Question 1

Effective budgeting in an expense area will lead to a zero variance at year end.

Accepted Answer

A) True 
 B)False  True

Question 2

The budget's primary function is to keep track of your income and expenditures.

Accepted Answer

A) True 
 B)False  False

Question 3

Which item below contains all inflexible expenses?

Accepted Answer

A) Rent,dining out,payroll taxes 
B) Hobbies,clothing,vacations 
C) Life insurance,health insurance,utilities 
D) Auto loan payments,mortgage payments,auto insurance 
A) Rent,dining out,payroll taxes 
B) Hobbies,clothing,vacations 
C) Life insurance,health insurance,utilities 
D) Auto loan payments,mortgage payments,auto insurance D

Question 4

A master budget worksheet is simply forecasted income and expenses for the budget year.

Accepted Answer

A) True 
 B)False

Question 5

In extending an expense item for the current budget year,an often-used and useful approach is to

Accepted Answer

A) use last year's figure. 
B) use the average of the last three years. 
C) use last year's figure plus a usual 10% "fudge factor." 
D) adjust last year's figure upwards by this year's expected inflation. 
A) use last year's figure. 
B) use the average of the last three years. 
C) use last year's figure plus a usual 10% "fudge factor." 
D) adjust last year's figure upwards by this year's expected inflation.

Question 6

The master budget worksheet shows

Accepted Answer

A) forecasted income and expenses for the budget year. 
B) month-to-month budget variances. 
C) a reconciliation of this year's budget to last year's balance sheet. 
D) all balance sheet and income statement accounts that relate to the annual budget. 
A) forecasted income and expenses for the budget year. 
B) month-to-month budget variances. 
C) a reconciliation of this year's budget to last year's balance sheet. 
D) all balance sheet and income statement accounts that relate to the annual budget.

Question 7

A debt service coverage ratio of 1.0 would mean all of your future income would be needed to repay existing debts.

Accepted Answer

A) True 
 B)False

Question 8

The following two items are from Marcia White's "Dining Out" expense category:
(1)January monthly variance = $25 (favorable);
(2)February cumulative variance = -$10 (unfavorable).
If Marcia budgeted $85 a month for this activity,we know that she

Accepted Answer

A) spent $60 in January and $95 in February. 
B) spent $60 in January and $120 in February. 
C) can bring the activity back within budget by spending $85 in March. 
D) has not budgeted properly. 
A) spent $60 in January and $95 in February. 
B) spent $60 in January and $120 in February. 
C) can bring the activity back within budget by spending $85 in March. 
D) has not budgeted properly.

Question 9

Bud Wiser's nominal income was $10,000 in 2007 and $11,000 in 2008.If the inflation rate in 2008 was 8%,Bud's real income fell in 2008.

Accepted Answer

A) True 
 B)False

Question 10

Three years ago,Michelle bought a custom-made bookcase to fit in the corner of her apartment.She paid $1,000 for it.To replace it today would cost $1,500;however,if she had to sell it,she believes she could get only $700.The appropriate balance sheet amount for the bookcase is

Accepted Answer

A) $1,000. 
B) $1,500. 
C) $ 700. 
D) $1,200. 
A) $1,000. 
B) $1,500. 
C) $ 700. 
D) $1,200.

Question 11

A debt ratio of 2.2 means you have $2.20 of assets for each $1 of total liabilities.

Accepted Answer

A) True 
 B)False

Question 12

The primary purpose of the monthly review and control is

Accepted Answer

A) to indicate future revised spending amounts,assuming some prior variances. 
B) to revise action plans. 
C) to identify family members causing unfavorable variances. 
D) make sure the previous month's budget is balanced. 
A) to indicate future revised spending amounts,assuming some prior variances. 
B) to revise action plans. 
C) to identify family members causing unfavorable variances. 
D) make sure the previous month's budget is balanced.

Question 13

An asset is anything you own that has market value.

Accepted Answer

A) True 
 B)False

Question 14

If take-home pay is $10,000 and debt service charges are $4,000,the debt service coverage ratio is 0.40.

Accepted Answer

A) True 
 B)False

Question 15

Inflation influences real income but not real net worth .

Accepted Answer

A) True 
 B)False

Question 16

A loan on a life insurance policy is shown as a noncurrent liability even though the debt has no due date.

Accepted Answer

A) True 
 B)False

Question 17

Flexible expenses are best understood as those expenses over which you have little or no control.

Accepted Answer

A) True 
 B)False

Question 18

The sum of current and noncurrent liabilities is net worth.

Accepted Answer

A) True 
 B)False

Question 19

People suffering from sticker shock probably have

Accepted Answer

A) overestimated their real income. 
B) underestimated their nominal income. 
C) overestimated inflation. 
D) underestimated inflation. 
A) overestimated their real income. 
B) underestimated their nominal income. 
C) overestimated inflation. 
D) underestimated inflation.

Question 20

Mona Farrow has $2,000 of liquid assets and $12,000 of take-home pay.Mona has two months of liquid reserves and most financial advisors would consider this inadequate.

Accepted Answer

A) True 
 B)False

Effective budgeting in an expense area will lead to a zero variance at year end.

