Deck 3: Money Management Strategy: Financial Statements and Budgeting

Question 1

Which of the following financial documents would most likely be stored in a safe-deposit box?

A) W-2 forms
B) Personal financial statements
C) Warranties
D) Savings certificates
E) Checking account statements

Answer 1

Savings certificates

Question 2

Money management activities refer to long-term investment decisions.

Answer 2

False

Question 3

A personal cash flow statement presents income and outflows of cash for a given time period, such as a month.

Answer 3

True

Question 4

Insolvency is a result of having more liabilities than assets.

Question 5

A home file should be used for:

A) storing all financial documents and records.
B) financial records for current needs.
C) documents that require maximum security.
D) obsolete financial documents.
E) records that are difficult to replace.

Question 6

Furniture, jewelry, and an automobile are examples of liquid assets.

Question 7

Opportunity costs refer to:

A) current spending habits.
B) changing economic conditions that affect a person's cost of living.
C) storage facilities to make financial documents easily available.
D) trade-offs associated with financial decisions.
E) avoiding the use of consumer credit.

Question 8

In order to calculate savings ratio, the amount saved each month is divided by net income.

Question 9

A budget is a specific plan of how a person or family will spend their money.

Question 10

Take-home pay is a person's earnings after deductions for taxes and other items.

Question 11

A personal cash flow statement can serve as the basis for the budget categories used by an individual or family.

Question 12

Discretionary income is money left over after paying for housing, food, and other necessities.

Question 13

A person's net worth is the difference between the value of the items owned and the amounts owed to others.

Question 14

A personal balance sheet reports your income and expenses.

Question 15

Financial records that are referred to on a regular basis should be kept in a safe-deposit box.

Question 16

Definite financial obligations are referred to as variable expenses.

Question 17

If expenses for a month are greater than income, an increase in net worth will result.

Question 18

For many years, the United States has ranked highest among industrial nations in savings rate.

Question 19

When one money management decision is made, an alternative must be given up.

Question 20

Opportunity costs are only associated with money management decisions involving long-term financial security.

Question 21

Items that you own with a monetary worth are referred to as:

A) liabilities.
B) variable expenses.
C) net worth.
D) income.
E) assets.

Question 22

Which one of the following illustrates an insolvent situation?

A) Assets $56,000; annual expenses $60,000
B) Assets $78,000; net worth $22,000
C) Liabilities $45,000; net worth $6,000
D) Assets $40,000; liabilities $45,000
E) Annual cash inflows $45,000; liabilities $50,000

Question 23

Liquid assets refer to:

A) amounts that must be paid soon.
B) cash and other items that are easily converted to cash.
C) total income available to a family for spending.
D) the value of investments.
E) amounts on which taxes must be paid.

Question 24

Which of the following are considered to be personal financial statements?

A) Budget and credit card statements
B) Balance sheet and cash flow statement
C) Checkbook and budget
D) Tax returns
E) Bank statement and savings passbook

Question 25

Which of the following would be an example of a personal and employment document?

A) Budget
B) Passbook
C) Social Security card
D) Property tax bill
E) Lease

Question 26

The value of items owned minus the amounts owed to others equals:

A) net assets.
B) net worth.
C) total liabilities.
D) total income.
E) budgeted expenses.

Question 27

A person's net worth is computed by:

A) adding assets and liabilities.
B) deducting current living expenses from total assets.
C) subtracting total liabilities from total assets.
D) subtracting assets from current liabilities.
E) adding liabilities and budgeted expenses.

Question 28

A personal balance sheet presents:

A) amounts budgeted for spending.
B) income and expenses for a period of time.
C) earnings on savings and investments.
D) items owned and amounts owed.
E) family financial goals.

Question 29

Which type of financial records includes stock and bond reports?

A) Investment
B) Insurance
C) Estate planning
D) Tax
E) Consumer purchase

Question 30

A person's net worth would increase as a result of:

A) reduced amounts owed to others.
B) reduced earnings.
C) increased spending for current living expenses.
D) decreased value of personal possessions.
E) decreased value of investments.

Question 31

Liabilities are amounts representing:

A) debts.
B) items of value.
C) living expenses.
D) taxable income.
E) current assets.

Question 32

Which of the following would be considered a long-term liability?

A) Charge account payment
B) Mortgage
C) Six month personal loan
D) Amount due for taxes
E) Amount due on a credit card

Question 33

Warranties are commonly associated with ____________ purchases.

A) investment
B) insurance
C) credit
D) financial service
E) consumer

Question 34

The current financial position (including net worth) of an individual or family is best presented with the use of a(n):

A) budget.
B) cash flow statement.
C) balance sheet.
D) bank statement.
E) time value of money report.

Question 35

Current liabilities differ from long-term liabilities based on:

A) the amount owed.
B) the financial situation of the creditor.
C) the interest rate charged.
D) when the debt is due.
E) current economic conditions.

