IRDAI Assistant Manager Finance and Accounting (Specialist Stream) Syllabus

Finance and Accounting (Specialist Stream) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Finance and Accounting (Specialist Stream) in IRDAI Assistant Manager, not a summary of it.

1. 1

   Financial Management

   4 topics

   • Time Value of Money and Capital Budgeting
   • Cost of Capital and Capital Structure
   • Working Capital and Dividend Decisions
   • Financial Statement and Ratio Analysis
2. 2

   Accounting Fundamentals

   4 topics

   • Accounting Concepts, Conventions and Standards
   • Preparation of Financial Statements
   • Insurance Company Accounting and Solvency Margin
   • Cost and Management Accounting Basics
3. 3

   Financial Markets and Instruments

   4 topics

   • Money Market and Capital Market Instruments
   • Derivatives and Risk Hedging
   • Mutual Funds and Investment Vehicles
   • Credit Rating and Bond Valuation
4. 4

   Economics and Public Finance

   4 topics

   • Micro and Macroeconomic Concepts
   • National Income, Inflation and Money Supply
   • Budget, Fiscal Policy and Taxation (GST Basics)
   • Balance of Payments and International Finance

Finance and Accounting (Specialist Stream) flashcards for IRDAI Assistant Manager

22 of 59 cards from the Finance and Accounting (Specialist Stream) deck — real questions with worked answers.

1. What is the basic formula for the Future Value (FV) of a single sum invested today?

   FV = PV × (1 + r)^n, where PV = present value, r = interest rate per period, and n = number of periods.

2. What is the formula for the Present Value (PV) of a single future amount?

   PV = FV / (1 + r)^n. It discounts a future cash flow back to today at rate r over n periods.

3. How is the Net Present Value (NPV) of a project calculated, and what is the accept/reject rule?

   NPV = Σ [Cash flow_t / (1 + r)^t] − Initial investment. Accept the project if NPV > 0; reject if NPV < 0.

4. What is the Internal Rate of Return (IRR) and its decision rule?

   IRR is the discount rate at which a project's NPV equals zero. Accept the project if IRR > cost of capital (required rate of return).

5. What does the Payback Period measure, and what is its main limitation?

   It is the time required to recover the initial investment from cash inflows. Its main limitation is that it ignores the time value of money and cash flows after the payback point.

6. What is the Profitability Index (PI) and its accept rule?

   PI = PV of future cash inflows / Initial investment (= 1 + NPV/Investment). Accept the project if PI > 1.

7. What is the formula for the Weighted Average Cost of Capital (WACC)?

   WACC = (E/V × Ke) + (D/V × Kd × (1 − tax rate)), where E = equity, D = debt, V = E + D, Ke = cost of equity, Kd = cost of debt.

8. How is the cost of equity estimated using the Capital Asset Pricing Model (CAPM)?

   Ke = Rf + β × (Rm − Rf), where Rf = risk-free rate, β = beta, and (Rm − Rf) = market risk premium.

9. How is the after-tax cost of debt calculated?

   After-tax cost of debt = Kd × (1 − tax rate). Interest is tax-deductible, so the effective cost is reduced by the tax shield.

10. What does Modigliani-Miller (MM) Proposition I state in a world with corporate taxes?

    With taxes, firm value increases with leverage because of the interest tax shield: Value of levered firm = Value of unlevered firm + (Tax rate × Debt).

11. What is financial leverage and how is the degree of financial leverage (DFL) measured?

    Financial leverage is the use of fixed-cost debt to magnify returns to equity. DFL = % change in EPS / % change in EBIT = EBIT / (EBIT − Interest).

12. What is working capital, and how is net working capital defined?

    Working capital is funds for day-to-day operations. Net working capital = Current assets − Current liabilities.

13. What is the operating cycle (working capital cycle)?

    It is the time taken to convert raw materials into cash: Inventory period + Receivables collection period − Payables deferral period.

14. Under the Walter and Gordon dividend models, what is the relationship between dividends and firm value for a growth firm (r > Ke)?

    For a growth firm where return on investment (r) exceeds cost of equity (Ke), retaining earnings (lower payout) maximizes share value; a 100% retention/zero payout is optimal.

15. What is the Modigliani-Miller (MM) dividend irrelevance theory?

    In perfect markets, dividend policy does not affect firm value or share price; shareholders are indifferent between dividends and capital gains because they can create 'homemade dividends'.

16. What is the current ratio formula and the conventionally ideal value?

    Current ratio = Current assets / Current liabilities. A ratio of 2:1 is conventionally considered ideal.

17. What is the quick (acid-test) ratio and the ideal benchmark?

    Quick ratio = (Current assets − Inventory − Prepaid expenses) / Current liabilities. A ratio of 1:1 is considered ideal.

18. How is the debt-equity ratio calculated and what does it indicate?

    Debt-equity ratio = Total debt / Shareholders' equity. It measures financial leverage; a higher ratio indicates greater reliance on borrowed funds and higher financial risk.

19. What is Return on Equity (ROE) and its DuPont three-factor breakdown?

    ROE = Net profit / Shareholders' equity. DuPont: ROE = Net profit margin × Asset turnover × Equity multiplier (Net profit/Sales × Sales/Assets × Assets/Equity).

20. What is the inventory turnover ratio and what does a high ratio signify?

    Inventory turnover = Cost of goods sold / Average inventory. A high ratio signifies fast-moving stock and efficient inventory management.

21. What are the accrual (mercantile) concept and the matching concept in accounting?

    Accrual concept: revenues and expenses are recognized when earned/incurred, not when cash is received/paid. Matching concept: expenses are matched against the revenues of the same period.

22. What is the going concern concept?

    It assumes the business will continue operating for the foreseeable future and is not about to be liquidated, justifying valuation of assets at cost rather than liquidation value.

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