Finance Chapter 2 Questions

When you calculate a budget_________ , you determine the difference between the actual amount spent or received and the amount budgeted.

variance

How often should you prepare a balance sheet?

every 3 to 6 months

Which one of the following is an example of a variable expense? loan payment car payment groceries house payment

groceries

The text covers ______ main money management activities.

three (3)

true or false: Net worth is found by subtracting liabilities from asset

true

A ______will help you spend money wisely and have more control of your life.

budget

The two documents considered to be part of personal financial statements include the personal balance sheet and which of the following? Multiple choice question. Cash flow statement Funding sheet MACRS statement

cash flow statement

true or false: When evaluating your budget, you should review and perhaps revise your financial goals and budget allocations and review your financial progress.

true

True or false: Money management involves financial activities necessary to manage current personal economic resources, while working for the achievement of long-term financial security.

true (this is the definition of money management )

Time _______ of money calculations can be used to calculate progress toward achieving different financial goals.

value

Time______ of money calculations can be used to calculate progress toward achieving different financial goals.

value

True or false: Financial goals should be specific, realistic, measurable, have a time frame, and imply the type of action to be taken

true

True or false: The steps to prepare a budget include setting financial goals, estimating expected income, budgeting for emergency funds and expenses, recording actual expenses, calculating variances, and evaluating. True false question.

true

true or false: Budgets allow you to live within your income while increasing your chances of achieving your financial goal

true

true or false: People should prepare a personal balance sheet on a periodic basis to evaluate financial progress

true

true or false: People should prepare a personal balance sheet on a periodic basis to evaluate financial progress. True false question.

true

Which types of expenses fluctuate by household situation, time of year, and economic conditions? Multiple choice question. Fixed Variable Standard Required

variable

Which types of expenses fluctuate by household situation, time of year, and economic conditions? Multiple choice question. Variable Standard Fixed

variable

If expected expenditures for food were $1,000 while the actual food costs were $750, what would be the variance?

$250 favorable

Joe borrowed $100,000 (a four-year loan at 10 percent interest) on January 2, 2020. During the course of the year, he paid back $30,000 on that debt. What would his December 31, 2020 balance sheet show for this debt? Interest is an expense and not part of the loan balance. Multiple choice question. Approximately $25,000 because that is what will be paid over the next 12 months. $70,000 because the balance sheet should report what is owed on the balance sheet date. Approximately $10,000 because that is the amount of interest owed. $100,000 because the balance sheet shows what was originally borrowed.

$70,000 because the balance sheet should report what is owed on the balance sheet date

Which of the following statements is true? Multiple choice question. An adequate emergency fund is usually 3-6 months of gross pay An emergency fund should be invested in stocks An adequate emergency fund is 9-12 months of take home pay An adequate emergency fund is usually 3-6 months of living expenses

An adequate emergency fund is usually 3-6 months of living expenses

Which of the following are characteristics of good financial goals? Multiple select question. Unspecific target amount Have a definite time frame Measurable Realistic to achieve

Have a definite time frame Measurable Realistic to achieve

hich of the following can help you to achieve your financial goals? Multiple select question. Invest 40 percent of your annual salary in a new sports car. Have savings deducted and automatically deposited into a savings account from each paycheck. Save coins in a jar at the end of each day for deposit at a future time into a savings account. Buy long-term bonds with deductions from every other paycheck. Write a check each payday to deposit into a savings account.

Have savings deducted and automatically deposited into a savings account from each paycheck. Save coins in a jar at the end of each day for deposit at a future time into a savings account. Write a check each payday to deposit into a savings account. Save between 5 percent and 10 percent of each paycheck.

Which of the following are characteristics of good financial goals? Multiple select question. Measurable Realistic to achieve Unspecific target amount Have a definite time frame

Measurable Realistic to achieve Have a definite time frame

Which of the following are the major money management activities? Multiple select question. Preparing personal financial statements Storing and maintaining personal financial records Investing in speculative stocks Creating and implementing a plan for savings

Preparing personal financial statements Storing and maintaining personal financial records Creating and implementing a plan for savings

Which of the following provide accurate explanations of net worth? Multiple select question. The amount you would have if you sold the assets and paid off the liabilities Assets minus liabilities Total liabilities minus current assets Assets sold in 12 months minus liabilities owed within the next 12 months

The amount you would have if you sold the assets and paid off the liabilities Assets minus liabilities

Which of the following statements are true about a balance sheet that you are reviewing on 1/15/2021 that shows an "as of" date of 12/31/2020 and assets of $600,000 and liabilities of $425,000? Multiple choice question. The net worth is $175,000 as of 1/15/2021. The net worth is $175,000 as of 12/31/2020. The liabilities, which don't change much, are $425,000 as of 12/31/2020 and 1/15/2021. The assets as of 1/15/2021 have a market value of $600,000.

The net worth is $175,000 as of 12/31/2020.

Arrange the steps involved in the process of budgeting in the correct order of occurrence. (Place the first step at the top.) set financial goals estimate income budget an emergency fund and savings budget fixed expenses budget variable expenses record spending amounts review spending and savings patterns

The same order :

The rule of thumb when saving for ______ fund is to set aside three to six months of living expenses.

an emergency

A personal_______ sheet also called a net worth statement or statement of financial position, reports what you own and what you owe.

balance

Which of the following is a financial statement that reports what an individual or a family owns and owes? Multiple choice question. Cash flow sheet Balance sheet Income statement

balance sheet

Purchase receipts, insurance policies, tax forms, and which of the following are the basis of financial recordkeeping? Multiple choice question. Credit card statements correct Marriage licenses Birth certificates

credit card statements

true or False: Personal balance sheet and the cash flow statement come from financial institutions, businesses, or the government.

false (personal balance sheets and the cash flow statement are created by individuals)

Cash______ is the actual inflow and outflow of cash during a given time period

flow

The most common overspending areas to evaluate when revising your goals and budget allocations are entertainment and ______. Multiple choice question. food housing transportation

food

Cash flow is the ______ of cash during a given period of time.

inflow and outflow

Invoices, credit card statements,________ policies, and tax forms are the basis of financial record keeping and personal economic choices. (Enter one word per blank.)

insurance

Money management refers to the daily financial activities necessary to manage current ______ economic resources while working toward long-term financial security.

personal