Question 36

An individual retirement account is an example of a(n) ____________ asset.

A) personal
B) common
C) investment
D) household
E) budgeted

Question 37

A family with $45,000 in assets and $22,000 of liabilities would have a net worth of:

A) $45,000.
B) $23,000.
C) $22,000.
D) $67,000.
E) $41,000.

Question 38

Which one of the following presents a summary of income and outflows for a period of time?

A) Balance sheet
B) Bank statement
C) Investment summary
D) Cash flow statement
E) Asset report

Question 39

A cash flow statement reports a person's or a family's:

A) net worth.
B) current income and payments.
C) plan for spending.
D) value of investments.
E) balance of savings.

Question 40

Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?

A) Budget variance
B) Investment assets
C) Long-term liabilities
D) Current assets
E) Current liabilities

Question 41

A decrease in net worth could be the result of:

A) income exceeding expenses for a month.
B) expenses exceeding income for a month.
C) assets exceeding expenses.
D) increased earnings on the job.
E) income and expenses being equal for a month.

Question 42

To determine a person's solvency, which financial document should be consulted?

A) Cash flow statement
B) Budget
C) Debt consolidation statement
D) Balance sheet
E) Credit report

Question 43

A budget deficit would result when a person's or family's:

A) actual expenses are less than planned expenses.
B) actual expenses are greater than planned expenses.
C) actual expenses equal planned expenses.
D) assets exceed liabilities.
E) net worth decreases.

Question 44

Jennifer Rodrick uses a computer to help her record her spending each month. She updates her records weekly. This would be an example of:

A) money management.
B) an opportunity cost.
C) a balance sheet.
D) creative accounting.
E) electronic analysis.

Question 45

A common deduction from a person's paycheck is for:

A) interest.
B) taxes.
C) rent.
D) unemployment.
E) current liabilities.

Question 46

Which one of the following should be budgeted first?

A) Variable expenses
B) Vacation expenses
C) Fixed expenses
D) Unplanned living expenses
E) Recreation expenses

Question 47

Nick Boss has a savings account with $550 in it. He knows that he can withdraw this money whenever he wishes. This would be an example of:

A) money management.
B) an opportunity cost.
C) a limited asset.
D) a liquid asset.
E) net worth analysis.

Question 48

Kyle Burroughs has decided to put $25 more per week in his savings account. He knows this will reduce his ability to go out to eat each week but thinks building his savings is important. This would be an example of:

A) a budget variance.
B) an opportunity cost.
C) a balance sheet.
D) an accounting error.
E) a budget anomaly.

Question 49

When it comes to savings, most Americans:

A) have an adequate emergency fund.
B) devote large portions of their income to savings.
C) find saving difficult.
D) keep substantial amounts in a regular savings account.
E) reduce the amount they save during their working life.

Question 50

Which one of the following is the best example of a long-term goal for a young couple?

A) A new car
B) Reduction of amounts owed on credit cards
C) Increased savings
D) Income for retirement
E) Funds for a vacation

Question 51

Total earnings of a person minus the deductions for taxes and other items is called:

A) budgeted income.
B) gross pay.
C) net worth.
D) total revenue.
E) take-home pay.

Question 52

Changes in the cost of living are:

A) different in various geographic areas.
B) the same for different locations.
C) constant from month to month.
D) the same for all goods and services.
E) not a factor when preparing a budget.

Question 53

Karen Price has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes. This would be an example of:

A) money management.
B) opportunity cost analysis.
C) a balance sheet.
D) a liquidation exercise.
E) a budget variance.

Question 54

Ed Bostrom wants to reduce his fixed expenses. Which action would be appropriate?

A) Get a part-time job
B) Eat more meals at home rather than in restaurants
C) Find a place to live with a lower rent
D) Save more money for the future
E) Buy on credit items than might cost more later

Question 55

If a family planned to spend $370 for food during March but only spent $348, this difference would be referred to as a:

A) variance.
B) deficit.
C) fixed living expense.
D) budget reduction.
E) contribution to net worth.

Question 56

Payments that do not vary from month to month are ____________ expenses.

A) fixed
B) usage
C) variable
D) luxury
E) output

Question 57

Which of the following payments would be considered a variable expense?

A) Rent
B) Installment loan payment
C) Mortgage payment
D) Payment on a car loan
E) Water bill

Question 58

A personal balance sheet:

A) predicts income and expenses.
B) reports what an individual or a family owes and owns.
C) reports income and expenses or an individual or a family.
D) predicts net worth of an economic entity.
E) analyzes debt payment activities.

Question 59

Improvements in a person's financial position are the result of:

A) increased liabilities.
B) reductions in earnings.
C) increased savings and investments.
D) increased purchases on credit.
E) lower amounts deposited in savings.

