CFP - Financial Statements Flashcards
Balance Sheets are presented as
“a moment in time”
B.S. Classification of CDs
<12 months = Cash & Cash Equivalents
> 12 Months = Invested Assets
All assets on the balance sheet are stated at
Fair Market Value
EE Savings bonds are classified as ______
Examples of Personal Use Assets
Personal Residence
Car
Furniture
Boat Clothing
Liabilities are stated at
principal outstanding
Income Statement statement fixed expenses examples
Mortgage, car payment, boat payment, student loan payment
(any expense that remains constant each month)
Income Statement statement variable expenses examples
Car repairs, entertainments expenses, utilities, charitable contributions
(expenses the client can control)
Income Statement is presented over
“a period of time”
Does an income statement/cash flow statement report employer’s contributions to retirement plans?
NO
Does an income statement/cash flow statement report the giving or receiving of inheritances?
NO
Limitations to F/S analysis
it only provides us with a historical perspective. It is not predictive of the future.
It is appropriate to rent of lease if:
The client’s time in the property is going to be short (1-3 years)
An ARM is appropriate if:
the client’s time in the property will be short (1-3 years)
How do you interpret a 2/6 ARM?
The interest rate cannot increase more than 2% per year of 6% during the term of the loan
