College Personal finance ch 2
How long should you keep documents relating to investments
as long as you own these items
Items that you own that have a monetary value are referred to as:
assets
Which of the following situations describes a person who could be insolvent?
assets: $40,000; liabilities $55,000
An organized system of financial records provides a basis for reducing credit card usage
false
Financial advisors suggest that an emergency fund should cover one to two months of living expenses
false
If a household has $195,000 of assets and $75,000 of liabilities, then net worth would be $125,000
false
Some people keep various documents and valuables in safe deposit boxes in banks and other financial institutions because the safety of the contents of these boxes is absolutely foolproof.
false
When creating a budget, it is important to save the amount you have left at the end of the month
false
annual investment account statements should be shredded
false
copies of tax returns and supporting data should be saved for 10 years
false
liquid assests can be easily converted into cash and include money in checking accounts and all personal possessions
false
when completing a cash flow statement, take-home pay less deductions equals gross salary
false
All of the following are ways that households can increase their net worth except:
increase their debt ratio
Which of the following ratios indicated the number of months in which living expenses can be paid if an emergency arises?
liquidity ratio
Which of the following appears as a cash outflow on a cash flow statement
loan payment
When creating a personal balance sheet, which of the following is a current liability
medical bill
Discretionary income equals:
money left over after paying for housing, food, and other necessities
Take- home pay is also called
net pay
The amount you would have left if all assets were sold and all debts were paid in full is called:
net worth
When creating a budget, which of the following statements is true?
numbers in the budget are estimates
The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a:
personal balance sheet
When creating a personal balance sheet, which of the following is an investment asset?
retirement account such as a 401k
Which of the following ratios shows the relationship between gross income and money saved
savings ratio
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns ?
seven years
All of the following are sources of income except:
social security taxes
which of the following is a deduction to determine take-home pay?
social security taxes
Disposable income equals
the amount a person or household has to spend
A balance sheet reports what an individual or family owns and owes
true
In an organized system of financial records, investment records belong in a home file, home computer, or online
true
When completing a cash flow statement, deductions are subtracted from gross salary to determine take-home pay
true
a cash flow statement uses this equation: total cash received during the time period - cash outflows during this time period = cash surplus (or deficit)
true
Which of the following appears as a cash outflow on a cash flow statement?
variable expenses
Given the following information, calculate the debt- payments
34.78%
Financial experts recommend monthly savings of ____ of gross income
5-10%
When creating a budget, it is important to:
"pay yourself first" by setting aside savings before other expenses are budgeted
A current ratio of 2 means:
$2 in liquid assets are available for every $1 of current liabilities
Given the following information, calculate the liquidity ratio
2.44
Given the following information, calculate the current ratio
2.50
Financial experts recommend a debt/payments ratio of less than ____ of take home pay
20%
Given the following information, calculate the savings ratio
21.21%
Given the following information, calculate the debt ratio percentage
33.33%
A debt ratio of 0.5 indicates
For every dollar of net worth, debt equals $0.50.
The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?
Indefinitely
A personal balance sheet reports:
Items owned, amounts owed, and net worth
Another name for a statement of financial position is a:
balance sheet
The current financial position of an individual or family is best presented in the form of a:
balance sheet
A high debt ratio is best
false
Which of the following ratios indicated that liquid assets are available to pay current liabilities for a household?
current ratio
Which of the following ratios indicated the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debts (except mortgage?)
debt-payments ratio
A budget is a record of how a person or family has spent money
false
