foundations of finance

Foundations of Finance challenges members to demonstrate their understanding of core financial principles through an objective test. This event covers topics such as financial planning, budgeting, banking, investments, and the role of financial institutions in both personal and business contexts.

Event Overview

Division: Collegiate
Event Type: Individual
Event Category: Objective Test, 100-multiple choice questions (breakdown of question by competencies below)
Objective Test Time: 50 minutes

Career Cluster Framework Connection: Financial Services

NACE Competency Alignment: Career & Self-Development, Critical Thinking, Technology

Items Competitor Must Provide: Pencil, Computer, Photo Identification, Attire that meets the Florida FBLA Dress Code

This event is intended for students who are early in their collegiate academic journey and just beginning their study of finance. Only members who have completed no more than six credit hours on a semester schedule (or the equivalent number of quarter hours) of college-level finance coursework by May 1, 2026, are eligible to compete.

 Competencies

·         Financial instruments and institutions
·         Time value of money
·         Cost of capital and capital budgeting
·         Valuation and rates of return
·         Financial analysis
·         Capital investment decisions
·         Financial risks and returns
·         International finance

Test questions are based on the knowledge areas and objectives outlined for this event. Detailed objectives can be found in the study guide included in these guidelines.

State

Eligibility

·         FBLA membership dues are paid by 11:59 pm Eastern Time on February 1st of the current program year.

·         Members must be registered for the SLC and pay the state conference registration fee in order to participate in competitive events.

·         Members must stay within the official FBLA housing block of the official FBLA hotel to be eligible to compete.

·         Each chapter may submit one entry per event.

·         On the state level, each member can compete in up to three different events in the following combinations: three objective tests OR two objective tests and one performance OR two objective tests and one production or one objective test and two production OR one objective test, one performance, and one production. Students may enter the Christopher Heider, Rob Kelleher, Who’s Who event, and one Chapter event (Community Service, State of the Chapter) in addition to their above chosen events.

·         Picture identification (physical or digital: driver’s license, passport, state-issued identification, or school-issued identification) matching the conference nametag is required when checking in for competitive events.

·         If competitors are late for an objective test, they may be either disqualified or permitted to begin late with no extension of the time as scheduled.

·         Participants must adhere to the Florida FBLA dress code established by the Florida Board of Directors or they will not be permitted to participate in the competitive event.

Recognition

·         The number of competitors will determine the number of winners. The maximum number of winners for each competitive event is 4.

Event Administration

·         This event is an objective test administered prior to the SLC. Advisers will receive information regarding testing requirements.

·         No reference or study materials may be brought to the testing site.

·         No calculators may be brought into the testing site; online calculators will be provided through the testing software.

Scoring

·         Ties are broken by comparing the correct number of answers to the last 10 questions on the test. If a tie remains, answers to the last 20 questions on the test will be reviewed to determine the winner. If a tie remains, the competitor who completed the test in a shorter amount of time will place higher.

·         Results announced at the State Leadership Conference are considered official and will not be changed after the conclusion of the State Leadership Conference.

Americans with Disabilities Act (ADA)

·         FBLA complies with the Americans with Disabilities Act (ADA) by providing reasonable accommodations for competitors. Accommodation requests must be submitted through the conference registration system by the official registration deadline. All requests will be reviewed, and additional documentation may be required to determine eligibility and appropriate support.

Penalty Points

·         Competitors may be disqualified if they violate the Competitive Event Guidelines or the Honor Code.

Electronic Devices

·         Unless approved as part of a documented accommodation, all cell phones, smartwatches, electronic devices, and headphones must be turned off and stored away before the competition begins. Visible devices during the event will be considered a violation of the FBLA Honor Code.

National

Be sure to see the National guidelines at https://www.fbla.org/divisions/collegiate/pbl-competitive-events/

Study Guide: Knowledge Areas and Objectives

A. Financial Instruments and Institutions

1. Describe the standard and unique features of the following securities: bills, notes, bonds, zeros, and municipal bonds.

2. Demonstrate an understanding of negotiable instruments and identify the terms of negotiability.

3. Define the concept of the money supply.

4. Identify the functions of the Federal Reserve.

5. Justify the existence of money in the economy.

6. Identify the types of short-term bank loans.

7. Describe the process of accounts receivable financing.

8. Characterize the limitations of intermediate-term bank loans.

9. Explain and give examples of long-term debt financing.

10. Describe the process of investment banking.

11. Obtain business credit and control its use.

12. Explain forms of financial exchange (e.g., cash, credit, debit, electronic funds, and transfer).

13. Identify types of currency (e.g., paper money, coins, banknotes, government bonds, and treasury notes).

14. Describe functions of money (e.g., medium of exchange, unit of measure, and store of value).

15. Examine the structure and operation of the banking system in the United States.

16. Explain the role of central banks.

17. Explain financial services companies.

18. Discuss the role of credit unions.

19. Explain the role of savings and loan associations.

20. Discuss the role of the World Bank Group in international financial assistance.

B. Time Value of Money

1. Explain the following concepts: present and future value of money, annuity, lump sum, effective interest rates, APR, annuity due, amortizing loans, and perpetuity.

