FPQP® -module 2 Pre-Test Exam Training Questions with
Rated A+ Financial Solutions Latest 2025/2026
FACT stands for what - correct answer Fair and Accurate Credit Transactions Act
Two types of basic credit - correct answer Installment (close ended) (big purchases)
Revolving (open ended)
What is a bridge loan? - correct answer A loan which occurs between the termination
of one mortgage and the beginning of the next.
T/F a home is normally an appreciating asset - correct answer True
Primary financial advantages of owning a home? - correct answer Tax saving
Potential appreciation
The first step in the budgeting process is - correct answer Setting goals
T/F sole proprietorship can be sued personally - correct answer True
S corporations unique attributes: - correct answer Permits flow-through income
treatment to shareholders
It's status as an S corp is determined by federal tax law, but is incorporated by state law
No more than 100 shareholders
Only have one class if stock
,Does not permit foreign ownership
Two basic financial statements used in planning? - correct answer Personal balance
sheet
Cash flow statement
Three categories of assets? - correct answer Cash/cash equivalents
Invested assets
Use assets
Short term vs long term liabilities? - correct answer Short is paid within 1 year, and
long term is paid in full in longer than 1 year
How much of disposable income should be allocated to savings? - correct answer 10%
The six debt ratios? - correct answer Liquidity ratio
Savings ratio
Debt to income ratio
Back end ratio
Consumer ratio
Gross income vs net income
Qualifications for credit - correct answer Character
Capital
Capacity
Collateral
FICO stands for - correct answer Fair Isaac and company
FICO score range? - correct answer 300-850
, Risk based pricing is? - correct answer Borrower charging a higher interest rate due to
credit report problems
FICO scoring factors? - correct answer Accounts owed - 30%
New credit - 10%
Length of credit history - 15%
Credit mix - 10%
Payment history - 35%
Liquidity - correct answer Represents ability of an assets to be converted quickly and
easily to cash with little to no loss of principal
Marketability - correct answer Ease of buying and selling an asset at any price
Basic Liquidity Ratio - correct answer Shows the number of months a household could
continue to meet its expenses from existing cash and cash equivalent assets after a
total loss of income
Basic Liquidity Ratio Formula - correct answer Total Cash + Cash Equivalents
= ----------------------------------------
(Annual Expenses - Savings - Taxes) / 12
Emergency fund should be for: - correct answer 3 months when there are 2 incomes
and lose only 1
6 months when only 1 income and that income is lost
Savings Ratio - correct answer Illustrates the percentage of gross income reserved for
future consumption (should have 10% or higher)
Savings Ratio Formula - correct answer Savings + Investments
Rated A+ Financial Solutions Latest 2025/2026
FACT stands for what - correct answer Fair and Accurate Credit Transactions Act
Two types of basic credit - correct answer Installment (close ended) (big purchases)
Revolving (open ended)
What is a bridge loan? - correct answer A loan which occurs between the termination
of one mortgage and the beginning of the next.
T/F a home is normally an appreciating asset - correct answer True
Primary financial advantages of owning a home? - correct answer Tax saving
Potential appreciation
The first step in the budgeting process is - correct answer Setting goals
T/F sole proprietorship can be sued personally - correct answer True
S corporations unique attributes: - correct answer Permits flow-through income
treatment to shareholders
It's status as an S corp is determined by federal tax law, but is incorporated by state law
No more than 100 shareholders
Only have one class if stock
,Does not permit foreign ownership
Two basic financial statements used in planning? - correct answer Personal balance
sheet
Cash flow statement
Three categories of assets? - correct answer Cash/cash equivalents
Invested assets
Use assets
Short term vs long term liabilities? - correct answer Short is paid within 1 year, and
long term is paid in full in longer than 1 year
How much of disposable income should be allocated to savings? - correct answer 10%
The six debt ratios? - correct answer Liquidity ratio
Savings ratio
Debt to income ratio
Back end ratio
Consumer ratio
Gross income vs net income
Qualifications for credit - correct answer Character
Capital
Capacity
Collateral
FICO stands for - correct answer Fair Isaac and company
FICO score range? - correct answer 300-850
, Risk based pricing is? - correct answer Borrower charging a higher interest rate due to
credit report problems
FICO scoring factors? - correct answer Accounts owed - 30%
New credit - 10%
Length of credit history - 15%
Credit mix - 10%
Payment history - 35%
Liquidity - correct answer Represents ability of an assets to be converted quickly and
easily to cash with little to no loss of principal
Marketability - correct answer Ease of buying and selling an asset at any price
Basic Liquidity Ratio - correct answer Shows the number of months a household could
continue to meet its expenses from existing cash and cash equivalent assets after a
total loss of income
Basic Liquidity Ratio Formula - correct answer Total Cash + Cash Equivalents
= ----------------------------------------
(Annual Expenses - Savings - Taxes) / 12
Emergency fund should be for: - correct answer 3 months when there are 2 incomes
and lose only 1
6 months when only 1 income and that income is lost
Savings Ratio - correct answer Illustrates the percentage of gross income reserved for
future consumption (should have 10% or higher)
Savings Ratio Formula - correct answer Savings + Investments
