CFP CFP Business & Financial Management 1 — Questions and Answers
Question 1: A personal trainer setting up an independent fitness business should primarily use which business structure to limit personal liability?
- Sole proprietorship
- Limited Liability Company (LLC) (Correct answer)
- General partnership
- Informal agreement
Correct answer: Limited Liability Company (LLC)
An LLC separates personal assets from business liabilities, protecting the trainer from lawsuits arising from client injuries.
Question 2: Which financial document gives a certified fitness professional the best snapshot of monthly profitability?
- Balance sheet
- Cash flow statement
- Income statement (Profit & Loss) (Correct answer)
- Accounts receivable report
Correct answer: Income statement (Profit & Loss)
The income statement (P&L) shows revenues minus expenses over a period, directly revealing whether the business is profitable.
Question 3: A CFP wants to price sessions to cover costs and achieve a 30% profit margin. If total monthly costs are $3,000 and they plan 100 sessions per month, what is the minimum price per session?
- $30
- $39
- $43 (Correct answer)
- $52
Correct answer: $43
Cost per session is $30; adding a 30% margin means dividing $30 by 0.70, yielding approximately $42.86 (~$43).
Question 4: Which type of insurance is MOST important for a self-employed certified fitness professional to carry?
- Life insurance
- Professional liability (E&O) insurance (Correct answer)
- Property insurance
- Unemployment insurance
Correct answer: Professional liability (E&O) insurance
Professional liability insurance protects the trainer against claims of negligence or injury resulting from their professional services.
Question 5: A fitness professional tracks that 20% of clients leave within the first 3 months. Which metric best describes this problem?
- Net Promoter Score
- Client acquisition cost
- Client retention rate / churn rate (Correct answer)
- Session utilization rate
Correct answer: Client retention rate / churn rate
Churn rate (inverse of retention rate) measures the percentage of clients who discontinue services within a given period.
Question 6: What is the primary purpose of a client service agreement (contract) in a personal training business?
- To increase session prices automatically
- To define the scope of services, payment terms, and liability waivers (Correct answer)
- To replace the need for professional liability insurance
- To guarantee client weight loss results
Correct answer: To define the scope of services, payment terms, and liability waivers
A client service agreement legally documents expectations, payment obligations, cancellation policies, and risk acknowledgment, protecting both parties.
CFP CFP Business & Financial Management 1
A personal trainer setting up an independent fitness business should primarily use which business structure to limit personal liability?