ECON1200 Chapter 2

If expected expenditures for food were $1,000 while the actual food costs were $750, what would be the variance?

$250 favorable

Which of the following are the major money management activities?

- creating and implementing a savings plan - preparing personal financial statements - storing and maintaining personal financial records

Take-home pay is:

earnings (salary, wages, and commissions) after deducting for taxes and other items

Which one of the following is an example of a variable expense?

groceries

Which of the following assets are liquid assets?

money market account, cash value of life insurance, savings account, cash

Which of the following are not liquid assets?

real estate

The rule of thumb when saving for ______ fund is to set aside three to six months of living expenses.

an emergency

Which of the following provide accurate explanations of net worth?

assets minus liabilities AND the amount you would have if you sold the assets and paid off the liabilities

A personal ___ sheet also called a net worth statement or statement of financial position, reports what you own and what you owe

balance

Which of the following is a financial statement that reports what an individual or a family owns and owes?

balance sheet

After categorizing assets and calculating total assets, what do you do next when preparing the balance sheet?

classify liabilities , total the liabilities, and calculate net worth

Purchase receipts, insurance policies, tax forms, and which of the following are the basis of financial recordkeeping?

credit card statements

How often should you prepare a balance sheet?

every 3-6 months

The balance sheet equation is __

total assets minus total liabilities equal net worth

If Joe and Mary Smith have money market accounts of $100,000, real estate holdings of $300,000, loans of $25,000, and investments of $10,000, what would their total assets be?

$410,000

A cash flow statement shows a summary of cash __ and payments for a given period such as a month or a year

income

Budgets allow you to live within your income while increasing your chances of achieving your financial goals

true

A ___will help you spend money wisely and have more control of your life.

budget

Money management refers to the daily financial activities necessary to manage current ______ economic resources while working toward long-term financial security.

personal

When preparing a personal balance sheet, which of the following statements should you not do?

subtract assets from liabilities to determine net worth

When you calculate a budget ____ you determine the difference between the actual amount spent or received and the amount budgeted.

variance

Invoices, credit card statements, ____ policies, and tax forms are the basis of financial record keeping and personal economic choices.

insurance

Which of the following statements are true about a balance sheet that you are reviewing on 1/15/2021 that shows an "as of" date of 12/31/2020 and assets of $600,000 and liabilities of $425,000?

the net worth is $175,000 as of 12/31/20

Which types of expenses fluctuate by household situation, time of year, and economic conditions?

variable

Money management involves financial activities necessary to manage current personal economic resources, while working for the achievement of long-term financial security.

true

True or false: Take-home pay is the same as discretionary income.

false

True or false: Total assets minus only current liabilities equal net worth. Be sure to read the sentence carefully before answering.

false

The two documents considered to be part of personal financial statements include the personal balance sheet and which of the following?

cash flow statement

If Tom and Liz Gomes have liquid assets of $200,000, real estate of $350,000, home improvement loans of $250,000, and investments of $30,000, what would their total assets be?

$580,000

True or false: The statement of cash flow is a summary of cash receipts and payments for a given period.

true

The most common overspending areas to evaluate when revising your goals and budget allocations are entertainment and ______.

food

Which of the following can help you to achieve your financial goals?

- save between 5 & 10% of each paycheck - have savings deducted automatically each paycheck - save coins in a jar at the end of the day for future savings deposit - write a check each payday to deposit into a savings acct

Joe borrowed $100,000 (a four-year loan at 10 percent interest) on January 2, 2020. During the course of the year, he paid back $30,000 on that debt. What would his December 31, 2020 balance sheet show for this debt? Interest is an expense and not part of the loan balance.

$70,000 because the balance sheet should report what is owed on the balance sheet date.

Personal balance sheet and the cash flow statement come from financial institutions, businesses, or the government.

false

The money left over after paying for housing, food, and other necessities is called ___

discretionary income

Cash ___ is the actual inflow and outflow of cash during a given time period

flow

____ of money calculations can be used to calculate progress toward achieving different financial goals.

time value

Financial goals should be specific, realistic, measurable, have a time frame, and imply the type of action to be taken.

true