NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
Which of the following is generally treated as a discretionary expense when preparing a client's cash flow statement?
Holiday travel and dining out are discretionary expenses because they can be cut or deferred if needed. Loan EMIs, term insurance premiums and school fees are committed, non-discretionary outflows that must be paid regularly.
- AHome loan EMI
- BAnnual insurance premium on term cover
- CHoliday travel and dining outCorrect
- DSchool fees of the child
Explanation
Discretionary expenses can be reduced or postponed without serious consequences; holidays and dining out fit this. EMIs, insurance premiums and school fees are committed or non-discretionary obligations.
Did you get it right without looking?
One question tells you little. A timed set on Evaluating the Financial Position of Clients shows your real accuracy, how long you take and where you lose marks.
More Evaluating the Financial Position of Clients questions
- In the personal financial statements of a client, which of the following is correctly classified as a liquid asset?
- Meena Iyer has total assets of Rs 80 lakh, of which Rs 50 lakh is her house, and total liabilities of Rs 20 lakh. Her financial assets are R…
- In personal financial statement analysis, the ratio of liquid assets to monthly non-discretionary cash expenses is used to assess which aspe…
- In personal financial planning, which ratio is computed as liquid assets divided by monthly non-discretionary cash expenses, and is commonly…
- A client has liquid assets of Rs 3,00,000 and monthly non-discretionary expenses of Rs 50,000. What is her liquidity ratio (liquid assets to…
- Which of the following is treated as a long-term liability in a client's personal balance sheet?