-equity ratio indicates that a company is more leveraged and has a higher risk of default. A lower debt-to-equity ratio indicates that a company is less leveraged and has a lower risk of default.
The ROA ratio is a good measure of a company's profitability. However, it is important to consider other factors when analyzing a company's financial performance.