Deck 2: Your Financial Statements and Plans

Question 1

The income statement includes information on your latest paycheck.

Answer 1

False

Question 2

All assets are recorded on the balance sheet at their original cost.

Answer 2

False

Question 3

One could use statements from their various financial institutions to help complete a balance sheet.

Answer 3

True

Question 4

Money I loaned to a friend is a liability on my balance sheet.

Question 5

A budget is a detailed financial forecast.

Question 6

The income and expenditures statement provides a measure of financial performance over a period of time.

Question 7

For purposes of personal financial planning,assets appear on a balance sheet at fair market value,just as they would under Generally Accepted Accounting Principles (GAAP)on a business balance sheet.

Question 8

Investment assets include items such as boats or automobiles.

Question 9

Financial assets are intangible assets acquired to achieve long-term personal financial goals.

Question 10

You are more likely to achieve your goals if a definite goal date is set.

Question 11

The financial planning process is regulated by state governments when done by professionals.

Question 12

Assets purchased on credit should be included on the asset side of the balance sheet.

Question 13

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

Question 14

A budget is a detailed statement of what income and expenses occurred over a past period.

Question 15

A house and land are examples of financial property.

Question 16

Assets listed on your balance sheet must have monetary value.

Question 17

Jewelry,furniture and computers are examples of personal property.

Question 18

Financial planning is necessary only if you earn a lot of money.

Question 19

A charge made on your credit card becomes a liability as soon as the charge is incurred.

Question 20

Most types of personal property depreciate,or decline in value,shortly after being put into use.

Question 21

Your net worth and your equity in owned assets are the same basic concept.

Question 22

Interest you earned on your savings account would be an entry on the balance sheet.

Question 23

A cash surplus will typically produce a positive savings ratio.

Question 24

If you listed your gross salary in the income portion of the budget,the expenditures section must include income taxes and social security.

Question 25

Only the current month's payment on your mortgage loans would be listed on the balance sheet as a liability.

Question 26

Your auto loan payments would be listed as an expense on the income statement.

Question 27

If you use net salary as income on your budget,the expenditures section must include income and social security taxes.

Question 28

Mary and Tom purchased their home for $150,000,and it is now worth $175,000.Its asset value is $150,000.

Question 29

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

Question 30

The equity in your home is the difference between the loan balance and the purchase price.

Question 31

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

Question 32

A cash deficit decreases net worth.

Question 33

Budgets should be prepared on an accural basis.

Question 34

The income and expenditures statement is a summary of actual income and expenditures over a specific point of time.

Question 35

Inability to reach short-term goals will significantly affect your ability to reach long-term goals.

Question 36

An income statement deficit would increase net worth.

Question 37

A budget is an orderly estimate of income and expenditures.

Question 38

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

Question 39

The savings ratio is useful in the evaluation of the balance sheet.

Question 40

If you obtain a loan to purchase a car in June,this loan amount would be included as income for June.

Question 41

Financial planning experts recommend married couples use a money management system that includes at least 2 checking accounts.

Question 42

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

Question 43

Using the future value calculations to estimate the funds needed to meet a goal takes compounding into account.

Question 44

The level of the debt service ratio would indicate your ability to meet loan payments out of current income.

Question 45

The best way to balance your budget is to increase borrowing.

Question 46

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

Question 47

One should quickly make important financial decisions soon after a financial shock,such as death or divorce.

Question 48

With cafeteria plans,employees can select the employee benefits that best meet their needs.

Question 49

A cash budget has value only if you use it,review it regularly,and keep carful records of income and expenses.

Question 50

Monthly statements and pay stubs can be shredded when year-end statements are received.

Question 51

When preparing a cash budget,estimating expenses using actual expenses from previous years and by tracking current expenses makes the task easier.

Question 52

The savings ratio indicates the percentage of after-tax income that is saved.

Question 53

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

Question 54

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

Question 55

You have a balanced budget when total income for the year equals or exceeds total expenditures for the year.

Question 56

You may be under-budgeting for food if you continually have monthly deficits in the food category.

