Personal Finance Quiz 2

Money management refers to Day-to-day financial activities.
Which of the following is a component of money management? Storing and maintaining personal financial records and documents. Creating a balance sheet. Creating and implementing a plan for spending and saving. Creating a cash flow statement. All of these choices are components of money management.Answer: All of these choices are components of money management.
A personal balance sheet reports Items owned, amounts owed, and your net worth.
Which of the following is a liquid asset? Savings/money market accounts Cash surrender value of life insurance Checking account balance Money market accounts All of these are liquid assetsAnswer: All of these are liquid assets.
The amount you would have left if all assets were sold and all debts were paid in full is called your Net worth.
The equation to calculate net worth is Assets minus Liabilities = Net worth.
Which of the following situations describes a person who could be insolvent? Assets $56,000; annual expenses $60,000 Assets $78,000; net worth $22,000 Liabilities $45,000; net worth $6,000 Assets $40,000; liabilities $55,000Annual cash inflows $45,000; liabilities $50,000Insolvency occurs when liabilities, $55,000, far exceed assets, $40,000.
Which of the following is a cash inflow? Payment for rent Purchase of groceries Payment for loan Income from employment (correct)Payment for medical expenses
A current ratio of 2 means $2 in liquid assets are available for every $1 of current liabilities.
A debt ratio of 0.5 indicates For every dollar of net worth, debt equals $0.50.
Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household? Current ratio
Discretionary income equals Money left over after paying for housing, food, and other necessities.
An example of a variable expense is a(n) Mortgage or rent payment. Installment loan payment. Monthly train ticket for commuting to work. Monthly allocation for life insurance. Electric bill. (correct)
An example of a fixed expense is Medical expenses. Gifts. Utilities. Home rental payment. (Correct)Recreation.
When household budgets must be cut, which of the following categories would be most difficult to cut? Auto insuranceWhen household budgets must be cut, spending is most frequently reduced for vacations, dining out, cleaning and lawn services, cable/internet service, and charitable donations.
The document that would tell you what you received and spent over the past month is the Cash flow statement.
A family with $100,000 in assets and $60,000 of liabilities would have a net worth of $40,000.Assets minus Liabilities = $100,000 − 60,000 = $40,000.
Given the following information, calculate the net worth: Assets = $8,000Cash inflows = $6,000Cash outflows = $4,500Liabilities = $5,000 $3,000
Given the following information, calculate the debt ratio percentage: Liabilities = $25,000Liquid assets = $5,000Monthly credit payments = $800Monthly savings = $760Net worth = $75,000Take-home pay = $2,300Gross income = $3,500Monthly expenses = $2,050 33.33 percentLiabilities/Net worth = $25,000/$75,000 = 0.3333 = 33.33%.
Given the following information, calculate the current ratio: Liquid assets = $5,000Monthly credit payments = $800Monthly savings = $760Net worth = $75,000Current liabilities = $2,000Take-home pay = $2,300Gross income = $3,500Monthly expenses = $2,050 2.50Liquid assets/Current liabilities = $5,000/$2,000 = 2.50.
Given the following information, calculate the liquidity ratio: Liabilities = $25,000Liquid assets = $5,000Monthly credit payments = $800Monthly savings = $760Net worth = $75,000Current liabilities = $2,600Take-home pay = $2,300Gross income = $3,500Monthly expenses = $2,050 2.44Liquid assets/Monthly expenses = $5,000/$2,050 = 2.44.

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