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CFP > General > Flashcards

General Flashcards

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CFP® flashcards
1
Q

Current Ratio
Current Assets
Current Liabilities

A

Current Ratio=Current Assets/Current Liabilities

Current Assets: Cash equivalents, Marketable Securities, accounts receivable, Inventory

Current Liabilities: Accounts payable, credit card debt, taxes payable

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2
Q

Securities Act of 1933

Securities Act of 1934

A

33: Requires prospectus for new issues and full & fair disclosure
34: Passed to regulate secondary market and created SEC to enforce securities laws

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3
Q

Investment Company Act of 1940

Securities Investors Protection Act of 1970

A

40: Authorized SEC to regulate UIT, open end funds, closed end funds, and variable products.
70: Established SPIC to supervise securities firms that get into financial difficulties. Also to insure investors against losses due to failure of brokerage firm

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4
Q

Gross Domestic Product (GDP)

A
  • Total dollar value of all goods and services produced within the US ONLY
  • GDP counts economic activity without regard to yearly price fluctuations
  • Does NOT include any income generated outside of the US or adjustments for foreign currencies
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5
Q

Business Cycle

A

GDP on Y axis, Time on X axis:

Expansion, Peak, Recession, Trough, Recovery

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6
Q

Recession vs Depression

A

Recession: Two consecutive quarters of economic decline (negative GDP)

Depression: Six consecutive quarters of economic decline (negative GDP)

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7
Q

EXCEPTIONS to Filing as an Investment Advisor

A
  • Banks that are not also investment companies
  • Lawyers, accountants, teachers (advice incidental)
  • Broker/Dealer or Registered Reps whose performance is incidental and who get no special compensation
  • Publishers of bona fide newspapers
  • Those who give advice solely relating to US government securities
  • When only clients are insurance companies
  • Family Office
  • Under $100m in AUM (register with state)
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8
Q

Law of Agency (Insurance Authority)

A
  • Express: written, explicit direction from principal to agent
  • Implied: that which public believes an individual holds and includes signage, rate books, etc. Implied is actual authority that ages has to carry out the principals business.
  • Apparent: arises out of negligence of the principal allowing the agent to appear to have authority because of certain actions of the agent in the past.
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9
Q

Red Herring Prospectus

A

A letter outlining information about an upcoming issue of a security.

  • does need to be approved by SEC
  • does not include price or size of issue
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10
Q

FDIC Coverage

A
  • Single Accounts: 250k (per titling, not per account)
  • Joint Account: 250k per joint owner (if one person has multiple joint accounts, aggregate 250k for that person)
  • Rev Trust: 250k per beneficiary
  • IRA’s: 250k per account (separate from single accounts)

be careful whose (if specific person) coverage they are asking for

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11
Q

Discount Rate
Federal Funds Rate
Prime Rate

A

Discount: rate the FED charges member banks to borrow

Federal: rate for borrowing banks to banks

Prime: rate that banks charge customers for borrowing

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12
Q

Fiscal Policy

A

Expansionary: cut taxes & increase spending

Contraction: raise taxes & cut spending

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13
Q

Monetary Policy

A

Expansionary: lower reserve requirement, lower discount rate, buy treasuries

Contraction: Raise requirement, raise rate, sell treasuries

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14
Q

Leading Indicators

A
  • hours of production
  • unemployment claims
  • new manufacturing orders
  • interest rate spread
  • money supply
  • stock prices
  • consumer expectations
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15
Q

Coincident Indicators

A
  • number of employees on non-farm payroll

- industrial production

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16
Q

Lagging Indicator

A
  • duration of unemployment
  • average prime rate
  • loans outstanding
17
Q

Reverse Mortgage

A
  • Provides stream of income to former owner

- If owner dies, heirs are responsible for for selling house and paying balance…

18
Q

Commingle

A
  • A CFP may not commingle client money with the funds of the financial planning firm
  • client funds MAY be commingled in a common client investment account
19
Q

Qualified Tuition Plans (529)

A

College Save: market-based, risky, includes graduate school, any school, R and B

Prepaid Tuition: tracks inflation, safer, specific schools, no R and B

The max contribution is whatever the plan states. There is an IRC rule that allows you to use 5 years of the annual exclusion at once (75k s and 150k mfj)

20
Q

Coverdell ESA

A
  • $2k/yr/child
  • non-deductible but tax free distributions for qualified
  • grow tax deferred
  • many qualified expenses (R and B and elementary)
  • all funds gone by age 30
21
Q

Financial Aid

A
  • FAFSA is fee and needs to be submitted yearly
  • earliest submit is October of year before school
  • EFC takes 20% of kids assets and 5.64% parent
  • home, retirement, and business ownership not counted toward EFC

CFP (7 decks)

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