2. Utilize the time value of money concepts.

3. Assess the time value of money concepts in decision making.

4. Discuss the time value of money and implications thereof to risk, rates of return, and value.

5. Perform various types of time value of money calculations.

6. Apply the time value concept of financial decision situations.

7. Discuss the conflicts between the Net present value and the Internal Rate of Return and how to resolve these conflicts.

C. Cost of Capital and Capital Budgeting

1. Explain the significance of a firm’s capital structure.

2. Discuss the theory of capital structure.

3. Describe the financial needs of a business at different stages of its development.

4. Compare and contrast the various financing opportunities (both debt and equity) organizations have available for making decisions to fund operations and capital expenditures.

5. Discuss factors to consider in choosing between debt and equity capital.

6. Analyze and demonstrate control of cash flow.

7. Implement capital budgeting techniques in making capital expenditure decisions.

8. Engage in certain capital budgeting procedures including payback, discounted payback, net present value, and internal rate of return.

9. Discuss the general concepts of capital budgeting.

10. Describe the process of evaluating capital budging projects.

11. Tie the capital budgeting decision to the overall goal of shareholder wealth maximization.

12. Describe how the cost of capital plays a role in various decisions made by financial managers.

13. List the factors that determine the cost of capital.

14. Compute the cost of debt, preferred and common stock capital, and put them together to develop the overall cost of capital for the firm.

15. Define the role of tax laws in computing cost of capital.

16. Identify and calculate component costs of capital and the weighted average cost of capital.

17. Compute the operating, financial combined leverage and provide the implications for decision making.

D. Valuation and Rates of Return

1. Describe security valuation and rate of return.

2. Define and measure the risk and rates of return through the capital asset pricing model.

3. Use certain stock and bond valuation models.

4. Describe the basic process used to value bonds, find their yield to maturity, and yield to call.

5. Describe the relationship that exists in bond valuation and its implication for investors.

6. Calculate the expected and required rate of return for stocks.

7. Review concepts of valuation for entrepreneurial ventures and possible funding sources for them.

8. Explain the calculation of the Capital Asset Pricing Model (CAPM) and integrate the results in the valuation of a company’s stock.

E. Financial Analysis

1. Identify the role and functions of finance, tools for financial planning and analysis.

2. Utilize the basic tools of finance in analyzing a company to provide solutions for identified problems.

3. Distinguish between operating cash flows and counting income.

4. Prepare a statement of cash flows.

5. Perform financial analysis using financial ratios, DuPont analysis, common size statements, and financial forecasting.

6. Analyze and interpret financial ratios relative to liquidity, asset management, debt management, profitability, and market value.

7. Differentiate between horizontal and vertical analysis.

8. Explain and give examples of solvency and debt service ratios.

9. Explain the DuPont system.

10. Explain the concepts of financial forecasting.

11. Calculate and discuss break-even analysis.

12. Discuss and give examples of leverage.

13. Detail the use of operating leverage.

F. Capital Investment Decisions

1. Evaluate the effect of credit markets on a company’s ability to finance its operations.

2. Discuss the effect of currency fluctuations as they impact a company’s finances and investment rating.

3. Discuss types of investment and planning horizons.

4. Consider the challenges of managing and funding growth.

5. Describe the difference between the funder’s perspectives and those of the company being financed.

6. Appreciate the difference between venture capital, private equity, early stage, and traditional financing sources.

7. Allocate a limited budget to capital investment projects.

8. Discuss how to incorporate risk in capital investment decisions.

9. Explain the nature of capital investment.

G. Financial Risks and Returns

1. Define market risk and diversifiable risk.

2. Discuss the relationship between risk and return, and its implication for investors.

3. Determine the breakeven point and name the assumptions and implications.

4. Explain and list various types of risk.

5. Discuss and define return.

6. Explain the concept of risk-return trade-off.

7. Explain the nature of risk management.

8. Explain the role of ethics in risk management.

9. Develop and evaluate a risk management program.

10. Discuss the nature of risk control (e.g., internal and external).

11. Explain ways to assess risk.

H. International Finance

1. Identify the issues to consider when investing in foreign money market securities.

2. Describe how and why exchange rates move.

3. Evaluate the impact of capital inflows and capital outflows.

4. State pros and cons of the International Monetary Fund.

5. Examine strategies for considering international growth.

6. Explain the use of trade credit.