CFC Business Financial Planning 2

Question 1

Which ratio measures how quickly a business collects its accounts receivable?

Accepted Answer

Accounts receivable turnover ratio

Answer

Accounts receivable turnover equals net credit sales divided by average accounts receivable, measuring how efficiently a business collects on credit sales.

Question 2

A business owner's 'key man' insurance proceeds received by the company upon an owner's death are:

Accepted Answer

Generally received income-tax-free by the company

Answer

Life insurance death benefits received by a business are generally excluded from federal income tax under IRC Section 101(a), subject to the transfer-for-value rules.

Question 3

Under the qualified business income (QBI) deduction (Section 199A), eligible pass-through business owners may deduct up to what percentage of qualified business income?

Accepted Answer

20%

Answer

The Section 199A QBI deduction allows eligible owners of pass-through entities (sole proprietors, partnerships, S corps, some trusts) to deduct up to 20% of qualified business income.

Question 4

A business continuation plan funded with life insurance should be reviewed and updated when:

Accepted Answer

Annually or when business value changes significantly

Answer

Buy-sell agreements and associated insurance funding should be reviewed regularly — ideally annually — and whenever major changes in business value, ownership, or personal circumstances occur.

Question 5

Which capital budgeting method measures the time required for a project's cumulative cash flows to recover the initial investment?

Accepted Answer

Payback period

Answer

The payback period calculates how many years it takes for a project's undiscounted cumulative inflows to equal the initial outlay, assessing liquidity and risk.

CFC - Certified Financial Consultant Practice Test

CFC - Certified Financial Consultant Practice Test

CFC Business Financial Planning 2