Chapter 3 Study Questions

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

23,000

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

Balance sheet and cash flow statement

Which one of the following presents a summary of cash receipts and payments for a period of time?

Cash flow statement

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

For may years, the United States has ranked highest among industrial nations in savings rate

False

Money management activities refer to long term investment decisions?

False

Ed Bostrom wants to reduce his fixed expenses. Which action would be appropriate?

Find a place to live with a lower rent

A personal balance sheet presents:

Items owned and amounts owed

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

Mortgage

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

Social Security Number

A budget is a specific plan of how a person or family will spend their money

True

Cash and other tangible property with a monetary value that you own are referred to as

assets

Which one of the following illustrates an insolvent situation?

assets 40,000, liabilities 45,000

Liquid assets refer to

cash and other items that are easily converted into cash

A retirement account is an example of _ asset

investment

cost refers to Opportunity

trade-offs associated with financial decisions

A person's net worth is the difference between the value of the items owned and the amounts owed to others:

True

Discretiony income is money left over after paying for housing, food and other necessities.

True

Insolvency is a result of having more liabilities than assets

True

Take- home pay is a person's earnings after deductions for taxes and other items.

True

Liabilities are amounts representing

debts