The document analyzes the cost efficiency of Indian life insurance companies following deregulation in the 1990s. It uses a Data Envelopment Analysis approach to estimate cost efficiency scores for major life insurers in India from 2002-2007. The key findings are that the Life Insurance Corporation of India (LIC) achieved a score of 1 (full efficiency) each year, while private insurers' scores ranged from 0.1912 to 0.8697, indicating room for reducing costs while maintaining output levels. Overall, cost efficiency improved for most insurers over the period examined, but LIC remained the most cost efficient operator in the Indian life insurance market.
This document provides examples and explanations for conducting benefit-cost analysis to evaluate engineering projects and alternatives. It defines the key steps and techniques in benefit-cost analysis including identifying project benefits and costs, quantifying them, discounting cash flows, and calculating the benefit-cost ratio. Examples are provided to demonstrate computing benefit-cost ratios, incremental analysis, and selecting the alternative with the highest ratio or most desirable increment above 1 to indicate project acceptance.
This document discusses investment alternatives and methods for evaluating them, including present worth (PW) and annual worth (AW). It covers the following key points:
- There are four types of investment alternatives: mutually exclusive set, independent set, single project, and "do nothing" option.
- PW and AW can both be used to evaluate alternatives, with PW preferred for revenue projects and AW for cost projects.
- When alternatives have different lives, the lowest common multiple approach is used to evaluate them over the same period for comparison.
- Examples are provided to illustrate how to calculate PW and AW for alternatives and choose the most favorable option based on these measures.
Marginal analysis examines the costs and benefits of small incremental changes to determine the optimal level of a decision variable. It works by comparing the marginal benefit and marginal cost of an additional unit. If the marginal benefit exceeds the marginal cost, the decision variable should be increased as net benefits will rise. For example, a firm considers producing one more widget. If the extra widget's marginal revenue of $1,200 is less than its marginal cost of $1,500, the firm should not produce it, as net profits would fall. Marginal analysis provides a framework for maximizing benefits given scarce resources.
1. Breakeven analysis determines the level of a variable (e.g. quantity, units) that results in no profit or loss. It is used to evaluate a single project or choose between two alternatives.
2. Payback period is the estimated time for a project's cash inflows to recover its initial investment. It can be calculated with or without considering the time value of money (discounted vs no-return payback).
3. Both breakeven analysis and payback period are useful initial screening tools but should not be the sole basis for a decision, as they do not consider cash flows or returns after the payback period. More comprehensive methods like net present worth are generally preferred.
The document discusses the importance of engineering economy in decision making for individuals, businesses, and government agencies. Engineering economy provides quantitative analysis techniques to evaluate and compare the costs and benefits of project alternatives over time. It helps structure the estimates needed to evaluate alternatives and select the most economically favorable option based on metrics like present worth, rate of return, and benefit-cost ratio.
This document provides an introduction to economics. It defines economics as the study of how limited resources are used to satisfy unlimited human wants. The objectives of economics are outlined as a high level of employment, price stability, efficiency, an equitable distribution of income, and growth. The flow of goods, services, resources and money payments in a simple economy is described involving households, business firms, and the payments between them. The law of supply and demand and the factors influencing supply and demand are explained. Engineering economics is introduced as analyzing alternatives within a project to compare monetary returns. The concepts of cost, revenue, profit, break even analysis, and margin of safety are defined in the context of economics.
This document provides an overview of techniques for formalized sensitivity analysis and expected value decisions. It discusses determining sensitivity to parameter variation, using three estimates to analyze sensitivity, calculating expected values of cash flows and alternatives, and using decision trees to model staged evaluations under uncertainty. The techniques aim to account for variability in parameters, quantify uncertainty through probabilities, and identify best decisions considering risk.
Chapter 8 ror analysis for multiple alternativesBich Lien Pham
This document discusses rate of return analysis for multiple project alternatives. It explains that incremental analysis is required to select the alternative with the highest overall rate of return. The key steps are: (1) calculate incremental cash flows between alternatives; (2) use these cash flows to calculate the incremental internal rate of return, ∆i*; (3) eliminate alternatives where ∆i* is less than the minimum acceptable rate of return; (4) repeat for remaining alternatives until one alternative remains. This process ensures the alternative with the highest overall rate of return is selected. Examples are provided to demonstrate calculating incremental cash flows and ∆i* to determine the best alternative.
This document provides examples and explanations for conducting benefit-cost analysis to evaluate engineering projects and alternatives. It defines the key steps and techniques in benefit-cost analysis including identifying project benefits and costs, quantifying them, discounting cash flows, and calculating the benefit-cost ratio. Examples are provided to demonstrate computing benefit-cost ratios, incremental analysis, and selecting the alternative with the highest ratio or most desirable increment above 1 to indicate project acceptance.
This document discusses investment alternatives and methods for evaluating them, including present worth (PW) and annual worth (AW). It covers the following key points:
- There are four types of investment alternatives: mutually exclusive set, independent set, single project, and "do nothing" option.
- PW and AW can both be used to evaluate alternatives, with PW preferred for revenue projects and AW for cost projects.
- When alternatives have different lives, the lowest common multiple approach is used to evaluate them over the same period for comparison.
- Examples are provided to illustrate how to calculate PW and AW for alternatives and choose the most favorable option based on these measures.
