QUESTION 1

1. Which statement is true regarding personal and business financial statements?

   	a.	The personal cash flow statement correlates to the business income statement.
   	b.	The personal cash flow statement correlates to the business balance sheet.
   	c.	The personal net worth statement correlates to the business income statement.
   	d.	There is no correlation between the personal and business financial statements.
   	e.	I am not sure.

1 points

QUESTION 2

1. Your client Richard has a cash ratio of 3%. What does Richard need to do to increase his cash ratio to an appropriate level?

   	a.	Reduce lines of credit with higher mortgage payments
   	b.	Increase portfolio investments in long-term commitments
   	c.	Convert some fixed-term assets into more liquid assets
   	d.	Transfer funds from cash accounts to brokerage accounts
   	e.	I am not sure.

1 points

QUESTION 3

1. What does the debt-to-assets ratio measure?

   	a.	The client's ability to meet short-term demands
   	b.	The client's ability to pay debts over the long term
   	c.	How well clients are progressing toward accumulating capital
   	d.	The percentage a client is spending after-tax on debt payments
   	e.	I am not sure.

1 points

QUESTION 4

1. What is Kim's total debt service ratio? Your client Kim has the following financial profile:

   Liquid Assets	$44,000
   Investment Assets	$140,500
   Personal Assets	$195,500
   Total Assets	$117,000
   Total Liabilities	$263,000
   Net Worth	$187,000
   Annual debt payments	$22,000
   Annual gross income	$145,000

   	a.	0.185
   	b.	0.152
   	c.	0.527
   	d.	62.5
   	e.	I am not sure.

1 points

QUESTION 5

1. Which ratio is typically lower for younger clients than for older clients?

   	a.	Investment assets-to-net worth ratio
   	b.	Debt-to-equity ratio
   	c.	Debt-to-assets ratio
   	d.	Total debt service ratio.
   	e.	I am not sure.

1 points

QUESTION 6

1. What is June's cash ratio? Your client June has the following financial profile:

   Liquid Assets	$44,000
   Investment Assets	$140,500
   Personal Assets	$195,500
   Total Assets	$380,000
   Total Liabilities	$263,000
   Net Worth	$117,000
   Annual debt payments	$22,000
   Annual gross income	$145,000

   	a.	0.116
   	b.	0.185
   	c.	0.31
   	d.	0.527
   	e.	I am not sure.

1 points

QUESTION 7

1. What is meant by capital account?

   	a.	The balance sheet of a business
   	b.	The equity value of a business
   	c.	A list of a business's assets
   	d.	A business income statement
   	e.	I am not sure.

1 points

QUESTION 8

1. What is Kim's debt-to-equity ratio? Your client Kim has the following financial profile:

   Liquid Assets	$44,000
   Investment Assets	$140,500
   Personal Assets	$195,500
   Total Assets	$380,000
   Total Liabilities	$263,000
   Net Worth	$117,000
   Annual debt payments	$22,000
   Annual gross income	$145,000

   	a.	0.185
   	b.	0.116
   	c.	0.527
   	d.	0.625
   	e.	I am not sure.

1 points

QUESTION 9

1. What is your assessment of this ratio given Tom's age and stage in the life cycle? Your client Tom, 29, has a cash (liquid assets-to-total assets) ratio of 6%. He recently took out a mortgage on a condo with his wife, who is expecting a baby.

   	a.	It's high for a younger client with financial obligations; it should be kept under 5%.
   	b.	It's in the normal range, but it may be too low given Tom's financial obligations.
   	c.	It's low, but it's appropriate for a young person with family obligations to have a low cash ratio.
   	d.	It's far too low; given Tom's financial obligations, it should be least 30%.
   	e.	I am not sure.

1 points

QUESTION 10

1. Which statement is true regarding the debt-to-net worth ratio?

   	a.	It measures short-term liquidity
   	b.	It measures how much debt is used to finance each unit of equity.
   	c.	It reflects the proportion of assets financed by debt.
   	d.	It compares the debt payment amount to the net income amount
   	e.	I am not sure.