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Flashcards in General Deck (21)
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Current Ratio
Current Assets
Current Liabilities

Current Ratio=Current Assets/Current Liabilities

Current Assets: Cash equivalents, Marketable Securities, accounts receivable, Inventory

Current Liabilities: Accounts payable, credit card debt, taxes payable


Securities Act of 1933

Securities Act of 1934

33: Requires prospectus for new issues and full & fair disclosure

34: Passed to regulate secondary market and created SEC to enforce securities laws


Investment Company Act of 1940

Securities Investors Protection Act of 1970

40: Authorized SEC to regulate UIT, open end funds, closed end funds, and variable products.

70: Established SPIC to supervise securities firms that get into financial difficulties. Also to insure investors against losses due to failure of brokerage firm


Gross Domestic Product (GDP)

- Total dollar value of all goods and services produced within the US ONLY
- GDP counts economic activity without regard to yearly price fluctuations
- Does NOT include any income generated outside of the US or adjustments for foreign currencies


Business Cycle

GDP on Y axis, Time on X axis:

Expansion, Peak, Recession, Trough, Recovery


Recession vs Depression

Recession: Two consecutive quarters of economic decline (negative GDP)

Depression: Six consecutive quarters of economic decline (negative GDP)


EXCEPTIONS to Filing as an Investment Advisor

- Banks that are not also investment companies
- Lawyers, accountants, teachers (advice incidental)
- Broker/Dealer or Registered Reps whose performance is incidental and who get no special compensation
- Publishers of bona fide newspapers
- Those who give advice solely relating to US government securities
- When only clients are insurance companies
- Family Office
- Under $100m in AUM (register with state)


Law of Agency (Insurance Authority)

- Express: written, explicit direction from principal to agent
- Implied: that which public believes an individual holds and includes signage, rate books, etc. Implied is actual authority that ages has to carry out the principals business.
- Apparent: arises out of negligence of the principal allowing the agent to appear to have authority because of certain actions of the agent in the past.


Red Herring Prospectus

A letter outlining information about an upcoming issue of a security.
- does need to be approved by SEC
- does not include price or size of issue


FDIC Coverage

- Single Accounts: 250k (per titling, not per account)
- Joint Account: 250k per joint owner (if one person has multiple joint accounts, aggregate 250k for that person)
- Rev Trust: 250k per beneficiary
- IRA's: 250k per account (separate from single accounts)

*be careful whose (if specific person) coverage they are asking for*


Discount Rate
Federal Funds Rate
Prime Rate

Discount: rate the FED charges member banks to borrow

Federal: rate for borrowing banks to banks

Prime: rate that banks charge customers for borrowing


Fiscal Policy

Expansionary: cut taxes & increase spending

Contraction: raise taxes & cut spending


Monetary Policy

Expansionary: lower reserve requirement, lower discount rate, buy treasuries

Contraction: Raise requirement, raise rate, sell treasuries


Leading Indicators

- hours of production
- unemployment claims
- new manufacturing orders
- interest rate spread
- money supply
- stock prices
- consumer expectations


Coincident Indicators

- number of employees on non-farm payroll
- industrial production


Lagging Indicator

- duration of unemployment
- average prime rate
- loans outstanding


Reverse Mortgage

- Provides stream of income to former owner
- If owner dies, heirs are responsible for for selling house and paying balance...



- A CFP may not commingle client money with the funds of the financial planning firm
- client funds MAY be commingled in a common client investment account


Qualified Tuition Plans (529)

College Save: market-based, risky, includes graduate school, any school, R and B

Prepaid Tuition: tracks inflation, safer, specific schools, no R and B

The max contribution is whatever the plan states. There is an IRC rule that allows you to use 5 years of the annual exclusion at once (75k s and 150k mfj)


Coverdell ESA

- $2k/yr/child
- non-deductible but tax free distributions for qualified
- grow tax deferred
- many qualified expenses (R and B and elementary)
- all funds gone by age 30


Financial Aid

- FAFSA is fee and needs to be submitted yearly
- earliest submit is October of year before school
- EFC takes 20% of kids assets and 5.64% parent
- home, retirement, and business ownership not counted toward EFC