Deck 2: Money Management Strategy: Financial Statements and Budgeting

Question 1

Insolvency is a result of having an unequalbalance of tangible and intangible goods.

Answer 1

False

Question 2

A person's lifestyle is a reflection of his or her values, goals, career, and family situation.

Answer 2

True

Question 3

Most income tax documents and records should be kept in a safety deposit box.

Answer 3

False

Question 4

Furniture, jewelry, and an automobile are examples of liquid assets.

Question 5

If budgeted spending is less than actual spending, this is referred to as a deficit.

Question 6

Insolvency is the inability to pay debts by the due date, because liabilities exceed the value of assets.

Question 7

Medical expenses, clothing, and telephone are examples of fixed expenses.

Question 8

When one money management decision is selected, something else must be given up.

Question 9

If expenses for a month are greater than income, an increase in net worth will result.

Question 10

Take-home pay is a person's earnings after deductions for taxes and other items.

Question 11

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

Question 12

Most Canadians have an adequate savings for emergencies.

Question 13

A personal cash flow statement can serve as the basis for the budget categories used by an individual or family.

Question 14

A personal cash flow statement presents income and outflows of cash for a given time period, such as a month.

Question 15

Financial recordsthat may need to be referred to on a regular basis should not be kept in a safety deposit box.

Question 16

Definite financial obligations are referred to as variable expenses.

Question 17

Opportunity costs are not only associated with money management decisions involving long-term financial security.

Question 18

Personal recordscurrent budget, cheque book(s) and bank statements.

Question 19

Current liabilities are amounts that must be paid within a short period of time, usually less than a year.

Question 20

A person's net worth is the difference between the value of the items owned and the amounts owed to others.

Question 21

A home file should be used for:

A)storing all financial documents and records.
B)obsolete financial documents.
C)documents that requiremaximum security.
D)financial recordsfor current needs.
E)records that are difficult to replace.

Question 22

Buying on credit results in payments later and a reduction in the amount of future income available for spending is an example of a(n):

A)Opportunity cost
B)Cash flow management
C)Spending habits
D)Savings plan

Question 23

Comparison shopping can save you money and improve the quality of your purchases but uses up something of value you cannot replace: your time is an example of a(n):

A)Opportunity cost
B)Cash flow management
C)Spending habits
D)Savings plan

Question 24

An exampleof a personal and employment document is a:

A)Social Insurance card.
B)passbook.
C)budget
D)property tax bill.
E)lease.

Question 25

An organized system of financial records provides a basis for:

A)Determining available resources for current and future buying.
B)Handling long term business affairs
C)Handling moderate term business affairs
D)Cash flow projections

Question 26

"Sharing the bills" is a budgeting strategy for two-income households where each partner contributes an equal amount into the pool.

Question 27

Spending money on current living expenses reduces the amount you can use for saving and investing for long-term financial security is an example of a(n):

A)Opportunity cost
B)Cash flow management
C)Spending habits
D)Savings plan

Question 28

Opportunity cost refers to:

A)current spending habits.
B)changing economic conditions that affect a person's cost of living.
C)storage facilities to make financial documents easily available.
D)trade-offs associated with financial decisions.
E)avoiding the use of consumer credit.

Question 29

Which of the following financial documents would most likely be stored in a safety deposit box?

A)FT-4 slips
B)Personal financial statements
C)Warranties
D)Stock certificates
E)Checking accountstatements

Question 30

An organized system of financial records provides a basis for:

A)Completing required tax reports.
B)Handling long term business affairs
C)Handling moderate term business affairs
D)Cash flow projections

Question 31

The components of money management activities are:

A)Sorting, Creating personal financial statements and implementing a budget
B)Balancing incomeswith expenses
C)Saving for retirement
D)Balancing currentspending with the opportunity cost

Question 32

Money manage refers to

A)Day-to-day financial activities
B)Long term financial activities
C)Asset management
D)Investment management

Question 33

Saving and investing for the future reduces the amount you can spend now is an example of a(n):

A)Opportunity cost
B)Cash flow management
C)Spending habits
D)Savings plan

Question 34

Leveraged investing in common shares is expected to increase your net worth.

Question 35

Opportunity costs are only associated with money management decisions involving long-term financial security.

