ch 4

If Pat earns $120 each paycheck and receives four paychecks per month, how much should she include as earnings in her yearly budget?

120*4=480*12=5760

Sherry Mather's has $31,565 in total assets and owes $13,565 on her car loan and credit cards. What is Sherry's net worth?

31,565-13,565=18000

During May, Andy had cash inflows of $550, $40, $65, and $80. He had cash outflows of $10, $30, $60, $25, $100, and $250. What is Andy's net cash flow?

550+40+65+80=735, 10+30+60+25+100+250=525, 735-525=260

Why is it good to prepare a budget analysis and examine variances?

Companies prepare budgets so they can plan the evolution of their business. Budgeted costs allow them to set prices, project sales and estimate profits

Explain the difference between needs and wants. Give examples of each.

Need: something you must have to survive. ex. food, shelter Want: something you would like to have. ex. ipad

List the six steps involved in the decision-making process

Step 1: Identify the decision. You realize that you need to make a decision. Step 2: Gather relevant information. Step 3: Identify the alternatives. Step 4: Weigh the evidence. Step 5: Choose among alternatives. Step 6: Take action. Step 7: Review your decision & its consequences.

a cash flow statement is

a persons cash inflows and outflows for a period of time

A utility bill is an example of

a variable expense

Which of the following would not be included in a person's listing of assets? a.$13,000 car loan c.$5,000 dinette set b.$300 cash on hand d.$1,000 in savings account

a.$13,000 car loan

What should you do if your budget does not balance?

adjust savings, lower expenses, increase income

Assets that are growing in value over time are said to be ________

appreciating

______ are money and items of value that you own.

assets

Your net worth can be computed as

assets minus liabilities

A(n) _______ is a spending and saving plan based on expected income and expenses.

budget

If Alicia budgets $30 per week for lunches but spends $39, what is the variance percentage?

budgeted amt- 30 actual amt-30 = d/9 = 9/30 = 30%

Assets that are decreasing in value over time are said to be _______

depreciating

The amount of money a person has to spend after needs are met is called

discretionary income

savings should be added to income when balancing budget (t/f)

false

_________ include money or other items of value that people can use to acquire goods and services

financial resources

the amt owed on a credit card is an example of

liability

A ________ shows a person's net worth based on his or her assets and liabilities.

personal net worth statement

your wealth can be measured using a

personal net worth statement

Which of the following would be considered a fixed expense?

rent

because people do not have enough resources to meet all their needs and wants

they must make choices

with every buying decision there is a ____ and ______

tradeoff, opportunity cost

if you spend less money than you planned to, this is a(n) _________ variance in your budget analysis

unfavorable