Question 1

Monthly budget estimates for many line items are simply the annual estimate divided by 12.

Accepted Answer

A) True 
 B)False

Question 2

A liquidity ratio of 2.2 indicates $2.20 of income for each $1 of current liabilities.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of an inflexible expense?

Accepted Answer

A) Mortgage payments 
B) Entertainment 
C) Home maintenance 
D) Newspapers and magazines 
A) Mortgage payments 
B) Entertainment 
C) Home maintenance 
D) Newspapers and magazines

Question 4

Which of the following relationships is correct?

Accepted Answer

A) Liabilities = Net worth - Assets 
B) Liabilities = Assets 
C) Liabilities = Net worth + Assets 
D) Net worth = Assets - Liabilities 
A) Liabilities = Net worth - Assets 
B) Liabilities = Assets 
C) Liabilities = Net worth + Assets 
D) Net worth = Assets - Liabilities

Question 5

Among other things,a well-planned budget

Accepted Answer

A) forces you to choose among competing activities. 
B) plans for savings of at least 20% of your after-tax income. 
C) must include many categories of income and expense items. 
D) assures a positive savings each month. 
A) forces you to choose among competing activities. 
B) plans for savings of at least 20% of your after-tax income. 
C) must include many categories of income and expense items. 
D) assures a positive savings each month.

Question 6

A positive contribution to savings can

Accepted Answer

A) increase both assets and net worth. 
B) increase both assets and liabilities. 
C) increase net worth only. 
D) increase assets only or liabilities only. 
A) increase both assets and net worth. 
B) increase both assets and liabilities. 
C) increase net worth only. 
D) increase assets only or liabilities only.

Question 7

A positive contribution to savings must lead to an increase in assets,a decrease in liabilities,or a combination of each.

Accepted Answer

A) True 
 B)False

Question 8

In relation to the balance sheet or income statement,the budget

Accepted Answer

A) requires greater accuracy. 
B) requires greater concern for financial goals. 
C) is less concerned with planning. 
D) is less important. 
A) requires greater accuracy. 
B) requires greater concern for financial goals. 
C) is less concerned with planning. 
D) is less important.

Question 9

A master budget worksheet can be prepared on the same form that is used for the income statement.

Accepted Answer

A) True 
 B)False

Question 10

Current liabilities are often defined as those

Accepted Answer

A) payable immediately. 
B) payable within one year. 
C) payable over the same maturity as the asset they financed. 
D) that can be liquidated without decreasing your existing net worth. 
A) payable immediately. 
B) payable within one year. 
C) payable over the same maturity as the asset they financed. 
D) that can be liquidated without decreasing your existing net worth.

Question 11

Juanita has the following three ratios: (1)debt service coverage = 2.5, (2)debt ratio = 0.5,and (3)liquidity ratio = 0.8.We can say that Juanita has

Accepted Answer

A) poor solvency and poor liquidity. 
B) strong solvency and strong liquidity. 
C) strong liquidity but poor solvency. 
D) strong solvency but poor liquidity. 
A) poor solvency and poor liquidity. 
B) strong solvency and strong liquidity. 
C) strong liquidity but poor solvency. 
D) strong solvency but poor liquidity.

Question 12

Which of the following items would appear on a personal balance sheet?

Accepted Answer

A) A loan made on a life insurance policy 
B) Interest paid on an installment loan 
C) Interest received on a savings account 
D) Premiums paid on a health insurance policy 
A) A loan made on a life insurance policy 
B) Interest paid on an installment loan 
C) Interest received on a savings account 
D) Premiums paid on a health insurance policy

Question 13

Asset values on the balance sheet should reflect their acquisition costs.

Accepted Answer

A) True 
 B)False

Question 14

From a budgeting view,which of the following statements is not true concerning variances?

Accepted Answer

A) A favorable expense variance means the budgeted amount was more than actual. 
B) Cumulative variance = current month's variance + variances of previous months. 
C) Ideally,cumulative variances for the year will equal zero. 
D) Ideally,cumulative variances for the year should have a positive value. 
A) A favorable expense variance means the budgeted amount was more than actual. 
B) Cumulative variance = current month's variance + variances of previous months. 
C) Ideally,cumulative variances for the year will equal zero. 
D) Ideally,cumulative variances for the year should have a positive value.

