It is one of the important financial tools of appraisal of financial condition, efficiency and profitability of business. It is useful from following objects (i) short term and long term planning l(ii) measurement and evaluation of financial performance (iii) study of financial trends (iv) decision making for investments and operations and (v) diagnosis of financial ills.
Insurance Encyclopedia
Ratio decidendi
The principle on which the case is decided. It makes the decision a precedent for the future development of the law.
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The principle of law on which a judgment in a lawsuit is based.
Ratio test (Pensions)
A test of coverage, wherein a certain amount of employees on the lower end of the pay scale who benefit from the plan must equal 70 percent of the employees on the higher end of the pay scale.
Ratios
The following ratios are important for monitoring performance or calculating premiums: 1. Burning ratio. Insurance claims as a percentage of total premiums for current policies. 2. Claims (or loss) ratio. Incurred losses in relation to earned premiums. 3. Expense ratio. Insurers’ total expenses in relation to written premiums. 4. Combined or composite ratio. Sum of (2) and (3), a figure below 100 per cent indicating that an underwriting profit has been achieved.
Ratios Audit
Ratios derived from an Insurer’s financial statement that are useful in assessing its financial strength. Audit ratios are part of the Insurance regulatory information system.