Financial Planning and Analysis Practice
Exam
Course Introduction
Financial Planning and Analysis is a vital course that equips students with the knowledge and skills necessary to guide organizations through effective financial decision-making processes. The course covers the fundamentals of budgeting, forecasting, financial modeling, and performance analysis, enabling students to assess an organization's financial health and recommend strategies for improvement. Emphasis is placed on interpreting financial data, utilizing analytical tools, and developing actionable insights that support business objectives. By the end of the course, students will have a deep understanding of how to create, implement, and monitor financial plans that drive organizational success in dynamic environments.
Recommended Textbook
Personal Financial Planning 1st Edition by Lewis Altfest
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651 Verified Questions
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Chapter 1: Introduction to PFP
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Sample Questions
Q1) Which of the following best defines household finance?
A) The study of how a household and the people in it develop the cash flows necessary to support operations and provide for the well-being of its members.
B) The study of how much it costs to purchase a home.
C) The study of how a household and the people in it can minimize the risk of bankruptcy.
D) The study of how the number of people in a household can be maximized.
E) The study of how a household and the people in it limit expenditures and maximize cash inflows.
Answer: A
Q2) Which of the following characterizes personal financial planning services before 1970?
A) It was widely available to the general population.
B) It was primarily available to the very wealthy.
C) It primarily focused on tax issues.
D) It primarily focused on insurance issues.
E) None of the above characterizes personal financial planning services before 1970.
Answer: B
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Chapter 2: Time Value of Money
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Sample Questions
Q1) What is a perpetual annuity?
A) A stream of investment payments that are funded through borrowing.
B) A stream of investment payments that are assumed to continue forever.
C) An annuity investment that is passed down as an inheritance.
D) All of the above.
E) None of the above.
Answer: B
Q2) What is the nominal return?
A) The return on assets based on the actual number of dollars received.
B) The return on assets based on the inflation-adjusted number of dollars received.
C) The return on assets assuming compounding one time per year.
D) The return on assets based on the APR.
E) None of the above.
Answer: A
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4
Chapter 3: Beginning the Planning Process
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Sample Questions
Q1) What is empathy?
A) Speaking positively about another person's strongly held beliefs.
B) Believing that you can rely on another person to perform as expected.
C) Trying to place oneself in another person's position.
D) Trying not to be judgmental about another person's position.
E) None of the above.
Answer: C
Q2) Biologists argue that:
A) We are programmed through our genetic makeup to strive for certain objectives.
B) Our goals are influenced by the way we were raised by our families and other groups of people in our environment.
C) The underlying goal of most human behavior is to have as many pleasurable experiences as possible.
D) Goal oriented behavior is genetically limited to the pursuit of pleasure.
E) None of the above.
Answer: A
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5
Chapter 4: Household Finance
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Sample Questions
Q1) What are the similarities and differences between household and business financial processes for each of the following?
Q2) What is the goal of a household?
A) To earn as much money as it can.
B) To maximize utility.
C) To identify and manage revenues and expenses.
D) All of the above.
E) None of the above.
Q3) Which of the following is not true according to the life cycle theory?
A) Borrowing generally takes place early in the household's life, when income is low.
B) As income rises, people increase their debt rather than save for retirement.
C) Upon retirement savings are liquidated steadily to maintain their cost of living.
D) The goal is to "die broke."
E) All of the above are true according to the life cycle theory.
Q4) Please provide a breakdown of alternative household structures and their effect on financial, legal, and tax matters.
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Chapter 5: Financial Statements Analysis
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Sample Questions
Q1) Which of the following is not applicable to a functional household statement of cash flows?
A) Resembles business cash flow statement.
B) Calculates net cash flows properly.
C) Handles revenues properly.
D) It is simpler than a traditional household statement of cash flows.
E) All of the above are applicable to a traditional household statement of cash flows.
Q2) What is depreciation?
