Business Financial Planning Flashcards
6 cards from real CFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Business Financial Planning flashcards as text
Which ratio measures how quickly a business collects its accounts receivable?
Answer: Accounts receivable turnover ratio
Accounts receivable turnover equals net credit sales divided by average accounts receivable, measuring how efficiently a business collects on credit sales.
A business owner's 'key man' insurance proceeds received by the company upon an owner's death are:
Answer: Generally received income-tax-free by the company
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.
Under the qualified business income (QBI) deduction (Section 199A), eligible pass-through business owners may deduct up to what percentage of qualified business income?
Answer: 20%
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.
A business continuation plan funded with life insurance should be reviewed and updated when:
Answer: Annually or when business value changes significantly
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.
Which capital budgeting method measures the time required for a project's cumulative cash flows to recover the initial investment?
Answer: Payback period
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.
A CFC client is considering whether to lease or buy equipment. A key advantage of leasing is:
Answer: Preserving capital and potentially keeping the liability off-balance-sheet (for operating leases)
Operating leases preserve cash flow by avoiding large upfront capital outlays and, under older accounting rules, kept obligations off the balance sheet — though ASC 842 now requires most leases on-balance-sheet.