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. The payout ratio
Sources of Funds-Use of Funds or Money in- Money out
assets less liabilities - divided by the number of shares of common stock of a company
dividends / earnings
Earnings Before Interest & Taxes

2. Equivalent Tax Deduction
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Tax Credit/marginal tax rate
Price Earnings Growth ratio; P/E divided by projected earnings growth
Net Worth/Total Assets

3. Book Value (of company stock)
Earnings After Taxes
g = ROE X b - where b is equal to the retention ratio
assets less liabilities - divided by the number of shares of common stock of a company
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence

4. Working Capital
Dollars of coupon interest per year/Bond's current market price
1 - the payout ratio
current assets - current liabilities
driving - expressive - amiable - analytical

5. Domains of a CFP
current assets - current liabilities
Tax Credit/marginal tax rate
g = ROE X b - where b is equal to the retention ratio
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards

6. Net Investment Income
Explanatory - Interpretive - Reassuring - Suggestive
Tax Free Yield/(1 - Tax Bracket)
EBIT/I (Where I = Interest Expense)
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)

7. Debt to Equity ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Total Long-term Debt / Equity
(1/T)(r1+r2+...+rT)
current assets / current liabilities

8. Present value of a Bond
Earnings Before Interest & Taxes
P*(1+g)/(k-g) P=div per share divided by other div
(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

9. Types of Understanding Responses Associated With Active Listening
(Mortgage+Debt Repayment)/Net Income
Price/Earnings per share
Earnings After Taxes
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization

10. Equivalent Tax Credit
Tax Deduction * marginal tax rate
Total Liabilities / Equity
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n
dividends / earnings

11. Holding Period Return
Tax Deduction * marginal tax rate
(P1 + D - P0)/P0
EAT / Sales
Earnings Before Interest & Taxes

12. Savings Ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
(Mortgage+Debt Repayment)/Net Income
Tax Deduction * marginal tax rate
Net Income/Equity

13. Cash Ratio
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
dividends / earnings
(cash + marketable securities) / current liabilities
Price/Earnings per share

14. Times Interest Earned
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
P*(1+g)/(k-g) P=div per share divided by other div
(Mortgage+Debt Repayment)/Net Income
EBIT/I (Where I = Interest Expense)

15. After-tax Yield
g = ROE X b - where b is equal to the retention ratio
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Tax Free Yield/(1 - Tax Bracket)
driving - expressive - amiable - analytical

16. Quick Ratio (aka Acid test)
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
taxable interest - non-qual. divs - short-term cap. gains
Sales / Average Total Assets
(current assets - inventory) / current liabilities

17. Social Styles
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
(1/T)(r1+r2+...+rT)
driving - expressive - amiable - analytical
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)

18. Total Debt to Equity ratio
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
Total Liabilities / Equity
Total Return (1 - tax bracket)
assets less liabilities - divided by the number of shares of common stock of a company

19. Solvency Ratio
(P1 + D - P0)/P0
Net Worth/Total Assets
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
Total Return (1 - tax bracket)

20. Arithmetic Mean Return; T = Terminal period; good for comparing different investments
(1/T)(r1+r2+...+rT)
g = ROE X b - where b is equal to the retention ratio
1 - the payout ratio
dividends / earnings

21. Net After Tax Profit Margin
Sales / Average Total Assets
Tax Credit/marginal tax rate
EAT / Sales
Sources of Funds-Use of Funds or Money in- Money out

22. Current Ratio
EBIT/I (Where I = Interest Expense)
current assets / current liabilities
P*(1+g)/(k-g) P=div per share divided by other div
Price Earnings Growth ratio; P/E divided by projected earnings growth

23. Types of Leading Responses
Dollars of coupon interest per year/Bond's current market price
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Explanatory - Interpretive - Reassuring - Suggestive
[(1+ NR) / (1 + CCL)] - 1

24. Opportunities in Financial Planning
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
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 Return (1 - tax bracket)
dividends / earnings

25. Assets to Equity ratio
Explanatory - Interpretive - Reassuring - Suggestive
Total Assets / Equity
Continuing - Restatement of content - Reflection of feeling - Clarifying - Summarization
Price/Earnings per share

