Financial Planning and Analysis
Pre-Test Questions
Course Introduction
Financial Planning and Analysis is a course designed to introduce students to the principles, tools, and techniques used to evaluate an organizations financial health and guide its strategic decision-making processes. The course covers budgeting, forecasting, variance analysis, and financial modeling, enabling students to interpret financial statements, assess performance, and support long-term financial planning. Emphasis is placed on the integration of quantitative analysis with business strategy, risk assessment, and effective communication of financial insights to stakeholders. Through case studies and practical exercises, students develop the analytical skills necessary to contribute to the financial success and sustainability of organizations.
Recommended Textbook
Personal Financial Planning 1st Edition by Lewis Altfest
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20 Chapters
651 Verified Questions
651 Flashcards
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Chapter 1: Introduction to PFP
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Sample Questions
Q1) Which of the following issues can be categorized as a consumption and savings issue?
A) The need to resolve a debt problem.
B) The desire to improve investment returns.
C) Discomfort with the current risk profile.
D) All of the above.
E) None of the above.
Answer: E
Q2) Which of the following is not a personal finance issue?
A) Consumption and savings
B) Risk management
C) Investments
D) Financing
E) All of the above are personal finance issues
Answer: E
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Page 3
Chapter 2: Time Value of Money
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Sample Questions
Q1) What is an annuity due?
A) An annuity where the payments are made at the end of each period.
B) An annuity where the payments are made at the beginning of each period.
C) An annuity where if a payment is missed, it must be paid within one period or the investment is seized.
D) An annuity where if a payment is missed, it must be paid immediately or the investment is seized.
E) None of the above.
Answer: B
Q2) What is the present value of $25,250,300 to be received 73 years from now if the interest rate is 22.5 percent?
A) $10,454,550.25
B) $9.30
C) $12,566.60
D) $8,987,000.45
E) $8,500,000.25
Answer: B
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4
Chapter 3: Beginning the Planning Process
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Sample Questions
Q1) Which of the following characterizes communication?
A) It is the ability to transmit a message successfully to another person.
B) It is required to demonstrate to others that we possess desirable traits.
C) It is necessary even if you are honest, knowledgeable, and concerned.
D) All of the above.
E) None of the above.
Answer: D
Q2) Which of the following is not a rule that can help you become a more effective listener?
A) Do more listening than talking.
B) Avoid trying to get into the other person's way of thinking.
C) Keep your responses to the topic being discussed.
D) Focus your full attention.
E) All of the above are rules that can help you become a more effective listener.
Answer: B
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Chapter 4: Household Finance
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Sample Questions
Q1) Which of the following is a characteristic of the life cycle theory of savings?
A) It assumes that utility cannot be measured in money terms.
B) It says that our spending decisions are based on the amount of income we earn currently.
C) Is says that before we establish our lifetime resources, we try to maintain a constant level of expenditures throughout our life cycle.
D) All of the above.
E) None of the above.
Q2) Why don't many young people begin saving for retirement once they begin working?
A) Sound financial planning advises against such savings.
B) These savings are much less "high powered" for accumulation purposes.
C) Young people prefer enjoyment today over what they perceive as a distant concern about retirement.
D) All of the above.
E) None of the above.
Q3) 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) What are financing activities?
A) The cash left over after our operating, capital expenditure, and debt activities.
B) Outlays on household related matters that provide benefit beyond the current year.
C) The day-to-day financial functions of the household.
D) Cash flows that come from changes in debt.
E) None of the above.
Q2) Which of the following tells you how you are doing today and sets the stage for any steps that need be taken to alter future activities?
A) Balance sheet.
B) Cash flow statement.
C) Projected cash flow statement.
D) Income statement.
E) None of the above.
Q3) How are each of the following items recorded according to GAAP business?
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Chapter 6: Cash Flow Planning
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Sample Questions
Q1) Success in saving can occur by minimizing discomfort through:
A) Staying away from stores that result in greater spending than needed.
B) Saving a fraction of the extra money obtained from raises before the new money enters the spending stream.
C) Carrying credit cards only for planned expenditures and for vacations.
D) Dollar cost averaging.
E) None of the above.
Q2) Establishing how people differ in the way they spend their money is:
A) Of crucial importance to financial planners.
B) Generally not of concern to advisors.
C) The first step of the financial planning process.
D) The second step of the financial planning process.
E) The third step of the financial planning process.
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.
Page 8
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Chapter 7: Debt
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Sample Questions
Q1) Consider a situation where you borrow $40,000. The interest paid is $3,000, and is deducted at the beginning of the period. What is the interest rate?
A) 12.11%
B) 7.5%
C) 8.11%
D) 11.5%
E) 0
Q2) The amount of debt outstanding relative to one's assets is which of the following?
A) Operating risk.
B) Debt risk.
C) Financial risk.
D) Interest rate risk.
E) None of the above.
