Deck 2: Money Management Skills

Question 1

The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement.

Answer 1

False

Question 2

In an organized system of financial records, medical information belongs in a home file.

Answer 2

True

Question 3

In an organized system of financial records, investment records belong in a home file, home computer, or online.

Answer 3

True

Question 4

Money management refers to day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security.

Question 5

A cash flow statement uses this equation: Total cash received during the time period - Cash outflows during the time period = Cash surplus (or deficit).

Question 6

Net worth is the amount owed to others.

Question 7

A budget is a record of how a person or family has spent their money.

Question 8

Financial documents that you may need quick access to should be kept in a safe deposit box.

Question 9

In an organized system of financial records, birth and marriage certificates belong in a safe deposit box.

Question 10

Copies of tax returns and supporting data should be saved for 10 years.

Question 11

When completing a cash flow statement, deductions are subtracted from gross salary to determine take-home pay.

Question 12

Current liabilities are the debts you must pay within a short time, usually less than a year.

Question 13

An organized system of financial records provides a basis for reducing credit card usage.

Question 14

A cash flow statement uses this equation: Assets - Liabilities = Net worth.

Question 15

Programs are available to help low-income people around the world improve their money management skills or financial literacy.

Question 16

In an organized system of financial records, credit card records belong in a safe deposit box.

Question 17

Birth certificates, wills, and Social Security data should be kept for up to 7 years.

Question 18

Liquid assets can be easily converted to cash and include money in checking accounts and personal possessions.

Question 19

Money management refers to annual financial activities necessary to manage personal economic resources.

Question 20

The current financial position of an individual or family is a common starting point for financial planning.

Question 21

A mortgage is an amount borrowed to buy a tv or other personal possession.

Question 22

If a household has $195,000 of assets and $75,000 of liabilities, then their net worth would be $125,000.

Question 23

Which of the following is a component of money management?

A) Storing and maintaining personal financial records and documents.
B) Creating a balance sheet.
C) Creating and implementing a plan for spending and saving.
D) Creating a cash flow statement.
E) All of the above are components of money management.

Question 24

When completing a cash flow statement, take-home pay less deductions equals gross salary.

Question 25

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

A) W-2 forms
B) Personal financial statements
C) Warranties
D) Marriage certificates
E) Bank statements

Question 26

Financial advisers suggest that an emergency fund should cover one to two months of living expenses.

Question 27

How long should you keep documents relating to investments?

A) No need to since the broker probably has a copy.
B) As long as you these items.
C) Seven years.
D) Ten years.
E) Permanently.

Question 28

Money management refers to

A) Preparing personal financial statements.
B) Day-to-day financial activities.
C) Trade-offs that occur with financial decisions.
D) Storing financial records for easy access.
E) Spending money on current living expenses.

Question 29

Brokerage statements are an example of a(n) ____________ record.

A) investment
B) insurance
C) estate planning
D) tax
E) consumer purchase

Question 30

Annual investment account statements should be shredded.

Question 31

Which of the following is most correct?

A) Rare coins and stamps belong in a safe deposit box.
B) A marriage certificate should be kept in a home file.
C) W-2s for tax records belong in a safe deposit box.
D) A current budget belongs in your safe deposit box.
E) Adoption papers belong in a home file.

Question 32

Which of the following is most correct?

A) A current budget belongs in your safe deposit box.
B) A warranty belongs in a safe deposit box.
C) Adoption papers belong in a home file.
D) A death certificate should be kept in a home file.
E) Tax records belong in a home file.
F) A current budget belongs in your safe deposit box
G) Adoption papers belong in a home file

Question 33

When creating a budget, it is important to save the amount you have left at the end of the month.

Question 34

One method to spend more money is to deduct an amount automatically from your salary in a direct deposit system.

Question 35

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep copies of your tax returns?

A) Until you receive your refund
B) Until the end of the current year
C) Three years
D) Seven years
E) Permanently

Question 36

A high debt ratio is best.

Question 37

A home file should be used to keep

A) 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 38

A balance sheet reports what an individual or family owns and owes.

Question 39

One method to save more money is to write a check each payday and deposit it in a separate savings account.

Question 40

The number of personal financial records a household has to organize may seem overwhelming. How long should you keep documents relating to the purchase and sale of real estate?

A) Until the mortgage is paid off
B) Until you move out of the house
C) Three years
D) Seven years
E) Indefinitely

Question 41

Which of the following will increase the net worth of a household?

A) Decrease saving by $50 per month
B) Increase the amount borrowed for major purchases
C) Decrease spending by $5 per day
D) Invest in possessions whose values do not increase
E) Increase spending by $5 per day

Question 42

The amount you would have left if all assets were sold and all debts were paid in full is called your

A) Net assets.
B) Net worth.
C) Total liabilities.
D) Total income.
E) Budgeted expenses.

Question 43

When creating a personal balance sheet, which of the following is an investment asset?

A) Cash value of life insurance
B) Checking account
C) Personal possessions in your home
D) Retirement account
E) Vacation property

Question 44

The inability to pay debts when they are due because liabilities far exceed the value of assets is called

A) Liabilities.
B) Insolvency.
C) Net worth.
D) Cash flow.
E) Liquid assets.

Question 45

How long should you keep your most current will?

A) No need to keep it since your lawyer probably has a photocopy.
B) One year.
C) Three years.
D) Seven years.
E) Permanently.

Question 46

The main purposes of personal financial statements are to

A) Report your current financial position.
B) Measure your progress toward financial goals.
C) Maintain information about your financial activities.
D) Provide data for preparing tax forms or applying for credit.
E) All of the above are correct

Question 47

Which of the following are two personal financial statements that you create yourself?

