FCS 3450 Chapter 2 McGraw-Hill Connect (practice w/ answers)

Which of the following are the basic major money management activities?
-Sorting and maintaining personal financial records
-Preparing personal financial statements
-Creating and implementing a plan for savings
T or F: Total assets minus only current liabilities equal net worth. Be sure to read the sentence carefully before answering
-False
Invoices, credit card statements, INSURANCE policies and tax forms are the basis of financial reccord keeping and personal economic choices
the word is INSURANCE
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
True
Where should difficult-to-replace documents be kept?
Safe deposit box
Copies of tax returns should be retained for at least
7 years
Most financial documents come from financial institutions, however the two documents you create yourself (also know as personal financial statements) are the personal
balance sheet, and the cash flow
A personal balance sheet is also called a net worth statement or statement of financial positions reports what you own and what you owe
balance
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
-Report your current financial position
-Measure your progress toward financial goals
-Provide data for preparing tax forms or applying for credit.
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?
The net worth is: $175,000 as of 12/31/2009
After categorizing assets and calculating total assets, what do you do next when preparing the balance sheet?
Classify liabilities, total the liabilities, and calculate net worth
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
She has: $10,500
10,000+500
Which of the following are liquid assets? Most of these are mentioned explicitly in the text
-money market account
-cash value of life insurance
-cash
-savings account
T or F: Net worth is found by subtracting liabilities from assets.
True
T or F: Medical bills, credit card balances, and home equity loans are all examples of current liabilities
False
Financial Ratios are guidelines for
measuring changes in your financial situation
T or F: The statement of the cash flow is a summary of cash receipts and payments for a given period
True
Take-home pay is
earnings (salary, wages, and commissions) after deducting for taxes and other items
Expenses that do not vary from month to month are referred to as:
Fixed expenses
Variable expense
payments that change from month to month
Discretionary income
what you have left after you have paid housing, food, and othe rnecessities
T or F: Budgets allow you to live within your income while increasing your chances of achieving your financial goals
True
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?
True
The balance sheet equation is
Total assets- total liabilities = net worth