Marginal analysis examines the costs and benefits of small incremental changes to determine the optimal level of a decision variable. It works by comparing the marginal benefit and marginal cost of an additional unit. If the marginal benefit exceeds the marginal cost, the decision variable should be increased as net benefits will rise. For example, a firm considers producing one more widget. If the extra widget's marginal revenue of $1,200 is less than its marginal cost of $1,500, the firm should not produce it, as net profits would fall. Marginal analysis provides a framework for maximizing benefits given scarce resources.
1. Breakeven analysis determines the level of a variable (e.g. quantity, units) that results in no profit or loss. It is used to evaluate a single project or choose between two alternatives.
2. Payback period is the estimated time for a project's cash inflows to recover its initial investment. It can be calculated with or without considering the time value of money (discounted vs no-return payback).
3. Both breakeven analysis and payback period are useful initial screening tools but should not be the sole basis for a decision, as they do not consider cash flows or returns after the payback period. More comprehensive methods like net present worth are generally preferred.
The document discusses the importance of engineering economy in decision making for individuals, businesses, and government agencies. Engineering economy provides quantitative analysis techniques to evaluate and compare the costs and benefits of project alternatives over time. It helps structure the estimates needed to evaluate alternatives and select the most economically favorable option based on metrics like present worth, rate of return, and benefit-cost ratio.
This document provides an introduction to economics. It defines economics as the study of how limited resources are used to satisfy unlimited human wants. The objectives of economics are outlined as a high level of employment, price stability, efficiency, an equitable distribution of income, and growth. The flow of goods, services, resources and money payments in a simple economy is described involving households, business firms, and the payments between them. The law of supply and demand and the factors influencing supply and demand are explained. Engineering economics is introduced as analyzing alternatives within a project to compare monetary returns. The concepts of cost, revenue, profit, break even analysis, and margin of safety are defined in the context of economics.
This document provides an overview of techniques for formalized sensitivity analysis and expected value decisions. It discusses determining sensitivity to parameter variation, using three estimates to analyze sensitivity, calculating expected values of cash flows and alternatives, and using decision trees to model staged evaluations under uncertainty. The techniques aim to account for variability in parameters, quantify uncertainty through probabilities, and identify best decisions considering risk.
Chapter 8 ror analysis for multiple alternativesBich Lien Pham
This document discusses rate of return analysis for multiple project alternatives. It explains that incremental analysis is required to select the alternative with the highest overall rate of return. The key steps are: (1) calculate incremental cash flows between alternatives; (2) use these cash flows to calculate the incremental internal rate of return, ∆i*; (3) eliminate alternatives where ∆i* is less than the minimum acceptable rate of return; (4) repeat for remaining alternatives until one alternative remains. This process ensures the alternative with the highest overall rate of return is selected. Examples are provided to demonstrate calculating incremental cash flows and ∆i* to determine the best alternative.
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Send your semester & Specialization name to our mail id :
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This chapter introduces quantitative analysis and its applications. Quantitative analysis is a scientific approach to managerial decision making that processes raw data into meaningful information. The chapter outlines the quantitative analysis approach, which includes defining the problem, developing a model, acquiring data, developing a solution, testing the solution, analyzing results, and implementing. It also discusses using computers and spreadsheets to develop models and potential problems with the quantitative analysis approach.
This document discusses decision making and professional ethics in engineering economic decisions. It begins by classifying problems as simple, intermediate, or complex. The rational decision making process involves 9 steps: recognizing the problem, setting goals/objectives, gathering data, identifying alternatives, selecting evaluation criteria, constructing a model, predicting outcomes, choosing the best alternative, and auditing results. Professional ethics are important to consider, as codes of ethics guide engineers' decisions. Situations involving safety compromises or unfair advantages can raise ethical issues.
This document discusses various applications of linear programming (LP) in areas such as marketing, finance, and operations management. In marketing, LP can be used for media selection and marketing research problems. It provides examples of using LP to determine an optimal advertising plan that maximizes exposure quality within a budget. In finance, LP is used for portfolio selection and financial planning problems. Operations management applications covered include make-or-buy decisions, production scheduling, workforce assignment, and blending problems.
This document provides an overview of various quantitative techniques topics including linear programming, transportation problem, forecasting, assignment problem, queuing theory, decision theory, inventory management, simulation, and network analysis. It describes the basic concepts, steps, and methods for each topic at a high level. For example, it defines linear programming as a technique for optimal allocation of limited resources given a criterion, describes the steps and assumptions. It also provides examples to illustrate some concepts.
This document provides teaching notes for a chapter on the costs of production. It discusses key topics like accounting versus economic costs, definitions of total, average and marginal costs, and cost minimization. It emphasizes distinguishing accounting and economic costs, understanding cost curves, and how costs relate to profit maximization and the supply curve. It provides questions to review the chapter, including questions about opportunity costs, true/false statements about costs, implications of marginal costs, cost minimization, and properties of isocost lines.
This document is a lecture on cost estimation that covers several topics:
1) It discusses capital costs including fixed capital and working capital.
2) It explains the breakdown of total product costs including manufacturing costs, general expenses, and their typical percentages.
3) It provides examples of cost estimation problems from referenced textbooks, showing calculations for direct costs, indirect costs, depreciation, taxes, net profit, and cash flow.
1. This chapter introduces public sector projects and their economic evaluation, where the owners and users are citizens rather than private customers or clients.
