FINANCIAL PLANNING A-F Flashcards
1
Q
ABOVE-THE-LINE DEDUCTIONS
A
DEDUCTIONS FOR ADJUSTED GROSS INCOME, ALSO KNOWN AS ADJUSTMENTS TO INCOME
2
Q
ACCURACY-RELATED PENALTY
A
A PENALTY OF 20% OF THE UNDERPAYMENT AMOUNT IMPOSED ON TAXPAYERS WHO FILE INCORRECT TAX RETURNS IN CERTAIN SITUATIONS
3
Q
ACHIEVING A BETTER LIFE EXPERIENCE (ABLE) ACCOUNT
A
A TAX-ADVANTAGED SAVINGS ACCOUNT ESTABLISHED TO ASSIST PERSONS WITH DISABILITIES
4
Q
ACTIVE LISTENING
A
REQUIRES THE LISTENERS UNDIVIDED ATTENTION. ACTIVE LISTENING INVOLVES COCENTRATION ON WHAT THE SPEAKER IS SAYING. THE LISTENER MUST PUT ASIDE IRRELEVANT THOUGHTS
5
Q
ADJUSTED GROSS INCOME
A
GROSS INCOME LESS ABOVE-THE-LINE DEDUCTIONS
6
Q
AFFECT HEURISTIC
A
DEALS WITH JUDGING SOMETHING, WHETHER IT IS GOOD OR BAD
7
Q
AGGREGATE DEMAND CURVE
A
A GRAPHICAL REPRESENTATION OF THE QUANTITY OF GOODS AND SERVICES CONSUMERS ARE WILLING TO BUY AT ANY GIVEN PRICE LEVEL
8
Q
AGGREGATE SUPPLY CURVE
A
A GRAPHICAL REPRESENTATION BETWEEN QUANTITY SUPPLIED AND PRICE
9
Q
AGGRESSIVE GROWTH FUNDS
A
TYPICALLY INVEST IN SMALL CAP SOCKS, WHERE PRICE APPRECIATION IS THE PRIMARY OBJECTIVE
10
Q
ALPHA
A
THE DIFFERENCE BETWEEN THE ACTUAL RETURN GENERATED BY THE FUND RELATIVE TO THE EXPECTED RETURN GIVE THE LEVEL OF RISKINESS OF THE FUND, AS MEASURED BY BETA.
11
Q
ALWAYS BAR LIST
A
CFP BOARDS LIST OF UNACCEPTABLE CONDUCT THAT WILL ALWAYS BAR AN INDIVIDUAL FROM BECOMING CERTIFIED
12
Q
AMERICAN OPPORTUNITY TAX CREDIT (AOTC)
A
THE AOTC PROVIDES A TAX CREDIT OF UP TO $2,500 (2021) PER STUDENT FOR THE FIRST FOUR YEARS OF QUALIFIED EDUCATION EXPENSES FOR POSTSECONDARY EDUCATION
13
Q
AMORTIZATION SCHEDULE
A
ILLUSTRATES THE REPAYMENT OF DEBT OVER TIME. EACH DEBT PAYMENT CONSUISTS OF BOTH INTEREST EXPENSE AND PRINCIPAL REPAYMENT
14
Q
ANCHORING
A
ATTACHING OR ANCHORING ONES THOUGHTS TO A REFERENCE POINT EVEN THOUGH THERE MAY BE NO LOGICAL
RELEVANCE OR IS NOT PERTINENT TO THE ISSUE IN QUESTION. ANCHORING IS ALSO KNOWN AS CONSERVATISM OR BELIEF PERSERVERANCE
15
Q
ANCILLARY PROBATE
A
CONCURRENT SECOND PROBATE PROCESS CONDUCED IN A NON-DOMICILIARY STATE IN WHICH THE DECENDENT OWNS PROPERTY
16
Q
ANNUAL EXCLUSION
A
AN EXCLUSION FROM GIFT TAXES FOR PRESENT INTEREST TRANSFERS LESS THAN OR EQUAL TO $15,000 (IN 2021) PER YEAR PER DONEE
17
Q
ANNUITY
A
A RECURRING CASH FLOW, OF AN EQUAL AMOUNT THAT OCCURS AT PERIODIC (BUT REGULAR) INTERVALS
18
Q
ANNUITY DUE
A
OCCURS WHEN THE TIMING OF THE FIRST PAYMENT IS AT THE BEGINNING OF THE FIRST PERIOD. THE PERIOD MAY BE THE BEGINNING OF A MONTH, QUARTER, OR YEAR
19
Q
ANNUITY DUE PAYMENT FROM A LUMP-SUM DEPOSIT
A
THE PAYMENT THAT CAN BE GENERATED AT THE BEGINNING OF EACH PERIOD, BASED ON A LUMP-SUM AMOUNT DEPOSITED TODAY
20
Q
ANNUITY METHOD
A
DETERMINES HOW MUCH A CLIENT NEEDS TO FUND THEIR RETIREMENT BASED ON THE ASSUMPTIONTHAT THE PERSON WILL DIE EXACTLY AT THE ASSUMED LIFE EXPECTANCY WITH A RETIREMENT ACCOUNT BALANCE OF ZERO
21
Q
ANONYMOUS CASE HISTORIES
A
SUMMARY OF THE RELEVANT EVENTS IN CERTAIN CASES OF MISCONDUCT, ACCOMPANIED BY AN EXPLANATION OF ANY DISCIPLINE PENALTY, ACTION BY CFP BOARD, AND OTHER INFORMATION
22
Q
ARITHMETIC OR AVERAGE RETURN
A
THE SUM OF ALL RETURNS DIVIDED BY THE NUMBER OF PERIODS
23
Q
ARTICLES OF INCORPORATION
A
THE CHARTER DOCUMENT FOR A CORPORATION THAT MUST BE FILED WITH THE SECRETARY OF STATE IN THE STATE OF ORGANIZATION
24
Q
ARTICLES OF ORGANIZATION
A
THE CHARTER DOCUMENT OF AN LLC THAT MUST BE FILED WITH THE SECRETARY OF STATE IN THE STATE OF ORGANIZATION
25
ASSET ACCUMULATION PHASE
THIS PHASE IS USUALLY FROM THE EARLY 20s TO MID 50s WHEN ADDITIONAL CASH FLOW FOR INVESTING IS LOW AND THE DEBT-TO-NET WORTH RATIO IS HIGH
26
ASSET ALLOCATION
THE DIVIDING OF A PORTFOLIO INTO VARIOUS ASSET CLASSES
27
ASSETS
A BALANCE SHEET CATEGORY THAT REPRESENTS ANYTHING OF ECONOMIC VALUE THAT CAN ULTIMATELY BE CONVERTED TO CASH
28
ATTORNEY-IN-FACT
AGENT OR POWER HOLDER OF A POWER OF ATTORNEY
29
AVAILABILITY HEURISTIC
WHEN A DECISION MAKER RELIES UPON KNOWLEDGE THAT IS READILY AVAILABLE IN HIS OR HER MEMORY, THE COGNITIVE HEURISTIC KNOWN AS "AVAILABILITY" IS INVOKED
30
BALANCE SHEET
