Personal Finance Ch.2

to calculate net worth

assets-liabilities=net worth

Financial experts recommend a debt/payments ratio of less than ___ of take-home pay.

20%

A family with 10,000 in assets and 60,000 of liabilities would have a net worth of

40,000 (assets minus liabilities= net worth)

Items that you own that have a monetary value are referred to as

Assets

Take-home pay is also called

net pay

A statement that included liquid assets, real estate, personal possessions, and investment assets is known as a

Personal balance sheet

A budget system that involves envelopes, folders, or containers to hold money or slips of paper is called

Physical budget

Which of the following is a deduction to determine take-home pay?

Social security Pay

A personal balance sheet reports

Items owned, amounts owed, and your net worth.

A budget system that can be kept on notebook paper or accounting paper is called

Written budget

Money management refers to

day to day financial activities

Calculate liquidity ratio

liquid assets/monthly expenses

Calculate debt-payment ratio

monthly credit card payments/Take home pay

Calculate saving ratio

monthly savings/ gross income

Financial experts recommend monthly savings of ____ of gross income.

5-10%

Which of the following are two personal financial statements that you create yourself?

Balance sheet and cash flow statement

The difference between the amount budgeted and the actual amount received or spent is called

Budget variance

The money left over after paying for housing, food, and other necessities

Discretionary income

Another name for statement of financial position is a

Balance sheet

The inability to pay debts when they are due because liabilities far exceed the value of assets is called

Insolvency

Calculate debt ratio percentage

Liabilities/net worth

Which of the following situations describes a person who could be insolvent

Assets $4,000; liabilities $55,000

budget variance

budgeted amount minus the actual amount that you spend

Calculate Current Ratio

liquid assets/current liabilities

Discretionary income equals

money left over after paying for housing, food, and other necessities