Concept Of Financial Planning - Ch 1
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Definition of Financial Planning is
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“Financial Planning is the process of meeting one’s life goals through the proper management of personal finances.”
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“Financial Planning is the process of meeting one’s life goals.”
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“Financial Planning is the proper management of personal finances.”
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None of the above
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This quiz is designed based on theConcept of Financial Planning - Chapter 1
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- 2.
Number of steps of financial planning are
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4
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5
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6
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7
Correct Answer
A. 6Explanation
The correct answer is 6 because financial planning typically involves several steps such as setting financial goals, gathering financial information, analyzing the information, developing a financial plan, implementing the plan, and monitoring and reviewing the plan regularly. Therefore, there are a total of 6 steps involved in the process of financial planning.Rate this question:
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- 3.
The first step of financial planning process is
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Gathering client data, including goals
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Analyzing and evaluating current situation and needs
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Establishing and defining client relationship
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Implementing the recommendations
Correct Answer
A. Establishing and defining client relationshipExplanation
The first step of the financial planning process is establishing and defining the client relationship. This involves the financial planner getting to know the client, understanding their goals, needs, and objectives. It also includes establishing trust and communication between the planner and the client. This step is crucial as it sets the foundation for the entire financial planning process and ensures that the planner has a clear understanding of the client's financial situation and objectives before moving forward with the analysis and recommendation stages.Rate this question:
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- 4.
The last step of financial planning process is
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Gathering client data, including goals
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Monitoring and reviewing the Financial Plan
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Analyzing and evaluating current situation and needs
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Developing and presenting recommendations
Correct Answer
A. Monitoring and reviewing the Financial PlanExplanation
The last step of the financial planning process is monitoring and reviewing the financial plan. This involves regularly assessing the progress and performance of the plan, comparing it to the client's goals and objectives, and making any necessary adjustments or modifications. By monitoring and reviewing the financial plan, the planner can ensure that it remains relevant and effective in helping the client achieve their financial goals.Rate this question:
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- 5.
This is not the most "common" life goals are
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Children’s future including education and marriage
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Corpus for starting own business
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Buying a house
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Comfortable Retirement
Correct Answer
A. Corpus for starting own businessExplanation
The given answer suggests that one of the common life goals is to have a corpus or savings specifically for starting one's own business. This implies that many individuals aspire to become entrepreneurs and need financial resources to fund their business ventures.Rate this question:
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- 6.
While offering solutions to clients, the following aspects of personal finance need not be analysed as a whole rather than seeing them in isolation
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Income
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Expenses
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Risk Tolerance
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Estate
Correct Answer
A. Risk ToleranceExplanation
When offering solutions to clients, it is important to consider each aspect of personal finance separately rather than analyzing them as a whole. However, risk tolerance is an exception to this rule. Risk tolerance refers to an individual's willingness to take on financial risks. It is a crucial factor to consider when developing a financial plan as it helps determine the appropriate investment strategy and asset allocation for the client. By understanding a client's risk tolerance, financial advisors can tailor their recommendations to align with the client's comfort level and financial goals.Rate this question:
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- 7.
Common factors which have compelled people to seek professional financial advisory services inculde
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Longer life span and lack of social security
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Proliferation of numerous products
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All the above
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None of the above
Correct Answer
A. All the aboveExplanation
The correct answer is "All the above." People are seeking professional financial advisory services due to a longer life span and lack of social security, as well as the proliferation of numerous financial products. Longer life spans mean individuals need to plan for retirement and ensure their savings last. Lack of social security or inadequate government support further emphasizes the need for professional advice. Additionally, the increasing number of financial products available can be overwhelming, making it necessary to seek guidance from experts.Rate this question:
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- 8.
Scope of Advsory Services include
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Insurance Planning
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MF Planning
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Currency Planning
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Derivative Planning
Correct Answer
A. Insurance PlanningExplanation
The correct answer is Insurance Planning because it is explicitly mentioned in the given options. The scope of Advisory Services includes various areas such as MF Planning, Currency Planning, and Derivative Planning, but Insurance Planning is also a part of it.Rate this question:
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- 9.
Net Worth is
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Assets + Liabilities
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Assets + Liabilities - Existing Insurance
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Assets - Liabilities + Existing Insurance
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Assets - Liabilities
Correct Answer
A. Assets - LiabilitiesExplanation
Net Worth is calculated by subtracting Liabilities from Assets. This is because Net Worth represents the value of an individual or organization's assets after deducting their debts or obligations. By subtracting Liabilities from Assets, we can determine the net value or equity that the entity holds.Rate this question:
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- 10.
Cash and cash equivalents are example of
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Cash Flows
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Net worth
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Liabilities
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Assets
Correct Answer
A. AssetsExplanation
Cash and cash equivalents are considered as assets because they represent the amount of money that a company has on hand or in readily available form. These assets can include physical cash, as well as highly liquid investments such as bank accounts, treasury bills, and short-term government bonds. As assets, cash and cash equivalents can be easily converted into cash and are therefore included in the balance sheet of a company to reflect its financial position.Rate this question:
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- 11.
Short-term investments — include investment options bought and held for sale or till maturity for a period of
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Upto 3 months
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From 3 months to a year
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Upto 3 years
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None of the above
Correct Answer
A. From 3 months to a yearExplanation
Short-term investments typically refer to investment options that are bought and held for a relatively short period of time, usually ranging from 3 months to a year. These investments are not intended to be held for the long term and are often chosen for their liquidity and potential to generate quick returns. Investments with a maturity period of less than 3 months are considered very short-term, while those with a maturity period of more than a year would be classified as medium or long-term investments. Therefore, the correct answer is "from 3 months to a year."Rate this question:
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- 12.
