GBUS10 Ch2 Homework

Angela's monthly disposable income is $2,887. She has monthly expenses of $2,629 (including recreational expenses of $357) and net cash flow of $258 per month. Angela makes a budget based on her personal cash flow statement. In two months, she must pay $307 for tags and taxes on her car. How much an Angela expect to save in the next 12 months?

Annual savings ($2,789) is annual net cash flow ($3,096 - $258 per month x 12) minus any additional outflows of cash ($307).

Net cash flows are

Cash inflows - cash out flows

Identify a factor that affect cash inflows

Cash inflows directly affected by incomes. Factors in determining your income are the stage in your career path, your job skills, and the type of job you hold. the number of income earners in the household will also affect your cash inflows.

Ryan and Nicole have $236,686 in assets, and the following liabilities: mortage $57,451 car loan $4,424 credit card balance $390 Student loans $20,823 Furniture note (6 months) $1,837 What are their current liabilities? What are their long-term liabilities? What is their net worth?

Current liablilties ($2,227) are debts that will be paid off in the near future (within one year) and include credit card balances ($390) and short-term notes ($1,837). Long-term liabilities ($82,698) are debts that will be paid over a period beyond one year and can include mortgages ($57,451), car loans ($4,424), and student loans ($20,823). Net worth is the difference between what is owned (assets) and what is owed (liabilities) and can be found using the following equation: Net worth = $236,686 - $84,925 = $151,761

Which of the following asset classification is true?

Household assets include items normally owned by a household, such as furniture. Liquid assets are financial assets that can be easily sold without a loss in value. Examples include cash, savings accounts, and checking accounts. Household assets include items normally owned by a household. Examples include a home, car, and furniture. Investments are financial assets held with the intent of receiving a return. Examples include stocks, bonds, mutual funds and real estate.

Ryan and Nicole would like to trace in one of their cars with a fair market value of $9,483 for a new one with a fair market value of $25,909. the dealer will take their car and provide a $16,847 loan for the new car. If they make this deal, what will the effect on their net worth? As you invest in assets, your liabilities and/or net worth may change. An increase in assets greater than any increase in liabilities will result in an increase in net worth and an increase in assets less than any increase in liabilities will result in a decrease in net worth. The change in assets is the investment in any new assets minus the ale of any existing assets.

If they trade in one of their cars for a new one, the amount by which Ryan and Nicole's assets change is $16,426. When they take out a new car loan, the amount by which Ryan and Nicole's liabilities change is $16,847. The effect on net worth is the change in assets minus the change in liabilities. The amount by which Ryan and Nicole's net worth will change is $421.

Ryan and Nicole would like to trade in one of their cars with fair market value of $6,508 for a new one with a fair market value of $21,920. The sealer will take their car and provide a $15,807 loan for the new car. If they make this deal, what will be the effect on their net worth?

Ryan and Nicole's net worth will decrease by $395 due to an increase in assets of $115,412 and an increase in liabilities of $15,807.

The personal balance sheet summarizes

What you own (assets), what you owe (liabilities), and your net worth (assets minus liabilities).

The process of creating an annual budget begins with

a monthly budget and is extended out for the year. the annual budget is adjusted to reflect anticipated large changes in your cash flows.

Wealth is built over time by

allocating more income to invest in assets. You build wealth by using part of your income to invest in more assets or to reduce your debt. The more of your income you can allocate to invest in assets or to reduce your debt, the greater will be the increase in net worth.

Your net worth is equal to

assets minus your liabilities. Your net worth is a snapshot of what you own, deducting any money that you owe.

Liabilities represent

debt (what you owe).

Long - term liabilities are

debt that will take longer than a year to pay off. Current liabilities are debt that you will pay off within a year. Long-term liabilities are debt that will take longer than a year to pay off.

Cash inflows are monies paid in such as

dividend and interest

Identify a factors affecting cash outflows

family status, including family size, age and personal consumption behavior.

A budget is a

forecast of cash inflows and cash outflows developed to determine whether your anticipated cash inflows are sufficient to meet your cash outflows.

When there are increases in your wealth, there are

increases in your net worth.

Your personal cash flow statement

shows your cash inflows and outflows and can be used to determine where either might be adjusted. Your personal balance sheet can be compared from period to period to determine if your net worth is, in fact, increasing.

When a period's budget indicates a cash

surplus, you can determine the amount that you will have available to invest in additional assets.

What two personal financial statements are most important to personal financial planning?

the personal cash flow statement and the personal balance sheet

Angela earns $1,590 per month before taxes in her full-time job and $566 before taxes in her part-time job. About $356 per month is needed to pay taxes. What is Angela's disposal income?

$1,800. For budgeting purposes, disposable income ($1,800) is typically the difference between gross income ($1,590 + $566) and income taxes ($356).