Test 1

T/F: An interest inventory measures the natural abilities that people possess.

False

tax-deferred income

Income that will be taxed at a later date.

discretionary income

Money left over after paying for housing, food, and other necessities.

The value of items owned minus the amounts owed to others equals:

Net worth

Freddie Moore has developed a budget that he follows each month. Freddie has an envelope for each type of expenditure. After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to spend on that category each month. What type of budget has Freddie created?

physical budget

liquidity

The ability to readily convert financial resources into cash without a loss in value.

deficit

The amount by which actual spending exceeds planned spending.

future value

The amount to which current savings will increase based on a certain interest rate and a certain time period; also referred to as compounding.

present value

The current value for a future amount based on a certain interest rate and a certain time period; also referred to as discounting.

job creation

The development of an employment position that matches your skills with the needs of an organization.

budget variance

The difference between the amount budgeted and the actual amount received or spent.

net worth

The difference between total assets and total liabilities.

taxable income

The net amount of income, after allowable deductions, on which income tax is computed.

One aspect of financial planning is to use credit appropriately/wisely. Which component of financial planning does this deal with? a. borrowing b. spending c. managing risk d. investing e. retirement and estate planning

a. borrowing

The changing cost of money when borrowing is referred to as __________ risk. a. interest rate b. inflation c. income d. liquidity e. personal

a. interest rate

Which of the following is described as an online "living entity"? a. social media resume b. Chronological resume c. functional resume d. infographic resume e. traditional resume

a. social media resume

The main goal of personal financial planning is managing your money to:

achieve personal economic satisfaction

The stages for family and financial needs of an adult are called the ________

adult life cycle

The first stage in the career planning and advancement to process is:

assess and research personal goals, abilities, and career fields

Anita Walsh is considering an additional charitable contribution of $1,500 to a tax-deductible charity, bringing her total itemized deductions to $16,000. If Michele is in a 24 percent tax bracket, how much will this $1,500 contribution reduce her taxes? a. $0 b. $360 c. $1,500 d. $1,600 3. $3,840

b. $360 why: $1,500 x 0.24= 360

In addition to price increases and consumer demand, what is another economic factor that can affect career opportunities? a. demographic trends b. interest rates c. foreign competition d. changing uses of technology e. geographic trends

b. interest rates

Attempts to increase financial resources are part of the _______ component of financial planning. a. planning b. obtaining c. saving d. sharing e. protecting

b. obtaining

Which one of the following people is least likely to have to file a federal income tax return? a. a U.S. citizen who is a resident of Puerto Rico b.a U.S. citizen earning $8,000 where taxes were withheld c. a single person earning less than $5,000 d. a single person over 65 earning $20,000 e. a 28 yr old single college student earning more than $28,000

c. a single person earning less than $5,000

Creativity, problem-solving skills, and physical dexterity are examples of: a. interests b. survival skills c. aptitudes d. occupational attitudes e. on the job training

c. aptitudes

Capital gains refers to: a. tax-exempt investments b. portfolio income c. profits from the sale of a capital asset d. earnings from investments such as dividends or interest e. earnings from passive activities

c. profits from the sale of capital assets

The finalists for a job position are invited for a(n) _____________ interview. a. informational b. confirmation c. selection d. screening e. personal contact

c. selection

Liquid assets refer to:

cash and items of value that can easily be converted to cash

Which type of audit is the simplest and most common for taxpayers? a. a field audit b. an office audit c. a research audit d. a correspondence audit e. a documentation audit

d. a correspondence audit

Formal training includes: a. company programs b. seminars and websites c. college courses d. all of these e. none of these

d. all of these

Which one of the following is included in gross income? a. tax credit b. exemption c. exclusion d. earned income e. tax deduction

d. earned income

Acceptable references are those that can verify your abilities and competencies such as: a. teachers b. previous employers c. supervisors d. business colleagues e. all of these

e. all of these

Effective personal tax strategies include: a. taking advantage of credits for which you qualify b. considering tax-exempt investments c. searching out all possible itemized deductions d. maximizing contributions to tax-deferred programs e. all of these

e. all of these

Financial institutions include the following: a. banks b. credit unions c. insurance companies d. investment companies e. all of these

e. all of these

The appropriate path for daily money decisions will: a. take time b. take effort c. result in lower stress c. result in personal financial security e. all of these

e. all of these

An organized system of financial records provides a basis for: a. handling daily business activities b. planning and measuring financial progress c. completing required tax reports d. making effective investment decisions e. all of these are correct

e. all of these are correct

Total earnings of a person minus the deductions for taxes and other items is called: a. budgeted income b. gross pay c. net worth d. total revenue e. take home pay

e. take home pay

What type of tax is imposed on the value of an individual's property at the time of his or her death?

estate

Vivian Reid just died. At the time of her death the total value of her assets was $150,000. The federal government collected $7,500 in taxes based on this value. What type of tax is this most likely to be?