A STATEMENT OF FINANCIAL POSITION THAT REPRESENTS THE ACCOUNTING FOR ITEMS THE CLIENT "OWNS" (ASSETS) AND ITEMS THAT ARE "OWED" (LIABILITIES). THE BALANCE SHEET PROVIDES A SNAPSHOT OF THE CLIENTS ASSETS, LIABILITIES, AND NET WORTH AS OF A STATED DATE
31
BALANCED FUNDS
TYPICALLY INVEST IN BOTH FIXED INCOME SECUIRTIES AND EQUITY SECURITIES
32
BAPCPA OF 2005
AMENDS THE TRUTH IN LENDING ACT IN VARIOUS RESPECTS, INCLUDING REQUIRING CERTAIN CREDITORS TO DISCLOSE ON THE FRONT OF BILLING STATEMENTS A MINIMUM MONTHLY PAYMENT WARNING FOR CONSUMERS
33
BASIS
REPRESENTS THE TOTAL CAPITAL OR AFTER-TAX INCOME USED BY A TAXPAYER TO PURCHASE AN INVESTMENT
34
BEHAVIORAL FINANCE
CONTAINS MUCH OF THE SCIENTIFIC FRAMEWORK AND LESSONS LEARNED FROM TRADITIONAL FINANCE, AMENDS SOME OF IT WITH BASIC ASSUMPTIONS BASED ON NORMAL, MORE HUMAN-LIKE BEHAVIOR, AND SUPPLEMENTS OTHER ASPECTS OF IT WITH NOTIONS FROM PSYCHOLOGY AND SOCIOLOGY
35
BELOW-THE-LINE DEDUCTIONS
DEDUCTIONS FROM ADJUSTED GROSS INCOME, INCLUDING ITEMIZED OR STANDARD DEDUCTIONS, AND THE QUALIFIED BUSINESS INCOME DEDUCTION
36
BENEFICIARY
THE PERSON(S) ENTITLED TO RECIEVE THE DEATH BENEFIT OF A LIFE INSURANCE POLICY AT THE INSUREDS DEATH. ALSO, THE PERSON(S) WHO HOLD THE BENEFICIAL TITLE TO A TRUSTS ASSETS
37
BETA
A MEASURE OF SYSTEMATIC RISK AND PROVIDES THE CORRELATION OF THE VOLATILITY OF A PORTFOLIO AS COMPARED TO THE MARKET BENCHMARK
38
BONDS
A DEBT ISSUANCE WHERE THE BOND ISSUER MAKES A PROMISE TO MAKE PERIODIC COUPON PAYMENTS (INTEREST) AND REPAYMENT OF THE PAR VALUE (PRINCIPAL) AT MATURITY
39
BUSINESS CYCLE
MEASURES ECONOMIC ACTIVITY OVER TIME. THE BUSINESS CYCLE IS CHARACTERIZED BY EXPANSION, PEAK, CONTRACTION OR RECESSION, AND TROUGH
40
BUSINESS RISK
THE INHERENT RISK OF DOING BUSINESS IN A PARTICULAR INDUSTRY
41
CALL RISK
THE RISK THAT A BOND WILL BE RETIRED EARLY BY THE ISSUING COMPANY
42
CALLS
GIVES THE HOLDER THE RIGHT TO BUY THE UNDERLYING SECURITY AT A CERTAIN PRICE BY A CERTAIN DATE
43
CANDIDATE FOR CFP(r) CERTIFICATION
INDIVIDUALS WHO HAVE COMPLETED A CFP BOARD REGISTERED EDUCATION PROGRAM MAY PRESENT THEMSELVES AS A "CANDIDATE FOR CFP(R) CERTIFICATION" FOR A PERIOD OF UP TO FIVE YEARS FOLLOWING COMPLETION OF THE EDUCATION PROGRAM WHILE FILFILLING THE REMAINING EXAM AND EXPERIENCE REQUIREMENTS
44
CAPITAL ASSET PRICING MODEL (CAPM)
INFORMS INVESTORS ABOUT A REASONABLE REQUIRED RETURN FOR SHAREHOLDERS WHEN INVESTING IN INDIVIDUAL STOCKS, BUT THE MODEL IS EASILY APPLIED TO MUTUAL FUNDS. THE REQUIRED RETURN IS BASED ON RISK-FREE RATES OF INTEREST, EXPECTED MARKET RETURNS, AND THE LEVEL OF SYSTEMATIC RISK OF THE FUND OR PORTFOLIO
45
CAPITALIZATION OF EARNINGS MODEL
A CAPITAL NEEDS ANALYSIS METHOD BASED ON PRODUCING A PERPETUAL STREAM OF INCOME
46
CAPITAL MARKET LINE (CML)
THE MACRO ASPECT OF THE CAPITAL ASSET PRICING MODEL (CAPM). IT SPECIFIES THE RELATIONSHIP BETWEEN RISK AND RETURN IN ALL POSSIBLE PORTFOLIOS
47
CAPITAL PRESERVATION MODEL (CP)
A CAPITAL NEEDS ANALYSIS METHOD THAT ASSUMES THAT AT THE CLIENTS LIFE EXPECTANCY, THE CLIENT HAS EXACTLY THE SAME ACCOUNT BALANCE AS HE DID AT THE BEGINNING OF RETIREMENT
48
CAPITALIZATION OF EARNINGS METHOD
A METHOD THAT PRESERVES THE CAPITAL AND INITIALLY USES A NUMERATOR OF GROSS INCOME AND DENOMINATOR OF RISKLESS RATE OF RETURN TO DETERMINE LIFE INSURANCE NEEDS. IT CAN BE FURTHER ADJUSTED TO ACCOUNT FOR TAXES, PERSONAL CONSUMPTION, AND INFLATION
49
CARD ACT OF 2009
PREVENTS CREDIT CARD COMPANIES (AND BANKS) FROM CHARGING HIDDEN FEES AND EXTRAORDINARY INTEREST RATES AS WELL AS PROMOTING EASY TO UNDERSTAND STATEMENTS
50
CASH AND CASH EQUIVALENTS
A BALANCE SHEET CATEGORY THAT REPRESENTS ASSETS THAT ARE HIGHLY LIQUID, WHICH MEANS THEY ARE EITHER CASH OR CAN BE CONVERTED TO CASH (WITHIN THE NEXT 12 MONTHS) WITH LITTLE TO NO PRICE CONCESSION FROM THE PRINCIPAL AMOUNT INVESTED
51
CASH FLOW APPROACH
THIS APPROACH TAKES AN INCOME STATEMENT APPROACH TO RECOMMENDATIONS. IT USES THE THREE-PANEL APPROACH AND USES A PRO FORMA APPROACH (AS IF) "TO PURCHASE" THE RECOMMENDATIONS THUS DRIVING DOWN THE DISCRETIONARY CASH FLOW. NEXT, POSITIVE CASH FLOWS OR THE SALE OF ASSETS ARE IDENTIFIED TO FINANCE THE RECOMMENDATIONS WHICH WERE PURCHASED
52
CASH FLOW STATEMENT