26. financial life cycle
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)
Sales / Average Total Assets
Total Assets / Equity
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

27. PEG ratio
Price Earnings Growth ratio; P/E divided by projected earnings growth
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
(cash + marketable securities) / current liabilities
Price/Earnings per share

28. Sustainable Growth Rate
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
g = ROE X b - where b is equal to the retention ratio
EGAD CIMP - Establish and define Relationship - Gather Information - Analyze and Evaluate Current Stauts - Develop Recommendations - Communicate Recommendations - Monitor Recommendations - Practice Professional Standards
(Coupon1 /2)/(1+YTM)/2?1 + (Coupon2 /2)/(1+YTM)/2?2 +...+ (CouponT /2)/(1+YTM)/2?n

29. P/E ratio
Dollars of coupon interest per year/Bond's current market price
Price/Earnings per share
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness
Total Return (1 - tax bracket)

30. 'normal' ratio
driving - expressive - amiable - analytical
current assets - current liabilities
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)

31. After-tax Return
EBIT/I (Where I = Interest Expense)
Total Return (1 - tax bracket)
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Sales / Average Total Assets

32. Debt Service Ratio
(Mortgage+Debt Repayment)/Net Income
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
Price/Earnings per share
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness

33. Liquidity Ratio
P*(1+g)/(k-g) P=div per share divided by other div
Earnings Before Interest & Taxes
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
Explanatory - Interpretive - Reassuring - Suggestive

34. ROE (Return On Equity)
assets less liabilities - divided by the number of shares of common stock of a company
Earnings Before Interest & Taxes
Net Income/Equity
Dollars of coupon interest per year/Bond's current market price

35. The retention ratio
dividends / earnings
1 - the payout ratio
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
current assets - current liabilities

36. Major CFP Planning Areas
G RETIRE - General Principles - Retirement Planning - Estate Planning - Tax Planning - Investment Planning - Risk Management (Insurance) - Employee Benefits
driving - expressive - amiable - analytical
Total Liabilities / Equity
(cash + marketable securities) / current liabilities

37. aka Net Income
Earnings After Taxes
dividends / earnings
Net Income/Equity
Dollars of coupon interest per year/Bond's current market price

38. Attributes of Effective Advisor communiations
current assets - current liabilities
driving - expressive - amiable - analytical
g = ROE X b - where b is equal to the retention ratio
Unconditional positive regard - Accurate empathy - Genuineness - Self-awareness

39. Real Return (inflation adjusted); NR = Nominal Return; CCL = Change in Cost of Living (inflation rate)
Earnings Before Interest & Taxes
(P1 + D - P0)/P0
[(1+ NR) / (1 + CCL)] - 1
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)

40. Asset Turnover Ratio
Sales / Average Total Assets
Tax Credit/marginal tax rate
current assets - current liabilities
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)

41. Gross Investment income
(Liquid Assets/Total Current Debts=Liquid Assets/(Current Liabilities+Annual Loan Payments)
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
taxable interest - non-qual. divs - short-term cap. gains
Tax Deduction * marginal tax rate

42. Net Cash Flow
Sources of Funds-Use of Funds or Money in- Money out
assets less liabilities - divided by the number of shares of common stock of a company
Tax Free Yield/(1 - Tax Bracket)
P*(1+g)/(k-g) P=div per share divided by other div

43. Current Yield of a bond

44. EBIT
Price/Earnings per share
P*(1+g)/(k-g) P=div per share divided by other div
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
Earnings Before Interest & Taxes

45. CFP Ethical principles
IOC FC PD - Integrity - Objectivity - Compentence - Fairness - Confidentiality - Professionalism - Diligence
(Mortgage+Debt Repayment)/Net Income
Gross investment Income less any deductible other investment-related expenses (must exceed 2% of AGI)
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)

46. financial planning pyramid
Top: Retirement and Estate - Mid: Growing Investments - Bottom: Guarding Against Uncertainty (Insurance)
EBIT/I (Where I = Interest Expense)
Net Cash Flow+Already Being Saved or Invested/Annual After Tax Income
Tax Deduction * marginal tax rate