The budget's primary function is to keep track of your income and expenditures.

Which item below contains all inflexible expenses?

A master budget worksheet is simply forecasted income and expenses for the budget year.

In extending an expense item for the current budget year,an often-used and useful approach is to

The master budget worksheet shows

A debt service coverage ratio of 1.0 would mean all of your future income would be needed to repay existing debts.

The following two items are from Marcia White's "Dining Out" expense category: (1)January monthly variance = $25 (favorable); (2)February cumulative variance = -$10 (unfavorable). If Marcia budgeted $85 a month for this activity,we know that she

Bud Wiser's nominal income was $10,000 in 2007 and $11,000 in 2008.If the inflation rate in 2008 was 8%,Bud's real income fell in 2008.

Three years ago,Michelle bought a custom-made bookcase to fit in the corner of her apartment.She paid $1,000 for it.To replace it today would cost $1,500;however,if she had to sell it,she believes she could get only $700.The appropriate balance sheet amount for the bookcase is

A debt ratio of 2.2 means you have $2.20 of assets for each $1 of total liabilities.

The primary purpose of the monthly review and control is

An asset is anything you own that has market value.

If take-home pay is $10,000 and debt service charges are $4,000,the debt service coverage ratio is 0.40.

Inflation influences real income but not real net worth .

A loan on a life insurance policy is shown as a noncurrent liability even though the debt has no due date.

Flexible expenses are best understood as those expenses over which you have little or no control.

The sum of current and noncurrent liabilities is net worth.

People suffering from sticker shock probably have

Mona Farrow has $2,000 of liquid assets and $12,000 of take-home pay.Mona has two months of liquid reserves and most financial advisors would consider this inadequate.

Financial Planning: Why Its Important to You

The Time Value of Money: All Dollars Are Not Created Equal

Taxes: the Governments Share of Your Rewards

Liquidity Management: Managing Current Assets and Current Liabilities

Short-Term Credit Management: Consumer Credit

Consumer Durables: the Personal Auto

Housing: the Cost of Shelter

Financial Markets and Instruments: Learning the Investment Environment

Investment Basics: Understanding Risk and Return

Stocks and Bonds: Your Most Common Investments

Mutual Fundsother Pooling Arrangements: Simplifying, Maybe Improving Investment Performance

Property and Liability Insurance: Protecting Your Lifestyle Assets

Health Care and Disability Insurance: Protecting Your Earning Capacity

Life Insurance and Estate Planning: Protecting Your Dependents

Retirement Planning: Planning for Your Long-Term Needs

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Exam 3: Financial Statement and Budgets: Where Are You Now and Where Are You Going

Effective budgeting in an expense area will lead to a zero variance at year end.

The budget's primary function is to keep track of your income and expenditures.

Which item below contains all inflexible expenses?

A master budget worksheet is simply forecasted income and expenses for the budget year.

In extending an expense item for the current budget year,an often-used and useful approach is to

The master budget worksheet shows

A debt service coverage ratio of 1.0 would mean all of your future income would be needed to repay existing debts.

The following two items are from Marcia White's "Dining Out" expense category: (1)January monthly variance = $25 (favorable); (2)February cumulative variance = -$10 (unfavorable). If Marcia budgeted $85 a month for this activity,we know that she

Bud Wiser's nominal income was $10,000 in 2007 and $11,000 in 2008.If the inflation rate in 2008 was 8%,Bud's real income fell in 2008.

Three years ago,Michelle bought a custom-made bookcase to fit in the corner of her apartment.She paid $1,000 for it.To replace it today would cost $1,500;however,if she had to sell it,she believes she could get only $700.The appropriate balance sheet amount for the bookcase is

A debt ratio of 2.2 means you have $2.20 of assets for each $1 of total liabilities.

The primary purpose of the monthly review and control is

An asset is anything you own that has market value.

If take-home pay is $10,000 and debt service charges are $4,000,the debt service coverage ratio is 0.40.

Inflation influences real income but not real net worth .

A loan on a life insurance policy is shown as a noncurrent liability even though the debt has no due date.

Flexible expenses are best understood as those expenses over which you have little or no control.

The sum of current and noncurrent liabilities is net worth.

People suffering from sticker shock probably have

Mona Farrow has $2,000 of liquid assets and $12,000 of take-home pay.Mona has two months of liquid reserves and most financial advisors would consider this inadequate.

Financial Planning: Why Its Important to You

The Time Value of Money: All Dollars Are Not Created Equal

Taxes: the Governments Share of Your Rewards

Liquidity Management: Managing Current Assets and Current Liabilities

Short-Term Credit Management: Consumer Credit

Consumer Durables: the Personal Auto

Housing: the Cost of Shelter

Financial Markets and Instruments: Learning the Investment Environment

Investment Basics: Understanding Risk and Return

Stocks and Bonds: Your Most Common Investments

Mutual Fundsother Pooling Arrangements: Simplifying, Maybe Improving Investment Performance

Property and Liability Insurance: Protecting Your Lifestyle Assets

Health Care and Disability Insurance: Protecting Your Earning Capacity

Life Insurance and Estate Planning: Protecting Your Dependents

Retirement Planning: Planning for Your Long-Term Needs

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