A) The projected reduction in asset value due to wear and tear or obsolescence.
B) A non-tax deductible expense that depreciates household assets.
C) The projected increase in asset value due to capital gains.
D) A non-tax deductible expense that depreciates household income.
E) None of the above.
Q3) Which assets are not usually placed on balance sheets?
A) Human-related assets.
B) Marketable investments.
C) Human assets.
D) All of the above.
E) Both a and c.
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Page 7
Chapter 6: Cash Flow Planning
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Sample Questions
Q1) Using cash as much as possible is as method through which one can:
A) Reduce temptation.
B) Minimize discomfort.
C) Eliminate options to spend.
D) All of the above.
E) None of the above.
Q2) Debt and marketable securities are examples of:
A) Liquidity substitutes.
B) Equity substitutes.
C) Emergency funds.
D) Purchasing power risk.
E) None of the above.
Q3) The ratio of liquid assets to total monthly household expenses is the:
A) Discretionary cost percentage.
B) Current ratio.
C) Operating ratio.
D) Nondiscretionary cost percentage.
E) None of the above.
Q4) Please list and describe eight different reasons for savings.
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Chapter 7: Debt
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Sample Questions
Q1) Which of the following steps will not help in improving your credit rating?
A) Pay all bills when due.
B) Increase the number of credit cards outstanding.
C) Obtain and review your credit report.
D) Plan future of credit.
E) All of the above steps will help in improve you credit rating.
Q2) Financial leverage is greater:
A) The lower the amount of interest expense and debt repayment commitments.
B) The greater the amount of interest expense commitments but not debt repayment commitments.
C) The lower the amount of debt repayment commitments but not interest expense commitments.
D) The greater the amount of interest expense and debt repayment commitments.
E) Both b and c
Q3) Which of the following factors will result in a lower credit score?
A) Married.
B) Children.
C) One wage earner.
D) Favorable credit history.
E) All of the above will result in a higher credit score.
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Chapter 8: Non Financial Investments
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Sample Questions
Q1) When calculating the NPV, what discount rate should we use?
A) A discount rate equal to the investment return that could be earned on nonmarketable securities with similar risk characteristics.
B) A discount rate equal to the investment return that could be earned on marketable securities with similar risk characteristics.
C) A discount rate equal to the investment return that could be earned on low-risk marketable securities.
D) A discount rate equal to the investment return that could be earned on high-risk nonmarketable securities.
E) None of the above.
Q2) What type of human-related assets is personal finance principally interested?
A) Assets that derive their value from particular people.
B) Assets that generate income.
C) Assets in which ownership is represented and traded solely through pieces of paper.
D) All of the above.
E) None of the above.
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10
Chapter 9: Financial Investments
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Sample Questions
Q1) The fact that records are kept by fund management is:
A) A weakness, as it provides a paper trail that can be used in an audit.
B) A strength, as it can provide you with information about performance.
C) A weakness, as it is used to justify the management expenses.
D) None of the above.
E) Both a and c.
Q2) If the risk free rate is 5% and the risk premium is 4%, what is the expected rate of return?
A) 9%
B) 1%
C) 14%
D) -1%
E) None of the above.
Q3) Which of the following time frames is associated with a long-term horizon?
A) 2-7.
B) 10-20.
C) 2-4.
D) 4-10.
E) 15-35.
Q4) Please list and explain nine strengths associated with mutual funds.
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Chapter 10: Risk Management
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Sample Questions
Q1) For what does medigap insurance pay?
A) The portion of medical expenses covered by the government.
B) The portion of medical expenses not covered by the government.
C) Assistance at home.
D) Payments to a nursing home.
E) None of the above.
Q2) The feature that allows an insured to swap a term policy in the future for a whole life policy is designated:
A) Convertible term.
B) Swap term.
C) Flexible swap.
D) Convertible swap.
E) None of the above.
Q3) Which of the following is an approach used to asses the amount of insurance needed?
