Fund life & health insurance Explain carefully why this statement is true. Reserve capital cannot be...

Fund life & health insurance

Explain carefully why this statement is true.

Reserve capital cannot be spending on operations but must be hold and have available to pay expected claims

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Expert Solution

Ans.1. Reserve Capital: Reserve capital is the capital which set aside out of profits to strengthen the financial position of the business. For Example: General reserve, running day to day business, meeting working capital requirements, payments for claims etc.

Importance for Reserve capital:

This is ready cash which is necessary for meeting regular business needs.

This fund cannot be be profitably for invested in the business itself.

This fund can be used for tackling financial stress.

jeff jeffy answered 2 years ago

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