2. Public sector projects have longer lifetimes, larger investments, and lower interest rates than private sector projects. Their costs, benefits, and potential disbenefits must be estimated.
3. The benefit-cost ratio was developed to introduce objectivity to economic analysis of public sector projects by reducing the effects of politics and special interests, though there is always disagreement about how to define and value benefits.
The document discusses benefit-cost analysis, which is a decision-making tool used to systematically evaluate the costs and benefits of public projects. It describes how to identify and quantify the social benefits and costs of a project in monetary terms to determine if the benefits outweigh the costs. The benefit-cost ratio and net benefit-cost ratio are introduced as metrics to evaluate projects, with ratios above 1 indicating an economically viable project. Examples are provided to demonstrate calculating these ratios and using incremental analysis for mutually exclusive projects.
The document discusses three potential investments being evaluated using several profitability measures: return on invested capital (ROI), payback period (PBP), net present value (NPV), and discounted cash flow rate of return (DCFRR). For each investment, the fixed capital, working capital, salvage value, service life, and annual gross income minus expenses are provided. Calculations are shown for depreciation, taxes, net profits, cash flows, and the various profitability measures. Based on the results, Investment 1 is acceptable while Investments 2 and 3 are unacceptable based on their PBP and ROI.
The document provides an executive summary of Chapter 10 from a textbook on engineering economy. It covers several key topics from the chapter, including different evaluation methods for comparing alternatives, determining the minimum attractive rate of return (MARR), accounting for debt and equity in the weighted average cost of capital (WACC), and methods for multi-attribute decision analysis. The summary highlights the importance of selecting the appropriate evaluation method based on problem characteristics, and calculating the MARR and WACC to evaluate investment opportunities.
The document provides an introduction to engineering economics. It defines economics and engineering economics, noting that engineering economics deals with the analysis and evaluation of factors that will affect the economic success of engineering projects. It discusses key concepts from economics used in engineering economics, such as scarcity, opportunity cost, demand and supply. It also outlines the basic guidelines for engineering economic analysis, including developing alternatives, focusing on differences among alternatives, using consistent and common units of measurement, and considering uncertainty. The document emphasizes that engineering economics is important for engineering decision-making involving questions about project priorities, designs, and economic worth.
This document discusses benefit-cost analysis for public sector projects. It defines key terms like costs, benefits, and dis-benefits. It explains that the conventional B/C ratio compares benefits minus dis-benefits to costs. A modified B/C ratio includes maintenance and operation costs in the numerator. It provides examples of calculating B/C ratios for single projects and using the incremental B/C method to select between alternatives. Engineers must consider ethical issues when involved in public policy making and planning projects.
This document discusses using the benefit-cost ratio method to evaluate public projects. It notes that public projects have unique challenges, including large scale, multiple purposes that may conflict, long time horizons, and difficulties measuring non-monetary benefits. The benefit-cost ratio is the ratio of the discounted benefits to the discounted costs. For mutually exclusive projects, an incremental benefit-cost analysis should be used to select the project with the highest incremental benefit-cost ratio. While widely used, the benefit-cost ratio method has some criticisms, as it may ignore distributional impacts and qualitative factors.
Marginal costing is a technique that involves classifying costs as either variable or fixed. Variable costs change with production volume, while fixed costs remain constant in total. Under marginal costing, only variable costs are considered in inventory valuation and income determination. The document discusses marginal costing concepts like contribution, break-even point, profit-volume ratio, and their importance in managerial decision making. It also provides examples of calculating these metrics from financial data.
Managerial Accounting Garrison Noreen Brewer Chapter 13Asif Hasan
This document discusses relevant cost analysis and identifying relevant costs for decision making. It provides an example of a student, Cynthia, deciding whether to drive or take the train to visit a friend. It identifies which of Cynthia's costs are relevant to the decision and which are not. Driving would result in costs of $114.86 while taking the train would cost $104. It then summarizes that from a financial perspective, Cynthia would be better off taking the train. The document also provides an example of using total and differential cost approaches to evaluate a new machine for a company.
Week 8 relevant costing and short-term decision-makingErfan Ovee Nomaan
This document discusses marginal costing and its use in short-term decision making. It provides examples of how marginal costing can be used to make make-or-buy decisions by considering only variable costs, one-off order decisions by evaluating contribution, product discontinuation decisions by analyzing contribution per product, and limiting factor analysis to determine optimal production levels when there are resource constraints. Fixed costs are generally ignored in short-term decision making unless they are incremental to the decision being considered. Marginal costing allows managers to focus on costs and revenues that change with different short-term business decisions.
This document provides lesson notes on short term decision making techniques, including cost-volume-profit analysis, break-even analysis, margin of safety, and incremental analysis. It defines each technique, explains how to calculate and interpret key metrics like break-even point and margin of safety, and gives examples of how managers can use these analyses to make decisions around pricing, production levels, and product lines. The document also lists several specific decisions that short term analysis can help with and notes other qualitative factors managers should consider.
