Introduction to Financial Management
Eastern Illinois University
FIN 3300
Final Exam Topics
Calculations will be required for items in bold.
What is Financial Planning?
Who is a Financial Planner?
Chapters 1/2
1) Financial Planning
a) Goals
b) Priorities
c) Challenges to accomplishing goals
2) Financial Planners
a) Regulation
b) CFP
c) Financial planning professional associations
Steps and Tools in the Financial Planning Process
Chapters 3/4
1) Steps in the financial planning process
a) Establish a relationship
i) Methods of compensation
b) Gather data and define client goals
i) Risk tolerance/risk capacity
c) Analyze and evaluate financial status
d) Develop and present financial plan
i) Alternatives
e) Implement
f) Monitor
2) Communication for Financial Professionals
a) Interviewing
i) Gathering information
ii) Counseling
b) Communication skills
i) “Attending” skills
ii) Active listening
c) Risk aversion
d) Client behaviors
i) Availability bias
ii) Irrational behavior
1) Denial of risk
2) Familiarity bias
3) Control bias
4) Time horizon
e) Assessing risk tolerance
3) Principles of Financial Planning
a) Before invest, insure
b) Take risk consistent with tolerance, capacity and goals
c) Education savings risk tolerance
d) Diversification
e) Make savings automatic
f) Dollar cost averaging
g) Increase rate of investing instead of rate of return
h) It’s not what you make, it’s what you keep
i) Tax efficient investing
j) Diversify taxability of investments
k) Repaying debt can be your best investment
Attitudes of Clients and Financial Services Industry Regulations
Chapters 5/6
1) Client Attitudes
a) Risk tolerance
2) Financial Service Industry Regulations
a) Investment adviser
i) Exceptions
ii) Merrill Lynch rule
3) Registration
a) SEC
b) State
4) ADV
5) Fiduciary
6) Brochure
Ethics and Financial Planning Standards
Chapters 7/8
1) Principles of the CFP Board Code of Ethics
a) Principle 1 – Integrity
b) Principle 2 – Objectivity
c) Principle 3 – Competence
d) Principle 4 – Fairness
e) Principle 5 – Confidentiality
f) Principle 6 – Professionalism
g) Principle 7 – Diligence
2) Financial Planning Practice Standards
a) Establish and Define Relationship
i) Compensation
ii) Client/practitioner responsibilities
iii) Duration
iv) Limits of scope
b) Gather Data
i) Establish goals
ii) Client must provide sufficient data to support analysis
c) Analyze and Evaluate Status
i) Agree on assumptions
ii) Personal (retirement age)
iii) Economic (investment returns)
d) Develop/Present Financial Plan
i) Develop alternatives/present plan
ii) Current course of action
iii) Other alternatives
iv) Help client understand plan
v) Don’t overwhelm
vi) Action list
e) Implement
i) Responsibilities/coordination
ii) Different opinions on investment products
f) Monitor
i) Responsibilities
Education Planning
Chapter 10
1) Education Funding Calculation
2) Education Income Tax Credits
a) Hope Credit
i) Phase out will be provided on exam
b) Lifetime Learning Credit
i) Phase out will be provided on exam
c) Coverdell ESA
i) Phase out on contributions will be provided on exam
d) 529 plans
i) Phase out on contributions will be provided on exam
3) Grants and Loans
4) Loans
a) Perkins
b) Stafford
i) Limited to Cost of Attendance - Grants
5) Parents (PLUS)
6) Student Loan Interest Expense
a) Can deduct up to $2,500 per year
b) Phase out will be provided on exam
7) Savings Bond Interest Income
8) Kids Working
a) No social security taxes if under 18
9) Shifting Income
a) Gift assets
i) UTMA/UGMA
10) Financial aid
a) Expected Family Contribution
i) Student Contribution
1) 35% of assets; 50% of earnings
ii) Parent Contribution
1) Generally 6% of assets
Special Circumstances/Special Needs
Chapters 12/13
1) Divorce planning
a) Division of assets
i) QDRO
ii) Value
b) Changing beneficiary (also life insurance)
c) Social security: ex-spouse of 10 years
d) Child support/alimony
2) Nontraditional relationships
a) Issues
b) Recommendations
3) Disability
a) Definition of disability
b) Income tax
c) Coverage
d) Elimination period
e) Benefit period
4) Terminal illness
a) Viatical settlement
b) Living will
c) Health care power of attorney
d) HIPPA
Budgeting/Personal Financial Statements
Chapters 15/16
1) Budgeting
a) Reasons to use a budget
b) Guidelines
c) Steps
2) Cash reserves
a) Factors impacting
3) Increasing investments
a) Increase rate of investment
4) Personal Financial Statements
a) Statement of Financial Condition
5) Obtaining credit
6) Capacity: ability to repay debt
7) Income, other debt payments
8) Dependents, alimony, child support
9) Character: will they repay debt
10) Pay bills on time
11) Stability: own home; job history
12) Collateral:
13) Reduce risk; reduce rate
14) Automatic payments: lower rate
Credit and Debt Management
Chapter 17
1) Debt ratios
a) Debt to income=Loan and credit card payments/gross income
i) ................
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