AFC Personal Financial Statements and Net Worth Analysis

Question 1

A client's personal balance sheet shows total assets of $285,000 and total liabilities of $112,000. What is the client's net worth?

Accepted Answer

$173,000

Answer

$397,000

Answer

$112,000

Answer

$285,000

Question 2

Which financial statement shows a client's monthly income sources and all expenses to determine whether they have a surplus or deficit?

Accepted Answer

Cash flow statement

Answer

Net worth statement

Answer

Balance sheet

Answer

Investment portfolio summary

Question 3

A client has monthly gross income of $5,000 and total monthly debt payments of $1,750. What is their debt-to-income (DTI) ratio?

Accepted Answer

35%

Answer

28%

Answer

40%

Answer

25%

Question 4

On a personal net worth statement, which of the following would be classified as a liability?

Accepted Answer

Outstanding student loan balance

Answer

Market value of a vehicle

Answer

Checking account balance

Answer

Vested 401(k) balance

Question 5

A client saves $400 per month on a gross income of $4,000 per month. What is their savings rate, and how does it compare to the commonly recommended minimum?

Accepted Answer

10%; meets the commonly recommended minimum of 10%

Answer

10%; falls below the recommended 20%

Answer

8%; meets the minimum

Answer

12%; exceeds the minimum

Question 6

Which financial ratio measures a client's ability to meet short-term obligations using liquid assets, and is calculated by dividing liquid assets by monthly expenses?

Accepted Answer

Liquidity ratio

Answer

Debt service ratio

Answer

Solvency ratio

Answer

Investment ratio