Deck 2: Money Management Skills

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

Definite financial obligations are referred to as variable expenses.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Liabilities are cash and items of value that can be easily converted to cash.

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

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 account statements

Question 23

Most Canadians have an adequate savings for emergencies.

Question 24

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

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

Question 25

An example of a personal and employment document is a:

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

Question 26

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

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

Question 27

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

Question 28

The current financial 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 29

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 30

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 31

Warranties are commonly associated with ____________ purchases.

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

Question 32

A family with $70,000 in 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 33

Liabilities are amounts representing

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

Question 34

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

Question 35

A personal balance sheet presents

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

Question 36

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 37

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

Question 38

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

Question 39

A home file should be used for:

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

Question 40

Items with a monetary worth are referred to as:

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

Question 41

Ed Bostrom wants 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 42

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

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

Question 43

A major expenditure for most families is

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

Question 44

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

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

Question 45

A decrease in net worth would be the result of:

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

Question 46

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) decreased value of personal possessions.
E) reduced amounts owed to others.

Question 47

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 48

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 49

A common deduction from a person's paycheck is for

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

Question 50

The payment items that should be budgeted first are

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

Question 51

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

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

Question 52

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

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

Question 53

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 54

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

A) increased liabilities.
B) reductions in earnings.
C) increased savings and investments.
D) increased purchases on credit.
E) lower amounts deposited in savings.

Question 55

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 56

A person's net worth is computed by

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

Question 57

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 58

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 59

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 60

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 61

Jennifer,a recent Concordia graduate,is struggling to pay off her $15,000 student loan.She has found employment with an international firm.Jennifer manages to balance her cash flows,but has only $500 in a chequing account to pay incoming bills.Her monthly after-tax cash inflows and expenses equal $2,000.What should be Jennifer's number one financial goal?

A) Pay off her student loan immediately.
B) Start an emergency fund.
C) Contribute to an RRSP.
D) Purchase life insurance coverage.
E) Accumulate funds for a down payment on a home

Question 62

When it comes to savings,most Canadians

A) have an adequate emergency fund.
B) use several different savings techniques.
C) find saving difficult.
D) keep substantial amounts in a regular savings account.
E) reduce the amount they save during their working life.

Question 63

Janice spends a total of $1,500 a month to cover all living expenses.Which of the following would represent the appropriate emergency fund?

A) $1,500 to $4,500
B) $3,000 to $7,500
C) $4,500 to $9,000
D) $5,000 to $10,000
E) $6,000 to $12,000

Question 64

Describe the four budgeting strategies suggested for dual income households.

Question 65

Changes in the cost of living are

A) different in various geographic 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 66

The Crown family has a difficult time staying on a budget.In an effort to actually see what funds are available for various expenses,a ____________ budget would be most appropriate.

A) written
B) computerized
C) physical
D) deficit
E) mental

Question 67

Janice spends a total of $1,500 a month to cover all living expenses.Which of the following would represent the minimum acceptable emergency fund?

A) Zero
B) $1,500
C) $4,500
D) $9,000
E) $3,000

Question 68

What are the main components of a personal balance sheet and a cash flow statement? What is the main purpose of each of these personal financial statements?

Question 69

If a family planned to spend $370 for food during March but only spent $348,this difference would be referred to as a

A) surplus.
B) deficit.
C) fixed living expense.
D) budget reduction.
E) contribution to net worth.

Question 70

A five-year non-redeemable GIC is classified as a(n)_______________ asset on the personal balance sheet.

A) liquid
B) investment
C) personal
D) business
E) marketable

Question 71

Given the following,what is the individual's net worth?

A) $11,810
B) $11,410
C) $10,910
D) $6,810
E) $6,500

Question 72

The difference between the amount budgeted and the actual amount is called a

A) financial plan.
B) current liability.
C) change in net worth.
D) budget variance.
E) variable living expense.

Question 73

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

A) actual expenses are less than planned expenses.
B) actual expenses are greater than planned expenses.
C) actual expenses equal planned expenses.
D) assets exceed liabilities.
E) net worth decreases.

Question 74

What types of financial records and documents should be kept in a safety deposit box?

Question 75

____________ is the recommended budgeting strategy for dual income households where the two partners have trust and shared values and goals?

A) Pooled income
B) 50/50
C) Proportionate contributions
D) Sharing the bills
E) Sharing goals