Question 60

During the past month, Jennifer Ernet had income of $3,000. During the month, her net worth declined by $200. If no other financial activities occurred, this means Jennifer's payments for the month were:

A) $3,200.
B) $3,000.
C) $2,800.
D) $200.
E) $0.

Question 61

The Hernandez family budgets $420 a month for food. Last month they spent $413, which creates a:

A) budget surplus of $7.
B) budget deficit of $7.
C) budget surplus of $420.
D) budget deficit of $413.
E) balanced budget.

Question 62

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her investment assets?

A) $2,050
B) $98,000
C) $27,800
D) $44,050
E) $171,900

Question 63

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is the total value of her debts?

A) $267,500
B) $105,500
C) $162,000
D) $205,500
E) None of these

Question 64

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her personal assets?

A) $2,050
B) $98,000
C) $27,800
D) $44,050
E) $171,900

Question 65

When preparing her monthly budget, Marge Kent has a total spending allowance of $4,600. Each month she pays $1,200 in rent, $60 for cable television and Internet service, and $240 for her auto loan. What percentage of her budget goes for these fixed expenses?

A) 6 percent
B) 12 percent
C) 27 percent
D) 33 percent
E) 40 percent

Question 66

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her real estate assets?

A) $2,050
B) $98,000
C) $27,800
D) $44,050
E) $171,900

Question 67

Sean Carter needs to store monthly statements from his bank, his credit card company and from his savings and loan. Where is the most appropriate place for Sean to store this information?

A) Home file cabinet
B) Safe deposit box
C) Personal computer
D) Best friend's house
E) None of these

Question 68

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the value of her liquid assets?

A) $2,050
B) $98,000
C) $27,800
D) $44,050
E) $171,900

Question 69

Patricia McDonald has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500 and owes $7,800 on her auto loan. She has also purchased some stock worth $5,500 and she has a retirement account worth $38,550. What is the total value of her assets?

A) $2,050
B) $98,000
C) $27,800
D) $44,050
E) $171,900

Question 70

Jonathan Wynn has developed a budget that he follows each month. Jonathan has an envelope for each type of expenditure. After he cashes his paycheck, he puts the amount of cash in each envelope that he plans to spend on that category each month. What type of budget has Jonathan created?

A) Mental budget
B) Physical budget
C) Written budget
D) Computerized budget
E) None of these

Question 71

This month, Ken Grossman has cash inflows of $3,100 and cash outflows of $2,950, resulting in a

A) balanced budget.
B) surplus of $150.
C) deficit of $150.
D) surplus of $3,100.
E) deficit of $2,950.

Question 72

Patricia McDonald has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is Patricia's net worth?

A) $267,500
B) $105,500
C) $162,000
D) $205,500
E) $132,000

Question 73

Samuel Jackson has developed a budget that he follows each month. This is a budget that he keeps in his head. He does not write anything down, nor does he use a computer to keep track of this budget. What type of budget has Samuel created?

A) Mental budget
B) Physical budget
C) Written budget
D) Computerized budget
E) None of these

Question 74

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $108,000, the value of her personal possessions is $62,000 and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $9,500 and the value of her long term liabilities is $68,000. What is Jamie's net worth?

A) $267,500
B) $105,500
C) $170,000
D) $205,500
E) None of these

Question 75

Kathy Stumbaugh has determined that the value of her assets is $46,000 and the value of her debts is $32,000. The difference between these two is $14,000. The $14,000 could be referred to as her:

A) nest egg.
B) total assets.
C) adjusted assets.
D) debt equity.
E) net worth.

Question 76

Katherine Kocher has determined the following information about her own financial situation. Her checking account is worth $850 and her savings account is worth $1,200. She owns her own home that has a market value of $98,000. She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300. She has a car worth $12,500. She has recently purchased a 2-year certificate of deposit worth $5,500 and she has a retirement account worth $38,550. What is the total value of her assets?

A) $127,850
B) $98,000
C) $168,600
D) $159,900
E) $171,900

Question 77

A person has $1,250 in liabilities, monthly savings of $200, and monthly gross income of $2,500. What is the person's savings ratio?

A) 0.52
B) 0.08
C) 2.35
D) 0.16
E) 12.58

Question 78

A family has a net worth of $156,000 and liabilities of $167,000, what is the amount of their assets?

A) $11,000
B) $156,000
C) $167,000
D) $323,000
E) $452,000

Question 79

Jamie McFarland has determined that the value of her liquid assets is $4,500, the value of her real estate is $128,000, the value of her personal possessions is $62,000, and the value of her investment assets is $73,000. She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000. What is the total value of her assets?

A) $267,500
B) $105,500
C) $162,000
D) $205,500
E) None of these

Question 80

Jerry Allison needs to store the title to his car and his house. Where is the most appropriate place for Jerry to store this information?

A) Home file cabinet
B) Safe deposit box
C) Personal computer
D) Best friend's house
E) None of these