Which of the Following Statements Regarding the Multiple-Of-Earnings Method Is

question 23

Multiple Choice

Which of the following statements regarding the multiple-of-earnings method is true?

• A) The multiple-of-earnings method determines the amount of life insurance coverage needed by multiplying the net annual earnings of the insured by some selected number.
• B) The multiple-of-earnings method determines the amount of life insurance coverage needed by multiplying the gross annual earnings of the insured by some selected number.
• C) The multiple-of-earnings method considers the insured's financial obligations to compute the insurance premium amount.
• D) The multiple-of-earnings method subtracts specific financial obligations and resources from the gross annual earnings of the insured to determine the amount of annual insurance premium.
• E) The multiple-of-earnings method multiplies the amount of tax benefits available to the insured when the life insurance benefit is paid.

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Definitions:

Product Development

The complete process of bringing a new product to market, from idea generation to commercialization.

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting.

R&D Costs

Expenses associated with the research and development of a company's goods or services, often considered an investment in a company's future.

Historical Cost Principle

An accounting principle that states all assets and liabilities should be recorded and reported at their original purchase cost.