Test your basic knowledge |

CFP: Certified Financial Planner

Subjects : certifications, cfp, business-skills

Instructions:

Answer 46 questions in 15 minutes.
If you are not ready to take this test, you can study here.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. Holding Period Return
(P1 + D - P0)/P0
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
EAT / Sales
current assets - current liabilities

2. Arithmetic Mean Return; T = Terminal period; good for comparing different investments
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
(1/T)(r1+r2+...+rT)
Earnings Before Interest & Taxes
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence

3. Social Styles
driving - expressive - amiable - analytical
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
Earnings Before Interest & Taxes
P*(1+g)/(k-g) P=div per share divided by other div

4. financial life cycle
(1/T)(r1+r2+...+rT)
1 - the payout ratio
Total Assets / Equity
early career (age 25 or younger to age 35) - career development (age 35 to age 50) - peak accumulation (age 50 to ages 58-62) - preretirement (3 to 6 years prior to planned retirement) - retirement (ages 62-66 and older)

5. Solvency Ratio
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Net Worth/Total Assets
EBIT/I (Where I = Interest Expense)
Total Liabilities / Equity

6. ROE (Return On Equity)
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Tax Free Yield/(1 - Tax Bracket)
Net Income/Equity

7. financial planning pyramid
dividends / earnings
Sales / Average Total Assets
current assets - current liabilities
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

8. 'normal' ratio
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
P*(1+g)/(k-g) P=div per share divided by other div
Explanatory - Interpretive - Reassuring - Suggestive

9. Debt to Equity ratio
Sales / Average Total Assets
Tax Free Yield/(1 - Tax Bracket)
Total Long-term Debt / Equity
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

10. Gross Investment income
Net Income/Equity
Total Return (1 - tax bracket)
taxable interest - non-qual. divs - short-term cap. gains
Tax Deduction * marginal tax rate

11. Current Ratio
current assets / current liabilities
Dollars of coupon interest per year/Bond's current market price
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence

12. Quick Ratio (aka Acid test)
current assets / current liabilities
Total Return (1 - tax bracket)
Tax Deduction * marginal tax rate
(current assets - inventory) / current liabilities

13. Assets to Equity ratio
Tax Free Yield/(1 - Tax Bracket)
(1/T)(r1+r2+...+rT)
Total Assets / Equity
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits

14. Liquidity Ratio
Earnings After Taxes
Total Return (1 - tax bracket)
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

15. Book Value (of company stock)
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
assets less liabilities - divided by the number of shares of common stock of a company
current assets - current liabilities
Tax Credit/marginal tax rate

16. After-tax Return
Total Return (1 - tax bracket)
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
current assets / current liabilities
assets less liabilities - divided by the number of shares of common stock of a company

17. CFP Ethical principles
Tax Credit/marginal tax rate
[(1+ NR) / (1 + CCL)] - 1
Price Earnings Growth ratio; P/E divided by projected earnings growth
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence

18. Working Capital
EBIT/I (Where I = Interest Expense)
current assets - current liabilities
Sales / Average Total Assets
(cash + marketable securities) / current liabilities

19. Equivalent Tax Deduction
(1/T)(r1+r2+...+rT)
Tax Credit/marginal tax rate
Total Long-term Debt / Equity
EAT / Sales

20. Equivalent Tax Credit
Tax Deduction * marginal tax rate
Net Income/Equity
current assets - current liabilities
current assets / current liabilities

21. The retention ratio
1 - the payout ratio
EAT / Sales
Dollars of coupon interest per year/Bond's current market price
Explanatory - Interpretive - Reassuring - Suggestive

22. Sustainable Growth Rate
Explanatory - Interpretive - Reassuring - Suggestive
EBIT/I (Where I = Interest Expense)
g = ROE X b - where b is equal to the retention ratio
1 - the payout ratio