An Analysis of Efficiency Performance of Private life Insurancepaperpublications3
Abstract:This paper deals with the analysis of the Efficiency of private life insurance industry since the liberlisation process of insurance sector in the country. Keeping in view the limitations of ratio analysis techniques, the methodology used to judge the efficiency of private life insurance companies is Data Envelopment Analysis (DEA). The result of the DEA analysis is used to assess the technical efficiency of individual firms with respect to the best practice or benchmark firms. It further allows the classification of the technical efficiency into pure technical and scale efficiency. The present study has used the Farrel model which was further developed by Charnes, Cooper, and Rhodes (1978). Data Envelopment Analysis (DEA) is a non-parametric linear programming tool used to study the efficiency of the economic units (life insurers) through the construction of the economic frontier. The study takes into account ten private life insurance companies which commenced their business in the country in the year 2001-2002 .The study covers a period of 13 years from 2001-02 till 2013-14.It is found that the technical efficiency scores of the firms measured under pure technical efficiency and scale efficiency scores of the firms are rising over the years. Of the ten private companies taken for study, SBI life shows that it is operating at a full scale and technically highly efficient firm in par with public sector monopolist Life Insurance Corporation of India.
The document discusses issues related to air pollution from the aviation industry, noting the environmental impact of carbon emissions and the health effects of noise pollution from aircraft. It also touches on challenges related to limited airspace and airport capacities, which sometimes forces aircraft to remain airborne while waiting to land. Strategies are needed to reduce the industry's environmental footprint through more stringent emission standards and efficient airport planning.
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and sales volume affect a company's profits. It requires identifying all costs as either variable or fixed. CVP analysis explores the relationship between costs, revenues, and activity level to measure how costs and profits vary with sales volume. It is used for forecasting profits, budget planning, pricing decisions, determining sales mix, and more. The three elements of CVP are costs, volume, and profit. The break-even point is the sales volume where total revenue equals total costs. Relevant costs must differ between alternatives and affect the decision. Sunk costs do not affect decisions as they cannot be changed.
This statistical analysis report examines IGI's position in Pakistan's insurance market and analyzes profitability and risk segmentation in the fire industry. Section 1 analyzes the top insurance companies based on underwriting profits and gross premiums from 2005-2013. IGI shows inconsistent underwriting growth trends compared to other mid-sized companies that generally see premium growth boost underwriting. Section 2 will segment fire industries based on profitability ratios to identify low-risk industries for IGI to target. The report aims to link the sections to improve IGI's underwriting profits and profitability through its fire premium portfolio. Regression analysis is conducted to determine the impact of various factors like premium, claims, and commissions on underwriting profits for different companies.
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
This chapter introduces quantitative analysis and its applications. Quantitative analysis is a scientific approach to managerial decision making that processes raw data into meaningful information. The chapter outlines the quantitative analysis approach, which includes defining the problem, developing a model, acquiring data, developing a solution, testing the solution, analyzing results, and implementing. It also discusses using computers and spreadsheets to develop models and potential problems with the quantitative analysis approach.
This document discusses decision making and professional ethics in engineering economic decisions. It begins by classifying problems as simple, intermediate, or complex. The rational decision making process involves 9 steps: recognizing the problem, setting goals/objectives, gathering data, identifying alternatives, selecting evaluation criteria, constructing a model, predicting outcomes, choosing the best alternative, and auditing results. Professional ethics are important to consider, as codes of ethics guide engineers' decisions. Situations involving safety compromises or unfair advantages can raise ethical issues.
This document discusses various applications of linear programming (LP) in areas such as marketing, finance, and operations management. In marketing, LP can be used for media selection and marketing research problems. It provides examples of using LP to determine an optimal advertising plan that maximizes exposure quality within a budget. In finance, LP is used for portfolio selection and financial planning problems. Operations management applications covered include make-or-buy decisions, production scheduling, workforce assignment, and blending problems.
This document provides an overview of various quantitative techniques topics including linear programming, transportation problem, forecasting, assignment problem, queuing theory, decision theory, inventory management, simulation, and network analysis. It describes the basic concepts, steps, and methods for each topic at a high level. For example, it defines linear programming as a technique for optimal allocation of limited resources given a criterion, describes the steps and assumptions. It also provides examples to illustrate some concepts.
This document provides teaching notes for a chapter on the costs of production. It discusses key topics like accounting versus economic costs, definitions of total, average and marginal costs, and cost minimization. It emphasizes distinguishing accounting and economic costs, understanding cost curves, and how costs relate to profit maximization and the supply curve. It provides questions to review the chapter, including questions about opportunity costs, true/false statements about costs, implications of marginal costs, cost minimization, and properties of isocost lines.
This document is a lecture on cost estimation that covers several topics:
1) It discusses capital costs including fixed capital and working capital.
2) It explains the breakdown of total product costs including manufacturing costs, general expenses, and their typical percentages.
3) It provides examples of cost estimation problems from referenced textbooks, showing calculations for direct costs, indirect costs, depreciation, taxes, net profit, and cash flow.
1. This chapter introduces public sector projects and their economic evaluation, where the owners and users are citizens rather than private customers or clients.
2. Public sector projects have longer lifetimes, larger investments, and lower interest rates than private sector projects. Their costs, benefits, and potential disbenefits must be estimated.
3. The benefit-cost ratio was developed to introduce objectivity to economic analysis of public sector projects by reducing the effects of politics and special interests, though there is always disagreement about how to define and value benefits.
The document discusses benefit-cost analysis, which is a decision-making tool used to systematically evaluate the costs and benefits of public projects. It describes how to identify and quantify the social benefits and costs of a project in monetary terms to determine if the benefits outweigh the costs. The benefit-cost ratio and net benefit-cost ratio are introduced as metrics to evaluate projects, with ratios above 1 indicating an economically viable project. Examples are provided to demonstrate calculating these ratios and using incremental analysis for mutually exclusive projects.
