Personal Finance

Money management refers to day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security True
Money management refers to annual financial activities necessary to manage personal economic resources False
An organized system of financial records provides a basis for reducing credit card usage False
A budget is a record of how a person or family has spent their money False
Programs are available to help low-income people around the world improve their money management skills or financial literacy True
In an organized system of financial records, credit card records belong in a safe deposit box False
In an organized system of financial records, birth and marriage certificates belong in a safe deposit box True
In an organized system of financial records, medical info belongs in a home file True
Financial documents that you may need quick access to should be kept in a safe deposit box False
In an organized system of financial records, investment records belong in a home file, home computer, or online True
Copies of tax returns and supporting data should be saved for 10 years False
Birth certificates, wills, and Social Security data should be kept for up to 7 years False
The two personal financial statements that you create yourself are the personal balance sheet and a credit card payoff statement False
The current financial position of an individual or family is a common starting point for financial planning True
Net worth is the amount owed to others False
Current liabilities are the debts you must pay within a short time, usually less than a year True
Liquid assets can be easily converted to cash and include money in checking accounts and personal possessions False
A cash flow statement uses this equation: Assets – Liabilities = Net worth False
A cash flow statement uses this equation: Total cash received during the time period – Cash outflows during the time period = Cash surplus (or deficit) True
When completing a cash flow statement, deductions are subtracted from gross salary to determine take-home pay True
When completing a cash flow statement, take-home pay less deductions equals gross salary False
Financial advisers suggest that an emergency fund should cover one to two months of living expenses False
When creating a budget, it is important to save the amount you have left at the end of the month False
One method to spend more money is to deduct an amount automatically from your salary in a direct deposit system False
One method to save more money is to write a check each payday and deposit it in a separate savings account True
Annual investment account statements should be shredded False
A mortgage is an amount borrowed to buy a TV or other personal possession False
If a household has $195,000 of assets and $70,000 of liabilities, then their net worth would be $125,000 False
A balance sheet reports what an individual or family owns and owes True
A high debt ratio is best False
Money management refers to- Day-to-day financial activities
Which of the following is a component of money management? All of the above
A home file should be used to keep- Financial records for current needs
Which of the following financial documents would most likely be stored in a safe deposit box or fireproof home safe? Marriage certificates
Which of the following is most correct? Tax records belong in a home file
Which of the following is most correct Rare coins and stamps belong in a safe deposit box
Brokerage statements are an example of an _____record Investment
How long should you keep copies of your tax returns? Seven years
How long should you keep documents relating to the purchase and sale of real estate? Indefinitely
How long should you keep documents relating to investments? As long as you have these items
How long should you keep your most current will? Permanently
The main purposes of personal financial statements are to All of the above are correct
Which of the following are two personal financial statements that you create yourself Personal balance sheet and cash flow statement
A personal balance sheet reports Items owned and amounts owed
The current financial position of an individual or family is best presented with the use of a Balance sheet
Another name for a statement of financial position is a Balance sheet
The statement that includes liquid assets, real estate, personal possessions, and investment assets is known as a Personal balance sheet
Items with monetary value are referred to as Assets
Which of the following is a liquid asset All of the above
When creating a personal balance sheet, which of the following is a real estate asset? Vacation property
When creating a personal balance sheet, which of the following is considered to be a personal possession asset? A five-year-old television set
When creating a personal balance sheet, which of the following is an investment asset Retirement account
When creating a personal balance sheet, which of the following is a current liability Medical bill
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 si Assets – Liabilities = Net worth
The inability to pay debt when they are due because liabilities far exceed the value of assets is called Insolvency
Which of the following situations describes a person who could be insolvent? Assets $40,000; Liabilities $55,000
All of the following are ways that household can increase their net worth except Increase their debt ratio
Which of the following will increase the net worth of a household? Decrease spending by $5 per day
Which of the following is a cash inflow Income from employment
Which of the following appears as a cash outflow on a cash flow statement? Variable expenses
Which of the following appears as a cash outflow on a cash flow statement Loan payment
Financial experts recommend monthly savings of _____ of gross income 5-10%
Financial experts recommend a debt/payments ratio of less than _____ of take home pay 20%
A current ratio of 2 means $2 in liquid assets are available for every $1 of current liabilities
A debt ratio of .5 indicates For ever dollar of net worth, debt equals $0.50
Which of the following ratios shows the relationship between debt and net worth? Debt ratio
Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household? Current ratio
Which of the following ratios indicates the number of month in which living expenses can be paid if an emergency arises Liquidity ratio
Which of the following ratios indicates the amount of a person’s earning that goes for payments for credit cards, auto loans, and other debt? (not mortgage) Debt payments ratio
Which of the following ratios shows the relationship between gross income and money saved? Savings ratio
All of the following are sources of income except Social security taxes
Which of the following is a deduction to determine take-home pay? Social security taxes
Disposable income equals disposable income
Discretionary income equals Money left over after paying for housing, food, and other necessities
The money left over after paying for housing, food, and other necessities is called Discretionary income
Take-home pay is also called Net pay
An example of a variable expense is an Electric bill
All of the following are fixes expenses except Utilites
An example of a fixed expense is A mortgage payment
Which of the following is NOT a main purpose of a budget? Spend your money without care
When creating a budget, which of the following statements is true? Numbers in a budget are estimates
When creating a budget, it is important to- “pay yourself first” by setting aside savings before other expenses are budgeted
The difference between the amount budgeted and the actual amount received or spent is called the Budget variance
A budget deficit would result when a person’s or family’s actual spending exceeds planed spending
After having established a spending plan, it is important to Keep track of your actual income and expenses
When household budgets must be cut, which of the following categories would be most difficult to cut? Auto insurance
A budget system that involves envelopes, folders, or containers to hold money slips of paper is called a Physical budget
A budget system that can be kept on notebook paper or accounting paper is called a Written budget
The document that would tell you what you received and spent over the past month is the Cash flow statement
The document that would be most useful to plan spending and saving to achieve financial goals is the Budget
The document that would report your current financial position is the Balance sheet
Net worth = Assets – Liabilities (ignore inflow/outflow)
Debt ratio percent = Liabilities/net worth
Current ratio = Liquid assets/current liabilites
Liquidity ratio Liquid assets/monthly expenses
Debt-payments ratio Monthly credit payments/take-home pay
Savings ratio Monthly savings/gross income

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