Q3) What are the two effects associated with undertaking additional debt?
A) Increased risk and increased potential returns.
B) Decreased risk and increased potential returns.
C) Increased risk and decreased potential returns.
D) Decreased risk and decreased potential returns.
E) None of the above.
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Page 9
Chapter 8: Non Financial Investments
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Sample Questions
Q1) Which of the following is not a reason to purchase a durable good?
A) To take advantage of a technological improvement with the potential to make household maintenance more time-efficient.
B) Physical wear and tear that results in an existing durable having reached the end of its useful life.
C) A change in circumstances.
D) To attempt to minimize risk.
E) All of the above are reasons to purchase a durable good.
Q2) The higher one's tax bracket,
A) The greater the "government subsidy" for tax-deductible real estate taxes and interest expense.
B) The lower the "government subsidy" for tax-deductible real estate taxes and interest expense.
C) The greater the amount of non-mortgage debt outstanding.
D) The lower the amount of non-mortgage debt outstanding.
E) None of the above.
Q3) What factors influence home affordability and whether the purchase of a home is realistic? For each, provides details as to why it is included on the list.
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Chapter 9: Financial Investments
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Sample Questions
Q1) Which of the following factors is not a personal consideration that enters into the asset allocation process?
A) Current available resources.
B) Projected future cash flows.
C) Taxes.
D) Risk neutrality.
E) All of the above are personal considerations that enter into the asset allocation process.
Q2) 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.
Q3) Which of the following is the most common measurement of price fluctuations?
A) Variance.
B) Mean.
C) Standard deviation.
D) Correlation.
E) None of the above.
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Chapter 10: Risk Management
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Sample Questions
Q1) Tangible assets that the household owns are:
A) Real assets.
B) Human assets.
C) Financial assets.
D) All of the above.
E) None of the above.
Q2) Why is it so difficult to identify a group of assets or other techniques that can fully eliminate portfolio risk?
A) They types of assets that can eliminate portfolio risk are only available to professional money managers.
B) The lack of a full hedge for the lifetime work-related income streams we call human assets.
C) The volatility of portfolio returns over time.
D) All of the above.
E) None of the above.
Q3) Please list and describe eight risk management approaches.
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Chapter 11: Other Insurance
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Sample Questions
Q1) The minimum coverage generally associated with umbrella coverage is:
A) $250,000
B) $500,000
C) $750,000
D) $1 million.
E) There is no minimum coverage.
Q2) Which of the following is not part of an automobile insurance policy?
A) Liability.
B) Medical.
C) Damage.
D) All of the above are part of an automobile insurance policy.
E) None of the above is part of an automobile insurance policy.
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.
Q4) Please list the type of dwelling and type of coverage associated with the eight types of homeowner's policies.
Page 13
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Chapter 12: Retirement Planning
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Sample Questions
Q1) Which of the following is not an advantage of a mutual fund versus a variable annuity?
A) Favorable capital gains rates on equity fund, appreciation and dividends.
B) Higher total expense ratios and a redemption charge for annuities.
C) Limitation on investment choice for annuities.
D) All of the above are advantages of a mutual fund versus a variable annuity.
E) None of the above is an advantage of a mutual fund versus a variable annuity.
Q2) What is the major difference between pre- and post-retirement planning?
A) The opportunity to enhance cash inflows is limited or nonexistent post-retirement.
B) Individuals tend to have more cash available than expected post-retirement.
C) Post-retirement planning is primarily focused are largely focused on revenues.
D) All of the above are major differences.
E) None of the above is a major difference.
Q3) For each of the following competing instruments, compare the advantages of an annuity and the advantages of the competing instrument.
(a) CD
(b) Taxable Bond
(c) Municipal Bond
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Page 14
Chapter 13: Educational Planning
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Sample Questions
Q1) In which of the following situations is there a 10% penalty incurred when withdrawing funds in Section 529 plans?
A) If the withdrawal from the account is due to the death of the designated beneficiary.
B) If the withdrawal from the account is due to the disability of the designated beneficiary.
C) Withdrawals of excess funds due to receipt of a scholarship.
D) Non-college expense withdrawals arising from attendance at a U.S. military academy.
E) None of the above.
Q2) Private school payments for the period before college are:
A) Eligible for Coverdells if student is a minor when attending private school.
B) Eligible for Coverdells.
C) Ineligible for Coverdells.
D) Ineligible for Coverdells if student is a minor when attending private school.
E) None of the above.
Q3) What are the steps in the educational policy statement process?
Q4) Please list and explain seven basic financial literacy principles.
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Chapter 14: Tax Planning
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Sample Questions
Q1) Which of the following is not a technique through which to reduce taxes?
A) Deferrals.
B) Conversions.
C) Transfers.
D) Eliminations
E) All of the above are techniques though which to reduce taxes.
Q2) New Series EE bonds purchased will earn a fixed rate of interest effective:
A) May 2005.