estate tax

Sophia Martinez knows that if she continues to work full time, it will be difficult for her to get the time off she needs to be able to travel around the world. However, if she continues to work full time she will more easily earn the money she needs to take her trip and still have money left for her living expenses after she gets back from her trip. Which step in the financial planning process does this scenario demonstrate?

evaluating her alternatives

Increased consumer spending will usually cause:

higher employment levels

A personal balance sheet presents:

items you own and amounts you owe

One of the main purposes of personal financial statements is to:

measure your progress toward financial goals

A decrease in net worth could be the result of:

outflows exceeding inflows for a month

The amount of income that a person or household has available to spend after deductions for taxes and other items is called:

take home pay

Changes in the cost of living:

vary depending on where you live

career

A commitment to a profession that requires continued training and offers a clear path for occupational growth.

informal interview

A company visit or meeting at which one gathers information about a career or an organization.

exemption

A deduction from adjusted gross income for yourself, your spouse, and qualified dependents that is no longer allowed.

balance sheey

A financial statement that reports what an individual or a family owns and owes; also called a net worth statement.

cash flow statement

A financial statement that summarizes cash receipts and payments for a time period.

financial plan

A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities.

Bankruptcy

A legal procedure for dealing with debt problems of individuals.

cover letter

A letter that accompanies a résumé and is designed to express interest in a job and obtain an interview.

inflation

A rise in the general level of prices.

excise tax

A tax imposed on specific goods and services, such as gasoline, cigarettes, alcoholic beverages, tires, and air travel.

estate tax

A tax imposed on the value of a person's property at the time of his or her death.

inheritance tax

A tax levied on the value of property bequeathed by a deceased person.

flexible employee benefit program

Also referred to as cafeteria-style benefits. A program that allow workers to base their job benefits on a credit system and personal needs.

job

An employment position obtained mainly to earn money, without regard for interests or opportunities for advancement.

assets

Cash and other property with a monetary value.

take home pay

Earnings after deductions for taxes and other items; also called net pay.

itemized deductions

Expenses that can be deducted from adjusted gross income, such as medical expenses, real estate property taxes, home mortgage interest, charitable contributions, casualty losses, and certain work-related expenses

You choose to invest $50 a month into a retirement fund. Assuming an interest rate of 9%, how much will you have in 40 years?

FV of an annuity: $234,066.01

T/F: The purpose of a tariff, also known as an import tax, is to decrease the trade deficit, which always has the effect intended.

Fals

T/F: Tax avoidance refers to the use of illegal actions to reduce one's taxes.

False

T/F: Lenders benefit more than borrowers in times of high inflation

False

What is the process of making and using contacts to obtain and update career information and find job opportunities?

Networking

You wish to borrow $18,000 to buy a new car. The rate is 8.6% over 4 years with monthly payments. Find the monthly payments.

PV of an annuity: $444.52

capital gains

Profits from the sale of a capital asset such as stocks, bonds, or real estate.

Improvements in a person's financial position are the result of:

Saving current income and investing

William Davis has a goal of "saving $60 a month for vacation." William's goal lacks:

a time frame

adjusted gross income(AGI)

Gross income reduced by certain adjustments, such as contributions to an individual retirement account (IRA) and alimony payments.

passive income

Income resulting from business activities in which you do not actively participate.

time value of money

Increases in an amount of money as a result of interest earned.

Money received in the form of dividends or interest is classified as ______________ income. a. passive b. earned c. excluded d. capital gain e. investment

Investment

earned income

Money received for personal effort, such as wages, salary, commission, fees, tips, or bonuses.

personal financial planning

The process of managing your money to achieve personal economic satisfaction.

tax evasion

The use of illegal actions to reduce one's taxes.

tax avoidance

The use of legitimate methods to reduce one's taxes.

T/F: A drawback of flexible spending accounts is that any account funds must be used to pay for expenses incurred before year's end or the money is lost.

True

T/F: A medical savings account (MSA) or health savings account (HSA) allows health care costs to be paid with pretax dollars.

True

T/F: A tax-exempt employee benefit may be worth more than a tax-deferred benefit.

True

T/F: An elevator speech is a short, persuasive, focused summary of your unique experiences and skills used when networking.

True

T/F: An office audit requires that a person visit an IRS office to clarify some aspect of his or her tax return.

True

T/F: Discretionary income is money left over after paying for housing, food, and other necessities.

True

T/F: General skills, also known as soft skills, are skills that are adaptable to varied careers.

True

T/F: Real estate property taxes are the major source of revenue for local government.

True

T/F: Technical skills, also known as hard skills, are skills needed for a specific profession.

True

T/F: Long-term financial security can be achieved both through frugal living and wise investing

True

T/F: Present value computations are used to determine how much you need to deposit now so that you can withdraw a specified amount for a set number of years.

True

T/F: Saving and investing for the suture reduces the amount you can spend now is an example of an opportunity cost

True