Chapter 3

A home file should be used for documents that require maximum security.

False

Opportunity costs refer to trade-offs associated with financial decisions.

True

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of $20,000

false

A person's net worth is computed by subtracting total assets from total liabilities.

false

If expenses for a month are greater than income, an increase in net worth will result.

false

Your monthly electric bill would be considered a fixed expense.

false

A budget deficit would result when a person's or family's actual expenses are greater than planned expenses.

true

A cash flow statement reports a person's or a family's current income and payments.

true

A personal balance sheet presents items owned and amounts owed.

true

Balance sheets and cash flow statements are considered to be personal financial statements.

true

During the past month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were $3,200.

true

Liquid assets refer to cash and other items that are easily converted to cash.

true

Payments that do not vary from month to month are fixed expenses.

true

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

true

The value of items owned minus the amounts owed to others equals net worth.

true