Personal finance exam 1

Your checking account is an example of

A liquid asset

Money is

A medium of exchange

Liabilities

Current - Amount you owe that is due within one year Long-term - Amount you owe that is due more than one year from date

Us commercial banks are insured by the

FDIC

Your income is directly related to your

Geographic location, age, and education

Basic planning environment

Government - through regulation, expenditures and tax policies Business - provide consumers with goods and services Consumers - their choices determines the kinds of goods and services that businesses will provide

Tax evasion is

Illegal

Henry is married to Lillian, and they have two dependent children. Henry can legally file using which of the following filing statuses?

Married filing jointly

Credit unions in the US are insured by the

NCUA

The federal income tax is

Progressive

What would not be listed as a liability on your balance sheet

Savings account

A capital gain that is reported on your tax return is the result of

Selling an asset for more than purchase price

Financial planning can help us to

Spend wisely

Your solvent if your

Total assets exceed total liabilities

An investment must be owned over one year in order to qualify for long-term capital gains treatment

True

Typically, a basic checking account does NOT earn interest

True

What is Fair Market Value?

What you can sell an asset for, that is the Net Realizable Value

The three parts of your balance sheet are

assets, liabilities, net worth

Martha is 80 and has a very high net worth. Her most important financial concern is probably her

estate

Your take-home pay is what you are left with after subtracting withholdings from your

gross earnings

Tax avoidance is

legal

Financial goals should be

specific, attainable, and prioritized

Assets are

the fair market value of what you own

Insolvent

your Net Worth is Negative

Solvent

your Net Worth is positive

In US banks, our deposits are insured up to

$250,000

Our income can consist of

-active income -passive income -portfolio income

Good tax planning typically involves

-using available deductions to reduce taxable income -using available credits to reduce taxable income

6 steps of finical process

1. Define financial goals 2. Develop financial plans and strategies to achieve goals 3. Implement financial plans and strategies 4. Periodically develop and implement budgets to monitor and control progress toward goals 5. Use finically statements to Evaluate results of plans and budgets, taking corrective action as required 6. Redefine goals as needed

Net worth is measured by

Assesses minus liabilities

Net Worth:

Assets - Liabilities = Net Worth

Which of the following would be listed as an asset on your balance sheet

Car owned

Liquid assets are

Cash or nearly cash assets