Question 1

What is household equity?

Accepted Answer

A) The household's net worth. 
B) The household's assets minus its liabilities. 
C) The household's liabilities minus its assets. 
D) Both a and b above. 
E) None of the above. 
A) The household's net worth. 
B) The household's assets minus its liabilities. 
C) The household's liabilities minus its assets. 
D) Both a and b above. 
E) None of the above. D

Question 2

A client owns a boat worth $45,000,savings of $500,000,and owes $65,000.What is the client's net worth?

Accepted Answer

A) $45,000 
B) $545,000 
C) $480,000 
D) $65,000 
E) None of the above. 
A) $45,000 
B) $545,000 
C) $480,000 
D) $65,000 
E) None of the above. C

Question 3

Pension plans that pay out yearly income upon retirement are an example of:

Accepted Answer

A) Human-related assets. 
B) Marketable investments. 
C) Human assets. 
D) Current assets. 
E) None of the above. 
A) Human-related assets. 
B) Marketable investments. 
C) Human assets. 
D) Current assets. 
E) None of the above. A

Question 4

Which of the following statements is not accurate?

Accepted Answer

A) Household results are provided on a cash flow statement while business results are provided on an income statement. 
B) Business accounting under GAAP attempts to report income and expenses,whether or not in cash,for a fair presentation. 
C) For household reporting of results,only cash matters. 
D) All of the above statements are accurate. 
E) None of the above statements are accurate. 
A) Household results are provided on a cash flow statement while business results are provided on an income statement. 
B) Business accounting under GAAP attempts to report income and expenses,whether or not in cash,for a fair presentation. 
C) For household reporting of results,only cash matters. 
D) All of the above statements are accurate. 
E) None of the above statements are accurate.

Question 5

What are pro forma statements?

Accepted Answer

A) Functional cash statements that were converted from traditional cash flow statements. 
B) Statements that do not include projections. 
C) Statements that include projections. 
D) Traditional cash statements that were converted from functional cash flow statements. 
E) None of the above. 
A) Functional cash statements that were converted from traditional cash flow statements. 
B) Statements that do not include projections. 
C) Statements that include projections. 
D) Traditional cash statements that were converted from functional cash flow statements. 
E) None of the above.

Question 6

What is a balance sheet?

Accepted Answer

A) A statement of financial position at a given point in time. 
B) A statement of assets that are expected to be or can be converted into cash in the next year. 
C) A statement of publicly traded investments. 
D) A statement of the future income stream of its wage earners. 
E) None of the above. 
A) A statement of financial position at a given point in time. 
B) A statement of assets that are expected to be or can be converted into cash in the next year. 
C) A statement of publicly traded investments. 
D) A statement of the future income stream of its wage earners. 
E) None of the above.

Question 7

What are operating activities?

Accepted Answer

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) Additions or subtractions from debt. 
E) None of the above. 
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) Additions or subtractions from debt. 
E) None of the above.

Question 8

Which of the following is not a characteristic of the cash flow statement?

Accepted Answer

A) It may be the single best measurement of the household's financial performance. 
B) It represents how much cash has been generated over a period of time. 
C) It includes all household operations that require financial resources. 
D) The cash flow statement is fairly difficult to understand and measure. 
E) All of the above are characteristics of the cash flow statement. 
A) It may be the single best measurement of the household's financial performance. 
B) It represents how much cash has been generated over a period of time. 
C) It includes all household operations that require financial resources. 
D) The cash flow statement is fairly difficult to understand and measure. 
E) All of the above are characteristics of the cash flow statement.

Question 9

Why is it useful for a footnote to the balance sheet to give the cost of investment assets individually?

Accepted Answer

A) To avoid double taxation when taxes are filed. 
B) To permit estimation of the effect of taxation on the gain upon ultimate sale. 
C) As investment assets often cannot be turned into cash immediately without penalty. 
D) All of the above. 
E) None of the above. 
A) To avoid double taxation when taxes are filed. 
B) To permit estimation of the effect of taxation on the gain upon ultimate sale. 
C) As investment assets often cannot be turned into cash immediately without penalty. 
D) All of the above. 
E) None of the above.

Question 10

How are each of the following items recorded according to GAAP business?
-Balance Sheet
-Performance for Period
-Revenues
-Expenses Paid
-Profits
-Capital Expenditures
-Depreciation
-Asset Value on Balance Sheet

Accepted Answer

-Balance Sheet: Based on original cost.

Question 11

Why are retirement assets listed separately on the balance sheet?

Accepted Answer

A) Retirement assets often cannot be turned into cash immediately without penalty. 
B) Normal withdrawals from pensions are taxable. 
C) Normal withdrawals from pensions are nontaxable. 
D) Retirement assets have low cash value relative to their face amount. 
E) Both a and b above. 
A) Retirement assets often cannot be turned into cash immediately without penalty. 
B) Normal withdrawals from pensions are taxable. 
C) Normal withdrawals from pensions are nontaxable. 
D) Retirement assets have low cash value relative to their face amount. 
E) Both a and b above.

