Flashcards in Module 5 (Data Gathering In Financial Statements) Deck (34):
Comprehensive fact finders focus on both ________________ data as well as _______________ data.
If a client is married, should both spouses participate in the completion of the fact finder?
What are the sections of a comprehensive fact finder?
Things that are affecting your financial plan
Objective requiring additional capital
Income and expenses
Assets and liabilities
What type of profile provides a quick assessment of the clients risk tolerance?
True or false. Risk/return profile is simple to measure.
Yes. It's difficult to measure
The risk/return pyramid illustrates the risk and rewards associated with different investments. Illustrate the risk/return pyramid.
We start at the bottom of the pyramid it should be cash/equivalents, fixed income (bonds), equities (stocks), speculative. As you go up the pyramid you increase your chances of losing your capital. As you go down the pier amid you increase the likelihood of you not losing your capital.
What is another way of saying a "Statement of Financial Position"?
This document reflects a family net worth for a specific time.
What is the formula used in your balance sheet?
Assets – liabilities = net worth
How is leased property shown on the balance sheet?
On the balance sheet, assets are divided into two categories what are they?
What are some things that are considered liquid assets?
Cash value life insurance
What are some assets that could be considered investment assets?
Stocks, bonds, mutual funds
Commodities, royalties, oil and gas interest
What type of asset is typically illiquid and held for services they provide to the individual?
Non-financial assets (personal assets)
Name some items that could be considered non-financial assets (personal assets).
- Primary residence, furniture, cars
- Farms and land
- Equity in businesses, partnerships, closely held corporation's
What a balance sheet what represents the amount that is owed by the client?
The liability section
How are liabilities divided what a balance sheet?
This type of liability is typically incurred to purchase "use" assets (houses, cars, land, businesses,).
What are some ways that your net worth can increase?
The value of your assets go up, saving your money, gifts, inheritance, or your liabilities decrease due to forgiveness.
If cash is used to pay off a debt or purchase an asset, the family's net worth will remain...
What is the liquidity ratios?
current liabilities + annual loan payments
What is the ideal liquidity ratio?
Between 1 and 2
If you liquidity ratio is too high what should you do?
Put some of the extra money in some form of investment.
What is the solvency ratios?
Net Worth / Total Assets
The cash flow statement summarizes cash inflows and outflows for a...
period of time.
What does the cash flow management consist of?
– Analysis (gather data and identify strengths and weaknesses)
– Planning (create a goal to optimize your cash flow)
– Budgeting (create a spending plan)
What is the starting point in preparing a cash flow statement?
Identify your gross income
What are your fixed expenses? These expenses can be consistent work a change frequently.
Basic needs (food, housing, clothing, medical)
What are your discretionary expenses?
Vacations, charity contributions, education tuition, savings, furniture, investing, gifts
What is the formula for your net cash flow?
income – expenses = net cash flow
If her clients cash flow is positive, what could be their next steps?
Take the extra money and put it in your savings or some type of investment.
If a client has a negative cash flow what should you do?
Borrow money or use your cash
What is the most important reason for saving according to various surveys?
The accumulation of funds for retirement.