Your Money & Credit (Test 1-Ch.2)

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Electric bill

All of the following are fixed expenses except

Receive a paycheck

Which of the following is a cash inflow?

Social security taxes

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

Rare coins and stamps belong in a safe deposit box

Which of the following is most correct?

True

Current liabilities are the debts you must pay within a short time

Net worth

The amount you would have if everything of value would be sold and all debts would be paid in full

True

The current financial position of an individual or family is a common starting point for financial planning

Indefinitely

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase of real estate?

Personal balance sheet

The statement that includes liquid assets, real estate, personal possesions, and investment assets is known as a

False

The two primary personal financial statements include the personal balance sheet and a credit card payoff statement

Decrease spending by $5 per day

Which of the following will increase the net worth of a household?

False

Wills and Social Security data should be kept for up to ten years

True

One method to save more money is to write a check each payday and deposit it in a savings account not readily available for regular spending

False

One method to spend more money is to use a direct deposit system from payroll

$323,000

Patrick Guitman has a net worth of $156,000 and liabilities of $167,000. What are his total assets?

True

Programs are available to help low-income older or disabled people who have difficulty budgeting

$88 surplus

Rebecca Gladlyn budgeted $1050 for housing and utilities in July. She actually spent $962. What is her budget variance?

Variance

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

Balance sheet

The document that would be most useful to track current value of investment accounts is

Budget

The document that would be most useful to track planned spending patterns for the next month is

Savings ratio

Which of the following ratios shows the relationship between gross income and money not spent?

Investment

A broker statement is an example of a ___________ record

Actual expenses are greater than planned expenses

A budget deficit would result when a person's or family's

Increase their debt ratio

All of the following are ways that households can increase their net worth except:

Mortgage

An example of a fixed expense is

Electric bill

An example of a variable expense is

Balance Sheet

Another name for a statement of financial position is a

Disposable income

Another name for take-home pay is

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

Discretionary income equals

Take-home pay

Disposable income equals

False

Financial advisers suggest that an emergency fund should cover one to two months of living expenses

20%

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

5-10%

Financial experts recommend a monthly savings ratio of at least _____ of gross income

False

Financial records that may need to be referred to on a regular basis should be kept in a safe-deposit box

False

Money management refers to annual financial activities necessary to manage personal economic resources

True

Money management refers to day-to-day financial activities necessary to manage personal economic resources

False

Most people liquidate their assets to calculate their net worth

False

Net worth is the amount owed to other

$33 deficit

Rebecca Gladlyn budgeted $345 for a new wardrobe in June. She actually spent $378. What is her budget variance?

False

Records related to tax returns should be saved for ten years

Retirement account

When creating a personal balance sheet, which of the following is an investment asset?

A five-year-old television

When creating a personal balance sheet, which of the following is considered to a personal possession asset?

Loan payment

Which of the following appears on a cash flow statement?

Payments for variable expenses

Which of the following appears on a cash flow statement?

Balance sheet and cash flow statement

Which of the following are considered to be the primary personal financial statements?

Auto insurance

Which of the following categories would be most difficult to cut from a household budget?

Marriage certificates

Which of the following financial documents would most likely be stored in a safe deposit box?

All of the above are components of money management

Which of the following is NOT a component of money management

Retirement investments

Which of the following is NOT a liquid asset?

Spend your money without care

Which of the following is NOT a main purpose of a budget?

Tax records belong in a home file

Which of the following is most correct?

Current ratio

Which of the following ratios indicates that liquid assets are available to pay liabilities for a household?

Debt payments ratio

Which of the following ratios indicates the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debt (except mortgage)?

Liquidity ratio

Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?

Debt ratio

Which of the following ratios shows the relationship between debt and net worth?

Assets $40,000; liabilities $45,000

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

False

A budget is a record of how a person or family has spent their money

Written budget

A budget that can be kept on notebook paper or budgeting paper is called a

Physical budget

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

False

A cash flow statement uses the equation: assets-liabilities=net worth

True

A cash flow statement uses the equation: cash inflows-cash outflows=cash surplus (deficit)

$2 of liquid assets are available for every $1 in current liabilities

A current ratio of 2 means:

For every dollar of net worth, debt equals $0.50

A debt ratio of 0.5 indicates:

$23,000

A family with $45,000 in asset and $22,000 of liabilities would have a net worth of

Financial records for current needs

A home file should be used for storing

Items owned and amounts owed

A personal balance sheet presents

Track spending and identify variances

After the budget is created, it is important to

Social security taxes

All of the following are sources of income except

33.3

Given the following information calculate the debt ratio percentage: Liabilities= $24,000 Liquid assets=$4,400 Monthly credit payments=$300 Monthly savings=$260 Net Worth=$72,000 Current liabilities= $1,100 Take-home pay=$1,800 Gross income=$3,000 Monthly expenses=$1,540

4

Given the following information, calculate the current ratio: Liabilities-24,000 liquid assets-4400 monthly credit payments-300 monthly savings-260 net worth-72000 current liabilities-1100 take-home pay-1800 gross income-3000 monthly expenses-1540

16.67 percent

Given the following information, calculate the debt payments ratio:

2.86

Given the following information, calculate the liquidity ratio:

$4000

Given the following information, calculate the net worth: Assets=$5000 Cash inflows=$4500 Cash outflows=$2000 Liabilities=$1000

8.67 percent

Given the following information, calculate the savings ratio:

As long as you own them

How long should you keep documents relating to investments?

Permanently

How should you keep your most current will?

True

In an organized system, a will belongs in a home file

True

In an organized system, an annual stock investment statement belongs in a safe deposit box

False

In an organized system, birth and marriage certificates belong in a safe deposit box

False

In an organized system, credit card records belong in a safe deposit box

Assets

Items with value are referred to as

Day-to-day financial activities

Money management refers to

Balance sheet

The current financial position of an individual or family is best presented with the use of a(n)

Cash flow statement

The document that would be most useful to track spending patterns for the past few months is

Assets-liabilities =net worth

The equation to calculate net worth is:

False

The focus of an organized system of financial records is to reduce credit card usage

Insolvency

The inability to pay debts when they are due is called:

These are all correct

The main purposes of personal financial statements are to:

Discretionary income

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

Seven years

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

True

When completing a cash flow statement, deductions are subtracted from salary to determine take home pay

False

When completing a cash flow statement, take home pay less deductions equals salary

False

When creating a budget, it is important to save the amount you have left at the end of the month

Set aside savings before other expenses are budgeted

When creating a budget, it is important to:

Number in the budget are estimates

When creating a budget, which of the following statements is true?

Charge account

When creating a personal balance sheet, which of the following is a current liability?

Vacation property

When creating a personal balance sheet, which of the following is a real estate asset?


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