23. Debt Service Ratio
Tax Deduction * marginal tax rate
(Mortgage+Debt Repayment)/Net Income
(1/T)(r1+r2+...+rT)
early career (age 25 or younger to age 35) - career development (age 35 to age 50) - peak accumulation (age 50 to ages 58-62) - preretirement (3 to 6 years prior to planned retirement) - retirement (ages 62-66 and older)

24. Savings Ratio
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Dollars of coupon interest per year/Bond's current market price
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income

25. Current Yield of a bond

26. After-tax Yield
Explanatory - Interpretive - Reassuring - Suggestive
Tax Free Yield/(1 - Tax Bracket)
Tax Credit/marginal tax rate
Earnings After Taxes

27. Major CFP Planning Areas
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
(P1 + D - P0)/P0
driving - expressive - amiable - analytical

28. Types of Understanding Responses Associated With Active Listening
Sources of Funds-Use of Funds or Money in- Money out
(1/T)(r1+r2+...+rT)
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

29. Domains of a CFP
dividends / earnings
current assets - current liabilities
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
Explanatory - Interpretive - Reassuring - Suggestive

30. Total Debt to Equity ratio
dividends / earnings
Sources of Funds-Use of Funds or Money in- Money out
EBIT/I (Where I = Interest Expense)
Total Liabilities / Equity

31. Opportunities in Financial Planning
dividends / earnings
RIVETC - Rising median age - Increased impact of dual-income families - Volatility of financial conditions - Evolving tax environment - Technological change - Concern over fraud and firm failure
driving - expressive - amiable - analytical
Sources of Funds-Use of Funds or Money in- Money out

32. EBIT
Earnings Before Interest & Taxes
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards

33. Cash Ratio
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
driving - expressive - amiable - analytical
(cash + marketable securities) / current liabilities
Dollars of coupon interest per year/Bond's current market price

34. Real Return (inflation adjusted); NR = Nominal Return; CCL = Change in Cost of Living (inflation rate)
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
(current assets - inventory) / current liabilities
RIVETC - Rising median age - Increased impact of dual-income families - Volatility of financial conditions - Evolving tax environment - Technological change - Concern over fraud and firm failure
[(1+ NR) / (1 + CCL)] - 1

35. Attributes of Effective Advisor communiations
1 - the payout ratio
driving - expressive - amiable - analytical
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Tax Deduction * marginal tax rate

36. Asset Turnover Ratio
Sales / Average Total Assets
Total Return (1 - tax bracket)
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
Earnings Before Interest & Taxes

37. PEG ratio
Total Long-term Debt / Equity
Price Earnings Growth ratio; P/E divided by projected earnings growth
Net Income/Equity
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

38. Net Cash Flow
Explanatory - Interpretive - Reassuring - Suggestive
Sources of Funds-Use of Funds or Money in- Money out
Tax Credit/marginal tax rate
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

39. Net After Tax Profit Margin
P*(1+g)/(k-g) P=div per share divided by other div
1 - the payout ratio
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
EAT / Sales

40. Types of Leading Responses
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Explanatory - Interpretive - Reassuring - Suggestive
EBIT/I (Where I = Interest Expense)
Total Liabilities / Equity

41. aka Net Income
driving - expressive - amiable - analytical
current assets / current liabilities
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Earnings After Taxes

42. P/E ratio
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
current assets - current liabilities
Price/Earnings per share
dividends / earnings

43. Present value of a Bond
Explanatory - Interpretive - Reassuring - Suggestive
RIVETC - Rising median age - Increased impact of dual-income families - Volatility of financial conditions - Evolving tax environment - Technological change - Concern over fraud and firm failure
Total Assets / Equity
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n

44. Net Investment Income
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Total Return (1 - tax bracket)
Explanatory - Interpretive - Reassuring - Suggestive
g = ROE X b - where b is equal to the retention ratio

45. The payout ratio
EAT / Sales
dividends / earnings
Net Worth/Total Assets
driving - expressive - amiable - analytical

46. Times Interest Earned
Net Worth/Total Assets
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
EBIT/I (Where I = Interest Expense)