personal Finance and money management 2

True or false: Financial goals should be specific, realistic, measurable, have a time frame, and imply the type of action to be taken.

True

When evaluating your budget, you should review and perhaps revise your financial goals and budget allocations and review your financial progress.

True

True or false: Total assets minus only current liabilities equal net worth. Be sure to read the sentence carefully before answering.

false

If Joe and Mary Smith have money market accounts of $100,000, real estate holdings of $300,000, loans of $25,000, and investments of $10,000, what would their total assets be?

$410,000

If Tom and Liz Gomes have liquid assets of $200,000, real estate of $350,000, home improvement loans of $250,000, and investments of $30,000, what would their total assets be?

$580,000

The money left over after paying for housing, food, and other necessities is called income.

Discretionary

Personal balance sheet and the cash flow statement come from financial institutions, businesses, or the government.

False

True or false: Discretionary income is the same as net pay.

False

True or false: Insolvency is defined as having adequate liquid assets to pay off all owed debts.

False

True or false: Take-home pay is the same as discretionary income.

False

True or false: When cash outflows, or expenses, exceed cash inflows, or income, there will be a cash surplus.

False

Net worth is found by subtracting liabilities from assets. (Hint: Be sure to read the sentence carefully before answering.)

True

The steps to prepare a budget include setting financial goals, estimating expected income, budgeting for emergency funds and expenses, recording actual expenses, calculating variances, and evaluating.

True

Money management involves financial activities necessary to manage current personal economic resources, while working for the achievement of long-term financial security.

true

True or false: The statement of cash flow is a summary of cash receipts and payments for a given period.

true

Flexible payments that change from month to month are called __________ expenses.

variable

When you calculate a budget , you determine the difference between the actual amount spent or received and the amount budgeted.

variable

If Mary has cash inflow for the year of $120,000 with cash outflows of $135,000, her cash flow statement would show a:

$15,000 deficit

Tommy White has the following financial items on his balance sheet: $10,000 of liquid assets, $15,000 of personal property, $300,000 of real estate, $5,000 of current liabilities, and $120,000 of home mortgages. What is his net worth?

$200,000

A will help you spend money wisely and have more control of your life.

Blank 1: budget

If expected expenditures for food were $1,000 while the actual food costs were $750, what would be the variance?

$250 favorable

If assets are $1,500,000 and liabilities are $850,000, then the net worth is:

$650,000.

Joe borrowed $100,000 (a four-year loan at 10 percent interest) on January 2, 2020. During the course of the year, he paid back $30,000 on that debt. What would his December 31, 2020 balance sheet show for this debt? Interest is an expense and not part of the loan balance.

$70,000 because the balance sheet should report what is owed on the balance sheet date.

Which of the following provide accurate explanations of net worth?

Assets minus liabilities The amount you would have if you sold the assets and paid off the liabilities

Which of the following is a financial statement that reports what an individual or a family owns and owes?

Balance sheet

A personal sheet also called a net worth statement or statement of financial position, reports what you own and what you owe.

Blank 1: balance

Debts due within a short time, usually the next 12 months, would be classified as liabilities, while debts that will come due in a period beyond the next 12 months would be categorized as - liabilities.

Blank 1: current, short term, short-term, or shortterm Blank 2: long or noncurrent Blank 3: term

Cash is the actual inflow and outflow of cash during a given time period.

Blank 1: flow

Invoices, credit card statements, policies, and tax forms are the basis of financial record keeping and personal economic choices. (Enter one word per blank.)

Blank 1: insurance

A cash flow statement shows a summary of cash and payments for a given period such as a month or a year.

Blank 1: receipts, income, or reciepts

A cash results when cash inflows (receipts) are greater than cash outflows (expenditures).

Blank 1: surplus

The two documents considered to be part of personal financial statements include the personal balance sheet and which of the following?

Cash flow statement

How is a cash surplus (or deficit) on a statement of cash flows calculated?

Cash inflows (receipts) less cash outflows (expenditures) during a given period of time

Which of the following assets are liquid assets?

Cash value of life insurance Savings account Money market account Cash

After categorizing assets and calculating total assets, what do you do next when preparing the balance sheet?

Classify liabilities, total the liabilities, and calculate net worth

Purchase receipts, insurance policies, tax forms, and which of the following are the basis of financial recordkeeping?

Credit card statements

Which one of the following is an example of a variable expense?

Groceries

Which of the following are characteristics of good financial goals?

Measurable Realistic to achieve Have a definite time frame

Which combination of liabilities would be classified as current on a balance sheet?

Medical bills, income tax payments owed, insurance premiums to be paid next month, and charge accounts

Which of the following is not a variable expense?

Rent

Which of the following are normally fixed expenses?

Rent Installment loan payments Mortgage payments

Which of the following are the major money management activities?

Storing and maintaining personal financial records Preparing personal financial statements Creating and implementing a plan for savings

When preparing a personal balance sheet, which of the following statements should you not do?

Subtract assets from liabilities to determine net worth

Which of the following statements are true about a balance sheet that you are reviewing on 1/15/2021 that shows an "as of" date of 12/31/2020 and assets of $600,000 and liabilities of $425,000?

The net worth is $175,000 as of 12/31/2020.

The balance sheet equation is:

Total Assets - Total Liabilities = Net Worth

Budgets allow you to live within your income while increasing your chances of achieving your financial goals.

True

Which of the following can help you to achieve your financial goals?

Write a check each payday to deposit into a savings account. Have savings deducted and automatically deposited into a savings account from each paycheck. Save coins in a jar at the end of each day for deposit at a future time into a savings account. Save between 5 percent and 10 percent of each paycheck.

The rule of thumb when saving for ______ fund is to set aside three to six months of living expenses.

an emergency

Take-home pay is:

earnings (salary, wages, and commissions) after deducting for taxes and other items

Expenses that do not vary from month to month are referred to as __________ expenses.

fixed

The most common overspending areas to evaluate when revising your goals and budget allocations are entertainment and ______.

food

Cash flow is the ______ of cash during a given period of time.

inflow and outflow

The inability to pay debts when they are due is called .

insolvency

Financial ratios are guidelines for:

measuring changes in your financial situation

Current (short-term) liabilities include:

medical bills and insurance premiums.

Money management refers to the daily financial activities necessary to manage current ______ economic resources while working toward long-term financial security.

personal

To measure changes taking place in your financial situation, you probably need to calculate financial ______.

ratios

Which of the following are not liquid assets?

real estate

The text covers ______ main money management activities.

three