Personal finance chapter 2
A budget is a financial report that forecasts an individuals current income as a percentage of his or her past earnings. True or false
False
An individual should prepare his or her financial statements once in five years. True or false
False
Budgeting and record keeping are the same. True or false
False
Financial planning is necessary only if an individual earns a lot of money. True or false
False
If an individual obtains a loan to purchase a new car in June, this loan amount will be included as income for the month of June. True or false
False
Net income (after taxes) should be used when preparing an income and expense statement. True or false
False
The best way to balance one's budget is to increase borrowing. True or false
False
The preparation of an income and expense statement is the first step in the personal financial planning process. True or false
False
A cash budget has value only if one uses it, reviews it regularly, and keeps careful records of income and expenses. True or false
True
An inability to reach short-term goals will significantly affect one's ability to reach long-term goals. True or false
True
An income and expense statement provides a measure of financial performance over a period of time. True or false
True
An individual can maintain his or her personal financial statements using spreadsheet software. True or false
True
An individual is said to have a balanced budget when his or her total income for the year equals or exceeds his or her total expenditures for the year. True or false
True
An individual's auto loan payments are listed as an expense on the income and expense statement. True or false
True
Estimating expenses using actual expenses from previous years and tracking current expenses make the task of preparing a cash budget easier. True or false
True
Financial plans provide direction to annual budgets. True or false
True
Future value calculations to estimate the funds needed to meet a goal take compounding into account. True or false
True
If an individual lists his or her gross salary in the income portion of the budget, the expenditures section will include income taxes and social security taxes. True or false
True
In a budget, "fun money" is for family members to spend as they like without having to account for how it is spent. True or false
True
It is best to prepare an individual's personal financial statements at least once a year, ideally when drawing up his or her budget. True or false
True
It is recommended that an individual maintains a budget to summarize all of his or her financial transactions. True or false
True
Knowing how to prepare and interpret personal financial statements is a cornerstone of personal financial planning. True or false
True
The balance sheet shows an individual's financial condition as of the time the statement is prepared. True or false
True
A balance sheet describes a person's
financial position at any given point in time
