Deck 2: Money Management Skills

Question 1

When completing a cash flow statement,deductions are subtracted from salary to determine take-home pay.

Answer 1

True

Question 2

The two primary personal financial statements include the personal balance sheet and a credit card payoff statement.

Answer 2

False

Question 3

The current financial position of an individual or family is a common starting point for financial planning.

Answer 3

True

Question 4

A cash flow statement uses this equation: Assets - Liabilities = Net worth.

Question 5

Money management refers to day-to-day financial activities necessary to manage personal economic resources while working toward long-term financial security.

Question 6

Wills and Social Security data should be kept for up to 10 years.

Question 7

Financial records that may need to be referred to on a regular basis should be kept in a safe deposit box.

Question 8

Programs are available to help low-income older or disabled people who have difficulty budgeting.

Question 9

Money management refers to annual financial activities necessary to manage personal economic resources.

Question 10

Current liabilities are the debts you must pay within a short time,usually less than a year.

Question 11

Net worth is the amount owed to others.

Question 12

In an organized system,birth and marriage certificates belong in a safe deposit box.

Question 13

A cash flow statement uses this equation: Total cash received during the time period - Cash outflows during the time period = Cash surplus (deficit).

Question 14

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

Question 15

Records related to tax returns should be saved for 10 years.

Question 16

In an organized system,credit card records belong in a safe deposit box.

Question 17

In an organized system,account summaries showing the performance results of investments belong in a computer or online.

Question 18

In an organized system,a will belongs in a home file.

Question 19

The focus of an organized system of financial records is to reduce credit card usage.

Question 20

Most people liquidate their assets to calculate their net worth.

Question 21

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

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

Question 22

A personal balance sheet presents

A) Amounts budgeted for spending.
B) Income and expenses for a period of time.
C) Earnings on savings and investments.
D) Items owned and amounts owed.
E) Family financial goals.

Question 23

The number of personal financial records a household has to organize may seem overwhelming.How long should you keep copies of your tax returns?

A) Until you receive your refund
B) Until the end of the current year
C) Three years
D) Seven years
E) Permanently

Question 24

Money management refers to

A) Preparing personal financial statements.
B) Day-to-day financial activities.
C) Trade-offs that occur with financial decisions.
D) Storing financial records for easy access.
E) Spending money on current living expenses.

Question 25

How long should you keep documents relating to investments?

A) No need to since the broker probably has a copy.
B) As long as you own them.
C) Seven years.
D) Ten years.
E) Permanently.

Question 26

Which of the following is NOT a component of money management?

A) Storing personal financial records to document business transactions and legal matters.
B) Creating personal financial statements to measure and assess financial position and progress.
C) Creating a budget.
D) None of these are components of money management.
E) Storing personal financial records, creating personal financial statements, and creating a budget are all components of money management.

Question 27

When completing a cash flow statement,take-home pay less deductions equals salary.

Question 28

The number of personal financial records a household has to organize may seem overwhelming.How long should you keep documents relating to the purchase of real estate?

A) Until the mortgage is paid off
B) Until you move out of the house
C) Three years
D) Seven years
E) Indefinitely

Question 29

The current financial position of an individual or family is best presented with the use of a

A) Budget.
B) Cash flow statement.
C) Balance sheet.
D) Bank statement.
E) Time value of money report.

Question 30

A home file should be used for storing

A) All financial documents and records.
B) Financial records for current needs.
C) Documents that require maximum security.
D) Obsolete financial documents.
E) Records that are difficult to replace.

Question 31

How long should you keep your most current will?

A) No need to keep it since your lawyer probably has a photocopy.
B) One year.
C) Three years.
D) Seven years.
E) Permanently.

Question 32

Financial advisers suggest that an emergency fund should cover one to two months of living expenses.

Question 33

When creating a budget,it is important to save the amount you have left at the end of the month.

Question 34

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

A) W-2 forms
B) Personal financial statements
C) Warranties
D) Marriage certificates
E) Checking account statements

Question 35

The main purposes of personal financial statements are to

A) Report your current financial position.
B) Measure your progress toward financial goals.
C) Maintain information about your financial activities.
D) Provide data for preparing tax forms or applying for credit.
E) These are all correct.

Question 36

Which of the following is most correct?

