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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. Debt Service Ratio
Tax Deduction * marginal tax rate
(Mortgage+Debt Repayment)/Net Income
Tax Free Yield/(1 - Tax Bracket)
current assets - current liabilities

2. Types of Leading Responses
assets less liabilities - divided by the number of shares of common stock of a company
Explanatory - Interpretive - Reassuring - Suggestive
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Net Income/Equity

3. Net Investment Income
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Price/Earnings per share
Earnings After Taxes
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)

4. ROE (Return On Equity)
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
g = ROE X b - where b is equal to the retention ratio
Net Income/Equity
Total Assets / Equity

5. Real Return (inflation adjusted); NR = Nominal Return; CCL = Change in Cost of Living (inflation rate)
Total Assets / Equity
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
[(1+ NR) / (1 + CCL)] - 1
Total Return (1 - tax bracket)

6. Liquidity Ratio
assets less liabilities - divided by the number of shares of common stock of a company
(1/T)(r1+r2+...+rT)
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
current assets / current liabilities

7. Sustainable Growth Rate
assets less liabilities - divided by the number of shares of common stock of a company
Tax Credit/marginal tax rate
g = ROE X b - where b is equal to the retention ratio
Total Long-term Debt / Equity

8. Cash Ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Tax Deduction * marginal tax rate
(cash + marketable securities) / current liabilities
current assets - current liabilities

9. financial planning pyramid
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
g = ROE X b - where b is equal to the retention ratio
dividends / earnings

10. Social Styles
driving - expressive - amiable - analytical
[(1+ NR) / (1 + CCL)] - 1
Earnings Before Interest & Taxes
Earnings After Taxes

11. EBIT
Net Worth/Total Assets
Earnings Before Interest & Taxes
EAT / Sales
(cash + marketable securities) / current liabilities

12. Arithmetic Mean Return; T = Terminal period; good for comparing different investments
Earnings Before Interest & Taxes
(1/T)(r1+r2+...+rT)
Total Return (1 - tax bracket)
Price/Earnings per share

13. Types of Understanding Responses Associated With Active Listening
(cash + marketable securities) / current liabilities
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
current assets / current liabilities
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization

14. PEG ratio
(1/T)(r1+r2+...+rT)
Sales / Average Total Assets
Price Earnings Growth ratio; P/E divided by projected earnings growth
Total Return (1 - tax bracket)

15. Current Ratio
current assets / current liabilities
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)
EBIT/I (Where I = Interest Expense)
Dollars of coupon interest per year/Bond's current market price

16. Gross Investment income
taxable interest - non-qual. divs - short-term cap. gains
Explanatory - Interpretive - Reassuring - Suggestive
Sales / Average Total Assets
Earnings Before Interest & Taxes

17. Domains of a CFP
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Total Liabilities / Equity
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n

18. Attributes of Effective Advisor communiations
(P1 + D - P0)/P0
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Total Assets / Equity
Explanatory - Interpretive - Reassuring - Suggestive

19. 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
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
assets less liabilities - divided by the number of shares of common stock of a company

20. Book Value (of company stock)
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
assets less liabilities - divided by the number of shares of common stock of a company
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

21. Solvency Ratio
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
Net Worth/Total Assets
Total Liabilities / Equity
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits

22. Assets to Equity ratio
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Total Assets / Equity
Dollars of coupon interest per year/Bond's current market price
Net Income/Equity

23. Debt to Equity ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Total Long-term Debt / Equity

24. Equivalent Tax Deduction
Tax Credit/marginal tax rate
current assets / current liabilities
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
(current assets - inventory) / current liabilities

25. financial life cycle
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Sources of Funds-Use of Funds or Money in- Money out
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)
EAT / Sales

26. Holding Period Return
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
Sources of Funds-Use of Funds or Money in- Money out
Earnings After Taxes
(P1 + D - P0)/P0

27. Opportunities in Financial Planning
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
Explanatory - Interpretive - Reassuring - Suggestive
EAT / Sales
current assets / current liabilities

28. Net Cash Flow
Sources of Funds-Use of Funds or Money in- Money out
1 - the payout ratio
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
g = ROE X b - where b is equal to the retention ratio

29. Quick Ratio (aka Acid test)
(Mortgage+Debt Repayment)/Net Income
(current assets - inventory) / current liabilities
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

30. Working Capital
g = ROE X b - where b is equal to the retention ratio
current assets - current liabilities
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Total Assets / Equity

31. P/E ratio
Price/Earnings per share
Total Return (1 - tax bracket)
dividends / earnings
Tax Deduction * marginal tax rate

32. The retention ratio
(current assets - inventory) / current liabilities
1 - the payout ratio
(1/T)(r1+r2+...+rT)
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization

33. After-tax Yield
taxable interest - non-qual. divs - short-term cap. gains
EBIT/I (Where I = Interest Expense)
Tax Free Yield/(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

34. Times Interest Earned
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
EAT / Sales
EBIT/I (Where I = Interest Expense)
Net Worth/Total Assets

35. Net After Tax Profit Margin
Tax Deduction * marginal tax rate
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
EAT / Sales
Net Income/Equity

36. Major CFP Planning Areas
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
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
g = ROE X b - where b is equal to the retention ratio

37. Equivalent Tax Credit
Tax Deduction * marginal tax rate
(1/T)(r1+r2+...+rT)
Dollars of coupon interest per year/Bond's current market price
Total Assets / Equity

38. CFP Ethical principles
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
(current assets - inventory) / current liabilities
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Earnings After Taxes

39. Savings Ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Tax Credit/marginal tax rate
1 - the payout ratio
current assets / current liabilities

40. The payout ratio
EAT / Sales
Price Earnings Growth ratio; P/E divided by projected earnings growth
dividends / earnings
Price/Earnings per share

41. Asset Turnover Ratio
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
Explanatory - Interpretive - Reassuring - Suggestive
Total Return (1 - tax bracket)
Sales / Average Total Assets

42. Current Yield of a bond

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43. 'normal' ratio
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Sales / Average Total Assets
P*(1+g)/(k-g) P=div per share divided by other div
(1/T)(r1+r2+...+rT)

44. aka Net Income
Price/Earnings per share
Earnings After Taxes
Explanatory - Interpretive - Reassuring - Suggestive
EBIT/I (Where I = Interest Expense)

45. Total Debt to Equity ratio
Sales / Average Total Assets
Sources of Funds-Use of Funds or Money in- Money out
Total Liabilities / Equity
Earnings After Taxes

46. Present value of a Bond
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
Total Long-term Debt / Equity
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)