FPQP Final Exam Questions with 100%
Correct Answers
Steps of Financial Planning
1 Understand clients' personal and financial Circumstances
2. identify and select goals
3. analyze current course of action and identify potential alternatives
4. develop financial planning recommendations
5. present recommendations
6. implement recommendations
7. monitor progress update as necessary
Setting financial goals (PTA)
Purpose - be specific
Time - when?
Amount - how much?
Balance Sheet
A financial statement that reports assets, liabilities, and owner's equity on a specific date.
Income Statement
a financial statement that gives operating results for a specific period
Financial Situation Analysis
Evaluate:
1. Emergency Fund - is there one, is it enough, enough CF to build ine?
2. Level of Debt - how does it relate to 3 debt ratios, type, CF to accelerate payoff?
, 3. Level of savings - >10%
4. Diversification of assets
5. Preparation for retirement - is there any, using match effectively, any extra for additional
investment?
6. Tax Issues - anything can switch to non-taxable, title appropriately for estate planning
Basic Liquidity Ratio
Number of months you could meet expenses using only monetary assets if all income ceases.
cash and cash eqiv/(monthly expenses - taxes - savings)
3mos if 2 full-time jobs
6 mos. if 1 full-time job
Savings Ratio
savings + investments / total income, should be 10% or greater
Front end of debt to income ratio
Goes to service housing costs,Should be less than 28%, PITI / gross income
Back End (Debt to Income Ratio)
amt goes to service all debt, should be less than 36%, debt payments / gross income, does not
include, taxes, interest or insurance
Consumer Debt
Debts that are owed as a result of purchasing goods that are consumable, does not include
mortgage, only debt ration based on net income, should be less than 20%
debt payments - mortgage / net income
Areas of Credit Evaluation
Correct Answers
Steps of Financial Planning
1 Understand clients' personal and financial Circumstances
2. identify and select goals
3. analyze current course of action and identify potential alternatives
4. develop financial planning recommendations
5. present recommendations
6. implement recommendations
7. monitor progress update as necessary
Setting financial goals (PTA)
Purpose - be specific
Time - when?
Amount - how much?
Balance Sheet
A financial statement that reports assets, liabilities, and owner's equity on a specific date.
Income Statement
a financial statement that gives operating results for a specific period
Financial Situation Analysis
Evaluate:
1. Emergency Fund - is there one, is it enough, enough CF to build ine?
2. Level of Debt - how does it relate to 3 debt ratios, type, CF to accelerate payoff?
, 3. Level of savings - >10%
4. Diversification of assets
5. Preparation for retirement - is there any, using match effectively, any extra for additional
investment?
6. Tax Issues - anything can switch to non-taxable, title appropriately for estate planning
Basic Liquidity Ratio
Number of months you could meet expenses using only monetary assets if all income ceases.
cash and cash eqiv/(monthly expenses - taxes - savings)
3mos if 2 full-time jobs
6 mos. if 1 full-time job
Savings Ratio
savings + investments / total income, should be 10% or greater
Front end of debt to income ratio
Goes to service housing costs,Should be less than 28%, PITI / gross income
Back End (Debt to Income Ratio)
amt goes to service all debt, should be less than 36%, debt payments / gross income, does not
include, taxes, interest or insurance
Consumer Debt
Debts that are owed as a result of purchasing goods that are consumable, does not include
mortgage, only debt ration based on net income, should be less than 20%
debt payments - mortgage / net income
Areas of Credit Evaluation
