Chapter 3, Review Quiz, Quiz, Key Terms, etc.

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is the total value of her debts?

$105,500

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

$23,000

Renee Howells has found the items listed below out about herself. What is the total value of her assets? Checking Account Balance-$983 Current Value of Automobile-$9800 Household possessions-$5000 Balance on Educational Loan-$3150 Balance in Savings Account-$1495 Home Computer-$1200 Stereo Equipment-$2400 Balance on Credit Card-$1343 Value of Stock Investment- $3400 Balance on Car Loan-$6500

$24,278

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her personal assets?

$27,800

During the past month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were:

$3,200

A person has $1,250 in liabilities, monthly savings of $200, and monthly gross income of $2,500. What is the person's savings ratio?

0.08

The Budgeting Process

1. set financial goals 2. estimate income 3. budget an emergency fund 4. budget fixed expenses 5. budget variable expenses 6. record spending amounts 7. review spending and saving patterns

Which one of the following illustrates an insolvent situation?

Assets $40,000; liabilities $45,000

A(n) ________ is a specific plan for spending income.

Budget

Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?

Current liabilities

Financial advisors suggest that a good rule of thumb for an emergency fund is to have three to six weeks of living expenses saved. True or false?

False

Which one of the following should be budgeted first?

Fixed expenses

Sean Carter needs to store monthly statements from his bank, his credit card company and from his savings and loan. Where is the most appropriate place for Sean to store this information?

Home file cabinet

What percentage of people survey said that if they lost their job today that they would fall behind in their bill payments in three months or less?

More than half of those surveyed said they would fall behind in three months or less

Which of the following is part of the investment records you should keep?

Records of mutual fund purchases

Jerry Allison needs to store the title to his car and his house. Where is the most appropriate place for Jerry to store this information?

Safe Deposit Box

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

Savings certificates

Which of the following would be an example of a personal and employment document?

Social Security Card

A(n) ______ is when the amount budgeted is larger than the amount actually spent.

Surplus

The final step in the budgeting process is to periodically review your spending and savings patterns. True or false?

True

You have a positive net worth when the value of your assets is larger than the value of your debt. True or false?

True

Characteristics of Good Budgeting

Well-planned Realistic Flexible Clearly Communicated

Amy Farmer has developed a budget that she follows each month. She went to the office supply store and purchased a spiral notebook. Each month she pens in what she wants to spend in the various categories. At the end of the month, she pens the amount that she actually spent in each of these categories and compares the results. What type of budget has Amy created?

Written Budget

balance sheet

a financial statement that reports what an individual or a family owns and owes; also called a net worth statement

Nick Boss has a savings account with $550 in it. He knows that he can withdraw this money whenever he wishes. This would be an example of:

a liquid asset

safe deposit box

a private storage area at a financial institution with maximum security for valuables

budget

a specific plan for spending income

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

actual expenses are greater than planned expenses

written budget

allows you to provide a detailed plan for spending

liabilties

amounts owed to others

Which of the following is not likely to be a fixed expense? a. groceries for the month b. monthly cable bill c. medical expenses for the month d. monthly electrical bill e. all of the above are likely to be fixed expenses

b. monthly cable bill

liquid assets

cash and items of value that can easily be converted to cash

Liquid assets refer to:

cash and other items that are easily converted to cash

assets

cash and other property with monetary value

Warranties are commonly associated with ____________ purchases.

consumer

money management

day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security

long-term liabilities

debts that are not required to be paid in full until more than a year from now

current liabilities

debts that must be paid within a short time, usually less than a year

For January, Bethany DeWeese had cash inflows of $4,200 and cash outflows of $4,750, resulting in a:

deficit of $550

take-home pay

earnings after deductions for taxes and other items; also called disposable income

mental budget

exists only in a person's mind

variable expenses

flexible payments that change from month to month, ex. food, clothing, utilities

income

inflows of cash to an individual or a household

physical budget

involves envelopes, folders, or containers to hold money

__________ are those liabilities that you do not have to pay in full until more than a year from now.

long term liabilites

computerized budgeting system

may be developed using spreadsheet software

online budget

may be used through a website

Consumer Price Index (CPI)

measure of the general price level of consumer goods/services in the U.S.

discretionary income

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

Jennifer Rodrick uses a computer to help her record her spending each month. She updates her records weekly. This would be an example of:

money management

Which of the following would most likely be classified as a current liability?

monthly balance due on a credit card

Which of the following would be considered a long-term liability?

mortgage

budgeting app

on your phone

fixed expenses

payments that do not vary from month to month, ex. rent, mortgage, loan payments

Jonathan Wynn has developed a budget that he follows each month. Jonathan has an envelope for each type of expenditure. After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to spend on that category each month. What type of budget has Jonathan created?

physical budget

This month, Ken Grossman has cash inflows of $3,100 and cash outflows of $2,950, resulting in a

surplus of $150.

A common deduction from a person's paycheck is for:

taxes

cash flow

the actual inflow and outflow of cash during a given period

deficit

the amount by which actual spending exceeds planned spending

surplus

the amount by which actual spending is less than planned spending

budget variance

the difference between the amount budgeted and the actual amount received or spent

net worth

the difference between total assets and total liabilities

insolvency

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

Which of the following payments would be considered a variable expense?

water bill