Personal Finance Ch.2
to calculate net worth
assets-liabilities=net worth
Financial experts recommend a debt/payments ratio of less than ___ of take-home pay.
20%
A family with 10,000 in assets and 60,000 of liabilities would have a net worth of
40,000 (assets minus liabilities= net worth)
Items that you own that have a monetary value are referred to as
Assets
Take-home pay is also called
net pay
A statement that included liquid assets, real estate, personal possessions, and investment assets is known as a
Personal balance sheet
A budget system that involves envelopes, folders, or containers to hold money or slips of paper is called
Physical budget
Which of the following is a deduction to determine take-home pay?
Social security Pay
A personal balance sheet reports
Items owned, amounts owed, and your net worth.
A budget system that can be kept on notebook paper or accounting paper is called
Written budget
Money management refers to
day to day financial activities
Calculate liquidity ratio
liquid assets/monthly expenses
Calculate debt-payment ratio
monthly credit card payments/Take home pay
Calculate saving ratio
monthly savings/ gross income
Financial experts recommend monthly savings of ____ of gross income.
5-10%
Which of the following are two personal financial statements that you create yourself?
Balance sheet and cash flow statement
The difference between the amount budgeted and the actual amount received or spent is called
Budget variance
The money left over after paying for housing, food, and other necessities
Discretionary income
Another name for statement of financial position is a
Balance sheet
The inability to pay debts when they are due because liabilities far exceed the value of assets is called
Insolvency
Calculate debt ratio percentage
Liabilities/net worth
Which of the following situations describes a person who could be insolvent
Assets $4,000; liabilities $55,000
budget variance
budgeted amount minus the actual amount that you spend
Calculate Current Ratio
liquid assets/current liabilities
Discretionary income equals
money left over after paying for housing, food, and other necessities