EXPLAINS HOW CASH AND CASH EQUIVALENTS WERE USED OR GENERATED BETWEEN TWO BALANCE SHEETS
53
CEILING
A MAXIMUM LIMIT ON THE AMOUNT THAT MAY BE DEDUCTIBLE. EXPENSES ARE ONLY DEDUCTIBLE UP TO THE CEILING AMOUNT
54
CERTIFICANT
AN INDIVIDUAL WHO IS CURRENTLY CERTIFIED BY THE CFP BOARD
55
CERTIFIED FINANCIAL PLANNER BOARD OF STANDARDS, INC. ("CFP BOARD")
BOARD THAT MAINTAINS PROFESSIONAL STANDARDS NECESSARY FOR COMPETENCY AND ETHICS IN THE FINANCIAL PLANNING PROFESSION FOR THOSE PROFESSIONALS WHO HAVE BEEN GRANTED THE RIGHT TO USE THEIR DESIGNATION
56
CFP BOARD COUNSEL
HAS THE AUTHORITY TO INVESTIGATE AND FILE A COMPLAINT AGAINST A RESPONDENT FOR ALLEGED VIOLATIONS OF THE CODE AND STANDARDS OR THE PATHWAY TO CFP CERTIFICATION AGREEMENT. THE TERM INCLUDES CFP BOARD STAFF OPERATING AT THE DIRECTION OF CFP BOARD COUNSEL
57
CHAPTER 11 BANKRUPTCY
KNOWN AS "REORGANIZATION BANKRUPTCY" FOR CORPORATIONS, SOLE PROPRIETORSHIPS, AND PARTNERSHIPS
58
CHAPTER 13 BANKRUPTCY
ALSO KNOWN AS A "WAGE EARNERS PLAN," IS FOR INDIVIDUALS OR SELF-EMPLOYED WORKERS THAT WANT TO KEEP THEIR ASSETS AND PAYOFF A PORTION OF THEIR DEBTS OVER TIME
59
CHAPTER 7 BANKRUPTCY
FOR INDIVIDUALS OR BUSINESSES TO USE FOR PROTECTION FROM CREDITORS UNDER FEDERAL AND STATE BANKRUPTCY LAWS
60
CHECKING THE BOX
WHEN AN ELIGIBLE ENTITY CHOOSES TO BE TAXED AS EITHER A CORPORATION OR A PARTNERSHIP
61
CLIENT
ANY PERSON, INCLUDING A NATURAL PERSON, BUSINESS ORGANIZATION, OR LEGAL ENTITY, TO WHOM THE CFP PROFESSIONAL PROVIDES OR AGREES TO PROVIDE PROFESSIONAL SERVICES PURSUANT TO AN ENGAGEMENT
62
CLOSED QUESTIONS
SEEKS A RESPONSE THAT IS VERY SPECIFIC AND COMMONLY INVOLVES AN ANSWER THAT CAN BE ACCOMPLISHED WITH A SINGLE WORD OR TWO. CLOSED QUESTIONS LEAD WITH IS, ARE, DO, DID, COULD, WOULD, HAVE, OR "IS IT NOT TRUE THAT..."
63
CLOSED-END INVESTMENT COMPANIES
A TYPE OF INVESTMENT COMPANY THAT TRADES ON STOCK MARKET EXCHANGES. CLOSED-END FUNDS DO NOT GENERALLY ISSUE ADDITIONAL SHARES AFTER THEIR INITIAL OFFERING
64
CODE OF ETHICS
ORGANIZED INTO SIX OVERRIDING PRINCIPLES THAT PROVIDE A FRAMEWORK FOR THE ETHICAL AND PROFESSIONAL STANDARDS AND IDEALS FOR CFP(R) PROFESSIONALS
65
COEFFICIENT OF DETERMINATION (R-SQUARED)
A MEASURE OF HOW MUCH RETURN IS A RESULT OF THE CORRELATION TO THE MARKET OR WHAT PERCENTAGE OF A SECURITYS RETURN IS A RESULT OF THE MARKET
66
COGNITIVE-BEHAVIORAL PARADIGM (COGNITIVE-BEHAVIOR SCHOOL OF THOUGHT)
HUMANS ARE BEINGS ARE SUBJECT TO THE SAME LEARNING PRINCIPLES THAT WERE ESTABLISHED IN ANIMAL RESEARCH. THE BASIC PRINCIPLES OF CLASSICAL AND OPERANT CONDITIONING ARE ASSUMED TO ACCOUNT FOR AN INDIVIDUALS BEHAVIOR AND UNDERSTANDINGS THROUGHOUT THEIR LIVES
67
COLLEGE SAVINGS PLANS (529 SAVINGS PLANS)
A PLAN THAT ALLOWS FOR COLLEGE SAVING ON A TAX-DEFERRED BASIS WITH ATTENDANCE AT ANY ELIGIBLE EDUCATION INSTITUTION. DISTRIBUTIONS FROM A COLLEGE SAVINGS PLAN ARE FEDERAL AND STATE INCOME TAX-FREE, AS LONG AS THEY ARE USED TO PAY FOR QUALIFIED EDUCATION EXPENSES
68
COMMISSION
COMPENSATION GENERATED FROM A TRANSACTION INVOLVING A PRODUCT OR SERVICE AND RECEIVED BY AN AGENT OR BROKER, USUALLY CALCULATED AS A PERCENTAGE ON THE AMOUNT OF THE TRANSACTION. THIS INCLUDES 12b-1 FEES, TRAILINGCOMMISSIONS, SURRENDER CHARGES AND CONTINGENT DEFERRED SALES CHARGES
69
COMMISSION AND FEE
IF A CFP PROFESSIONAL OR ANY RELATED PARTY RECEIVES BOTH FEES AND SALES-RELATED COMPENSATION FOR PROVIDING PROFESSIONAL ACTIVITIES, THE CFP PROFESSIONALS COMPENSATION IS DESCRIBED AS "COMMISSION AND FEE"
70
COMMUNITY PROPERTY
A CIVIL LAW ORIGINATING STATUTORY REGIME UNDER WHICH MARRIED INDIVIDUALS OWN AN EQUAL UNDIVIDED INTEREST IN ALL PROPERTY ACCUMULATED DURING THEIR MARRIAGE. PROPERTY ACQUIRED BEFORE THE MARRIAGE AND PROPERTY RECEIVED BY GIFT OR INHERITANCE DURING THE MARRIAGE RETAINS ITS STATUS AS SEPERATE PROPERTY
71
COMPETENCE
REQUIRES ATTAINING AND MAINTAINING AN ADEQUATE LEVEL OF KNOWLEDGE AND SKILL, AND APPLICATION OF THAT KNOWLEDGE AND SKILL IN PROVIDING SERVICES TO CLIENTS
72
COMPLEMENTS
PRODUCTS THAT ARE CONSUMED JOINTLY
73
COMPOSURE
A CLIENTS ABILITY TO REMAIN CALM AND FOCUSED WHEN UNDER PRESSURE
74
CONFIDENTIALITY
ENSURING THAT INFORMATION IS ACCESSIBLE ONLY TO THOSE AUTHORIZED TO HAVE ACCESS
