Module 5 (Data Gathering In Financial Statements) Flashcards Preview

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Flashcards in Module 5 (Data Gathering In Financial Statements) Deck (34):
1

Comprehensive fact finders focus on both ________________ data as well as _______________ data.

quantitative
qualitative

2

If a client is married, should both spouses participate in the completion of the fact finder?

Yes

3

What are the sections of a comprehensive fact finder?

Personal information
Financial objectives
Things that are affecting your financial plan
Objective requiring additional capital
Income and expenses
Assets and liabilities
Risk/return profile

4

What type of profile provides a quick assessment of the clients risk tolerance?

Risk/return profile

5

True or false. Risk/return profile is simple to measure.

Yes. It's difficult to measure

6

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.

7

What is another way of saying a "Statement of Financial Position"?

Balance sheet

8

This document reflects a family net worth for a specific time.

Balance sheet

9

What is the formula used in your balance sheet?

Assets – liabilities = net worth

10

How is leased property shown on the balance sheet?

Liability

11

On the balance sheet, assets are divided into two categories what are they?

Financial
Non-financial

12

What are some things that are considered liquid assets?

Cash
Cash Equivalents
CDs
Cash value life insurance

13

What are some assets that could be considered investment assets?

Stocks, bonds, mutual funds
Retirement accounts
Trust
Notes receivable
Commodities, royalties, oil and gas interest

14

What type of asset is typically illiquid and held for services they provide to the individual?

Non-financial assets (personal assets)

15

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

16

What a balance sheet what represents the amount that is owed by the client?

The liability section

17

How are liabilities divided what a balance sheet?

Short-term liabilities
Long-term liabilities

18

This type of liability is typically incurred to purchase "use" assets (houses, cars, land, businesses,).

long-term liabilities

19

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.

20

If cash is used to pay off a debt or purchase an asset, the family's net worth will remain...

the same.

21

What is the liquidity ratios?

Liquid assets
————————————————
current liabilities + annual loan payments

22

What is the ideal liquidity ratio?

Between 1 and 2

23

If you liquidity ratio is too high what should you do?

Put some of the extra money in some form of investment.

24

What is the solvency ratios?

Net Worth / Total Assets

25

The cash flow statement summarizes cash inflows and outflows for a...

period of time.

26

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)

27

What is the starting point in preparing a cash flow statement?

Identify your gross income

28

What are your fixed expenses? These expenses can be consistent work a change frequently.

Basic needs (food, housing, clothing, medical)

29

What are your discretionary expenses?

Vacations, charity contributions, education tuition, savings, furniture, investing, gifts

30

What is the formula for your net cash flow?

income – expenses = net cash flow

31

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.

32

If a client has a negative cash flow what should you do?

Borrow money or use your cash

33

What is the most important reason for saving according to various surveys?

The accumulation of funds for retirement.

34

When creating a budget for clients, what are the things you should you see with the budget?

– It should be flexible
– Simple and brief
– Tailored to specific goals
– Follow form and content consistently
– Illuminate any extra unneeded information
– Estimate insignificant items