personal finance chapter two
at what time is cash inflows tend to be the highest
20 years into a career
budget
a cash flow statement that is based on forecasted cash flows for a future time period
personal cash flow statments
a document that shows your cash inflows and outflows
which of the following is not considered an asset for a family
a leased car
cash in a savings account
a liquid asset
A high debt ratio indicates
an excessive amount of debt and should be reduced over time to avoid any debt repayment problems.
expenses
are also cash outflows
the current financial position of an individual or family is best presented with the use of a
balance sheet
Jennifer has assets of $100,000 and $10,000 of debt. She could
borrow more money, since her debt ratio is low
the personal cash flow statement measures
cash inflows and outflows
If you do not budget for unexpected expenses in a given month, you will likely experience a(n)
cash shortage
which of the following is not a liquid asset
corporate stock you own outright
which of the following will not increase your net worth
country club paid monthly
cash flow statements reports
current income and payments
if you sell stock from your portfolio to pay off your car loan, your debt ratio of .5 will
decrease
paying cash for a cruise will
decrease assets
net cash flows
difference between cash inflows and cash outflows and can be negative or positive
education level
does not affect cash outflows
Stocks are considered liquid assets since they are easy to sell without a loss in value.
false
liquid assets
financial assets that can be easily sold without a loss in value
bonds
financial instruments issued by borrowers to raise funds
a budget will not
help determine if cash outflows will be sufficient enough to cover cash inflows
both husband and wife are employed, their consumption tends to
increase
what is not an appropriate approach to solving the problem of an annual budget deficiency
increase short-term, flexible expenditure
the net worth of an individual or family can be increased by
increasing income
when you retire, which of the following will be key sources of cash flows
interest and dividends, and also social security and 401k
cash in your wallet, checking account, and savings account comprise
liquid assets
liquidity ratio
liquid assets/liabilities
the primary goal of financial planning
maximize wealth
Paying off a credit card with cash will have which of the following effects on net worth?
no effect
many people tend to _______ their cash inflows and _____ their cash outflows
overestimate and underestimate
which of the following is not a true statement about mutual funds
proceeds are only invested in stocks
A person's net worth would increase as a result of
reduced amounts owed to others.
real estate
rental property and land
which cashflow will be discontinued after retirement
salary
main source of cash flow for most people is
salary and wages
investment assets
when a person owns corporate stock, government or corporate bonds, or mutual funds
a low liquidity ratio means that
you probably will have trouble paying your current bills
what usually affects cash inflows the most
your job skills
David's liquidity ratio is 3.0. He has $1,000 in current liabilities. Therefore, he has ________ worth of liquid assets. A) $3,000 B) $333 C) $4,000 D) $700
3,000
If Kim's current debt ratio is 45%, this means that ________ of Kim's assets are purchased on credit.
45%
if your net cash flows exceed your net cash outflows, you can increase your net worth by investing the difference in more
assets
a persons balance sheet summarizes
assets, liabilities, and net worth
In budgeting, it is useful to compare ____ with the budgeted amounts to determine the accuracy or error of the budget and adjust it as necessary.
both actual cash inflows and outflows
current liabilities
debts that are to be paid off within a year
You save the same dollar amount from each paycheck during your career. as your income increases, your savings rate will
decrease
Your current liquidity ratio is 2.0. If you take money out of your savings account to pay off a credit card your liquidity ratio will
increase
chang investments from risky stocks to more conservative stocks
is not a key budgeting influence for a personal financial plan
inventory
is not an asset you might find on a personal balance sheet
household assets
items owned by a household such as a home or car
what would increase your liquid assets
making regular deposits to a savings account at your bank
balance sheet assets should be valued at
market value
savings rate calculated
savings/ disposable income
why is it important to monitor your debt level
so it does not become so high that you cannot cover the monthly payments
liabilities can be calculated by
subtracting net worth from assets
balance sheet
summary of assets, liabilities, and net worth
market value
the amount you would receive if you sold an asset today
personal cash flow statements are usually the starting point for an individual or family's budget
true
your net worth can change even if your net cash flows are zero
true
a personal balance sheet presents
Items owned and amounts owed