A) Partial replacement.
B) Revenue enhancement.
C) Private insurance needs.
D) All of the above are approaches.
E) None of the above is an approach.
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Chapter 11: Other Insurance
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Sample Questions
Q1) Which of the following is not a type of hazard?
A) Physical hazard.
B) Moral hazard.
C) Morale hazard.
D) All of the above are types of hazards.
E) None of the above is a type of hazard.
Q2) An individual facing risk:
A) Is unaware of the exact outcome and is unaware of the probabilities associated with alternative outcomes.
B) Is unaware of the exact outcome but is aware of the probabilities associated with alternative outcomes.
C) Is aware of the exact outcome.
D) All of the above.
E) None of the above.
Q3) Real property includes:
A) Structures that are affixed to land.
B) Land.
C) Assets that are not affixed to land.
D) All of the above.
E) None of the above.
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Chapter 12: Retirement Planning
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Sample Questions
Q1) Which of the following is the second step of the retirement planning process?
A) Analyze retirement risks.
B) Familiarize yourself with retirement issues.
C) Develop goals.
D) Become knowledgeable about retirement structures.
E) None of the above.
Q2) A pension plan that may be used for retirement but whose deposits are generally not eligible to receive a tax deduction is know as a:
A) Qualified plan.
B) Taxable plan.
C) Defined tax plan.
D) Nonqualified plan.
E) None of the above.
Q3) How many years of projected retirement are a female that retires at age 65 expected to have?
A) 16.
B) 19.
C) 22.
D) 25.
E) 28.
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Chapter 13: Educational Planning
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Sample Questions
Q1) For which of the following loans are the student's parents liable to repay?
A) Federal PLUS loans.
B) State PLUS loans.
C) Stafford loans.
D) All of the above.
E) None of the above.
Q2) Over the period 1999-2003, what was the rate of college costs inflation?
A) 2.9%.
B) 4.2%.
C) 4.9%.
D) 5.5%.
E) None of the above.
Q3) For Series EE, what was the income eligibility for a joint filing in 2005?
A) $61,200-$91,850.
B) $61,200-$76,200.
C) $91,850-$121,850.
D) $61,200-$121,850.
E) None of the above.
Q4) For each of the following areas, please list important topics that should be discussed to help client's become financial literate:
Page 15
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Chapter 14: Tax Planning
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Sample Questions
Q1) Please list and explain eight tax planning strategies.
Q2) The fact that taxes influence the timing of transactions and preparation for payment of sums due is an example of the tax impact on:
A) Investments.
B) Cash flow planning.
C) Financing.
D) Risk management.
E) None of the above.
Q3) The tax strategy of timing income and expenses is implemented through:
A) Delay selling an investment that has risen in value until the New Year.
B) Delaying selling an investment that has appreciated in value until it qualifies for favorable long-term capital gains treatment.
C) Selling investments with losses to reduce current taxes.
D) Selecting the year to declare a gain or loss to take tax advantage of a more favorable marginal tax bracket.
E) None of the above.
Q4) Please detail the principal components of the tax return.
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Chapter 15: Estate Planning
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Sample Questions
Q1) Fast growing assets:
A) Are often preferred gifting vehicles as they eliminate assets that can increase the estate's valuation.
B) Are not preferred gifting vehicles as they eliminate assets that can increase the estate's valuation.
C) Are often preferred gifting vehicles as they do not eliminate assets that can increase the estate's valuation.
D) Are not preferred gifting vehicles as they do not eliminate assets that can increase the estate's valuation.
E) None of the above.
Q2) For which of the following is life insurance in estate planning irrelevant?
A) Liquidity.
B) Relative assurance of payment.
C) Tax savings.
D) Only c is relevant.
E) All of the above are relevant.
Q3) What are the fourteen steps of estate planning?
Q4) Please list and describe eight factors for which a legally recognized will should be evaluated.