The document discusses three potential investments being evaluated using several profitability measures: return on invested capital (ROI), payback period (PBP), net present value (NPV), and discounted cash flow rate of return (DCFRR). For each investment, the fixed capital, working capital, salvage value, service life, and annual gross income minus expenses are provided. Calculations are shown for depreciation, taxes, net profits, cash flows, and the various profitability measures. Based on the results, Investment 1 is acceptable while Investments 2 and 3 are unacceptable based on their PBP and ROI.
The document provides an executive summary of Chapter 10 from a textbook on engineering economy. It covers several key topics from the chapter, including different evaluation methods for comparing alternatives, determining the minimum attractive rate of return (MARR), accounting for debt and equity in the weighted average cost of capital (WACC), and methods for multi-attribute decision analysis. The summary highlights the importance of selecting the appropriate evaluation method based on problem characteristics, and calculating the MARR and WACC to evaluate investment opportunities.
The document provides an introduction to engineering economics. It defines economics and engineering economics, noting that engineering economics deals with the analysis and evaluation of factors that will affect the economic success of engineering projects. It discusses key concepts from economics used in engineering economics, such as scarcity, opportunity cost, demand and supply. It also outlines the basic guidelines for engineering economic analysis, including developing alternatives, focusing on differences among alternatives, using consistent and common units of measurement, and considering uncertainty. The document emphasizes that engineering economics is important for engineering decision-making involving questions about project priorities, designs, and economic worth.
This document discusses benefit-cost analysis for public sector projects. It defines key terms like costs, benefits, and dis-benefits. It explains that the conventional B/C ratio compares benefits minus dis-benefits to costs. A modified B/C ratio includes maintenance and operation costs in the numerator. It provides examples of calculating B/C ratios for single projects and using the incremental B/C method to select between alternatives. Engineers must consider ethical issues when involved in public policy making and planning projects.
This document discusses using the benefit-cost ratio method to evaluate public projects. It notes that public projects have unique challenges, including large scale, multiple purposes that may conflict, long time horizons, and difficulties measuring non-monetary benefits. The benefit-cost ratio is the ratio of the discounted benefits to the discounted costs. For mutually exclusive projects, an incremental benefit-cost analysis should be used to select the project with the highest incremental benefit-cost ratio. While widely used, the benefit-cost ratio method has some criticisms, as it may ignore distributional impacts and qualitative factors.
Marginal costing is a technique that involves classifying costs as either variable or fixed. Variable costs change with production volume, while fixed costs remain constant in total. Under marginal costing, only variable costs are considered in inventory valuation and income determination. The document discusses marginal costing concepts like contribution, break-even point, profit-volume ratio, and their importance in managerial decision making. It also provides examples of calculating these metrics from financial data.
Managerial Accounting Garrison Noreen Brewer Chapter 13Asif Hasan
This document discusses relevant cost analysis and identifying relevant costs for decision making. It provides an example of a student, Cynthia, deciding whether to drive or take the train to visit a friend. It identifies which of Cynthia's costs are relevant to the decision and which are not. Driving would result in costs of $114.86 while taking the train would cost $104. It then summarizes that from a financial perspective, Cynthia would be better off taking the train. The document also provides an example of using total and differential cost approaches to evaluate a new machine for a company.
Week 8 relevant costing and short-term decision-makingErfan Ovee Nomaan
This document discusses marginal costing and its use in short-term decision making. It provides examples of how marginal costing can be used to make make-or-buy decisions by considering only variable costs, one-off order decisions by evaluating contribution, product discontinuation decisions by analyzing contribution per product, and limiting factor analysis to determine optimal production levels when there are resource constraints. Fixed costs are generally ignored in short-term decision making unless they are incremental to the decision being considered. Marginal costing allows managers to focus on costs and revenues that change with different short-term business decisions.
This document provides lesson notes on short term decision making techniques, including cost-volume-profit analysis, break-even analysis, margin of safety, and incremental analysis. It defines each technique, explains how to calculate and interpret key metrics like break-even point and margin of safety, and gives examples of how managers can use these analyses to make decisions around pricing, production levels, and product lines. The document also lists several specific decisions that short term analysis can help with and notes other qualitative factors managers should consider.
An Analysis of Efficiency Performance of Private life Insurancepaperpublications3
Abstract:This paper deals with the analysis of the Efficiency of private life insurance industry since the liberlisation process of insurance sector in the country. Keeping in view the limitations of ratio analysis techniques, the methodology used to judge the efficiency of private life insurance companies is Data Envelopment Analysis (DEA). The result of the DEA analysis is used to assess the technical efficiency of individual firms with respect to the best practice or benchmark firms. It further allows the classification of the technical efficiency into pure technical and scale efficiency. The present study has used the Farrel model which was further developed by Charnes, Cooper, and Rhodes (1978). Data Envelopment Analysis (DEA) is a non-parametric linear programming tool used to study the efficiency of the economic units (life insurers) through the construction of the economic frontier. The study takes into account ten private life insurance companies which commenced their business in the country in the year 2001-2002 .The study covers a period of 13 years from 2001-02 till 2013-14.It is found that the technical efficiency scores of the firms measured under pure technical efficiency and scale efficiency scores of the firms are rising over the years. Of the ten private companies taken for study, SBI life shows that it is operating at a full scale and technically highly efficient firm in par with public sector monopolist Life Insurance Corporation of India.
