FCS 3450 Chapter 2 McGraw-Hill Connect (practice w/ answers) – Flashcards
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Which of the following are the basic major money management activities?
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-Sorting and maintaining personal financial records -Preparing personal financial statements -Creating and implementing a plan for savings
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T or F: Total assets minus only current liabilities equal net worth. Be sure to read the sentence carefully before answering
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-False
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Invoices, credit card statements, INSURANCE policies and tax forms are the basis of financial reccord keeping and personal economic choices
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the word is INSURANCE
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T or F: Money management is the day-to-day financial activities necessary to manage current personal economic resources while working toward long-term financial security
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True
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Where should difficult-to-replace documents be kept?
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Safe deposit box
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Copies of tax returns should be retained for at least
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7 years
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Most financial documents come from financial institutions, however the two documents you create yourself (also know as personal financial statements) are the personal
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balance sheet, and the cash flow
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A personal balance sheet is also called a net worth statement or statement of financial positions reports what you own and what you owe
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balance
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Personal financial statements provide information about your current financial position and present a summary of your income and spending. Which of the following statements does not describe a main purpose of personal financial statements
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-Report your current financial position -Measure your progress toward financial goals -Provide data for preparing tax forms or applying for credit.
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Which of the following statements are true about a balance sheet that you are reviewing on 1/15/2010 that shows an "as of" date of 12/31/2009 and assets of $600,000 and liabilities of $425,000?
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The net worth is: $175,000 as of 12/31/2009
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After categorizing assets and calculating total assets, what do you do next when preparing the balance sheet?
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Classify liabilities, total the liabilities, and calculate net worth
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Karen James owes $10,000 in medical bills, $500 to the public utility, $15,000 on a 4 year student loan, and $100,000 on a 15 year home mortgage. What is the total Karen's current liabilities? This is taken directly from the text in discussion of CURRENT LIABILITIES
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She has: $10,500 10,000+500
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Which of the following are liquid assets? Most of these are mentioned explicitly in the text
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-money market account -cash value of life insurance -cash -savings account
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T or F: Net worth is found by subtracting liabilities from assets.
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True
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T or F: Medical bills, credit card balances, and home equity loans are all examples of current liabilities
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False
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Financial Ratios are guidelines for
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measuring changes in your financial situation
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T or F: The statement of the cash flow is a summary of cash receipts and payments for a given period
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True
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Take-home pay is
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earnings (salary, wages, and commissions) after deducting for taxes and other items
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Expenses that do not vary from month to month are referred to as:
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Fixed expenses
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Variable expense
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payments that change from month to month
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Discretionary income
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what you have left after you have paid housing, food, and othe rnecessities
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T or F: Budgets allow you to live within your income while increasing your chances of achieving your financial goals
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True
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Establishing an emergency fund that will cover your living expenses for three to six months to be used during periods of unexpected financial difficulty is what financial advisors suggest?
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True
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The balance sheet equation is
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Total assets- total liabilities = net worth
