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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. Net Cash Flow
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Sources of Funds-Use of Funds or Money in- Money out

2. Debt Service Ratio
(P1 + D - P0)/P0
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Tax Deduction * marginal tax rate
(Mortgage+Debt Repayment)/Net Income

3. Net Investment Income
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
(current assets - inventory) / current liabilities
Earnings After Taxes
Sources of Funds-Use of Funds or Money in- Money out

4. Real Return (inflation adjusted); NR = Nominal Return; CCL = Change in Cost of Living (inflation rate)
Sources of Funds-Use of Funds or Money in- Money out
driving - expressive - amiable - analytical
assets less liabilities - divided by the number of shares of common stock of a company
[(1+ NR) / (1 + CCL)] - 1

5. financial life cycle
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
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)
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Tax Deduction * marginal tax rate

6. Arithmetic Mean Return; T = Terminal period; good for comparing different investments
(1/T)(r1+r2+...+rT)
Price Earnings Growth ratio; P/E divided by projected earnings growth
Explanatory - Interpretive - Reassuring - Suggestive
g = ROE X b - where b is equal to the retention ratio

7. Times Interest Earned
EBIT/I (Where I = Interest Expense)
Tax Deduction * marginal tax rate
taxable interest - non-qual. divs - short-term cap. gains
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards

8. Types of Understanding Responses Associated With Active Listening
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
Net Worth/Total Assets
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Tax Free Yield/(1 - Tax Bracket)

9. Gross Investment income
taxable interest - non-qual. divs - short-term cap. gains
Total Assets / Equity
current assets - current liabilities
Sources of Funds-Use of Funds or Money in- Money out

10. Net After Tax Profit Margin
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
current assets - current liabilities
Total Return (1 - tax bracket)
EAT / Sales

11. PEG ratio
dividends / earnings
Price Earnings Growth ratio; P/E divided by projected earnings growth
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Net Worth/Total Assets

12. Present value of a Bond
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
(Mortgage+Debt Repayment)/Net Income
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
assets less liabilities - divided by the number of shares of common stock of a company

13. Assets to Equity ratio
taxable interest - non-qual. divs - short-term cap. gains
Total Assets / Equity
Net Worth/Total Assets
(P1 + D - P0)/P0

14. Equivalent Tax Credit
Tax Deduction * marginal tax rate
Dollars of coupon interest per year/Bond's current market price
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Net Worth/Total Assets

15. 'normal' ratio
g = ROE X b - where b is equal to the retention ratio
P*(1+g)/(k-g) P=div per share divided by other div
(cash + marketable securities) / current liabilities
Tax Credit/marginal tax rate

16. Working Capital
Total Liabilities / Equity
current assets - current liabilities
Dollars of coupon interest per year/Bond's current market price
(current assets - inventory) / current liabilities

17. Liquidity Ratio
(cash + marketable securities) / current liabilities
EBIT/I (Where I = Interest Expense)
Dollars of coupon interest per year/Bond's current market price
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

18. financial planning pyramid
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
Tax Credit/marginal tax rate
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
Dollars of coupon interest per year/Bond's current market price

19. Solvency Ratio
(cash + marketable securities) / current liabilities
current assets / current liabilities
Total Liabilities / Equity
Net Worth/Total Assets

20. Current Yield of a bond

21. Types of Leading Responses
[(1+ NR) / (1 + CCL)] - 1
taxable interest - non-qual. divs - short-term cap. gains
Explanatory - Interpretive - Reassuring - Suggestive
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

22. Book Value (of company stock)
(cash + marketable securities) / current liabilities
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
(Mortgage+Debt Repayment)/Net Income
assets less liabilities - divided by the number of shares of common stock of a company

23. 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
Dollars of coupon interest per year/Bond's current market price
g = ROE X b - where b is equal to the retention ratio
Price/Earnings per share

24. P/E ratio
current assets - current liabilities
Total Long-term Debt / Equity
Price/Earnings per share
dividends / earnings

25. Savings 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 Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Total Liabilities / Equity
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

26. Social Styles
Total Liabilities / 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)
driving - expressive - amiable - analytical
Price/Earnings per share

27. Current Ratio
Total Assets / Equity
EBIT/I (Where I = Interest Expense)
current assets / current liabilities
assets less liabilities - divided by the number of shares of common stock of a company

28. The payout ratio
dividends / earnings
EBIT/I (Where I = Interest Expense)
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Earnings Before Interest & Taxes

29. After-tax Yield
Tax Free Yield/(1 - Tax Bracket)
dividends / earnings
(Mortgage+Debt Repayment)/Net Income
Price/Earnings per share

30. Asset Turnover Ratio
Sales / Average Total Assets
driving - expressive - amiable - analytical
current assets - current liabilities
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

31. Attributes of Effective Advisor communiations
EBIT/I (Where I = Interest Expense)
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
g = ROE X b - where b is equal to the retention ratio
Sales / Average Total Assets

32. Debt to Equity ratio
Total Long-term Debt / Equity
driving - expressive - amiable - analytical
taxable interest - non-qual. divs - short-term cap. gains
current assets / current liabilities

33. aka Net Income
Earnings After Taxes
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Total Long-term Debt / Equity
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization

34. EBIT
dividends / earnings
Earnings Before Interest & Taxes
Sources of Funds-Use of Funds or Money in- Money out
(Mortgage+Debt Repayment)/Net Income

35. The retention ratio
Tax Deduction * marginal tax rate
current assets / current liabilities
1 - the payout ratio
(Mortgage+Debt Repayment)/Net Income

36. Sustainable Growth Rate
g = ROE X b - where b is equal to the retention ratio
Sources of Funds-Use of Funds or Money in- Money out
P*(1+g)/(k-g) P=div per share divided by other div
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)

37. ROE (Return On Equity)
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Total Long-term Debt / Equity
[(1+ NR) / (1 + CCL)] - 1
Net Income/Equity

38. After-tax Return
Price/Earnings per share
driving - expressive - amiable - analytical
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Total Return (1 - tax bracket)

39. Equivalent Tax Deduction
Tax Credit/marginal tax rate
Explanatory - Interpretive - Reassuring - Suggestive
[(1+ NR) / (1 + CCL)] - 1
taxable interest - non-qual. divs - short-term cap. gains

40. 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
driving - expressive - amiable - analytical
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)
Total Long-term Debt / Equity

41. Total Debt to Equity ratio
Sales / Average Total Assets
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
Total Liabilities / Equity
g = ROE X b - where b is equal to the retention ratio

42. Holding Period Return
(P1 + D - P0)/P0
EAT / Sales
P*(1+g)/(k-g) P=div per share divided by other div
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization

43. Major CFP Planning Areas
(P1 + D - P0)/P0
Explanatory - Interpretive - Reassuring - Suggestive
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
P*(1+g)/(k-g) P=div per share divided by other div

44. Cash Ratio
P*(1+g)/(k-g) P=div per share divided by other div
(current assets - inventory) / current liabilities
Dollars of coupon interest per year/Bond's current market price
(cash + marketable securities) / current liabilities

45. CFP Ethical principles
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
Total Return (1 - tax bracket)

46. Quick Ratio (aka Acid test)
Earnings After Taxes
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
(current assets - inventory) / current liabilities
Sources of Funds-Use of Funds or Money in- Money out