The document discusses issues related to air pollution from the aviation industry, noting the environmental impact of carbon emissions and the health effects of noise pollution from aircraft. It also touches on challenges related to limited airspace and airport capacities, which sometimes forces aircraft to remain airborne while waiting to land. Strategies are needed to reduce the industry's environmental footprint through more stringent emission standards and efficient airport planning.
Cost-volume-profit (CVP) analysis is used to determine how changes in costs and sales volume affect a company's profits. It requires identifying all costs as either variable or fixed. CVP analysis explores the relationship between costs, revenues, and activity level to measure how costs and profits vary with sales volume. It is used for forecasting profits, budget planning, pricing decisions, determining sales mix, and more. The three elements of CVP are costs, volume, and profit. The break-even point is the sales volume where total revenue equals total costs. Relevant costs must differ between alternatives and affect the decision. Sunk costs do not affect decisions as they cannot be changed.
This statistical analysis report examines IGI's position in Pakistan's insurance market and analyzes profitability and risk segmentation in the fire industry. Section 1 analyzes the top insurance companies based on underwriting profits and gross premiums from 2005-2013. IGI shows inconsistent underwriting growth trends compared to other mid-sized companies that generally see premium growth boost underwriting. Section 2 will segment fire industries based on profitability ratios to identify low-risk industries for IGI to target. The report aims to link the sections to improve IGI's underwriting profits and profitability through its fire premium portfolio. Regression analysis is conducted to determine the impact of various factors like premium, claims, and commissions on underwriting profits for different companies.
Pricing Optimization using Machine LearningIRJET Journal
This document discusses using machine learning algorithms to optimize pricing. Specifically:
1. It reviews previous research applying machine learning to price prediction and optimization in various industries like e-commerce, real estate, and insurance. Methods discussed include linear regression, clustering, random forests, and integer linear programming.
2. It then introduces using machine learning like regression trees and random forests to forecast demand and maximize revenue by setting optimal prices. Variables like holidays, promotions, and inventory are considered.
3. The goal of the paper is to develop a pricing algorithm that can predict and optimize daily prices in response to changing demand using machine learning techniques. Outcomes will demonstrate machine learning's ability to optimize pricing.
This document analyzes the cost sheet of Dabur India Limited for the fiscal year 2015-2016. It includes the preparation of the cost sheet, classification of costs into fixed and variable, and analysis using marginal costing tools. The analysis finds that variable costs account for 61.44% of total costs and the profit margin is 17% of net sales. The break-even point is Rs. 40,372 crores in sales and the margin of safety is 25% of actual sales.
This document provides an overview of fundamental analysis techniques used in security analysis and portfolio management. It outlines 5 course outcomes related to macro/industry analysis, equity valuation, financial statement analysis, bond/fixed income strategies, and options/futures. It then discusses various fundamental analysis approaches including economic analysis, industry analysis, and company analysis. Several analysis models and techniques are described such as DuPont analysis, P/E ratios, and portfolio construction approaches. Technical analysis indicators like support/resistance levels, point and figure charts, and gaps are also introduced.
IRJET- Credit Profile of E-Commerce CustomerIRJET Journal
This document proposes using RFM (Recency, Frequency, Monetary) variables and advanced k-means clustering to create positive and negative credit profiles for e-commerce customers. This will help minimize losses by identifying genuine versus fraudulent customers. The methodology calculates credit scores based on RFM and other factors. Advanced k-means clustering is then used to segment customers into clusters like excellent, good, average, and worst. Customers in different clusters will receive different benefits or restrictions based on their predicted reliability. The goal is to reduce losses from unwanted cancellations while retaining high value customers.
A Medical Price Prediction System using Boosting Algorithms through Machine L...IRJET Journal
This document presents research on using machine learning algorithms to predict medical insurance costs. The researchers trained and tested various regression algorithms on health insurance data to predict premium costs, including linear regression, random forest, and gradient boosting. Random forest regression performed best with an r2 score of 0.862533. Comparing actual and predicted costs through algorithms can help insurance companies choose the most accurate model for predicting customer premiums and improving medical access. The researchers conclude random forest was the best algorithm identified for accurately predicting health insurance costs.
This document discusses how segmentation would be implemented in a project to classify pixels in microscopy images as belonging to LDL particles or the background. It proposes using a convolutional neural network trained on a dataset of microscopy images and corresponding manually created segmentation masks. To address the small size of the original dataset, data augmentation is applied by mirror flipping the images, tripling the size of the dataset. Further augmentation by rotating images was considered but abandoned due to the computational expense of training on a much larger dataset. The segmentation method aims to classify each pixel rather than ignore spatial information about objects.
Social Cost Benefit Analysis (SCBA) evaluates whether a proposed project will benefit or cost society. It considers factors like employment, income distribution, savings and investment, externalities, and taxes. The UNIDO approach is a 5-stage methodology for conducting SCBA, analyzing financial profitability, economic efficiency, impact on savings and income distribution, and the difference between social and economic values. Opportunity cost is the cost of the next best alternative forgone. Capital structure refers to how a firm finances its operations through various sources of funds like debt and equity.
On successful completion of this module the student will be able to:
1. Evaluate the performance of a company using various financial analytical tools.
2. Analyze different patterns of cost behaviour and apply cost-volume-profit analysis to
business decisions..