75
CONFIRMATION BIAS
A COMMONLY USED AND POPULAR PHRASE IS THAT "YOU DO NOT GET A SECOND CHANCE AT A FIRST IMPRESSION." PEOPLE TEND TO FILTER INFORMATION AND FOCUS ON INFORMATION SUPPORTING THEIR OPINIONS
76
CONFLICT OF INTEREST
(A) WHEN A CFP PROFESSIONALS INTERESTS (INCLUDING THE INTERESTS OF THE CFP PROFESSIONALS FIRM) ARE ADVERSE TO THE CFP PROFESSIONALS DUTIES TO A CLIENT, OR (B) WHEN A CFP PROFESSIONAL HAS DUTIES TO ONE CLIENT THAT ARE ADVERSE TO ANOTHER CLIENT
77
CONSERVATION (RISK MANAGEMENT) PHASE
THIS PHASE IS FROM LATE 20s TO EARLY 70s, WHERE CASH FLOW, ASSETS, AND NET WORTH HAVE INCREASED AND DEBT HAS DECREASED SOMEWHAT. IN ADDITION, RISK MANAGEMENT OF EVENTS LIKE UNEMPLOYMENT, DISABILITY DUE TO ILLNESS OR ACCIDENT, AND UNTIMELY DEATH BECOME A PRIORITY
78
CONSTANT GROWTH DIVIDEND DISCOUNT MODEL
VALUES A COMPANYS STOCK BY DISCOUNTING THE FUTURE STREAM OF CASH FLOWS OR DIVIDENDS
79
CONSUMER PRICE INDEX (CPI)
MEASURES THE OVERALL PRICE LEVELS FOR A BASKET OF GOODS AND SERVICES CONSUMERS PURCHASE
80
COST BASIS
INITIAL BASIS AN INVESTOR ACQUIRES IN AN ASSET BY USING CAPITAL TO PURCHASE THE INVESTMENT
81
COUNTRY RISK
THE RISK OF POLITICAL AND ECONOMIC STABILITY OR INSTABILITY OF A COUNTRY THAT A COMPANY FACES WHEN DOING BUSINESS IN A PARTICULAR COUNTRY
82
COVARIANCE
THE MEASURE OF TWO SECURITIES WHEN COMBINED AND THEIR INTERACTIVE RISK (RELATIVE RISK)
83
COVERDELL EDUCATION SAVINGS ACCOUNT (ESA)
A TAX DEFERRED TRUST OR CUSTODIAL ACCOUNT ESTABLISHED TO PAY FOR QUALIFIED HIGHER EDUCATION OR QUALIFIED ELEMENTARY / SECONDARY SCHOOL EXPENSES
84
CURRENT RATIO
MEASURES HOW MANY TIMES THE CLIENT CAN SATISFY THEIR SHORT-TERM LIABILITIES WITH CURRENT ASSETS (CASH AND CASH EQUIVALENTS)
85
CYCLICAL UNEMPLOYMENT
OCCURS WHEN THERE IS AN OVERALL DOWNTURN IN BUSINESS ACTIVITY AND FEWER GOODS ARE BEING PRODUCED CAUSING A DECREASE IN THE DEMAND FOR LABOR
86
DEBT
THE LENDING OF FUNDS IN RETURN FOR PERIODIC INTEREST PAYMENTS AND THE REPAYMENT OF THE PRINCIPAL DEBT OBLIGATION
87
DEBT MANAGEMENT
THE ANALYSIS OF DEBT BECAUSE CLIENTS CAN HAVE TOO MUCH DEBT, DEBT THAT HAS HIGH INTEREST RATES, AND DEBT THAT IS GENERALLY NOT WELL MANAGED. THE ANALYSIS OF DEBT INCLUDES CALCULATING HOUSING RATIOS 1 AND 2 AND COMPARING THOSE TO WELL ESTABLISHED BENCHMARKS (METRICS) OF 28%/36%. IN ADDITION, THE FINANCIAL PLANNER WILL EVALUATE THE QUALITY AND THE COST OF EACH CLIENTS INDIVIDUAL DEBT
88
DEBT RATIOS
MEASURE HOW WELL THE CLIENT IS MANAGING THEIR OVERALL DEBT STRUCTURE
89
DEBT-TO-TOTAL ASSETS RATIO
INDICATES WHAT PERCENTAGE OF ASSETS IS BEING PROVIDED BY CREDITORS. THE LOWER THIS RATIO THE BETTER, AS IT INDICATES THAT THE ASSETS OWNED HAVE A LOW AMOUNT OF DEBT OWED
90
DEDUCTIONS
ITEMS THAT ARE SUBTRACTED FROM GROSS INCOME, EITHER BELOW-OR ABOVE-THE -LINE, IN ORDER TO ARRIVE AT TAXABLE INCOME
91
DEFAULT (UNDER CFPBOARDS PROCEDURAL RULES)
A RESPONDENT IS IN DEFAULT IF HE OR SHE FAILS TO ACKNOWLEDGE RECEIPT OF A NOTICE OF INVESTIGATION WITHIN THE REQUIRED TIME LIMIT, FAILS TO FILE AN ANSWER TO A COMPLAINT WITHIN THE REQUIRED TIME LIMIT, FAILS TO PROVIDE PROOF OF COMPLIANCE WITH AN INTERIM SUSPENSION ORDER WITHIN THE REQUIRED TIME LIMIT, OR FAILS TO PAY THE HEARING FEES ASSESSED BY CFP BOARD. A DEFAULT MAY RESULT IN AN ADMINISTRATIVE ORDER OF SUSPENSION OR REVOCATION (OR AN ADMINISTRATIVE TEMPORARY OR PERMANENT BAR FOR CANDIDATES FOR CFP CERTIFICATION)
92
DEFAULT RISK
THE RISK THAT A COMPANY MAY NOT BE ABLE TO MAKE INTEREST OR PRINCIPAL PAYMENTS UNDER A DEBT OBLIGATION
93
DEFENSE OF MARRIAGE ACT (DOMA)
SIGNED INTO LAW ON SEPTEMBER 21, 1996 AND WAS "TO DEFINE AND PROTECT THE INSTITUTION OF MARRIAGE". UNDER SECTION 7, DEFINITION OF "MARRIAGE" AND "SPOUSE" THE LAW STATES, "IN DETERMINGING THE MEANING OF ANY ACT OF CONGRESS, OR OF ANY RULING, REGULATION, OR INTERPRETATION OF THE VARIOUS ADMINISTRATIVE BUREAUS AND AGENCIES OF THE UNITED STATES, THE WORD "MARRIAGE" MEANS ONLY A LEGAL UNION BETWEEN ONE MAN AND ONE WOMAN AS HUSBAND AND WIFE, AND THE WORD "SPOUSE" REFERS ONLY TO A PERSON OF THE OPPOSITE SEX WHO IS A HUSBAND OR WIFE". HOWEVER, IN THE 2013 LANDMARK CASE, UNITED STATES v. WINDSOR, THE SUPREME COURT EFFECTIVELY DECLARED DOMA AS UNCONSTITUTIONAL. THE RESULT OF THIS RULING IS THAT THERE IS NO LONGER A DISTINCTION FOR FEDERAL PURPOSES BETWEEN MARRIAGES OF HETEROSEXUALS AND MARRIAGES OF HOMOSEXUALS
