AAFM Cheat Sheet 2026

The 30 highest-yield AAFM facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. An author's use of vivid sensory language primarily serves to do what? → Help the reader imagine the scene
2. What is the importance of regulatory compliance in financial management? → To ensure ethical and legal practices.
3. A commodity futures contract traded on an exchange differs from an over-the-counter forward in that it is which of the following? → Standardized and centrally cleared
4. Which financial statement shows a company's assets, liabilities, and equity at a point in time? → Balance sheet
5. The step-up in cost basis at death allows heirs to inherit appreciated assets using which value as their new basis? → Fair market value at the date of death
6. How is a company's market capitalization calculated? → Current stock price multiplied by total shares outstanding
7. Which insurance concept refers to the insured retaining part of a loss through a deductible? → Risk retention
8. Which client profiling dimension measures the financial capacity to absorb losses without affecting lifestyle? → Risk capacity
9. What is a primary goal of reading investment analysis reports? → Identifying market trends and investment insights.
10. The time value of money concept holds that a dollar today is worth: → More than a dollar in the future
11. When evaluating the credibility of a source, a reader should check what? → The author's expertise and supporting evidence
12. Generation-skipping trusts are often called dynasty trusts because they are designed to benefit how many generations of a family? → Multiple generations across extended periods
13. Why is context important in interpreting financial text? → It ensures accurate understanding of financial information.
14. The primary role of a central bank in monetary policy is to: → Manage money supply and interest rates
15. Which statement best describes a fiduciary standard of care? → Acting in the client's best interest above the planner's own
16. What is the primary advantage of tax-deferred retirement accounts in planning? → Contributions and growth are not taxed until withdrawal
17. What does 'price discovery' refer to in the context of capital markets? → The mechanism by which supply and demand forces determine asset prices
18. Asset location refers to strategically placing assets in which type of accounts to minimize the total tax drag on a portfolio? → Tax-advantaged vs. taxable accounts
19. Bias in a text is best described as what? → A one-sided or slanted presentation
20. Which of the following best defines 'inflation'? → A general rise in prices over time
21. The Sharpe ratio measures a portfolio's excess return per unit of which type of risk? → Total risk
22. Which document formally defines the services, responsibilities, and compensation between planner and client? → Engagement letter
23. A company’s profitability is best analyzed using which financial metric? → Net profit margin
24. Which of the following signals a sequence of events in a passage? → Words like first, next, and finally
25. Interest rate risk most directly affects the value of which instrument? → Fixed-income bonds
26. A bond's price will generally do what when market interest rates rise? → Fall
27. Which concept explains that professional fund managers rarely outperform the market on a risk-adjusted basis consistently? → Efficient Market Hypothesis
28. A cause-and-effect relationship in text shows what? → How one event leads to another
29. Which strategy involves investing a fixed dollar amount at regular intervals regardless of price? → Dollar-cost averaging
30. A financial professional discovers a colleague is misappropriating client funds. Ethically they should? → Report the misconduct through appropriate channels