3. Evaluate divisional performance using both financial and non-financial measures
This document is a project report submitted by a student on the topic of operating costing. It provides an introduction to operating costing and cost accounting. It defines operating costs and operating costing, and explains that operating costing is used to determine the cost of providing a service. The document outlines different costing methods and provides examples of operating costing for transport, hotels, and hospitals.
Marginal costing is a technique that differentiates between fixed and variable costs. It treats variable costs as product costs and fixed costs as period costs. Under marginal costing, only variable costs are considered in inventory valuation. Absorption costing treats both fixed and variable costs as product costs and includes a share of fixed costs in inventory valuation. The chapter provides definitions and concepts related to marginal costing, characteristics that distinguish it from absorption costing, and how profit is calculated differently under each method.
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Similar to Are indian life insurance companies cost efficient ppt (20)
Are indian life insurance companies cost efficient ppt
1. ARE INDIAN LIFE INSURANCE
COMPANIES COST EFFICIENT?
DR.RAM PRATAP SINHA
AND
PROFESSOR BISWAJIT CHATTERJEE
11th Annual Conference on Money and Finance
INDIRA GANDHI INSTITUTE OF DEVELOPMENT RESEARCH
23rd and 24th JANUARY 2009
2. Introduction
• Insurance sector in India was deregulated in the end-nineties
following recommendations made by the Malhotra
Committee(1994).
• Insurance Regulatory and Development Authority (IRDA) was
established in April 2000 to protect the interests of
policyholders and regulate, promote and ensure healthy growth
of the insurance industry.
• Till 1999, LIC was the only player in the Indian life insurance
market. Currently there are 16 more life insurers operating in
the Indian life insurance market.
• Between 2002-03 and 2006-07, the total premium income of the
life insurance sector grew from Rs 55767 Crores to Rs 156041
Crores i.e. a growth of 179%.
3. Objectives of the Present Study
• A number of research studies have attempted to compare the
relative performance of the LIC vis a vis the new private sector
companies during the reform era. However, no research study
has attempted to compare them in terms of cost efficiency. The
present paper seeks to fill this gap.
• However, in the matter of estimation of cost efficiency, the
present paper does not follow the traditional approach.
Instead, the present study is based on the “new cost efficiency
approach” developed by Tone(2002).
4. Estimation of Cost Efficiency :The
Methodological Issues
• Cost efficiency of a productive enterprise is an important indicator of
its performance. The cost efficiency of a firm is defined by the ratio
of minimum costs to actual costs for a given output vector is
computed by measuring the distance of its observed (cost)point from
an idealised cost frontier.
• Both parametric and non-parametric approaches can be used for the
measurement of cost efficiency.In a parametric setting, one makes
use of the Stochastic Frontier Analysis for the measurement of cost
efficiency.In a non-parametric setting, one can make use of either
DEA(Data Envelopment Analysis) or FDH (Free Disposal Hull
Method).The present paper uses DEA.
5. The Data Envelopment Approach
• Data Envelopment Analysis (DEA) is a non-parametric linear
programming tool generally used for performance evaluation
of economic units through the construction of such an
economic frontier. The advantage of DEA is that it requires very
few prior assumption on input-output relationship. The DEA
method enables extension of the single input-single output
technical efficiency measure to the multiple output- multiple
input case. In its constant returns to scale form,the DEA
methodology was developed by Charnes, Cooper and Rhodes
(1978). Banker, Charnes and Cooper (1984) extended the
approach to the case of variable returns to scale. The DEA
approach constructs the production frontier from piecewise
linear stretches resulting in a convex production possibility set.
6. Why DEA?
• The principal advantage of the DEA approach stems
from the fact that the assumption of a specific
functional form of the underlying technology is not
necessary. This makes DEA particularly useful when
dealing with service industries, since we have very
limited knowledge about the underlying production
technology in such cases. Instead of using any
functional form, DEA uses linear programming
approaches to envelope the observed data as tightly
as possible. It only requires that the production
possibility set is convex and the inputs and outputs
are disposable.
7. Estimation of Cost Efficiency Using DEA-
The Standard Approach:
• Suppose we have data on r inputs and s outputs for each of the n
firms. The ith firm(i=1,2,…,n) uses a r x 1 input vector xi= (x1,x2, …,xr)
to produce a s x 1 output vector y = (y1,y2,..,ys) where X is a r x n input
matrix and Y a s x n output matrix that represent data for all n sample
firms. In the first stage, the following linear programming problem (LP)
is solved:
Min ω’ixi*
• Subject to xi≥ Xλ, y≤Yλ, λ≥0,∑λ=1(under variable returns to scale)
• Whether, wi is a r x 1 input price vector for the i-th firm which
corresponds to the input vector xi, and xi* is the cost-minimizing input
vector for the i-th firm which is obtained by the LP .
• In the second stage, the cost efficiency of the i-th firm is calculated as
the ratio of minimum cost to observed cost:
• CE= ω’ixi*/ ω’ixi
• The measure of cost efficiency is bounded between 0 and 1. A cost
efficiency of 1 represents a fully cost efficient firm; 1-CE represents
the amount by which the firm could reduce its costs and still produce
at least the same amount of output.
