unit 1 (ch 6 and 4)

Question 1

what are the 3 parts of a statement of financial position

Answer 1

assets, liabilities, net worth

Question 2

what are the classifications/categories of assets

Answer 2

cash and cash equivalents, investment assets, personal use assets

Question 3

what is a cash and cash equivalent (assets classification)

Answer 3

liquid (easily converted to cash), convert to cash within a YEAR

Question 4

what is an investment asset (assets classification)

Answer 4

money is held for growth or income (ex. retirement)

Question 5

what is a personal use assets (assets classification)

Answer 5

long lived assets, used to maintain quality of life (ex. house or furniture)

Question 6

what are the 2 liability categories and classifications

Answer 6

current liabilities, long term liabilities

Question 7

what is a current liability (liability classification)

Answer 7

paid within one YEAR (ex. credit card debt, unpaid bills)

Question 8

what is a long term liability (liability classification)

Answer 8

extended beyond one year (ex. debts, larget assets)

Question 9

what is included in a financial statement

Answer 9

total assets that will equal total liabilities and net worth, assets stated at fair market value

Question 10

what is included in a statement of cash flows

Answer 10

summary of clients expenses over time (typically a year), can focus on realized transactions

Question 11

what are examples of inflows

Answer 11

employment income, investment income, other income (ex. gift)

Question 12

what are examples of outflows

Answer 12

fixed expenses (ex. mortgage), variable expenses (can somewhat plan for, ex. heating), discretionary expenses (you can choose whether or not you want to pay for it)

Question 13

what are savings subtracted from

Answer 13

inflows

Question 14

what is the purpose of a statement of changes in net worth

Answer 14

why did it change?

Question 15

a list of assets, liabilities, and net worth

Answer 15

statement of financial position textbook definition

Question 16

property owned completely or partially by the client

Answer 16

assets textbook definition

Question 17

the ability to buy or sell an asset quickly and at a known price

Answer 17

liquidity text def

Question 18

assets expected to be converted to cash within one year

Answer 18

current assets text def

Question 19

money owed by the client

Answer 19

liability text def

Question 20

the amount of wealth or equity the client has in owned assets

Answer 20

net worth text def

Question 21

the price at which an exchange will take place between a willing buyer and a willing seller, both informed and neither under duress to exchange

Answer 21

fair market value text def

Question 22

summary of the clients income and expenses during an interval of time, usually one year

Answer 22

personal statement of cash flows td

Question 23

money available after all expenses are accounted for

Answer 23

net cash flow td

Question 24

all monies received from employment, investments, and other sources

Answer 24

inflows

Question 25

deffered consumption

Answer 25

savings

Question 26

recurring obligations, or monthly expenses paid

Answer 26

outflows

Question 27

outflows that remain constant over a period of time and over which the client has little control

Answer 27

fixed outflows/expenses

Question 28

the relationship or relative value of two characteristics used to analyze an individuals financial health and to conduct comparison and trend analysis

Answer 28

ratio analysis

Question 29

the future dollar amount to which a sum certain today will increase compounded at a defined interest rate over a period of time

Answer 29

future value

Question 30

the current dollar value of a future sum discounted at a defined interest rate over a period of time

Answer 30

present value

Question 31

a series of deposits or payments of equal size deposited over a finite number of equal interval periods

Answer 31

annuity

Question 32

deposits or payments are made at the END of each period

Answer 32

ordinary annuity

Question 33

deposits or payments are made at the BEGINNING of each period

Answer 33

annuity due

Question 34

the future amount to which a series of deposits of equal size will equal when deposited over a finite number of equal interval periods paded on a defined interest rate when the deposits are made at the end of each period

Answer 34

future value of an ordinary annuity

Question 35

the future value to which a series of deposits of equal size will amount when deposited over a definite number of equal interval periods based on a defined interest rate and the deposits are made at the beginning of each period

Answer 35

future value of an annuity due

Question 36

the difference between the initial cash outflow and the present value of discounted cash inflows cost of investment

Answer 36

net present value

Question 37

the discount rate that causes cash inflows to equal cash outflows, thus allowing comparison of rates of return on alternative investments

Answer 37

internal rate of return