Question 36

Evidence exists that a person's choice of employment influences his or her lifestyle.

Question 37

An organized system of financial records provides a basis for:

A)Handling daily business affairs, including paying bills on time
B)Handling long term business affairs
C)Handling moderate term business affairs
D)Investment opportunities

Question 38

An organized system of financial records provides a basis for:

A)Planning and measuring financial progress.
B)Handling long term business affairs
C)Handling moderate term business affairs
D)Analyzing opportunity costs

Question 39

Under a direct depositsystem the bank will make an automatic debit from your bank account and have the funds transferred periodically to an investment account.

Question 40

A cash flow statement is a record of how a person or family has earned and spent their money.

Question 41

A family with $170,000 in assets and $152,000 of liabilities would have a net worth of:

A)$70,000.
B)$22,000.
C)$18,000
D)$92,000.
E)$41,000.

Question 42

A family with $90,000in assets and $52,000 of liabilities would have a net worth of:

A)$70,000.
B)$22,000.
C)$38,000
D)$92,000.
E)$41,000.

Question 43

Investments are funds set aside for:

A)Short term needs
B)Long term needs
C)Both short and long term needs
D)Moderate term needs
E)Emergencies

Question 44

A person's net worth would decrease as a result of

A)decreased value on investments
B)increased earnings.
C)decreased spending for current living expenses.
D)decreased value of personal possessions.
E)decreased amount owed to others.

Question 45

A person's net worth is computed by

A)subtracting total liabilities from total assets.
B)deducting currentliving expenses from total assets.
C)adding assets and liabilities
D)subtracting assets from currentliabilities.
E)adding liabilities and budgeted expenses.

Question 46

An individual retirement account is an example of a(n) ____________ asset.

A)liquid
B)common
C)investment
D)household
E)budgeted

Question 47

Current liabilities differ from long-term liabilities based on

A)the amount owed.
B)the financial situation of the creditor.
C)the interest rate charged.
D)when the debt is due.
E)current economic conditions.

Question 48

A family with $110,000 in assets and $49,000 of liabilities would have a net worth of:

A)$70,000.
B)$22,000.
C)$61,000
D)$92,000.
E)$41,000.

Question 49

Which of the following are considered to be personal financial statements?

A)Budget and credit card statements
B)Balance sheet and cash flow statement
C)Checkbook and budget
D)Tax returns
E)Bank statement and savings passbook

Question 50

Which of the following would be considered a long-term liability?

A)A charge accountpayment
B)A mortgage
C)An installment loan
D)An amount due for taxes
E)The amount due on a credit card

Question 51

A brokerage statement is an example of a(n) ____________ record.

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

Question 52

Liabilities are amountsrepresenting

A)taxable income
B)items of value.
C)living expenses.
D)debts
E)current assets.

Question 53

A personal balance sheet presents

A)items owned and amountsowed.
B)income and expenses for a period of time.
C)earnings on savingsand investments.
D)amounts budgeted for spending
E)family financial goals.

Question 54

Warranties are commonly associated with ____________ purchases.

A)investment
B)insurance
C)consumer
D)financial services
E)credit

Question 55

Ben Chase needs to pay off some of his debts over the next few months.Which item on his balance sheet would help him decide what amounts are due in the near future?

A)the budget variance
B)investment assets
C)long-term liabilities
D)current liabilities
E)current assets

Question 56

Liquid assets refer to

A)amounts that must be paid soon.
B)amounts on which taxes must be paid
C)total income available to a family for spending.
D)the value of investments.
E)items that are easily converted to cash.

Question 57

Items with a monetary worth are referred to as:

A)liabilities.
B)variable expenses.
C)net worth.
D)income.
E)assets.

Question 58

A family with $70,000in assets and $22,000 of liabilities would have a net worth of:

A)$70,000.
B)$22,000.
C)$48,000
D)$92,000.
E)$41,000.

Question 59

The currentfinancial position of an individual or family is best presented with the use of a(n)

A)budget.
B)cash flow statement.
C)balance sheet.
D)bank statement.
E)time value of money report.

