Chapter 2

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

Actual spending exceeds planned spending.

The Morrison family of six budgets $600 a month for food. This month the family spends $534 on food expenses. For this month, the Morrison family has a ___________ of $____.

Surplus; $66

cash flow

the total amount of money being transferred into and out of a business, especially as affecting liquidity.

Debt Ratio Formula

total liabilities/ Total assets

a (n) ____________ is the amount by which actual spending exceeds planned spending.

Deficit

The amount you would have left if all assets were sold and all debts were paid in full is called your

Net worth.

what is the second step in preparing a personal balance sheet?

To list your liabilities.

All of the following are fixed expenses except a(n)

Utilities.

Take-home pay is also called

Net pay.

Max and Lucille are currently preparing a personal balance sheet. Their total assets are equal to $159,788 and total liabilities are equal to $64,767. What is Max and Lucille's net worth?

$95,021

How should the assets you own be reported in your personal balance sheet?

At the actual or estimated current value of the asset

The __________________ ratio compares your liquid assets to your current liabilities.

Current

Current Ratio Formula

Current Assets / Current Liabilities

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)?

Debt payments ratio

A ______________________ should be used to keep records that you need on a regular basis and documents with limited value.

Home file

A personal balance sheet reports

Items owned, amounts owed, and your net worth

Liquidity ratio Formula

Liquid assets/ Monthly expenses

Saving ratio Formula

Monthly savings/ Gross income

According to the video, what can be thrown in a wastebasket?

Receipts for small non-tax-deductible purchases and Receipts for expired warranties.

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

Retirement account such as a 401k

Bailey is currently learning about the proper places to keep personal financial records in one of her classes in college. Where should Bailey tell her parents to keep her birth certificate, their marriage license, and mortgage documents for their house?

Safe Deposit Box or Fireproof Safe