94
DEFLATION
A DECREASE IN THE OVERALL PRICE LEVELS OF GOODS AND SERVICES
95
DEMAND
REPRESENTS THE QUANTITY CONSUMERS ARE WILLING TO PURCHASE OF A GOOD OR SERVICE, AT A PARTICULAR PRICE
96
DEPENDENT
A PERSON WHO IS A QUALIFYING CHILD OR QUALIFYING RELATIVE OF THE TAXPAYER
97
DEPENDENT WITH SPECIAL NEEDS
COULD BE AN INFANT, ADOLESCENT, OR ADULT. THE DEPENDENT COULD HAVE A WIDE RANGE OF CHALLENGES FROM VERY MILD PHYSICAL, EMOTIONAL, OR PSYCHOLOGICAL, TO A SITUATION WHERE AROUND THE CLOCK CARE IS REQUIRED
98
DERIVATIVES
FINANCIAKL SECURITIES THAT DERIVE THEIR VALUE FROM SOME UNDERLYING ASSET
99
DEVELOPMENTAL PARADIGM ("DEVELOPMENTAL" SCHOOL OF THOUGHT)
BELIEVES THAT HUMAN DEVELOPMENT OCCURS IN STAGES OVER TIME. RELATIONSHIPS THAT ARE FORMED EARLY IN LIFE BECOME A TEMPLATE FOR ESTABLISHING RELATIONSHIPS IN ADULTHOOD. AS TO EMOTIONS, THE DEVELOPMENTAL PARADIGM ASSUMES THAT ALL HUMANS DEVELOP AND PROGRESS IN A PREDICTABLE SEQUENCE
100
DILIGENCE
REQUIRES THE PROVISION OF SERVICES IN A RESONABLY PROMPT AND THOROUGH MANNER, INCLUDING THE PROPER PLANNING FOR, AND SUPERVISION OF, THE RENDERING OF PROFESSIONAL SERVICES
101
DISABILITY INSURANCE
INSURANCE THAT PROVIDES REPLACEMENT INCOME TO THE INSURED WHILE THE INSURED IS UNABLE TO WORK BECAUSE OF SICKNESS (ILLNESS) OR INJURY (ACCIDENT)
102
DISCIPLINARY AND ETHICS COMMISSION (DEC)
COMPOSED OF CFP PROFESSIONALS AND MEMBERS OF THE PUBLIC; HAS THE AUTHORITY TO ISSUE A FINAL ORDER IMPOSING DISCIPLINE IN THE FORM OF A SANCTION
103
DISCIPLINARY RULES
PRIOR TO JUNE 2020, THE DISCIPLINARY RULES PROVIDED DETAILED PROCEDURES FOLLOWED BY CFP BOARD IN ENFORCING THE STANDARDS OF PROFESSIONAL CONDUCT. REPLACED BY THE PROCEDURAL RULES IN JUNE 2020
104
DISCOUNT RATE
THE INTEREST RATE THAT THE FEDERAL RESERVE CHARGES FINANCIAL INSTITUTIONS FOR SHORT-TERM LOANS
105
DISCRETIONARY CASH FLOWS
EXPENSES WHICH CAN BE AVOIDED IN THE EVENT OF LOSS OF INCOME
106
DISINFLATION
A SLOWDOWN IN THE RATE OF INFLATION OR A SLOWDOWN IN THE GENERAL PRICE INCREASE OF GOODS AND SERVICES
107
DISPOSITION EFFECT
THE COGNITIVE BIAS IS "FAULTY FRAMING" WHERE NORMAL INVESTORS DO NOT MARK THEIR STOCKS TO MARKET PRICES. INVESTORS CREATE MENTAL ACCOUNTS WHEN THEY PURCHASE STOCKS AND CONTINUE TO MARK THEIR VALUE TO PURCHASE PRICES EVEN AFTER MARKET PRICES HAVE CHANGED. THE NORMAL INVESTOR DOES NOT CONSIDER THE STOCK A LOSER UNTIL THE STOCK IS SOLD
108
DISTRIBUTION (GIFTING) PHASE
THIS PHASE IS FROM THE LATE 40s TO END OF LIFE AND OCCURS WHEN THE INDIVIDUAL HAS HIGH ADDITIONAL CASH FLOW, LOW DEBT, AND HIGH NET WORTH
109
DO NOT RESUSCITATE (DNR)
DOCUMENTS DECLARE THE PRINCIPALS WISH TO AVOID HAVING CARDIOPULMONARY RESUSCITATION (CPR) PERFORMED IN THE EVENT THEIR HEART STOPS BEATING
110
DOCTRINE OF CONSTRUCTIVE RECEIPT
A CASH METHOD TAXPAYER MUST REPORT INCOME WHEN IT IS CREDITED TO THE TAXPAYERS ACCOUNT OR WHEN IT IS MADE AVAILABLE WITHOUT RESTRICTION
111
DOCTRINE OF THE FRUIT AND THE TREE
INCOME EARNED BY ONE TAXPAYER CANNOT BE ASSIGNED TO ANOTHER TAXPAYER. IT IS DESIGNED TO PREVENT TAXPAYERS FROM ASSIGNING INCOME TO A FAMILY MEMEBER IN A LOWER INCOME TAX BRACKET WHILE RETAINING THE ASSET THAT PRODUCES THE INCOME
112
DONEE
THE PERSON WHO RECEIVES THE GIFT
113
DONOR
THE PERSON WHO GIVES THE GIFT
114
DUE CARE
ENGAGING IN CONDUCT THAT A REASONABLE AND PRUDENT INDIVIDUAL WOULD EXERCISE UNDER THE SAME OR SIMILAR CIRCUMSTANCES
115
DURABLE POWER OF ATTORNEY FOR HEALTH CARE
A WRITTEN DOCUMENT ENABLING ONE INDIVIDUAL, THE PRINCIPAL, TO DESIGNATE ANOTHER PERSON TO ACT AS HIS "ATTORNEY-IN-FACT." A DURABLE POWER OF ATTORNEY SURVIVES THE INCAPACITY AND/OR DISABILITY OF THE PRINCIPAL
116
ECONOMIC BENEFIT DOCTRINE
STATES THAT IF A TAXPAYER RECEIVES AN ECONOMIC BENEFIT AS INCOME, THE VALUE OF THAT BENEFIT WILL BE SUBJECT TO TAX
117
ECONOMIC INDICATORS
DESCRIBES THE CURRENT AND FUTURE ECONOMY AND BUSINESS CYCLE. THE THREE ECONOMIC INDICATORS ARE: INDEX OF LEADING ECONOMIC INDICATORS, INDEX OF LAGGING ECONOMIC INDICATORS, AND INDEX OF COINCIDENT ECONOMIC INDICATORS
