Deck 3: Financial Statements,tools,and Budgets

Question 1

Values are fundamental beliefs regarding what consumer goods are worth.

Answer 1

False

Question 2

Tangible assets are assets whose primary purpose is to provide maintenance of a lifestyle.

Answer 2

True

Question 3

Financial planning is a single,customized plan regarding a person's financial affairs.

Answer 3

False

Question 4

A balance sheet describes an individual's financial progress over a period of time,generally a year.

Question 5

Financial planning is only for the rich.

Question 6

Among the intermediate-term goals for capital accumulation is having a fund for emergencies.

Question 7

Financial planning is the process of developing and implementing short-term plans to achieve financial objectives.

Question 8

Values have little impact on financial goals.

Question 9

The concept of "pay myself first," saving and investing before you pay other expenses,is a characteristic of successful financial managers.

Question 10

Financial planning begins by acquiring a good job that provides a person with enough extra income to manage.

Question 11

A cash-flow statement summarizes transactions that have taken place over a specific period of time.

Question 12

Effective financial goals should be stated explicitly in terms of purpose,dollar amounts,and projected date for achievement.

Question 13

Monetary assets include cash and near-cash items that can be readily converted to cash.

Question 14

Paying off debts is an example of a financial goal even though it does not involve a direct purchase.

Question 15

In general,tangible assets do not depreciate in value over time.

Question 16

Your goal in financial planning is to manage your income and wealth in such a way that your goals are met in a suitable manner.

Question 17

It is not necessary that your values be consistent with your financial and lifestyle goals.

Question 18

Financial planning begins by examining one's values.

Question 19

Financial planning focuses primarily on spending wisely.

Question 20

Reducing the number of bank and credit accounts that each partner brings into the marriage can save money on account fees.

Question 21

A cash-flow statement shows flows of income in and expenses out of your finances for a given period of time.

Question 22

The balance sheet serves as an assessment of assets and liabilities at fair market value as of a specified date.

Question 23

A cash-flow statement shows the value of your assets and liabilities as of a specific date.

Question 24

The surplus section on an individual's cash-flow statement is similar to net profit for a business.

Question 25

A cash-flow statement for a previous year would show whether you were able to live within your income.

Question 26

The liability section of a balance sheet would include money owed to a doctor or a lawyer but would not include money owed to a friend.

Question 27

Short-term liabilities are obligations to be paid off within one year.

Question 28

Keeping track of all income and expenses is very important to achieving your financial objectives.

Question 29

Savings set aside can be categorized as both fixed and variable expenses.

Question 30

Financial ratios are numerical calculations that make assessments of financial conditions more complex.

Question 31

The liquidity ratio reveals how many months it would take to convert all assets into cash.

Question 32

A balance sheet shows flows of income in and expenses out of your finances for a given period of time.

Question 33

It is usually easy to reduce a fixed expense.

Question 34

Most people keep track of their finances on a cash basis rather than on an accrual basis.

Question 35

A person who has a negative net worth is technically insolvent.

Question 36

Many experts recommend that people should have assets equal to one year's expenses in emergency cash reserves.

Question 37

A surplus demonstrates that you are managing your financial resources successfully and do not have to use savings or borrow to make financial ends meet.

Question 38

Both individual retirement accounts (IRAs)and non-residential real estate property are investment assets.

Question 39

Successful financial planning requires identifying the one best investment asset for an individual,then putting all of an individual's surplus into that asset.

Question 40

For most people,the only way to increase net worth is to spend less than their income;people must save and invest.

Question 41

Keeping good records is a prerequisite for effective financial planning.

Question 42

Safe-deposit boxes take two keys to open,and the financial institution where the box is located keeps one of these keys.

Question 43

Households dependent on the income from a self-employed person may need a larger emergency cash reserve than others.

Question 44

By analyzing financial statements,a person can assess his or her financial condition and progress.

Question 45

Disposable personal income is the amount of take-home pay remaining after all deductions are withheld for taxes,insurance,and union dues.

Question 46

The major purpose of budgeting is to make sure bills get paid.

Question 47

The asset-to-debt ratio compares total assets with total liabilities and is a broad measure of a household's financial liquidity.

Question 48

A low asset-to-debt ratio is a positive indicator of financial well-being.

Question 49

A family with two income earners will always need a greater amount of cash reserves than a family with one earner.

Question 50

A person is insolvent when he or she doesn't have enough current income to pay all of his or her current bills.

Question 51

Original deeds and mortgage papers should be stored in one's home file.

Question 52

You can use the liquidity ratio to determine the number of months that you could continue to meet your expenses using only your monetary assets should all income cease.

Question 53

Specific financial goals drive the creation of budgets.

Question 54

The debt payments-to-disposable-income ratio is gross income divided by monthly nonmortgage debt repayments.

Question 55

The major purpose of budgeting is to reach your financial goals.

Question 56

A debt-to-income ratio of 0.36 or less is considered manageable for most families.

Question 57

A debt-to-income ratio of 0.36 or less indicates that disposable income is adequate to make debt repayments.

Question 58

The debt-to-income ratio provides a view of total debt burden of an individual or family by comparing the dollars spent on gross annual debt repayments with gross annual income.

Question 59

The investment assets-to-total assets ratio compares the value of your investment assets with your total assets.

Question 60

Budgeting is narrower in scope than overall financial planning as it is primarily concerned with projecting future income and expenditures over a period of time.

Question 61

After the budgeting period has ended,you need to add up the actual income received and expenditures made during that period.

Question 62

A net surplus in your monthly budget cannot be carried forward to the next month.

Question 63

Reconciling budget estimates includes reconciling conflicting needs and wants.

Question 64

When budgeting,recordkeeping is the process of recording the sources and amount of dollars earned and spent.

Question 65

Budgeting gives one control over his or her finances.

Question 66

The three broad areas of financial plans include financial plans for​

A) ​spending.
B) ​risk management.
C) ​capital accumulation.
D) ​All of these.

Question 67

The basis for financial planning is (are)​

A) ​a budget.
B) ​personal values.
C) ​a balance sheet.
D) ​goals.

Question 68

When setting up your budget for the month,it is useful to use prior months' cash-flow statements to set your estimates for income and spending for the upcoming month.

Question 69

A budget variance is the difference between one's actual expenditure with budgeted amount for a specific category.

Question 70

Financial plans should include objectives and goals in which of the following areas?​

A) ​Spending
B) ​Risk management
C) ​Capital accumulation
D) ​All of these

Question 71

To make realistic estimates of income and expenses,reliable financial information is critical.The more accurate the estimates,the more effective the budget.

Question 72

The best method to control overspending is to regularly monitor unexpended balances in each budget classification.

Question 73

Budget estimates are the projected dollar amounts in a budget that one plans to receive or spend during the period covered by the budget.

Question 74

Discretionary income is the money left over once the necessities of living are covered.

Question 75

When a college student saves all summer so that he or she has money available to live on during the school year;he or she is using a revolving savings fund.

Question 76

A budget variance is the difference between the amount budgeted and the actual amount spent or received.

Question 77

Once budget estimates are determined;one should not make any changes in the budget for at least one year.

Question 78

The use of automated teller machines is recommended as a valid method of controlling expenditures.

Question 79

Discretionary income is the money people use to pay for the necessities of life.

Question 80

Using credit cards to "balance" your budget is a proper budgeting tool.