Your Money & Credit (Test 1-Ch.2)
Electric bill
All of the following are fixed expenses except
Receive a paycheck
Which of the following is a cash inflow?
Social security taxes
Which of the following is a deduction to determine take-home pay?
Rare coins and stamps belong in a safe deposit box
Which of the following is most correct?
True
Current liabilities are the debts you must pay within a short time
Net worth
The amount you would have if everything of value would be sold and all debts would be paid in full
True
The current financial position of an individual or family is a common starting point for financial planning
Indefinitely
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase of real estate?
Personal balance sheet
The statement that includes liquid assets, real estate, personal possesions, and investment assets is known as a
False
The two primary personal financial statements include the personal balance sheet and a credit card payoff statement
Decrease spending by $5 per day
Which of the following will increase the net worth of a household?
False
Wills and Social Security data should be kept for up to ten years
True
One method to save more money is to write a check each payday and deposit it in a savings account not readily available for regular spending
False
One method to spend more money is to use a direct deposit system from payroll
$323,000
Patrick Guitman has a net worth of $156,000 and liabilities of $167,000. What are his total assets?
True
Programs are available to help low-income older or disabled people who have difficulty budgeting
$88 surplus
Rebecca Gladlyn budgeted $1050 for housing and utilities in July. She actually spent $962. What is her budget variance?
Variance
The difference between the amount budgeted and the actual amount received or spent is called the
Balance sheet
The document that would be most useful to track current value of investment accounts is
Budget
The document that would be most useful to track planned spending patterns for the next month is
Savings ratio
Which of the following ratios shows the relationship between gross income and money not spent?
Investment
A broker statement is an example of a ___________ record
Actual expenses are greater than planned expenses
A budget deficit would result when a person's or family's
Increase their debt ratio
All of the following are ways that households can increase their net worth except:
Mortgage
An example of a fixed expense is
Electric bill
An example of a variable expense is
Balance Sheet
Another name for a statement of financial position is a
Disposable income
Another name for take-home pay is
Money left over after paying for housing, food, and other necessities
Discretionary income equals
Take-home pay
Disposable income equals
False
Financial advisers suggest that an emergency fund should cover one to two months of living expenses
20%
Financial experts recommend a debt/payments ratio of less than ______ of take-home pay
5-10%
Financial experts recommend a monthly savings ratio of at least _____ of gross income
False
Financial records that may need to be referred to on a regular basis should be kept in a safe-deposit box
False
Money management refers to annual financial activities necessary to manage personal economic resources
True
Money management refers to day-to-day financial activities necessary to manage personal economic resources
False
Most people liquidate their assets to calculate their net worth
False
Net worth is the amount owed to other
$33 deficit
Rebecca Gladlyn budgeted $345 for a new wardrobe in June. She actually spent $378. What is her budget variance?
False
Records related to tax returns should be saved for ten years
Retirement account
When creating a personal balance sheet, which of the following is an investment asset?
A five-year-old television
When creating a personal balance sheet, which of the following is considered to a personal possession asset?
Loan payment
Which of the following appears on a cash flow statement?
Payments for variable expenses
Which of the following appears on a cash flow statement?
Balance sheet and cash flow statement
Which of the following are considered to be the primary personal financial statements?
Auto insurance
Which of the following categories would be most difficult to cut from a household budget?
Marriage certificates
Which of the following financial documents would most likely be stored in a safe deposit box?
All of the above are components of money management
Which of the following is NOT a component of money management
Retirement investments
Which of the following is NOT a liquid asset?
Spend your money without care
Which of the following is NOT a main purpose of a budget?
Tax records belong in a home file
Which of the following is most correct?
Current ratio
Which of the following ratios indicates that liquid assets are available to pay liabilities for a household?
Debt payments ratio
Which of the following ratios indicates the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debt (except mortgage)?
Liquidity ratio
Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?
Debt ratio
Which of the following ratios shows the relationship between debt and net worth?
Assets $40,000; liabilities $45,000
Which of the following situations describes a person who could be insolvent?
False
A budget is a record of how a person or family has spent their money
Written budget
A budget that can be kept on notebook paper or budgeting paper is called a
Physical budget
A budget that involves envelopes, folders or containers to hold money or slips of paper is called a
False
A cash flow statement uses the equation: assets-liabilities=net worth
True
A cash flow statement uses the equation: cash inflows-cash outflows=cash surplus (deficit)
$2 of liquid assets are available for every $1 in current liabilities
A current ratio of 2 means:
For every dollar of net worth, debt equals $0.50
A debt ratio of 0.5 indicates:
$23,000
A family with $45,000 in asset and $22,000 of liabilities would have a net worth of
Financial records for current needs
A home file should be used for storing
Items owned and amounts owed
A personal balance sheet presents
Track spending and identify variances
After the budget is created, it is important to
Social security taxes
All of the following are sources of income except
33.3
Given the following information calculate the debt ratio percentage: Liabilities= $24,000 Liquid assets=$4,400 Monthly credit payments=$300 Monthly savings=$260 Net Worth=$72,000 Current liabilities= $1,100 Take-home pay=$1,800 Gross income=$3,000 Monthly expenses=$1,540
4
Given the following information, calculate the current ratio: Liabilities-24,000 liquid assets-4400 monthly credit payments-300 monthly savings-260 net worth-72000 current liabilities-1100 take-home pay-1800 gross income-3000 monthly expenses-1540
16.67 percent
Given the following information, calculate the debt payments ratio:
2.86
Given the following information, calculate the liquidity ratio:
$4000
Given the following information, calculate the net worth: Assets=$5000 Cash inflows=$4500 Cash outflows=$2000 Liabilities=$1000
8.67 percent
Given the following information, calculate the savings ratio:
As long as you own them
How long should you keep documents relating to investments?
Permanently
How should you keep your most current will?
True
In an organized system, a will belongs in a home file
True
In an organized system, an annual stock investment statement belongs in a safe deposit box
False
In an organized system, birth and marriage certificates belong in a safe deposit box
False
In an organized system, credit card records belong in a safe deposit box
Assets
Items with value are referred to as
Day-to-day financial activities
Money management refers to
Balance sheet
The current financial position of an individual or family is best presented with the use of a(n)
Cash flow statement
The document that would be most useful to track spending patterns for the past few months is
Assets-liabilities =net worth
The equation to calculate net worth is:
False
The focus of an organized system of financial records is to reduce credit card usage
Insolvency
The inability to pay debts when they are due is called:
These are all correct
The main purposes of personal financial statements are to:
Discretionary income
The money left over after paying for housing, food, and other necessities is called
Seven years
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?
True
When completing a cash flow statement, deductions are subtracted from salary to determine take home pay
False
When completing a cash flow statement, take home pay less deductions equals salary
False
When creating a budget, it is important to save the amount you have left at the end of the month
Set aside savings before other expenses are budgeted
When creating a budget, it is important to:
Number in the budget are estimates
When creating a budget, which of the following statements is true?
Charge account
When creating a personal balance sheet, which of the following is a current liability?
Vacation property
When creating a personal balance sheet, which of the following is a real estate asset?