A) Budget and credit card statements
B) Personal balance sheet and cash flow statement
C) Checkbook and budget
D) Tax returns
E) Bank statement and a balance sheet

Question 48

The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a

A) Personal balance sheet.
B) Bank statement.
C) Budget.
D) Cash flow statement.
E) Time value of money report.

Question 49

Another name for a statement of financial position is a

A) Balance sheet.
B) Bank statement.
C) Budget.
D) Cash flow statement.
E) Time value of money report.

Question 50

Which of the following situations describes a person who could be insolvent?

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 $55,000
E) Annual cash inflows $45,000; liabilities $50,000

Question 51

When creating a personal balance sheet, which of the following is a current liability?

A) Checking account
B) Mortgage
C) Educational loan
D) Auto loan
E) Medical bill

Question 52

All of the following are ways that households can increase their net worth except

A) Increase their savings.
B) Reduce spending.
C) Increase value of investments.
D) Reduce amounts owed.
E) Increase their debt ratio.

Question 53

When creating a personal balance sheet, which of the following is a real estate asset?

A) Cash value of life insurance
B) Vacation property
C) Possessions in your home
D) Investments for financing children's education
E) Retirement accounts

Question 54

When creating a personal balance sheet, which of the following is considered to be a personal possession asset?

A) A five-year-old television set
B) A home
C) Cash in a checking account
D) Retirement accounts
E) Vacation property

Question 55

Which of the following is a liquid asset?

A) Savings/money market accounts
B) Cash value of life insurance
C) Checking account balance
D) Money market accounts
E) All of the above are liquid assets

Question 56

The equation to calculate net worth is

A) Assets - Cash outflows = Net worth.
B) Cash inflows - Liabilities = Net worth.
C) Cash inflows - Cash outflows = Net worth.
D) Assets - Liabilities = Net worth.
E) Cash inflows + Liabilities = Net worth.

Question 57

The current financial position of an individual or family is best presented with the use of a

A) Budget.
B) Cash flow statement.
C) Balance sheet.
D) Bank statement.
E) Time value of money report.

Question 58

A personal balance sheet reports

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 59

Which of the following is a cash inflow?

A) Payment for rent
B) Purchase of groceries
C) Payment for loan
D) Income from employment
E) Payment for medical expenses

Question 60

Items with monetary value are referred to as

A) Liabilities.
B) Variable expenses.
C) Net worth.
D) Income.
E) Assets.

Question 61

Take-home pay is also called

A) Monthly savings.
B) Discretionary income.
C) Net pay.
D) Gross income.
E) Deductions.

Question 62

Which of the following appears as a cash outflow on a cash flow statement?

A) Home value
B) Loan payment
C) Net worth
D) Balance of mortgage
E) Cash value of life insurance

Question 63

Financial experts recommend a debt/payments ratio of less than ____ of take-home pay.

A) 0%
B) 5-10%
C) 20%
D) 25-35%
E) 50%

Question 64

Which of the following ratios indicates the amount of a person's earnings that goes for payments for credit cards, auto loans, and other debt (except mortgage)?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 65

Financial experts recommend monthly savings of ____ of gross income.

A) 0%
B) 5-10%
C) 20%
D) 25-35%
E) 50%

Question 66

Which of the following ratios shows the relationship between debt and net worth?

A) Debt ratio
B) Current ratio
C) Household ratio
D) Debt payments ratio
E) Savings ratio

Question 67

All of the following are sources of income except

A) Interest earned on savings
B) Commissions
C) Dividends
D) Salary
E) Social Security taxes

Question 68

Disposable income equals

A) Gross income.
B) Disposable income.
C) The amount being saved each month.
D) Money left over after paying for housing, food, and other necessities.
E) Social Security taxes.

Question 69

Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 70

An example of a fixed expense is

A) Medical expenses.
B) Gifts.
C) Utilities.
D) A mortgage payment.
E) Recreation.

Question 71

Which of the following appears as a cash outflow on a cash flow statement?

A) Liquid assets
B) Variable expenses
C) Net worth
D) Personal possessions
E) Real estate assets

Question 72

The money left over after paying for housing, food, and other necessities is called

A) Monthly savings.
B) Discretionary income.
C) Disposable income.
D) Gross income.
E) Take-home pay.

Question 73

Discretionary income equals

A) Gross income.
B) Take-home pay.
C) The amount being saved each month.
D) Money left over after paying for housing, food, and other necessities.
E) Social Security taxes.

Question 74

A debt ratio of 0.5 indicates

A) The balance on the mortgage = 50% of the value of the home.
B) For every dollar of net worth, debt equals $0.50.
C) For every dollar of debt, net worth equals $0.50.
D) For every dollar of take-home pay, monthly credit payments equal $0.50.
E) For every dollar of assets, monthly credit payments equal $0.50.

Question 75

Which of the following ratios shows the relationship between gross income and money saved?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 76

Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 77

A current ratio of 2 means

A) 2% from each paycheck is available for savings.
B) The minimum payment for a credit card is 2% of the balance.
C) 2 months of living expenses are available in case of emergency.
D) Net worth equals 2 times the amount of debt.
E) $2 in liquid assets are available for every $1 of current liabilities.

Question 78

Which of the following is a deduction to determine take-home pay?

A) Interest earned on savings
B) Commissions
C) Dividends
D) Salary
E) Social Security taxes

Question 79

All of the following are fixed expenses except a(n)

A) Mortgage or rent payment.
B) Installment loan payment.
C) Monthly train ticket for commuting to work.
D) Monthly allocation for life insurance.
E) Utilities.

Question 80

An example of a variable expense is a(n)

A) Mortgage or rent payment.
B) Installment loan payment.
C) Monthly train ticket for commuting to work.
D) Monthly allocation for life insurance.
E) Electric bill.