Financial Analysis & Planning Flashcards

A taxpayer who is self-employed may deduct health insurance premiums paid for themselves and their family:

Answer: As an above-the-line deduction against gross income

Self-employed individuals may deduct 100% of health insurance premiums as an adjustment to income under IRC Section 162(l), not on Schedule C.

When comparing a Roth IRA to a Traditional IRA for long-term tax planning, a Roth IRA is generally more advantageous when the taxpayer expects:

Answer: Their tax rate at withdrawal to be higher than their current rate

Roth contributions are made with after-tax dollars but grow tax-free, benefiting taxpayers who expect to be in a higher bracket during retirement.

The Section 179 deduction allows businesses to:

Answer: Immediately expense the cost of qualifying business property in the year placed in service

Section 179 permits businesses to elect to deduct the full cost of qualifying tangible personal and certain real property immediately rather than depreciating it over time.

In financial analysis, the DuPont formula decomposes return on equity (ROE) into which three components?

Answer: Net profit margin, asset turnover, and equity multiplier

The DuPont model expresses ROE as Net Profit Margin × Asset Turnover × Equity Multiplier, isolating profitability, efficiency, and leverage drivers.

For a calendar-year partnership, the Schedule K-1 must generally be provided to each partner by:

Answer: March 15 (or the extended due date of the partnership return)

Partnership Form 1065 and corresponding K-1s are due March 15 for calendar-year entities, with an automatic 6-month extension available.

Which capital budgeting technique IGNORES the time value of money?

Answer: Payback period method

The payback period simply counts how many years are needed to recover the initial investment without discounting future cash flows.

A CTC advising on estate planning should know that the federal estate tax annual gift tax exclusion for 2024 allows each donor to give per recipient:

Answer: $18,000

The annual gift tax exclusion was increased to $18,000 per recipient per donor in 2024, indexed for inflation under IRC Section 2503(b).