PMM T1

True/False. Insolvency results from taking in more than you consume financially.

False

True/False. Net income is used in calculating one's net worth.

False

True/False. The house that you are leasing from the landlord is a good example of a tangible asset that you would list on your balance sheet.

False

True/False. To determine your level of net worth, subtract your liabilities from your positive net equity.

False

Which financial planning document should you use to measure your current financial position? a) budget b) cash budget c) balance sheet d) income statement e) statement of financial ratios

c) balance sheet

If you liabilities are greater than the value of your assets you are considered: a) unstable b) bankrupt c) insolvent d) unbalanced

c) insolvent

Assets that you can purchase for the purpose of accumulating wealth to satisfy your financial goals are called: a) monetary assets b) intangible assets c) investment assets d) all of the above are correct.

c) investment assets

Which of the following be included on a personal income statement? a) your 401k balance b) buying a flat screen TV on credit c) making a payment to your credit card company d) all of the above

c) making a payment to your credit card company

One of the following items would not go on a balance sheet. Which one is it? a) current balances owed on your utility bills b) credit card balanced owed c) mortgage payment paid d) automobile loan balance e) student loan balance

c) mortgage payment paid

Your net worth, or your general level of financial worth, is found by a) subtracting your expenses from your income b) dividing your monetary assets by your current liabilities c) subtracting your liabilities from your assets d) dividing monthly debt (less mortgage payment) by monthly income e) subtracting current liabilities from monetary assets

c) subtracting your liabilities from your assets

An expenditure over which you have no control, are obligated to make, and is generally at a constant level each month is called a ____ expenditure. a) fixed b) variable c) staitonary d) discretionary e) none of the above

a) fixed

A statement that records where your money has come from and where it has gone over some period of time is called a(n): a) income statement b) balance sheet c) statement of net worth d) none of the above

a) income statment

When including an asset like a car on your balance sheet: a) list its value as given in a blue book or site like www.edmunds.com b) list the original purchase price of the vehicle c) list the amount it would cost to purchase a new model of this vehicle d) none of the above

a) list its value as given in a blue book or site like www.edmunds.com

A physical asset, such as furniture or a car, is called a(n) ____. a) tangible asset b) financial asset c) investment d) liability e) none of the above

a) tangible asset

The common thread among investment assets is: a) they are purchased for the purpose of generating wealth. b) they are purchased for one's personal use, like a vehicle or residence. c) they provide the necessary liquidity in case of an emergency. d) they must be easily turned into cash with little or no loss in value.

a) they are purchased for the purpose of generating wealth.

An expenditure that you can control over time and that you can manage is a(n) a) variable expenditure b) fixed expenditure c) constant expenditure d) short-term expenditure e) adjustable expenditure

a) variable expenditure

Fair market value refers to: a) what an asset could be sold for today b) what you paid when you purchased an asset c) what an asset will be worth at some point in the future d) how the price of an asset has changed since its original purchase

a) what an asset could be sold for today

Which type of expenditure would probably be the hardest for an individual to track? a) credit card b) cash c) checks written d) automatic payments e) direct deposits

b) cash

Liabilities are best described as: a) monetary items of value that you own b) financial debts and obligations that you owe c) your net worth d) assets that depreciate over time e) intangible obligations

b) financial debts and obligations that you owe

An expenditure over which you have no control and are obligated to make is a: a) repeating expenditure b) fixed expenditure c) constant expenditure d) long term expenditure e) contractual expenditure

b) fixed expenditure

Items on the balance sheet that represent amount owed to others are termed: a) assets b) liabilities c) revenues d) expenses e) none of the above

b) liabilities

An expenditure over which you have control, are not obligated to make, and may vary from month to month is called a ____ expenditure. a) fixed b) variable c) liquid d) vacillating e) none of the above

b) variable

A personal income statement is prepared: a) on an accrual basis b) on a cash basis c) based on actual cash flows d) only B and C above e) all of the above

d) only B and C above

How would an income statement benefit one in creating a financial plan? a) determine whether one is earning more than one spends b) spot problem areas of overspending c) determine if money is available for saving or investment d) know where one's money is going e) all of the above

e) all of the above

Practical uses of an income statement include a) determining whether you are earning more than you spend b) spotting problem areas of overspending c) determining if money is available for saving or investment d) knowing where your money is going e) all of the above

e) all of the above

Which of the following might be found on an income statement? a) wages and salaries b) interest and dividends c) income taxes paid d) payroll taxes paid e) all of the above

e) all of the above

You know you are insolvent when: a) your expenses exceed your income b) your assets are less than your liabilities c) your net worth is negative d) your debt ratio is too high e) both B and C above.

e) both B and C above

When measuring your financial condition, it is important to create: a) positive net worth b) a personal balance sheet c) an income statement d) positive net income e) both B and C are required.

e) both B and C are required.

Which of the following are not typically found on a balance sheet? a) monetary assets b) mortgage interest payments c) current market value of a home d) interested earned on a CD at the bank e) both B and D are not found on a balance sheet.

e) both B and D are not found on a balance sheet

True/False. An income statement tracks the amount of money you have coming in and going out over some period of time, like a month or a year.

True

True/False. Before you can hope to achieve your financial goals, you will need to first measure your current financial health and develop a plan and a budget.

True

True/False. Current liabilities are those that can typically be paid off in full within twelve months.

True

True/False. In some cases insolvency can lead to bankruptcy.

True

True/False. The interest charge on your credit card statement should be listed on your personal statement as a variable expense.

True