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Over funding as well under funding are detrimental to a company's financial health. Under funding is a situation where the company does not have enough funds to meet its requirement of day-to-day activities. This can be a very situation for the company since it does not enough cash available.
Over funding as well as having surplus assets is also equally dangerous for a company since the firm is unable to make enough returns on such idle money. Another reason for financial managers to avoid excess assets is because it would lead to a habit of unnecessary spending.
Holding excess cash or assets also has an opportunity cost attached with since the firm could have invested that cash somewhere or rented out that asset and earned some returns. If a company does not do that then it is losing out on an opportunity.
What else can I help you with?
What is nature and scope of financial management?
1.estimating financial requriments. 2.selecting a source of finance. 3.selecting a pattern of investment. 4.proper cash management. 5.implementing financial control. 6.proper use of surplus.
What are reserves and surplus in finance?
What is reserve & surplus in accounts
What is the entry for reserves and surplus?
entries for Reserve & surplus
What does surplus mean within a business?
Surplus mean excess in business. A business can have a surplus of product in its inventory, which isn't good for revenues.
What does The c 1 surplus requirement is an asset default test model recommended by naic to?
The C1 surplus requirement is an asset default test model recommended by the National Association of Insurance Commissioners (NAIC) to assess the potential impact of asset defaults on an insurance company's surplus. This model helps insurers evaluate the risk associated with their investments and ensures they maintain adequate capital to cover potential losses. By applying this requirement, regulators aim to promote financial stability and protect policyholders by requiring insurers to hold sufficient surplus in relation to their risk exposure.
Identify the seven main functions of financial managers?
7 functions of a financial manager are :- 1.Estimation of capital requirement 2.Determination of capital composition 3.Choice of source of funds 4.Investmentof funds 5.Disposal of surplus 6.Management of cash 7.Financial control
What did Greek colonies give to ancient Greece?
A place to dispose of their surplus populations.
What is the financial term for the opposite of deficit?
Surplus.
A large money supply is called?
A financial surplus perhaps.
What are the procedures used to identify and address surplus or missing equipment or resource?
write it down
What is net loss reserves to surplus ratio?
The net loss reserves to surplus ratio is a financial metric used in the insurance industry to assess the adequacy of an insurer's reserves relative to its surplus. It is calculated by dividing the net loss reserves (the funds set aside to pay future claims) by the surplus (the difference between assets and liabilities). A lower ratio indicates a stronger financial position, suggesting that the insurer has sufficient surplus to cover potential claims, while a higher ratio may signal potential financial strain. Monitoring this ratio helps regulators and stakeholders gauge the insurer's risk management and financial health.
Wildlife managers must know the number of extra (surplus) animals to set hunting quotas. TRUE FALSE?
TRUE. Wildlife managers need to understand the population dynamics of a species, including the number of surplus animals, to set sustainable hunting quotas. Accurate estimates of surplus populations help ensure that hunting does not negatively impact the overall health and viability of the species. This knowledge is essential for balancing wildlife conservation with human activities.
The shareholders'surplus plus the policyholders' surplus make up the earned surplus?
Earned surplus refers to the total accumulated profits that a company has retained, which can be used for growth, dividends, or reinvestment. It is composed of the shareholders' surplus, which represents the profits attributable to equity investors, and the policyholders' surplus, which pertains to the financial stability and reserves held for insurance policyholders. Together, these components reflect the overall financial health and retained earnings of a company, ensuring it can meet obligations and invest in future opportunities.
What is opposite of cash shortfall?
The opposite of a cash shortfall is a cash surplus, which occurs when an individual or organization has more cash available than needed for expenses and obligations. This surplus can provide opportunities for investment, saving, or spending on discretionary items. A cash surplus indicates strong financial health and the ability to meet future financial commitments easily.
What does C-1 Surplus Requirement do?
The C-1 Surplus Requirement is a regulatory mandate applicable to insurance companies, particularly in the context of risk-based capital (RBC) frameworks. It requires insurers to maintain a certain level of surplus to ensure they can meet their policyholder obligations and absorb potential losses. This surplus acts as a buffer against financial instability, safeguarding both the insurer and its policyholders. Ultimately, the C-1 Surplus Requirement helps promote the overall financial health of the insurance industry.
Why is reserves and surplus a part of liabilities?
reserves and surplus are shown into liability side of the financial statiment, since reserve is the money set aside from the capital for future use hence defining surplus as a debit in the business thus attributing to its liabiltiness,
What is the financial surplus?
A financial surplus occurs when an entity's income exceeds its expenses over a specific period. This can apply to individuals, businesses, or governments, indicating a positive cash flow that can be used for savings, investments, or debt repayment. Surpluses can also signal effective financial management and the ability to fund future projects or initiatives. In contrast, a financial deficit happens when expenses surpass income.
