Exam 2: Using Financial Statements and Budgets

A solvency ratio shows how much "cushion" you have as a protection against insolvency.

When a cash surplus exists on your income and expenditure statements,you can

Your ____ is an example of a liquid asset.

Net worth achieves is highest level beginning at age 65 and increases throughout retirement years.

Michael and Sandy purchased a home for $100,000 five years ago.If it appreciated 6% annually,what is it worth today?

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -The total amount of salary you earn before taxes are deducted is called your [gross | net] pay.

The balance sheet equation is assets plus liabilities equals net worth.

Using time value of money is most important when planning for short-term goals.

Mandy and Jeff have a net worth of $25,000 and total assets of $140,000.If their revolving credit and unpaid bills total $2,200,what are their total liabilities?

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -The first step in financial planning is to [define financial goals | set up a budget.]

Net worth is measured by

Sam and his wife Ann purchased a home in Lubbock,Texas in 1980 for $100,000.Their original home mortgage was for $90,000.The house has a current market value of $175,000 and a replacement value of $200,000.They still owe $55,000 on their home mortgage.Sam and Sally are now constructing their balance sheet.How should their home be reflected on their current personal balance sheet?

Balance sheets and income statements are most useful if prepared at least annually.

To determine how effectively the budget is working,you can use

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -If your expenses exceed your income,the bottom line of your income/expense statement will show a [surplus | deficit].

A family could have a positive savings ratio at the same time its debt service ratio is increasing.

Using time value of money is important when planning for long-term goals.

Net income (after taxes)should be used when developing an income and expense statement.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -A [savings account | retirement account] would be an example of a liquid asset.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -An asset must have [market | monetary] value to be included on a balance sheet.