Test 1 (Chapters 1, 2, & 3) FNBK 101

The income and expense statement looks forward in time, while a budget is backward looking.

False

The personal exemption for a student can be taken both by the parent and by the child.

False

A good financial plan completed when one is in their 30s will typically last a lifetime.

True

A person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to consume of 90%.

True

Financial assets include investments such as stocks and bonds.

True

Financial planning is a continuing, lifelong process.

True

Jewelry, furniture, and computers are examples of personal property.

True

Personal financial statements help you identify potential financial problems.

True

The liquidity ratio is an indicator of a family's ability to pay current debts if there is an interruption in income.

True

The main objective of tax planning is to maximize the amount of money you keep by minimizing the amount of taxes you pay.

True

The most effective way to achieve financial objectives is through financial planning.

True

You have a balanced budget when total income for the year equals or exceeds total expenditures for the year.

True

You may be under-budgeting for food if you continually have monthly deficits in the food category.

True

You should itemize deductions when total itemized deductions exceed the standard deduction.

True

Your personal value system will shape your attitude toward money and wealth accumulation.

True

The three parts of your personal balance sheet are

assets, liabilities, net worth.

Your ____ is an example of a liquid asset.

checking account

Your take-home pay is what you are left with after subtracting withholdings from your

gross earnings.

If you have any earned income, you are required to file a tax return.

False

The government employs monetary and fiscal policy to ensure the level of economic activity always remains stable.

False

A personal balance sheet shows your financial condition as of the time the statement is prepared.

True

A taxpayer claiming himself and one dependent had personal exemptions in 2014 amounting to $7,900.

True

The federal personal income tax is a progressive tax.

True

The balance sheet equation is assets plus liabilities equals net worth.

False

The federal government gets the majority of its revenue from the ____ tax.

Income

For tax purposes, head of household refers to

a single individual with dependents.

Personal financial management is important because it

makes personal financial goals easier to achieve.

The last step in the financial planning process is to

redefine goals and revise plans and strategies as personal circumstances change.

The primary reason people use financial advisors is

retirement needs.

If you do not wish to itemize deductions, you can use the

standard deduction.