Question 57

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

Question 58

Budgeting and record keeping are really the same activity.

Question 59

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

Question 60

The liquidity ratio is an indicator of a family's ability to pay current debts if there is an interruption in income.

Question 61

Your ____ is an example of a liquid asset.

A) home
B) car
C) checking account
D) charge account
E) life insurance cash value

Question 62

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?

A) $200,000 asset and $55,000 liability
B) $200,000 asset and $90,000 liability
C) $175,000 asset and $55,000 liability
D) $175,000 asset and $90,000 liability
E) $100,000 asset and $55,000 liability

Question 63

Kathy purchased new furniture for $10,000.She put $1,000 down and financed $9,000.She will pay $350 per month until the loan is paid off.Which of the following are true?

A) The furniture should be recorded as an asset of $10,000 on Kathy's balance sheet.
B) The $9,000 is entered as a liability on Kathy's balance sheet.
C) The furniture should be recorded as a $1,000 expenditure on Kathy's balance sheet.
D) The $350 payments are expenditures on Kathy's income and expenditure statement.
E) All are correct except c

Question 64

____ is an example of an personal asset.

A) Jewelry
B) Recreational equipment
C) Corporate bond
D) Charge account balance
E) Auto insurance premium

Question 65

Net worth is measured by

A) bank card balances.
B) house mortgage balances.
C) amount owed on an automobile loan.
D) assets minus liabilities.
E) insurance premium.

Question 66

The balance sheet equation is:

A) Total Assets / Total Liabilities = Net Worth.
B) Total Assets * Total Liabilities = Net Worth.
C) Total Assets - Total Liabilities = Net Worth.
D) Total Assets + Total Liabilities = Net Worth.
E) Total Liabilities - Total Assets = Net Worth.

Question 67

When Phil lists his house on his balance sheet,he should record the

A) actual purchase price.
B) replacement value.
C) insured value.
D) sale price.
E) fair market value.

Question 68

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

A) mortgaged home
B) savings account
C) owned automobile
D) checking account
E) leased automobile

Question 69

The balance sheet describes a family's wealth

A) at a certain point in tine.
B) as an annual summary.
C) as a time period less than one year.
D) at a future time.
E) none of these

Question 70

____ would not be a long-term financial goal.

A) Purchasing a new car
B) Providing adequate life insurance
C) Reducing income taxes
D) Paying your phone bill
E) Planning for retirement

Question 71

____ would not be listed as a liability on your balance sheet.

A) Taxes owed
B) Loan balances
C) Bank credit card charges
D) Savings accounts
E) Rent due

Question 72

A budget is a

A) purchase plan.
B) line of credit.
C) financial statement.
D) detailed financial forecast.
E) set of personal financial objectives.

Question 73

The main purpose of a budget is to

A) develop goals.
B) develop a financial plan.
C) give feedback to the plan.
D) monitor and control financial outcomes.
E) revise goals.

Question 74

Balance sheet liabilities should be recorded at their

A) original outstanding balance.
B) year-end outstanding balance.
C) average outstanding balance.
D) current outstanding balance.
E) none of these.

Question 75

In a budget,"fun money" is a budget category used for family members to spend as they like without having to account for how it is spent.

Question 76

Another term sometimes used instead of net worth is

A) assets.
B) net debts.
C) long-term liabilities
D) equity.
E) liquid assets.

Question 77

Budgets are

A) restrictive.
B) complicated.
C) are forward looking.
D) permanent.
E) unnecessary.

Question 78

On the balance sheet,a mortgage loan is recorded as the

A) interest only.
B) sum of interest paid and the outstanding balance.
C) sum of interest due and the outstanding balance.
D) principal portion only.
E) none of the above.

Question 79

The three parts of your balance sheet are

A) income,liabilities,balance.
B) assets,expenditures,balance.
C) assets,liabilities,balance.
D) assets,liabilities,net worth.
E) income,liabilities,net worth.

Question 80

Professional financial planners are regulated by

A) the federal government.
B) self-regulation.
C) state agencies.
D) local regulators.
E) no one.