A) A warranty belongs in a safe deposit box.
B) A birth certificate should be kept in a personal computer system.
C) Tax records belong in a home file.
D) A plan for effective budgeting belongs in your safe deposit box.
E) Adoption papers belong in a home file.

Question 37

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

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

Question 38

One method to save more money is to write a check each payday and deposit it in a savings account not readily available for regular spending.

Question 39

One method to spend more money is to use a direct deposit system from payroll.

Question 40

Which of the following is most correct?

A) Rare coins and stamps belong in a safe deposit box.
B) A birth certificate should be kept in a personal computer system.
C) W-2s for tax records belong in a safe deposit box.
D) A plan for effective budgeting belongs in your safe deposit box.
E) Adoption papers belong in a home file.

Question 41

Which of the following appears on a cash flow statement?

A) Home value
B) Loan payment
C) Net worth
D) Balance of mortgage
E) Cash value of life insurance

Question 42

Which of the following appears on a cash flow statement?

A) Assets
B) Payments for variable expenses
C) Net worth
D) Liabilities
E) Investments

Question 43

A current ratio of 2 means

A) 2% from each paycheck is available for savings.
B) The minimum payment for a credit card is 2% of the balance.
C) 2 months of living expenses are available in case of emergency.
D) Net worth equals 2 times the amount of debt.
E) $2 of liquid assets are available for every $1 in current liabilities.

Question 44

All of the following are ways that households can increase their net worth except

A) Increase their savings.
B) Reduce spending.
C) Increase value of investments.
D) Reduce amounts owed.
E) Increase their debt ratio.

Question 45

The equation to calculate net worth is

A) Assets - Cash outflows = Net worth.
B) Cash inflows - Liabilities = Net worth.
C) Cash inflows - Cash outflows = Net worth.
D) Assets - Liabilities = Net worth.
E) Cash inflows + Liabilities = Net worth.

Question 46

When creating a personal balance sheet,which of the following is an investment asset?

A) Cash value of life insurance
B) Checking account
C) Possessions in your home
D) Retirement account
E) Vacation property

Question 47

The amount you would have if everything of value would be sold and all debts would be paid in full is called your

A) Net assets.
B) Net worth.
C) Total liabilities.
D) Total income.
E) Budgeted expenses.

Question 48

Financial experts recommend a monthly savings ratio of at least ____ of gross income.

A) 0%
B) 5-10%
C) 20%
D) 25-35%
E) 50%

Question 49

Which of the following is NOT a liquid asset?

A) Savings/money market accounts
B) Cash value of life insurance
C) Checking account balance
D) Coins in a jar at home
E) Retirement investments

Question 50

Another name for a statement of financial position is a

A) Balance sheet.
B) Bank statement.
C) Budget.
D) Cash flow statement.
E) Time value of money report.

Question 51

Which of the following is a cash inflow?

A) Mail rent check
B) Buy groceries
C) Make a loan payment
D) Receive a paycheck
E) Pay medical expenses

Question 52

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

A) Assets $56,000; annual expenses $60,000
B) Assets $78,000; net worth $22,000
C) Liabilities $45,000; net worth $6,000
D) Assets $40,000; liabilities $45,000
E) Annual cash inflows $45,000; liabilities $50,000

Question 53

When creating a personal balance sheet,which of the following is considered to be a personal possession asset?

A) A five-year-old television set
B) A home
C) Cash in a checking account
D) Retirement investments
E) Vacation property

Question 54

Which of the following will increase the net worth of a household?

A) Decrease saving by $50 per month
B) Increase the amount borrowed for major purchases
C) Decrease spending by $5 per day
D) Invest in possessions whose values do not increase
E) Keep an extra $100 in a checking account instead of a savings account

Question 55

The statement that includes liquid assets,real estate,personal possessions,and investment assets is known as a

A) Personal balance sheet.
B) Bank statement.
C) Budget.
D) Cash flow statement.
E) Time value of money report.

Question 56

When creating a personal balance sheet,which of the following is a current liability?

A) Checking account
B) Net worth
C) Student loan
D) Money your sister owes you in two years
E) Charge account balance

Question 57

Financial experts recommend a debt/payments ratio of less than ____ of take-home pay.

A) 0%
B) 5-10%
C) 20%
D) 25-35%
E) 50%

Question 58

Items with monetary value are referred to as

A) Liabilities.
B) Variable expenses.
C) Net worth.
D) Income.
E) Assets.