Question 12

Which of the following is not applicable to a traditional household statement of cash flows?

Accepted Answer

A) Resembles business cash flow statement. 
B) Calculates net cash flows properly. 
C) Handles revenues properly. 
D) It is simpler than a functional household statement of cash flows. 
E) All of the above are applicable to a traditional 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 functional household statement of cash flows. 
E) All of the above are applicable to a traditional household statement of cash flows.

Question 13

For which of the following operating activities is the rate of inflation not commonly used for projections?

Accepted Answer

A) Food. 
B) Clothing. 
C) Alimony. 
D) Hobbies. 
E) Charitable contributions. 
A) Food. 
B) Clothing. 
C) Alimony. 
D) Hobbies. 
E) Charitable contributions.

Question 14

What are financing activities?

Accepted Answer

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. 
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.

Question 15

What is depreciation?

Accepted Answer

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. 
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.

Question 16

What are capital expenditures?

Accepted Answer

A) Additions or subtractions from debt. 
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. 
A) Additions or subtractions from debt. 
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.

Question 17

Which of the following is not a way though which one can avoid underestimating expenses?

Accepted Answer

A) Through using software programs detailing records of expenditures. 
B) Through avoiding hard copies of records of checks paid and actual bank and investment account cash deposits and withdrawals. 
C) Through recording after tax income plus other cash inflows and subtracting the amounts deposited into savings accounts. 
D) All of the above are ways through which one can avoid underestimating expenses. 
E) None of the above is a way through which one can avoid underestimating expenses. 
A) Through using software programs detailing records of expenditures. 
B) Through avoiding hard copies of records of checks paid and actual bank and investment account cash deposits and withdrawals. 
C) Through recording after tax income plus other cash inflows and subtracting the amounts deposited into savings accounts. 
D) All of the above are ways through which one can avoid underestimating expenses. 
E) None of the above is a way through which one can avoid underestimating expenses.

Question 18

What are savings?

Accepted Answer

A) Additions or subtractions from debt. 
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. 
A) Additions or subtractions from debt. 
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.

Question 19

Which of the following is not a reason why we include projections in a statement?

Accepted Answer

A) To better anticipate needs. 
B) To forecast resources to meet those needs. 
C) To adjust our plans according to our forecasts. 
D) All of the above are reasons why we include projections in a statement. 
E) None of the above is a reason why we include projections in a statement. 
A) To better anticipate needs. 
B) To forecast resources to meet those needs. 
C) To adjust our plans according to our forecasts. 
D) All of the above are reasons why we include projections in a statement. 
E) None of the above is a reason why we include projections in a statement.

Question 20

Financial assets that can be turned into cash are best defined as:

Accepted Answer

A) Real Estate. 
B) Current assets 
C) Marketable assets. 
D) Household assets. 
E) Other assets. 
A) Real Estate. 
B) Current assets 
C) Marketable assets. 
D) Household assets. 
E) Other assets.

Exam 5: Financial Statements Analysis

What is household equity?

A client owns a boat worth $45,000,savings of $500,000,and owes $65,000.What is the client's net worth?

Pension plans that pay out yearly income upon retirement are an example of:

Which of the following statements is not accurate?

What are pro forma statements?

What is a balance sheet?

What are operating activities?

Which of the following is not a characteristic of the cash flow statement?

Why is it useful for a footnote to the balance sheet to give the cost of investment assets individually?

How are each of the following items recorded according to GAAP business? -Balance Sheet -Performance for Period -Revenues -Expenses Paid -Profits -Capital Expenditures -Depreciation -Asset Value on Balance Sheet

Why are retirement assets listed separately on the balance sheet?

Which of the following is not applicable to a traditional household statement of cash flows?

For which of the following operating activities is the rate of inflation not commonly used for projections?

What are financing activities?

What is depreciation?

What are capital expenditures?

Which of the following is not a way though which one can avoid underestimating expenses?

What are savings?

Which of the following is not a reason why we include projections in a statement?

Financial assets that can be turned into cash are best defined as:

Introduction to PFP

Time Value of Money

Beginning the Planning Process

Household Finance

Cash Flow Planning

Debt

Non Financial Investments

Financial Investments

Risk Management

Other Insurance

Retirement Planning

Educational Planning

Tax Planning

Estate Planning

Stocks, Bonds and Mutual Funds

Background Topics

Capital Needs Analysis

Behavioral Financial Planning

Modern Investment Theory

Employee Benefits

Behavioral Finance-Applications

Comprehensive Financial Plan-Dan and Laura

Examining Financial Regulation and Ethics

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