Finance Quiz 1

A progressive tax system is one in which higher-income people pay _______ than lower-income people.

tax at a higher rate

A charge made on your credit card becomes a liability as soon as the charge is incurred.

true

The value of assets purchased on credit should be included on the asset side of your personal balance sheet.

true

Money I loaned to a friend is a liability on my balance sheet.

false

One's marginal tax rate is typical lower than one's average tax rate.

false

The balance sheet equation is assets plus liabilities equals net worth

false

The equity in your home is the difference between the loan balance and the purchase price.

false

If your total assets equal $87,000 and your total liabilities equal $10,000, your solvency ratio is

88.5%

Your total cash income is $40,000. You pay $5,000 in taxes and $30,000 in other expenses. Your savings ratio is

14.3%

If your _______, your net worth on the balance sheet would have increased from one period to the next.

assets increased and liabilities remain constant