Question 59

When creating a personal balance sheet,which of the following is a real estate asset?

A) Cash value of life insurance
B) Vacation property
C) Possessions in your home
D) Investments for a dream home
E) Mutual funds

Question 60

The inability to pay debts when they are due is called

A) Liabilities.
B) Insolvency.
C) Net worth.
D) Cash flow.
E) Liquid assets.

Question 61

The difference between the amount budgeted and the actual amount received or spent is called the

A) Variance.
B) Cash outflow.
C) Income.
D) Cash inflow.
E) Variable expense.

Question 62

Which of the following ratios shows the relationship between debt and net worth?

A) Debt ratio
B) Current ratio
C) Household ratio
D) Debt payments ratio
E) Savings ratio

Question 63

Which of the following ratios indicates that liquid assets are available to pay current liabilities for a household?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 64

Which of the following ratios indicates the amount of a person's earnings that goes for payments for credit cards,auto loans,and other debt (except mortgage)?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 65

Which of the following ratios shows the relationship between gross income and money saved?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 66

A debt ratio of 0.5 indicates

A) The balance on the mortgage = 50% of the value of the home.
B) For every dollar of net worth, debt equals $0.50.
C) For every dollar of debt, net worth equals $0.50.
D) For every dollar of take-home pay, monthly credit payments equal $0.50.
E) For every dollar of assets, monthly credit payments equal $0.50.

Question 67

All of the following are fixed expenses except a(n)

A) Mortgage payment.
B) Installment loan payment.
C) Monthly bus pass.
D) Allocation for life insurance.
E) Electric bill.

Question 68

An example of a fixed expense is

A) Medical expenses.
B) Gifts.
C) Utilities.
D) A mortgage.
E) Recreation.

Question 69

Disposable income equals

A) Gross income.
B) Take-home pay.
C) The amount being saved each month.
D) Money left over after paying for housing, food, and other necessities.
E) Social Security taxes.

Question 70

Discretionary income equals

A) Gross income.
B) Take-home pay.
C) The amount being saved each month.
D) Money left over after paying for housing, food, and other necessities.
E) Social Security taxes.

Question 71

When creating a budget,which of the following statements is true?

A) Include in income the bonuses and gifts you expect to receive.
B) It is easier to create a budget if your earnings vary.
C) Common financial problems can be maximized through budgeting.
D) Numbers in the budget are estimates.
E) It is better to overestimate your income for next year.

Question 72

When creating a budget,it is important to

A) Save the amount you have left at the end of the month.
B) Set aside savings after your variable expenses are paid.
C) Save an amount no more than 3% of your annual income in an emergency fund.
D) Spend the amount of money you have budgeted in each category.
E) "Pay yourself first" by setting aside savings before other expenses are budgeted.

Question 73

Which of the following ratios indicates the number of months in which living expenses can be paid if an emergency arises?

A) Debt ratio
B) Current ratio
C) Liquidity ratio
D) Debt payments ratio
E) Savings ratio

Question 74

All of the following are sources of income except

A) Interest
B) Commission
C) Dividends
D) Salary
E) Social Security taxes

Question 75

An example of a variable expense is a(n)

A) Mortgage payment.
B) Installment loan payment.
C) Monthly bus pass.
D) Allocation for life insurance.
E) Electric bill.

Question 76

The money left over after paying for housing,food,and other necessities is called

A) Monthly savings.
B) Discretionary income.
C) Disposable income.
D) Gross income.
E) Take-home pay.

Question 77

Another name for take-home pay is

A) Monthly savings.
B) Discretionary income.
C) Disposable income.
D) Gross income.
E) Deductions.

Question 78

A budget deficit would result when a person's or family's

A) Actual expenses are less than planned expenses.
B) Assets exceed liabilities.
C) Actual expenses equal planned expenses.
D) Actual expenses are greater than planned expenses.
E) Net worth decreases.

Question 79

Which of the following is a deduction to determine take-home pay?

A) Interest
B) Commissions
C) Dividends
D) Salary
E) Social Security taxes

Question 80

Which of the following is NOT a main purpose of a budget?

A) Help to live within your income
B) Spend your money without care
C) Reach financial goals
D) Prepare for financial emergencies
E) Develop wise financial management habits