Exam 2: Using Financial Statements and Budgets

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 budget will have value only if it is actually used and [records are kept of actual income and expenses | spending never deviates from the budgeted amount].

Which of the following is not among the four categories accounting for almost three-quarters of consumer spending?

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. -When your liabilities exceed your assets,you are [solvent | insolvent].

A(n)____ would not be listed as an asset on your balance sheet.

If your income and expense statement shows a cash deficit,you may have

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. -[Medical expenses | Rent payments] would be more difficult to estimate for the coming year.

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 primary function of financial statements is to provide a picture of your [actual | projected] financial position.

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 budget shows a deficit,one option is to increase [income | expenses] to regain balance.

When the income and expense statement indicates a cash surplus,this may be used to increase net worth by increasing assets or decreasing liabilities.

Net worth typically increases over the life cycle of an individual or family,peaking at about age 55.

Inflation this coming year is expected to be 4 percent.If Mr.Gonza earned $37,000 this year,how much must he earn the following year just to keep up with inflation and maintain the balance between his income and his increasing expenditures? (Show all work.)

A cash deficit decreases net worth.

Using personal balance sheet information,the ____ ratio indicates your ability to meet current debt payments.

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.

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 liquidity ratio is designed to show the percentage of [your current debt obligations | next month's credit obligations] you could cover with your current assets.

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. -Four categories,accounting for 75% of consumer spending,include [entertainment | food].

The best place to keep a budget is in a safe deposit box.

A personal balance sheet shows your financial condition as of the time the statement is prepared.

A home and land should be recorded on the personal balance sheet at their original cost.