8. Estimation of Cost Efficiency: The New
Approach
• In the life insurance sector, input and output quantities are
expressed in monetary terms. Further, the definition and
calculation of input and output prices is rather difficult. We
therefore follow Tone (2002) and calculate cost efficiency by
replacing the input vector xi expressed in physical terms by zi
where zi is the vector of inputs expressed in monetary terms. .
This approach further allows us to model input prices wi being
equal to unity for all selected inputs. The new LP is, therefore:
• Min C=Σ zi
• Subject to zi≥ Zλ, y≤Yλ, λ≥0,∑λ=1(under variable returns to
scale)
9. Previous Studies on Cost Efficiency
• In the Indian context, Tone and Sahoo(2005) were the first to study
efficiency of the life insurance sector as they applied new cost
efficiency model to examine the performance of Life Insurance
Corporation (LIC) of India. The findings show a significant
heterogeneity in the cost efficiency scores over the course of 19
years. A decline in performance after 1994–1995 can be taken as
evidence of increasing allocative inefficiencies arising from the huge
initial fixed cost undertaken by LIC in modernizing its operations.
• Gamarra(2007) estimated cost and profit efficiency of three groups
of German life insurance companies: multichannel insurers, direct
insurers, and independent agent insurers. Non-parametric DEA is
used to estimate efficiencies for a sample of German life insurers for
the years 1997-2005. Testing a set of hypothesis, she found
economic evidence for the coexistence of the different distribution
systems which is the absence of comparative performance
advantages of specialised insurers. Further, she found evidence for
scale economies in the German life insurance industry.
•
10. Outputs of Financial Service Industry
• The outputs of financial service firms are measured according to three main approaches: the asset
(intermediation) approach, the user-cost approach, and the value-added approach (refer Berger and
Humphrey, 1992).
• The asset approach treats financial service firms as pure financial intermediaries which borrow funds
from their customers which are invested, and thus transformed into assets. Interest payments are paid
out to cover the time value of the funds used. Applying the asset approach would mean that only the
intermediation services provided by life insurance firms are taken into account with out any regard to the
risk-pooling and risk-bearing services rendered by them.
• The user-cost approach was developed by Hancock (1985). It determines whether a financial product is an
input or an output by analyzing if its net contribution to the revenues of an insurance firm is positive or
negative. According to that, a product is considered an output, if its financial return exceeds the
opportunity costs of funds or if the financial costs of a liability are lower than the opportunity costs.
Otherwise, the financial product would be classified as an input. This method would require precise
information on product revenues and opportunity costs which can not be obtained for the Indian life
insurance firms.
• The value-added approach differs from the asset approach and the user-cost approach as it considers all
asset and liability categories to have some output characteristics. Those categories which have
substantial value added, are then used as the important outputs. The remaining categories are treated as
rather unimportant outputs, intermediate products, or inputs. An important advantage compared to the
user-cost approach consists in the fact that the value-added approach uses operating cost data rather
than determining the costs implicitly or using opportunity costs. The value added approach is
considered to be the most appropriate method to measuring output of financial firms and is widely used
in recent insurance studies.
11. Input and Output Proxies
• In the present study we follow the value added
approach and consider two output proxies: benefits
paid to the customers and net premium mobilized by
the insurance companies.
• The life insurers have two important cost
components: operating expenses and commission
expenses. We have included both of them in our
study as inputs expressed in monetary terms.
14. Descriptive Statistics of Cost Efficiency Scores
Particulars 2002-03 2003-04 2004-05 2005-06 2006-07
No of Life
Insurers
13 13 13 14 14
Mean Cost
Efficiency
0.5223 0.5740 0.7025 0.4773 0.4584
Mean Cost
Efficiency
of Private
Insurers
0.4825 0.5384 0.6777 0.4371 0.4167
Standard
Deviation
0.2520 0.3056 0.1990 0.2666 0.2604
15. Analysis of the Results
• In the present paper we have estimated cost efficiency of the
Life insurance companies operating in India using the new cost
efficiency approach suggested by Tone (2002).
• The results suggest an upward trend in cost efficiency of the
observed life insurers between 2002-03 and 2004-05. However,
the trend was reversed for the next two years i.e. 2005-06 and
2006-07.This has been so because of the fact that during the
initial years of observation, mean cost efficiency of the private
life insurers was rising but the trend was reversed in 2005-06
and 2006-07.
16. Important References
• Banker, R, A. Charnes and W.W. Cooper, 1984, “Some Models for Estimating
Technical and Scale Efficiency”, Management Science, 30:1078-1092.
• Charnes A, W.W. Cooper and E Rhodes ,1978, “Measuring Efficiency of
Decision Making Unit”, European Journal of Operational Research, Volume
2:429-444.
• Cummins,J.D. and M.A.Weiss,1993, “Measuring Cost Efficiency in the Property-
Liability Insurance Industry”, Journal of Banking and Finance,17:463-481.
• Farrell M.J.,1957, “The Measurement of Productive Efficiency”, Journal of The
Royal Statistical Society, Series A, General, 120 (3) : 253 281
• Gamarra Lucinda Trigo,2007, “Single- versus Multi-Channel Distribution
Strategies in the German Life Insurance Market: A Cost and Profit Efficiency
Analysis”, Working Paper No-81, University of Rostock, Institute of
Economics, Ulmenstrabe 69, 18057 Rostock, Germany
• Tone, K.,2002, A strange case of the cost and allocative efficiencies in DEA,
Journal of the Operational Research Society, 53, 1225-1231.