Chapter 3 Flash Cards

Which of these is not a good reason to keep financial records?

to make it harder for your heirs to understand your financial position

Survey results indicate that the majority of adults aged 22 to 29 years old believe they face

tougher financial pressures

Most financial advisors recommend that a person maintain a current ratio greater than

two

What is Natalya's savings ratio if her gross pay is $51,200 and her annual take-home pay is $37,515 of which $2,245 is available for savings?

2,245/37,515 = 6%

A recent Gallup poll found that about __________ of adults between the ages of 22 and 29 considered themselves to be living within their means.

70%

Which of these is a recognized personal financial certification?

CFP

Assets should be listed on your personal balance sheet and valued using

Fair market value

When evaluating a person's long-term debt coverage ratio, __________ indicates better financial health.

a higher ratio

Which of these things is a tangible asset that often represents a significant portion of an individual's savings?

a house

A financial statement that shows your overall financial position on a given date is known as:

an income statement

The financial statement that shows your cash inflows and outflows over a period of time such as a year is known as

an income statement

A plan for controlling cash inflows and cash outflows is known as a(n):

budget

Which of these things is not a category of personal asset? car note stock coin collection

car note

Good debt is used to:

finance an asset that will still have value after the debt is repaid

Any relatively constant household expenditure over which you have no control is categorized as a(n)

fixed expenditure

For a person to be successful in living on a budget it must be:

flexible

According to data collected in 2013 Americans spend the largest fraction of their budget on

housing

When a person owes more debts than the value of their assets they are said to be

insolvent

Fee-only financial planners tend to work with

larger and more stabilized situations

Which of these formulas is used to compute net worth?

net worth = assets - liabilities

A pool of money set aside to cover emergency expenses or a disruption in income is sometimes called a:

rainy day fund

The ratio that indicates whether you have the ability to meet your debt obligations is known as the

debt ratio

Creating a budget can help you save more for your personal financial goals because:

it can help you limit spending in areas where you have typically overspent

The best record keeping system is

one that you will use

After identifying your financial goals one of the next things you should do is:

set up a budget