118
EDUCATION FUNDING NEEDS ANALYSIS
DETERMINATION OF THE LUMP SUM OR ANNUAL SAVINGS REQUIRED TO PAY FOR COLLEGE
119
EFFECTIVE ANNUAL RATE
AN INVESTMENTS ANNUAL RATE OF RETURN WHEN COMPOUNDING OCCURS MORE THAN ONCE PER YEAR
120
EFFECTIVE TRANSFER
A TRANSFER OF A PERSONS ASSETS TO THE PERSON OR CHARITABLE INSTITUTION INTENDED BY THAT PERSON
121
EFFICIENT FRONTIER
COMPARES VARIOUS PORTFOLIOS BASED ON THEIR RISK-RETURN RELATIONSHIP. AN EFFICIENT PORTFOLIO PROVIDES THE HIGHEST AMOUNT OF RETURN FOR ANY GIVEN LEVEL OF RISK
122
EFFICIENT TRANSFER
A TRANSFER IN WHICH COSTS OF THE TRANSFER ARE MINIMIZED CONSISTENT WITH THE GREATEST ASSURANCE OF EFFECTIVENESS
123
EMERGENCY FUND RATIO
MEASURES HOW MANY MONTHS OF NON-DISCRETIONARY EXPENSES THE CLIENT HAS IN THE FORM OF CASH AND CASH EQUIVALENTS OR CURRENT ASSETS
124
EMPLOYER-PROVIDED EDUCATION ASSISTANCE PROGRAM
A PROGRAM ESTABLISHED BY AN EMPLOYER TO REIMBURSE EMPLOYEES FOR EDUCATION EXPENSES. THE EDUCATION EXPENSES MAY OR MAY NOT BE DIRECTLY RELATED TO THE EMPLOYEES CURRENT JOB DUTIES; IT DEPENDS ON THE EMPLOYERS POLICY
125
ENGAGEMENT
AN ORAL OR WRITTEN AGREEMENT ARRANGEMENT, OR UNDERSTANDING
126
ENGAGEMENT LETTER
A LEGAL AGREEMENT BETWEEN A PROFESSIONAL ORGANIZATION AND A CLIENT THAT DEFINES THEIR BUSINESS RELATIONSHIP
127
EQUAL CREDIT OPPORTUNITY ACT
PROHIBITS DISCRIMINATION, WHEN EVALUATING A DECISION TO GRANT CONSUMER CREDIT
128
EQUALIBRIUM PRICE
REPRESENTS THE PRICE AT WHICH THE QUANTITY DEMANDED EQUALS THE QUANTITY SUPPLIED
129
EQUITY
REPRESENTS OWNERSHIP IN A BUSINESS OR PROPERTY
130
EQUITY MUTUAL FUNDS
TYPICALLY INVEST IN EQUITY SECURITIES
131
ERISA (EMPLOYEE RETIREMENT INCOME SECURITY ACT)
DESIGNED TO PROTECT EMPLOYEE RETIREMENT SAVINGS ACCOUNTS FROM CREDITORS AND FROM PLAN SPONSORS
132
ESTATE PLANNING
THE PROCESS OF ACCUMULATION, MANAGEMENT, CONSERVATION, AND TRANSFER OF WEALTH CONSIDERING LEGAL, TAX, AND PERSONAL OBJECTIVES
133
ESTATE TAX
IMPOSED ON THE DECENDENTS RIGHT TO TRANSFER PROPERTY TO HIS HEIRS WHEN A CITIZEN OR RESIDENT OF THE UNITED STATES DIES
134
EXCESS RESERVES
REPRESENTS THE AMOUNT OF CASH OR DEPOSITS WITH THE FEDERAL RESERVE IN EXCESS OF THE MINIMUM AMOUNT REQUIRED
135
EXCHANGE RATE RISK
THE RISK THAT INTERNATIONAL INVESTMENTS AND DOMESTIC COMPANIES THAT IMPORT OR EXPORT GOODS ARE SUBJECT TO CHANGES IN RELATIONSHIP TO THE PRICE OF A DOLLAR, RELATIVE TO FOREIGN CURRENCIES.
136
EXCHANGE TRADED FUNDS (ETFs)
A FORM OF AN INVESTMENT COMPANY THAT INVESTS IN SECURITIES THAT ARE INCLUDED IN A PARTICULAR INDEX
137
EXCLUSIONS
INCOME ITEMS THAT ARE SPECIFICALLY EXEMPTED FROM INCOME TAX
138
EXECUTIVE RISK
THE RISK OF MORAL CHARACTER OF THE EXECUTIVES RUNNING THE COMPANY. THE EXTENT TO WHICH EXECUTIVES BREAK LAWS, REGULATIONS, OR ETHICAL STANDARDS THAT MAY NEGATIVELY IMPACT A COMPANY
139
EXPECTED RETURN
THE RATE OF RETURN EXPECTED FOR AN ASSET OR INVESTMENT PORTFOLIO
140
EXPENSES
AN INCOME STATEMENT CATEGORY, EXPENSES REPRESENT THOSE ITEMS THAT ARE PAID REGULARLY BY THE CLIENT DURING THE TIME PERIOD BEING PRESENTED. EXAMPLES OF EXPENSES INCLUDE MORTGAGE PRINCIPLE AND INTEREST, UTILITIES, TAXES, INSURANCE, TELEPHONE, WATER, CABLE OR SATELLITE, INTERNET, AND CELL PHONE
141
EXTERNAL DATA
THE EXTERNAL DATA, ALSO KNOWN AS THE EXTERNAL ENVIRONMENT INCLUDES THE CURRENT ECONOMIC, LEGAL, POLITICAL, SOCIOLOGICAL, TAX, AND TECHNOLOGY ENVIRONMENTS. EXAMPLES OF EXTERNAL DATA ARE THE CURRENT INTEREST RATES, STATUS OF THE HOUSING, JOB, INSURANCE AND INVESTMENT MARKETS, THE LOCAL COST OF LIVING, AND THE EXPECTED INFLATION RATE
142
EXTRINSIC MOTIVATION
AN OUTSIDE REWARD (YOU EXPECT TO GET SOMETHING IN RETURN) OR AVOIDANCE OF PUNISHMENT
143
FAILURE TO FILE PENALTY
A FIVE PERCENT PENALTY OF THE UNPAID TAX BALANCE FOR EACH MONTH OR PART THEREOF THAT A TAX RETURN IS LATE
144
FAILURE TO PAY PENALTY
A PENALTY OF 0.5 PERCENT PER MONTH OR PART THEREOF THAT A TAXPAYER FAILS TO PAY TAX THAT IS OWED
145
FAIR CREDIT BILLING ACT
REQUIRES TIMELY, WRITTEN VERIFICATION TO A CONSUMER DISPUTING A BILLING ERROR
146
FAIR CREDIT REPORTING ACT
PROTECTS CONSUMERS INFORMATION COLLECTED BY THE MAJOR CREDIT BUREAUS (EQUIFAX, TRANSUNION, AND EXPERIAN)
