Chpt. 2 Money Management

cash, savings account, cash value of life insurance, money market account

Which of the following are liquid assets?

True

Budgeting income may be difficult for someone who works strictly for commissions. True or False

inflow and outflow

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

receipts

Cash flow statements shows a summary of cash (________) and payments for a given period such as a month of year. This is taken directly from the text.

False

Insolvency is defined as having adequate liquid assets to pay off all of the debts of a person. True or False

False

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

insurance

Invoices, credit card statements, ___________ policies, and tax forms are the basis of financial record keeping and personal economic choices.

taking 1,000 cash from your liquid assets and paying down 1,000 of debt

all of the following will increase net worth except

7

Copies of tax return should be retained for at least how many years:

current, long

Debts due within 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 _____-term liabilities.

True

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

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

Take-home pay is:

False

Discretionary income is what you have for payment of housing, food, and other necessities. True or False

true

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

personal computer system, home filing system

Where should easy-to-replace documents such as resumes and lists of financial goals be stored?

groceries

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

creating and implementing a plan for savings, preparing personal financial statements, and storing and maintaining personal financial records

Which of the following are the basic major money management activities?

true

Establishing an emergency fund that will cover your living expenses for three to six months to be used during periods of unexpected financial difficulty, is what Financial Advisers would suggest. True or False

installment loan payments, mortgage payments, rent

Which of the following are normal fixed expenses?

The amount you would have if you sold the assets and paid off the liabilities, assets less liabilities

Which of the following provide an accurate explanation of net worth?

True

Items that are difficult to replace should be kept in a safe deposit box so that they won't be destroyed if there is a fire or flood in the home. True or False

580,000

If Tom and Liz Gnomes 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?

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

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

$250 favorable

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

true

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

1. set financial goals 2. estimate expected income 3. allocate an emergency fund and savings 4. budget known expenses 5. budget estimated expenses 6. record spending amounts and evaluate revisions

Place the following steps of budgeting in order:

well planned, realistic, flexible, clearly communicated

a successful budget should be:

as long as you own the assets

The length of time to hold onto records varies according to the type of record. How long should records pertaining to property and investments be retained?

ratios

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

200,000

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?

False

Total assets minus only CURRENT liabilities equal net worth. True or False

surplus

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

balance

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