Question 15

The primary functions of an investment asset are to increase your net worth and/or provide additional income.

Accepted Answer

A) True 
 B)False

Question 16

Dave Scott bought a used car in early 2007 for $12,000.He borrowed $11,000,which he is repaying over four years.During 2007,he made payments of $3,600,of which $800 was interest and $2,800 was repayment of principal.Dave believes the car depreciated about $4,000 in 2007.Given the above data we can say that by the end of 2005 the car had

Accepted Answer

A) increased Dave's net worth by $8,200. 
B) decreased Dave's net worth by $4,800. 
C) increased Dave's assets by $12,000,increased his liabilities by $11,000,and increased his net worth by $1,000. 
D) decreased Dave's net worth by $200. 
A) increased Dave's net worth by $8,200. 
B) decreased Dave's net worth by $4,800. 
C) increased Dave's assets by $12,000,increased his liabilities by $11,000,and increased his net worth by $1,000. 
D) decreased Dave's net worth by $200.

Question 17

Jan showed the following financial items at the ends of 2007 and 2085:
 
Jan's net worth changed in 2008 by

Accepted Answer

A) + $100. 
B) - $700. 
C) + $400. 
D) + $800. 
A) + $100. 
B) - $700. 
C) + $400. 
D) + $800.

Question 18

Common stocks are good examples of liquid assets.

Accepted Answer

A) True 
 B)False

Question 19

The current average savings rate for all U.S.families is generally in the range of:

Accepted Answer

A) 10 to 20%. 
B) 5 to 10%. 
C) 0 to 5%. 
D) 0 to - 5%. 
A) 10 to 20%. 
B) 5 to 10%. 
C) 0 to 5%. 
D) 0 to - 5%.

Question 20

Cash flow changes in net worth can be positive or negative.

Accepted Answer

A) True 
 B)False

Monthly budget estimates for many line items are simply the annual estimate divided by 12.

A liquidity ratio of 2.2 indicates $2.20 of income for each $1 of current liabilities.

Which of the following is an example of an inflexible expense?

Which of the following relationships is correct?

Among other things,a well-planned budget

A positive contribution to savings can

A positive contribution to savings must lead to an increase in assets,a decrease in liabilities,or a combination of each.

In relation to the balance sheet or income statement,the budget

A master budget worksheet can be prepared on the same form that is used for the income statement.

Current liabilities are often defined as those

Juanita has the following three ratios: (1)debt service coverage = 2.5, (2)debt ratio = 0.5,and (3)liquidity ratio = 0.8.We can say that Juanita has

Which of the following items would appear on a personal balance sheet?

Asset values on the balance sheet should reflect their acquisition costs.

From a budgeting view,which of the following statements is not true concerning variances?

The primary functions of an investment asset are to increase your net worth and/or provide additional income.

Jan showed the following financial items at the ends of 2007 and 2085: Jan's net worth changed in 2008 by

Common stocks are good examples of liquid assets.

The current average savings rate for all U.S.families is generally in the range of:

Cash flow changes in net worth can be positive or negative.

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

Monthly budget estimates for many line items are simply the annual estimate divided by 12.

A liquidity ratio of 2.2 indicates $2.20 of income for each $1 of current liabilities.

Which of the following is an example of an inflexible expense?

Which of the following relationships is correct?

Among other things,a well-planned budget

A positive contribution to savings can

A positive contribution to savings must lead to an increase in assets,a decrease in liabilities,or a combination of each.

In relation to the balance sheet or income statement,the budget

A master budget worksheet can be prepared on the same form that is used for the income statement.

Current liabilities are often defined as those

Juanita has the following three ratios: (1)debt service coverage = 2.5, (2)debt ratio = 0.5,and (3)liquidity ratio = 0.8.We can say that Juanita has

Which of the following items would appear on a personal balance sheet?

Asset values on the balance sheet should reflect their acquisition costs.

From a budgeting view,which of the following statements is not true concerning variances?

The primary functions of an investment asset are to increase your net worth and/or provide additional income.

Jan showed the following financial items at the ends of 2007 and 2085: Jan's net worth changed in 2008 by

Common stocks are good examples of liquid assets.

The current average savings rate for all U.S.families is generally in the range of:

Cash flow changes in net worth can be positive or negative.

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

Filters