Question 60

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

A)Assets $56,000; annual expenses $60,000
B)Assets $68,000; net worth $22,000
C)Liabilities $45,000; net worth $6,000
D)Assets $60,000; liabilities $61,000
E)Annual cash inflows$48,000; liabilities $50,000

Question 61

A major expenditure for most families is

A)insurance.
B)contributions.
C)clothing.
D)utilities.
E)transportation.

Question 62

To determine a person's solvency, which financial document should be consulted?

A)Cash flow statement
B)Budget
C)Debt consolidation statement
D)Personal balancesheet
E)Credit report

Question 63

Payments that do vary from month to month are ____________ expenses.

A)fixed
B)current
C)variable
D)luxury
E)budgeted

Question 64

This year Taylor's gross income is $80,000.Her deductions for federal and provincial taxes, CPP contributions and employment insurance are $15,500.She also had after-tax investment earnings of $8,000.Taylor's take-home pay is:

A)$70,000
B)$76,000
C)$77,500
D)$64,500
E)$62,000

Question 65

Total earnings of a person less deductions for taxes and other items is called

A)budgeted income.
B)gross pay.
C)net worth.
D)total revenue.
E)take-home pay.

Question 66

During the past month, Jennifer Sinnet had income of $3,500 and a decrease in net worth of $200.This means Jennifer's payments for the month were:

A)$3,700.
B)$3,300.
C)$2,800.
D)$1,000.
E)$200.

Question 67

Improvements in a person's financial position are the result of:

A)increased liabilities.
B)reductions in earnings.
C)increased savingsand investments.
D)increased purchases on credit.
E)lower amountsdeposited in savings.

Question 68

Ed Bostromwants to reduce his fixed expenses.What action would be appropriate?

A)Get a part-time job
B)Eat more meals at home than in restaurants
C)Find a place to live with a lower rent
D)Save more money for the future
E)Buy on credit for items that might cost more later

Question 69

Changes in the cost of living are

A)different in variousgeographic areas.
B)the same for different locations.
C)constant from month to month.
D)the same for all goods and services.
E)not a factor when preparing a budget.

Question 70

A common deduction from a person's paycheck is for

A)interest.
B)unemployment
C)rent.
D)taxes.
E)current liabilities.

Question 71

During the last month, Mary Jane had expenses of $5,000 and an increase in net worth of $700.This means Mary Jane's income for the month was:

A)$700.
B)$4,300.
C)$5,000.
D)$5,700.
E)$5,200.

Question 72

This year Taylor's gross income is $70,000.Her deductions for federal and provincial taxes, CPP contributions and employment insurance are $13,500.She also had after-tax investment earnings of $6,000.Taylor's take-home pay is:

A)$70,000
B)$76,000
C)$77,500
D)$56,500
E)$62,000

Question 73

A cash flow statement reports a person's or a family's

A)net worth.
B)current income and payments.
C)plan for spending.
D)value of investments.
E)balance of savings.

Question 74

The paymentitems that should be budgeted first are

A)variable expenses.
B)investment funds.
C)fixed expenses.
D)unplanned living expenses.
E)entertainment expenses.

Question 75

Which of the following presents a summary of income and outflows for a period of time?

A)A cash flow statement
B)A bank statement
C)An investment summary
D)balance sheet
E)An asset report

Question 76

This year Taylor's gross income is $120,000.Her deductions for federal and provincial taxes, CPP contributions and employment insurance are $43,900.She also had after-tax investment earnings of $12,000.Taylor's take-home pay is:

A)$70,000
B)$76,000
C)$77,500
D)$76,100
E)$62,000

Question 77

Which of the following payments would be considered a variable expense?

A)Rent
B)An installment loan payment
C)A mortgage payment
D)A monthlyparking fee
E)A telephone bill

Question 78

Payments that do not vary from month to month are ____________ expenses.

A)fixed
B)current
C)variable
D)luxury
E)budgeted

Question 79

A decrease in net worth would be the result of:

A)income greaterthan expenses for a month.
B)expenses greaterthan income for a month.
C)assets greaterthan expenses.
D)increased earnings on the job.
E)income and expenses equal for a month.

Question 80

A person's net worth would increase as a result of

A)decreased value on investments
B)reduced earnings.
C)increased spending for current living expenses.
D)increased value of personal possessions.
E)increased amount owed to others.