147
FAIR DEBT COLLECTION PRACTICES ACT
PREVENTS THIRD PARTY DEBT COLLECTORS FROM USING DECEPTIVE OR ABUSIVE METHODS TO COLLECT DEBTS
148
FAIR MARKET VALUE
THE PRICE A WILLING BUYER AND WILLING SELLER WOULD AGREE TO WHEN BOTH HAVE REASONABLE KNOWLEDGE OF THE FACTS OF THE TRANSACTION AND NEITHER IS UNDER ANY COMPULSION TO BUY OR SELL
149
FAIR PACKAGING AND LABELING ACT (FPLA)
HELPS CONSUMERS COMPARE THE VALUE OF PRODUCTS AND TO PREVENT UNFAIR OR DECEPTIVE PACKAGING AND LABELING OF MANY HOUSEHOLD ITEMS
150
FAMILY LIMITED PARTNERSHIP
A SPECIAL TYPE OF LIMITED PARTNERSHIP CREATED UNDER STATE LAW WITH THE PRIMARY PURPOSE OF TRANSFERRING ASSETS TO YOUNGER GENERATIONS USING ANNUAL EXCLUSIONS AND VALUATION DISCOUNTS FOR MINORITY AND LACK OF MARKETABILITY
151
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
FORMED IN 1933, AS A RESULT OF THE BANK FAILURES THAT OCCURED IN THE 1920s AND 1930s. THE THREE GOALS OF THE FDIC ARE TO INSURE DEPOSITS, MANAGE RECEIVERSHIPS, AND SUPERVISE FINANCIAL INSTITUTIONS
152
FEDERAL FUNDS RATE
THE BANK TO BANK LENDING RATE
153
FEDERAL PELL GRANT
NEED-BASED FINANCIAL AID FOR STUDENTS WHO HAVE NOT EARNED AN UNDERGRADUATE DEGREE OR A PROFESSIONAL DEGREE. A PELL GRANT DOES NOT HAVE TO BE REPAID. PELL GRANTS ARE AWARDED BASED ON FINANCIAL NEED
154
FEDERAL PERKINS LOAN
A PROGRAM FOR UNDERGRADUATE AND GRADUATE STUDENTS WITH EXCEPTIONAL FINANCIAL NEED. THE PERKINS LOAN IS A LOW INTERST RATE LOAN (5%), WHICH WAS OFFERED THROUGH A UNIVERSITYS FINANCIAL AID OFFICE. THE UNIVERSITY SERVES AS THE LENDER AND THE FEDERAL GOVERNMENT PROVIDES THE FUNDS. NO NEW PERKINS LOANS ARE AVAILABLE AFTER SEPTEMBER 30,2017
155
FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG)
A GRANT AWARDED TO STUDENTS WITH EXCEPTIONAL FINANCIAL NEED. PELL GRANT RECIPIENTS WITH THE LOWEST EFC ARE CONSIDERED FIRST FOR A FSEOG
156
FEDERAL TRADE COMMISSION (FTC)
WORKS FOR THE CONSUMER TO PREVENT FRAUDULENT, DECEPTIVE, AND UNFAIR BUSINESS PRACTICES IN THE MARKETPLACE AND TO PROVIDE INFORMATION TO HELP CONSUMERS IDENTIFY, PREVENT, AND AVOID THEM
157
FEDERAL WORK-STUDY (FWS)
JOBS ON CAMPUS OR OFF CAMPUS FOR UNDERGRADUATE OR GRADUATE STUDENTS TO HELP STUDENTS PAY FOR THEIR EDUCATION EXPENSES. TO BE ELIGIBLE STUDENTS MUST HAVE FINANCIAL NEED
158
FEE-ONLY
ALL OF THE CERTIFICANTS AND FIRMS COMPENSATION COMES EXCLUSIVELY FROM THE CLIENTS IN THE FORM OF FIXED, FLAT, HOURLY, PERCENTAGE OR PERFORMANCE BASED FEES, AND THE CERTIFICANT AND CERTIFICANTS FIRM DO NOT RECEIVE ANY FORM OF SALES-RELATED COMPENSATION
159
FEE SIMPLE OWNERSHIP
THE COMPLETE OWNERSHIP OF PROPERTY WITH ALL THE RIGHTS ASSOCIATED WITH OUTRIGHT OWNERSHIP
160
FELLOWSHIPS
PAID TO STUDENTS FOR WORK, SUCH AS TEACHING WHILE STUDYING FOR A MASTERS DEGREE OR CONDUCTING RESEARCH WHILE WORKING TOWARDS A DOCTORATE OF PHILOSOPHY DEGREE (PH.D.). FELLOWSHIPS CAN LAST ANYWHERE FROM A FEW WEEKS TO A FEW YEARS, DEPENDING ON THE DEPTH AND LEVEL OF WORK INVOLVED
161
FIDUCIARY
AT ALL TIMES WHEN PROVIDING FINANCIAL ADVICE TO A CLIENT, A CFP PROFESSIONAL MUST ACT IN THE BEST INTEREST OF THE CLIENT. INCLUDES THE DUTY OF LOYALTY, DUTY OF CARE, AND DUTY TO FOLLOW CLIENT INSTRUCTIONS
162
FINANCIAL DEPENDENCE
RELIANCE ON UNEARNED INCOME FROM ANOTHER PERSON TO THE EXTENT THAT IT CREATES ANXIETY AROUND THE FEAR OF BEING CUT OFF FROM THAT INCOME
163
FINANCIAL ENABLING
OCCURS WHEN ONE INDIVIDUAL PROVIDES FINANCIAL ASSISTANCE THAT KEEPS OTHERS DEPENDENT
164
FINANCIAL ENMESHMENT
OCCURS WHEN PARENTS INVOLVE CHILDREN IN ADULT FINANCIAL DECISIONS AND CONFLICTS AT A TIME WHEN THE CHILD IS NOT YET EMOTIONALLY AND COGNITIVELY PREPARED TO COPE WITH SUCH DECISIONS AND CONFLICTS
165
FINANCIAL EXPLOITATION
THE FRAUDULENT OR OTHERWISE ILLEGAL, UNAUTHORIZED, OR IMPROPER ACT OR PROCESS OF AN INDIVIDUAL, INCLUDING A CAREGIVER OR FIDUCIARY, THAT USES THE RESOURCES OF AN OLDER INDIVIDUAL FOR MONETARY OR PERSONAL BENEFIT, PROFIT, OR GAIN, OR THAT RESULTS IN DEPRIVING AN OLDER INDIVIDUAL OF RIGHTFUL ACCESS TO, OR USE OF, BENEFITS, RESOURCES, BELONGINGS, OR ASSETS
166
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA)