B) May 1995.
C) April 1995.
D) April 2005.
E) None of the above.
Q3) Which of the following is not an individual tax-advantaged investment?
A) Roth IRA.
B) Home.
C) Real estate investment.
D) Series EE bonds.
E) All of the above are individual tax-advantaged investments.
Q4) Please list and explain eight tax planning strategies.
Q5) Please detail the principal components of the tax return.
Page 16
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Chapter 15: Estate Planning
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Sample Questions
Q1) What is intestate?
A) Dying without a will.
B) Preparing a will that applies to only a single state.
C) Preparing a will that applies across a number of states.
D) Dying with a will that you prepared without a lawyer.
E) None of the above.
Q2) Which of the following is incorrect?
A) The letter of instruction is a legal document.
B) The letter of instruction can indicate where the will and other important papers are located.
C) The letter of instruction can discuss sensitive family matters that an executor may find helpful.
D) The letter of instruction can include burial wishes.
E) All of the above are correct.
Q3) A revocable trust:
A) Can be changed by the grantor for a short period following probate.
B) Can be revoked by the grantor for a short period following probate.
C) Usually has no impact on gift or estate taxes.
D) Usually has a large impact on gift and estate taxes.
E) None of the above.
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Chapter 16: Stocks, Bonds and Mutual Funds
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Sample Questions
Q1) Bond coupons are:
A) Fixed contractual payments that are affected by changes in market rates over time.
B) Fixed contractual payments that are not affected by changes in market rates over time.
C) Fixed contractual payments that are affected by changes in interest rates over time.
D) Fixed contractual payments that are affected by changes in default rates over time.
E) None of the above.
Q2) List and provide a detailed explanation for nine types of bond funds.
Q3) Due to changes in interest rates,
A) A premium bond has greater fluctuation in price than a discount bond.
B) A premium bond has identical fluctuation in price as a discount bond.
C) A discount bond has a greater fluctuation in price than a premium bond.
D) Both discount and premium bonds do not fluctuate in price.
E) None of the above.
Q4) List and provide examples of eight types of specialized funds that concentrate in publicly traded securities.
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18
Chapter 17: Background Topics
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Sample Questions
Q1) The measure of overall U.S. economic activity produced by U.S. businesses is the:
A) Gross Domestic Product.
B) Gross National Product.
C) Net Domestic Product.
D) Net National Product.
E) None of the above.
Q2) Which of the following is not required for a contract to be negotiable?
A) Written.
B) Signed by maker.
C) An unconditional promise to pay an exact amount of money.
D) Paid to a specific person or to anyone presenting the contract.
E) All of the above are required.
Q3) An act of wrongdoing against a person or a business or their property for which compensation is sought is:
A) A tort.
B) Negligence.
C) Belligerence.
D) All of the above.
E) None of the above.
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Page 19
Chapter 18: Capital Needs Analysis
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Sample Questions
Q1) 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.
Q2) Which of the following is not a question that should be asked to finalize the retirement needs analysis?
A) Are the assumptions those that you believe in?
B) Will you be able to carry out this plan?
C) Is this particular plan what you want to do, assuming you had resources that are currently unavailable to you?
D) Both a and b are not questions that should be asked.
E) Both b and c are not questions that should be asked.
Q3) Please list the 11 steps associated with a retirement needs analysis.
Q4) Please indicate whether Monte Carlo simulation and Total Portfolio Management includes each of the following:
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Page 20
Chapter 19: Behavioral Financial Planning
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Sample Questions
Q1) Which of the following is not a source of cognitive errors?
A) Lack of knowledge.
B) Hubris.
C) Weakness in perception and memory.
D) Limited processing scope and speed.
E) All of the above are sources of cognitive errors.
Q2) Which of the following is not a criticism of behavioral finance?
A) It has no scientific underpinning.
B) Its generalizations come from laboratory experiments and questionnaires.
C) Its generalizations come from how people act in real life.
D) All of the above are criticisms.
E) None of the above is a criticism.
Q3) A weakness of behavioral finance relative to classical finance is that it is characterized by:
A) Less firm conclusions.
B) Less satisfying financial conclusions.
C) Being less scientific in a financial sense.
D) Both a and b.
E) All of the above.
Q4) Please list and describe six common heuristics.
Page 21
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Chapter 20: Completing the Process
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Sample Questions
Q1) For which of the following operating segments of the financial plan is the cash relationship characterized as an outflow?
A) Revenues.
B) Living costs.
C) Retirement planning.
D) Both a and b.
E) Both b and c.
Q2) By which of the following steps in the financial planning process do we ask "Have you analyzed all areas that you intended to?"
A) Establishing the scope of the activity.
B) Gathering the data and identifying goals.
C) Compiling and analyzing the data.
D) All of the above.
E) None of the above.
Q3) Please list 8 distinguishing features of personal financial planning theory, and describe the benefit of each.
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