Land normally is considered
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Liquid assets
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Short-term investments
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Long-term investments
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Medium term investments
Correct Answer
A. Long-term investmentsExplanation
Land is considered a long-term investment because its value tends to appreciate over time and it is typically held for a significant period before being sold or developed. Unlike liquid assets or short-term investments that can be easily converted into cash, land requires time and effort to generate returns. Additionally, land is often held for long-term purposes such as development, agriculture, or conservation, making it a more suitable option for long-term investment strategies.Rate this question:
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- 13.
Difference between physical and financial assets is basis
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Tangibility
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Riskiness
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Both the above
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None of the above
Correct Answer
A. TangibilityExplanation
The difference between physical and financial assets is based on tangibility. Physical assets are tangible assets that can be seen and touched, such as real estate, machinery, or inventory. On the other hand, financial assets are intangible assets that represent a claim to future cash flows, such as stocks, bonds, or derivatives. The tangibility of an asset determines its physical presence and the ability to physically possess or utilize it.Rate this question:
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- 14.
Three categories of Financial Assets are
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Liquid, Metals, Equity
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Equity, Liquid, Fixed Income
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Real Estate, Equity, Fixed Income
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Commodities, Equity, Debt
Correct Answer
A. Equity, Liquid, Fixed IncomeExplanation
The correct answer is Equity, Liquid, Fixed Income. These three categories represent different types of financial assets. Equity refers to ownership in a company, typically in the form of stocks or shares. Liquid assets are those that can be easily converted into cash, such as cash itself or highly tradable securities. Fixed income assets, on the other hand, are investments that provide a fixed stream of income over a specific period, such as bonds or certificates of deposit. Together, these three categories cover a wide range of financial assets and investment options.Rate this question:
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- 15.
Home Loans are example of
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Current Liability
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Current Assets
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Common Assets
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Common Liabilities
Correct Answer
A. Common LiabilitiesExplanation
Home loans are considered common liabilities because they are debts or obligations that the borrower owes to the lender. Common liabilities are those that are shared or common among different individuals or entities. In the case of home loans, multiple individuals or entities can have the same liability of repaying the loan to the lender. Therefore, home loans fall under the category of common liabilities.Rate this question:
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- 16.
There are tax sops are available for
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Car loans
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Card Loans
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Personal Loans
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Home Loans
Correct Answer
A. Home LoansExplanation
Home loans have tax sops available, meaning that individuals can receive certain tax benefits or deductions when they take out a home loan. This is not the case for car loans, card loans, or personal loans. The question is asking which type of loan has tax sops available, and the correct answer is Home Loans.Rate this question:
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- 17.
Which of the following statements is true
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An Income and Expenditure statement shows the incomes and expenses incurred for a particular time period
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An Income and Expenditure statement shows the incomes and expenses incurred for a particular point in time
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Rental income is a expenditure
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Insurance premiums are example of sources of income
Correct Answer
A. An Income and Expenditure statement shows the incomes and expenses incurred for a particular time periodExplanation
An Income and Expenditure statement shows the incomes and expenses incurred for a particular time period. This means that it provides a summary of the financial transactions and activities that occurred over a specific duration, such as a month, quarter, or year. It includes all the revenues or incomes earned and the expenses or costs incurred during that period. By analyzing this statement, individuals or organizations can assess their financial performance, evaluate their income sources, and identify areas where expenses can be reduced or optimized.Rate this question:
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- 18.
This ratio indicates what percentage of assets are cash or can be converted into cash within a short period.
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Saving Ratio
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Debt Equity Ratio
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Liquidity Ratio
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Return on Equity
Correct Answer
A. Liquidity RatioExplanation
The liquidity ratio is a financial metric that indicates the percentage of assets that can be easily converted into cash within a short period. It measures a company's ability to meet its short-term obligations and is important for assessing its financial health and stability. A higher liquidity ratio suggests that a company has a larger proportion of liquid assets, which can be beneficial in times of financial stress or when immediate cash needs arise. Therefore, the liquidity ratio is the most appropriate answer in this context.Rate this question:
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- 19.
This factor does not affect the risk profile of a customer
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Investor’s age
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Family situation
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Food habits
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Current financial picture
Correct Answer
A. Food habitsExplanation
Food habits do not affect the risk profile of a customer. The risk profile of a customer is determined by factors such as their investment goals, time horizon, risk tolerance, and financial situation. Food habits, on the other hand, relate to an individual's dietary preferences and have no direct impact on their financial risk profile.Rate this question:
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- 20.
Normally, how many months’ expenses should be put aside so that they can be liquidated at a short notice
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0-3 months
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4-6 months
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7-9 months
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6-12 months
Correct Answer
A. 4-6 monthsExplanation
It is generally recommended to have 4-6 months' worth of expenses set aside in case of emergencies or unexpected financial situations. This amount provides a buffer and allows individuals to cover their basic needs and expenses for a few months without relying on credit or loans. By having this savings, individuals can have peace of mind and be better prepared for any unforeseen circumstances that may arise.Rate this question:
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Current Version
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Mar 22, 2023Quiz Edited by
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May 23, 2012Quiz Created by
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