Which of the Following Statements About the Capital Retention Approach

question 10

Multiple Choice

Which of the following statements about the capital retention approach for determining life insurance needs is (are) true?
I.It assumes that life insurance proceeds will be liquidated to provide income to survivors.
II.It requires the preparation of a personal balance sheet.

• A)I only
• B)II only
• C)both I and II
• D)neither I nor II

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Definitions:

Stockholders' Equity

The residual interest in the assets of a company that remains after deducting its liabilities, representing ownership interest.

Total Liabilities

The sum of all financial obligations (debts) owed by a company to external entities or individuals.

Bond Interest

The regular payments made to bondholders as compensation for the investment, typically expressed as a percentage of the principal.

Dividends

Disbursements issued to shareholders by a company, typically sourced from the firm's earnings.