A SELF-REGULATORY ORGANIZATION FOR ALL SECURITY FIRMS DOING BUSINESS IN THE UNITED STATES
167
FINANCIAL INFIDELITY
THE ACT OF ENGAGING IN SIGNIFICANT FINANCIAL TRANSACTIONS WITHOUT THE KNOWLEDGE AND SUPPORT OF A SPOUSE OR PARTNER
168
FINANCIAL NEEDS METHOD
A METHOD THAT EVALUATES THE INCOME REPLACEMENT AND LUMP-SUM NEEDS OF SURVIVORS IN THE EVENT OF AN INCOME PRODUCERS UNTIMELY DEATH
169
FINANCIAL PLAN
A WRITTEN DOCUMENT THAT GENERALLY SETS OUT A LIST OF RECOMMENDATIONS TO ACHIEVE A SET OF GOALS AND OBJECTIVES BASED ON AN UNDERSTANDING OF A CLIENTS CURRENT FINANCIAL AND PERSONAL SITUATION
170
FINANCIAL PLANNING
DEFINED BY CFP BOARD AS A COLLABORATIVE PROCESS THAT HELPS MAXIMIZE A CLIENTS POTENTIAL FOR MEETING LIFE GOALS THROUGH FINANCIAL ADVICE THAT INTEGRATES RELEVANT ELEMENTS OF THE CLIENTS PERSONAL AND FINANCIAL CIRCUMSTANCES
171
FINANCIAL RISK
THE AMOUNT OF LEVERAGE THE COMPANY IS USING IN ITS CAPITAL STRUCTURE. LEVERAGE IS A MEASURE OF THE AMOUNT OF DEBT A COMPANY USES TO CAPITALIZE THE BUSINESS
172
FINANCIAL STATEMENT ANALYSIS
THE PROCESS OF CALCULATING FINANCIAL RATIOS AND COMPARING THE ACTUAL RATIOS TO INDUSTRY ESTABLISHED BENCHMARKS
173
FINANCIAL STATEMENT AND RATIO ANALYSIS APPROACH
THE RATIO ANALYSIS PROVIDES AN OPPORTUNITY TO ASSESS THE CLIENTS STRENGTHS, WEAKNESSES, AND DEFICIENCIES WHEN THE CLIENTS RATIOS ARE COMPARED TO BENCHMARK METRICS. THE RATIO APPROACH USUALLY FOLLOWS THE PIE CHART APPROACH AND PROVIDES THE PLANNER WITH THE ACTUAL RATIOS WITH WHICH TO COMPARE THE BENCHMARKS IN THE METRICS APPROACH
174
FINANCIAL THERAPY
A PROCESS INFORMED BY BOTH THERAPEUTIC AND FINANCIAL COMPETENCIES THAT HELPS PEOPLE THINK, FEEL, COMMUNICATE, AND BEHAVE DIFFERENTLY WITH MONEY TO IMPROVE OVERALL WELL-BEING THROUGH EVIDENCE-BASED PRACTICES AND INTERVENTIONS
175
FINANCIAL WELL-BEING
A STATE OF BEING WHEREIN A PERSON CAN FULLY MEET CURRENT AND ONGOING FINANCIAL OBLIGATIONS, CAN FEEL SECURE IN THEIR FINANCIAL FUTURE, AND IS ABLE TO MAKE CHOICES THAT ALLOW THEM TO ENJOY LIFE
176
FISCAL POLICY
REPRESENTS THE GOVERNMENTS POSITION ON WHETHER TO EXPAND OR CONTRACT THE ECONOMY. CONGRESS USES TAXES AND GOVERNMENT SPENDING TO IMPLEMENT ITS FISCAL POLICY
177
FITNESS STANDARDS
ENSURE SPECIFIC CHARACTER AND FITNESS STANDARDS AS TO AN INDIVIDUALS CONDUCT BEFORE CERTIFICATION
178
FIXED EXPENSES
THOSE EXPENSES THAT ARE DUE AND PAYABLE REGARDLESS OF WHETHER INCOME IS AVAILABLE TO COVER THE COST. THERE IS LESS DISCRETION OVER FIXED EXPENSES IN THE SHORT TERM. EXAMPLES OF FIXD EXPENSES INCLUDE MORTGAGE PAYMENT, CAR PAYMENT, BOAT PAYMENT, STUDENT LOAN PAYMENT, PROPERTY TAXES, AND INSURANCE PREMIUMS
179
FIXED INCOME OR BOND FUNDS
TYPICALLY INVEST IN BONDS OF VARIOUS MATURITIES
180
FLOOR
A MINIMUM AMOUNT THAT MUST BE EXCEEDED BEFOR EEXPENSES MAY BE DEDUCTIBLE. ONLY THE TOTAL EXPENSES ABOVE THE FLOOR AMOUNT MAY BE DEDUCTED
181
FRAMING (OR THE FRAMING EFFECT)
A COGNITIVE BIAS UNDER WHICH THE MANNER IN WHICH SOMETHING IS FRAMED IMPACTS HOW THE CONTEXT IS EVALUATED OR INTERPRETED EVEN THOUGH THE SAME FACTS HAVE BEEN PROVIDED
182
FREE APPLICATION FOR FEDERAL STUDENT AID (FAFSA)
A FORM USED TO DETERMINE A STUDENTS ELIGIBILITY FOR ALL TYPES OF FINANCIAL AID, INCLUDING GRANTS, WORK-STUDY, AND LOANS. THE FAFSA IS USED TO DETERMINE THE EXPECTED FAMILY CONTRIBUTION AMOUNT (EFC, PRIOR TO 2023; STUDENT AID INDEX (SAI) BEGINNING IN 2023)
183
FRICTIONAL UNEMPLOYMENT
OCCURS WHEN PEOPLE ARE VOLUNTARILY UNEMPLOYED BECAUSE THEY ARE SEEKING OTHER JOB OPPORTUNITIES
184
FULL EMPLOYMENT
THE RATE OF EMPLOYMENT THAT EXISTS WHEN THERE IS EFFICIENCY IN THE LABOR MARKET
185
FUTURE VALUE
THE VALUE AT SOME POINT IN THE FUTURE OF A PRESENT AMOUNT OR AMOUNTS AFTER EARNING A RATE OF RETURN FOR A PERIOD OF TIME
186
FUTURE VALUE OF AN ANNUITY DUE
THE FUTURE VALUE OF EQUAL PERIODIC DEPOSITS, MADE AT THE BEGINNING OF THE PERIOD
187
FUTURE VALUE OF AN ORDINARY ANNUITY
THE VALUE OF EQUAL PERIODIC PAYMENTS OR DEPOSITS, AT SOME POINT IN THE FUTURE. THE FUTURE VALUE OF AN ORDINARY ANNUITY ASSUMES THAT DEPOSITS ARE MADE AT THE END OF A PERIOD OR END OF A YEAR
188
FUTURES CONTRACT
A COMMITMENT TO DELIVER AN AMOUNT OF A CERTAIN ITEM AT A SPECIFIED DATE AT AN AGREED UPON PRICE
