PF Ch. 2 Mult. Choice Semester 1

Which of the following ratios indicates the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debt (except mortgage)? a. Debt ratio b. Current ratio c. Household ratio d. Debt payments ratio e. Savings ratio

Debt payments ratio

Which of the following ratios show the relationship between debt and net worth? a. Debt ratio b. Current ratio c. Household ratio d. Debt payments ratio e. Savings ratio

Debt ratio

The money left over after paying for housing, food, and other necessities is called: a. Monthly savings b. Discretionary income c. Disposable income d. Gross income e. Take-home pay

Discretionary income

Another name for take-home pay is: a. Monthly savings b. Discretionary income c. Disposable income d. Gross income e. Deductions

Disposable income

A current ratio of 2 means: a. 2% from each paycheck is available for savings b. The minimum payment for a credit card is 2% of the balance c. 2 months of living expenses are available in case of emergency d. Net worth equals 2 times the amount of debt e. $2 of liquid assets are available for every $1 in current liabilities

$2 of liquid assets are available for every $1 in current liabilities

Financial experts recommend a monthly savings ratio of at least _______ of gross income. a. 0% b. 5-10% c. 23-35% d. 50%

5-10%

A budget deficit would result when a person's or family's: a. Actual expenses are less than planned expenses b. Assets exceed liabilities c. Actual expenses equal planned expenses d. Actual expenses are greater than planned expenses e. Net worth decreases

Actual expenses are greater than planned expenses

The main purposes of personal financial statements are to: a. Report your current financial position b. Measure your progress toward financial goals c. Maintain information about your financial activities d. Provide data for preparing tax forms or applying for credit e. All of the above

All of the above

How long should you keep documents relating to investments?: a. No need to since the broker probably has a copy b. As long as you own them c. Seven years d. Ten years e. Permanently

As long as you own them

Items with value are referred to as: a. Liabilities b. Variable expenses c. Net worth d. Income e. Assets

Assets

Another name for a statement of financial position is a: a. Balance sheet b. Bank statement c. Budget d. Cash flow statement e. Time value of money report

Balance sheet

The current financial position of an individual or family is best presented with the use of a(n): a. Budget b. Cash flow statement c. Balance sheet d. Bank statement e. Time value of money report

Balance sheet

Which of the following are considered to be the primary personal financial statements?: a. Budget and credit card statements b. Balance sheet and cash flow statement c. Checkbook and budget d. Tax returns e. Bank statement and savings passbook

Balance sheet and cash flow statement

The document that would be most useful to track planned spending patterns for the next month is: a. Balance sheet b. Cash flow statement c. Budget d. All of the above e. None of the above

Budget

The document that would be most useful to track spending patterns for the past few months is: a. Balance sheet b. Cash flow statement c. Budget d. All of the above e. None of the above

Cash flow statement

Which of the following ratios indicates that liquid assets are available to pay liabilities for a household? a. Debt ratio b. Current ratio c. Household ratio d. Debt payments ratio e. Savings ratio

Current ratio

An example of a variable expense is: a. Mortgage payment b. Install loan payment c. Monthly bus pass d. Allocation for life insurance e. Electric bill

Electric bill

A home file should be used for storing: a. All financial documents and records b. Financial records for current needs c. Documents that require maximum security d. Obsolete financial documents e. Records the are difficult to replace

Financial records for current needs

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase of real estate? a. Until the mortgage is paid b. Until you move out of the house c. Three years d. Seven years e. Indefinitely

Indefinitely

The inability to pay debts when they are due is called: a. Liabilities b. Insolvency c. Net worth d. Cash flow e. Liquid assets

Insolvency

A personal balance sheet presents: a. Amounts budgeted for spending b. Income and expenses for a period of time c. Earnings on savings and investments d. Items owned and amounts owed e. Family financial goals

Items owned and amounts owed

Which of the following financial documents would most likely be stored in a safe deposit box?: a. W-2 forms b. Personal financial statements c. Warranties d. Marriage certificates e. Checking account statements

Marriage certificates

An example of fixed expense is: a. Medical expenses b. Gifts c. Utilities d. Mortgage e. Recreation

Mortgage

The amount you would if everything of value would be sold and all debts would be paid in full: a. Net assets b. Net worth c. Total liabilities d. Total income e. Budgeted expenses

Net worth

When creating a budget, which of the following statements is true? a. Plan on your income being the same as last year b. It is easier to create a budget if your earnings vary c. Common financial problems can be maximized through budgeting d. Numbers in the budget are estimates e. It is better to overestimate your income for next year

Numbers in the budget are estimates

Which of the following appears on a cash flow statement?: a. Assets b. Payments for variable expenses c. Net worth d. Liabilities e. Investment transfers

Payments for variable expenses

How long should you keep your most current will?: a. No need to keep it since your lawyer probably has a photocopy b. One year c. Three years d. Seven years e. Permanently

Permanently

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a: a. Personal balance sheet b. Bank statement c. Budget d. Cash flow statement e. Time value of money report

Personal balance sheet

Which of the following is a cash inflow?: a. Mail rent check b. Buy groceries c. Make a loan payment d. Receive a paycheck e. Pay medical expenses

Receive a paycheck

Which of the following ratios shows the relationship between gross income and money not spent? a. Debt ratio b. Current ratio c. Household ratio d. Debt payments ratio e. Savings ratio

Savings ratio

Which of the following is NOT a main purpose of a budget?: a. Help to live within your income b. Spend your money without care c. Reach financial goals d. Prepare for financial emergencies e. Develop wise financial management habits

Spend your money without care

Disposable income equals: a. Gross income b. Take-home pay c. Amount being saved each month d. Money left over after paying for housing, food, and other necessities e. Social security taxes

Take-home pay

After the budget is created, it is important to: a. File the budget in a safe deposit box b. Compare it to the previous budget c. Track spending and identify variances d. Only pay attention to expenses that are more than 10 percent of your salary e. None of the above are true since budgets are just estimates

Track spending and identify variances

The difference between the amount budgeted and the actual amount received or spent is called the: a. Variance b. Cash outflow c. Income d. Cash inflow e. Variable expense

Variance