AAMS COMPREHENSIVE PRACTICE EXAMINATION
MODULES QUESTIONS COMPLETE WITH VERIFIED
ANSWERS
Question 1
Which of the following is NOT one of the major steps in the asset management
process?
A) Gather data
B) Establish goals
C) Calculate the client's net worth
D) Monitor
Correct Answer: C
Explanation: The five major steps are (1) gather data, (2) establish goals, (3)
analyze information, (4) make and implement recommendations, and (5) monitor.
Calculating net worth is a tool used during analysis, not a separate major step.
Question 2
Stefan's business plan states: "I will contact 50 prospective clients and document
this activity in the CRM for tracking purposes." Which primary element of a
SMART goal is missing?
A) Specific
B) Measurable
C) Achievable
D) Time-framed
Correct Answer: D
,Explanation: SMART stands for Specific, Measurable, Achievable, Relevant, and
Time-framed. Stefan's goal lacks a deadline or time frame (e.g., "by the end of the
month"). Without that, it is impossible to determine if the goal was met in a
timely manner.
Question 3
A 180-day certificate of deposit should be classified as which of the following on a
client's statement of financial position?
A) Invested asset
B) Use asset
C) Cash equivalent
D) Long-term liability
Correct Answer: C
Explanation: CDs with maturities of one year or less are considered cash
equivalents, not invested assets. Invested assets typically include stocks, bonds,
mutual funds, and retirement accounts.
Question 4
Victoria Gregory has the following:
• Cash/cash equivalents: $15,000
• Short-term debts: $23,000
• Long-term debts: $140,000
• Taxes: $8,000
• Invested assets: $45,000
• Use assets: $192,000
What is her net worth?
,A) $89,000
B) $97,000
C) $107,000
D) $252,000
Correct Answer: A
Explanation: Net worth = Total assets − Total liabilities.
Assets = $15,000 + $45,000 + $192,000 = $252,000.
Liabilities = $23,000 + $140,000 = $163,000. (Taxes are an expense, not a liability
on the balance sheet.)
Net worth = $252,000 − $163,000 = $89,000.
Question 5
Which statement best describes the income statement?
A) It shows net worth at a specific point in time
B) It indicates cash inflows and outflows over a period of time
C) It lists only invested assets
D) It is another name for a balance sheet
Correct Answer: B
Explanation: The income statement (or cash flow statement) covers a period of
time (e.g., a year or month) and shows gross income, expenses, and surplus or
deficit. The balance sheet is the snapshot of assets and liabilities at a specific date.
Question 6
Which of the following is considered a "foundation" goal?
A) Buying a vacation home
B) Funding a child's college education
C) Maintaining an emergency fund
D) Taking a luxury cruise
, Correct Answer: C
Explanation: Foundation goals are essential for survival and basic security. An
emergency fund (3–6 months of expenses) is a foundation goal. Lifestyle goals
(college, travel, second home) come after foundation goals are met.
Question 7
Which is the better written financial goal?
A) "I want to be rich when I retire"
B) "I will save more money this year"
C) "To accumulate $15,000 for a boat purchase in two years"
D) "To invest in growth stocks"
Correct Answer: C
Explanation: A well-written goal includes a specific dollar amount and a specific
time frame. Option C has both. The others are vague or lack measurable targets.
Question 8
When analyzing information from a client, which of the following is important to
identify?
A) Mismatches between current investments and stated goals
B) The client's favorite color
C) The client's shoe size
D) The client's birthday month
Correct Answer: A
Explanation: Analysis should reveal mismatches between resources/goals,
unrealistic goals, and tax problems. Personal trivia is irrelevant to the asset
management process.
MODULES QUESTIONS COMPLETE WITH VERIFIED
ANSWERS
Question 1
Which of the following is NOT one of the major steps in the asset management
process?
A) Gather data
B) Establish goals
C) Calculate the client's net worth
D) Monitor
Correct Answer: C
Explanation: The five major steps are (1) gather data, (2) establish goals, (3)
analyze information, (4) make and implement recommendations, and (5) monitor.
Calculating net worth is a tool used during analysis, not a separate major step.
Question 2
Stefan's business plan states: "I will contact 50 prospective clients and document
this activity in the CRM for tracking purposes." Which primary element of a
SMART goal is missing?
A) Specific
B) Measurable
C) Achievable
D) Time-framed
Correct Answer: D
,Explanation: SMART stands for Specific, Measurable, Achievable, Relevant, and
Time-framed. Stefan's goal lacks a deadline or time frame (e.g., "by the end of the
month"). Without that, it is impossible to determine if the goal was met in a
timely manner.
Question 3
A 180-day certificate of deposit should be classified as which of the following on a
client's statement of financial position?
A) Invested asset
B) Use asset
C) Cash equivalent
D) Long-term liability
Correct Answer: C
Explanation: CDs with maturities of one year or less are considered cash
equivalents, not invested assets. Invested assets typically include stocks, bonds,
mutual funds, and retirement accounts.
Question 4
Victoria Gregory has the following:
• Cash/cash equivalents: $15,000
• Short-term debts: $23,000
• Long-term debts: $140,000
• Taxes: $8,000
• Invested assets: $45,000
• Use assets: $192,000
What is her net worth?
,A) $89,000
B) $97,000
C) $107,000
D) $252,000
Correct Answer: A
Explanation: Net worth = Total assets − Total liabilities.
Assets = $15,000 + $45,000 + $192,000 = $252,000.
Liabilities = $23,000 + $140,000 = $163,000. (Taxes are an expense, not a liability
on the balance sheet.)
Net worth = $252,000 − $163,000 = $89,000.
Question 5
Which statement best describes the income statement?
A) It shows net worth at a specific point in time
B) It indicates cash inflows and outflows over a period of time
C) It lists only invested assets
D) It is another name for a balance sheet
Correct Answer: B
Explanation: The income statement (or cash flow statement) covers a period of
time (e.g., a year or month) and shows gross income, expenses, and surplus or
deficit. The balance sheet is the snapshot of assets and liabilities at a specific date.
Question 6
Which of the following is considered a "foundation" goal?
A) Buying a vacation home
B) Funding a child's college education
C) Maintaining an emergency fund
D) Taking a luxury cruise
, Correct Answer: C
Explanation: Foundation goals are essential for survival and basic security. An
emergency fund (3–6 months of expenses) is a foundation goal. Lifestyle goals
(college, travel, second home) come after foundation goals are met.
Question 7
Which is the better written financial goal?
A) "I want to be rich when I retire"
B) "I will save more money this year"
C) "To accumulate $15,000 for a boat purchase in two years"
D) "To invest in growth stocks"
Correct Answer: C
Explanation: A well-written goal includes a specific dollar amount and a specific
time frame. Option C has both. The others are vague or lack measurable targets.
Question 8
When analyzing information from a client, which of the following is important to
identify?
A) Mismatches between current investments and stated goals
B) The client's favorite color
C) The client's shoe size
D) The client's birthday month
Correct Answer: A
Explanation: Analysis should reveal mismatches between resources/goals,
unrealistic goals, and tax problems. Personal trivia is irrelevant to the asset
management process.
