Financial Analysis & Planning Flashcards
7 cards from real CRU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Planning flashcards as text
Which of the following IRS forms is used to report a borrower's share of income, deductions, and credits from a partnership?
Answer: Schedule K-1 (Form 1065)
Schedule K-1 from Form 1065 reports each partner's distributive share of partnership income, deductions, and credits.
A borrower earns $4,000/month base salary and $800/month in documented child support for the past 12 months expected to continue 3 more years. What is the total qualifying income?
Answer: $4,800
Child support received for at least 12 months and expected to continue at least 3 years may be counted as qualifying income, giving $4,000 + $800 = $4,800.
What is the primary purpose of a 'stress test' or sensitivity analysis in financial planning for a mortgage applicant?
Answer: To evaluate how changes in interest rates or income would affect the borrower's ability to repay
Stress testing models adverse scenarios — such as rate increases or income drops — to gauge repayment resilience.
Under Fannie Mae guidelines, which of the following is typically added back to a self-employed borrower's net income?
Answer: Depreciation expense
Depreciation is a non-cash deduction that reduces taxable income but not actual cash flow, so it is added back to calculate qualifying income.
A borrower's proposed PITI is $1,800 per month and gross monthly income is $5,400. What is the housing expense ratio (front-end DTI)?
Answer: 33%
Housing expense ratio = $1,800 / $5,400 = 33.3%, typically rounded to 33%.
When a borrower has co-signed on another person's loan, how is that obligation typically treated in the borrower's DTI calculation?
Answer: Included unless 12 months of on-time payment history by the primary borrower can be documented
Co-signed debts are included in DTI unless the borrower can show the primary obligor has made payments for at least 12 months.
Which financial ratio measures a borrower's ability to meet short-term obligations using only the most liquid assets?
Answer: Quick ratio (acid-test ratio)
The quick ratio excludes inventory and less-liquid assets, measuring whether liquid assets alone cover short-term liabilities.