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Chapter 16: Stocks, Bonds and Mutual Funds
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Sample Questions
Q1) If the annual coupon is $2,243.5, the face value $100,000, the market price $124,345.43, and the number of years to maturity 23.76, what is the approximate yield to maturity?
A) 0.42%
B) 1.42%
C) 2.42%
D) 24.42%
E) None of the above.
Q2) What is a load fund?
A) A fund that that does not offer sales commissions to the marketers of the funds.
B) A fund that provides a sales commission to the individual or brokerage firm that markets the fund.
C) A fund where the management company does not charge a load that they retain.
D) Both a and b.
E) Both b and c.
Q3) List and provide a detailed explanation for nine types of bond funds.
Q4) List and provide examples of eight types of specialized funds that concentrate in publicly traded securities.
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Chapter 17: Background Topics
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Sample Questions
Q1) What is the purchasing power of $100,000 at an inflation rate of 10% over 20 years?
A) $62,092.
B) $38,554.
C) $100,000.
D) $14,864.
E) $98,039.
Q2) Giving up something that has value in return for an act or promise is:
A) Compromise.
B) Consideration.
C) Contract.
D) Offer.
E) Acceptance.
Q3) Which of the following is characterized by a limited life cycle?
A) Subchapter S corporation.
B) Limited liability partnership.
C) Partnership.
D) All of the above.
E) None of the above.
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Chapter 18: Capital Needs Analysis
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Sample Questions
Q1) To which of the following is the real rate equal?
A) ((1 + inflation rate)/(1 + investment rate) - 1) x 100.
B) ((1 + investment rate)/(1 + inflation rate) - 1) x 100.
C) ((1 - investment rate)/(1 - inflation rate) + 1) x 100.
D) ((1 - inflation rate)/(1 - investment rate) + 1) x 100.
E) None of the above.
Q2) Large unreconciled differences between projected savings figures and current actual savings often come about through:
A) Underestimating future expenses.
B) Overestimating future expenses.
C) Underestimating future savings.
D) Overestimating future savings.
E) None of the above.
Q3) Which of the following is an advantage associated with being more conservative in one's simple capital needs projections?
A) You have no benchmark to determine how much to alter each calculation.
B) Errors associated with this approach will not change one's lifestyle.
C) It is easy to understand and to execute.
D) Both a and b.
E) Both b and c.
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Chapter 19: Behavioral Financial Planning
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Sample Questions
Q1) What are heuristics?
A) Simplified human approaches to complex tasks.
B) Actions based on a flawed view of reality.
C) A category of mnemonics.
D) Difficult to understand contract details that clients often overlook.
E) None of the above.
Q2) Which of the following best defines visceral feelings?
A) Human shortcomings that come from impulses to take action that are often short-term in nature and can cloud judgments.
B) Instinctive human behaviors that come from impulses to take action that are often short-term in nature and can improve judgments.
C) Human shortcomings that come from impulses to take action that are often long-term in nature and can cloud judgments.
D) Instinctive human behaviors that come from impulses to take action that are often long-term in nature and can improve judgments.
E) None of the above.
Q3) Please list and discuss seven methods that are helpful for maintaining control to achieve planned savings.
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Chapter 20: Completing the Process
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Sample Questions
Q1) An ideal financial plan should have:
A) A summary at the beginning.
B) A mix of written information, numbers through tables, and figures.
C) A summary at the end.
D) Both a and b.
E) All of the above.
Q2) For which of the following operating segments of the financial plan is the cash relationship characterized exclusively as an inflow?
A) Revenues.
B) Capital expenditures (nonfinancial investments).
C) Risk management
D) Both a and b.
E) Both b and c.
Q3) Why is there a need for the financial plan to integrate all financial actions?
A) Due to the possibility that the justification for some actions may be forgotten.
B) Due to the limited resources households have.
C) To satisfy certain regulation that financial planners must follow.
D) All of the above.
E) None of the above.
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Page 22