Deck 2: Planning With Personal Financial Statements

Question 1

Which of the following is not a cash inflow?

A) Interest received
B) Dividend income
C) Car payment
D) Salary

Answer 1

Car payment

Question 2

Jim has $1,000 of salary and $100 of dividend income this month.This month he also has rent and utilities of $300 and he spent $200 on groceries and $100 on clothing.What is Jim's net cash flow this month?

A) $400
B) $600
C) $500
D) $1,100

Answer 2

$500

Question 3

Which of the following is not a cash outflow?

A) Salary
B) Rent
C) Telephone bill
D) Car payment

Answer 3

Salary

Question 4

Your cash outflows are the same as your liabilities such as the amount you owe on your car or home.

Question 5

Use the following two columns of items to answer the matching questions below:
household assets

A)a summary of assets, liabilities and net worth
B)the difference between cash inflows and outflows
C)items owned by a household such as a home or car
D)a financial statement that measures cash inflows and outflows

Question 6

Use the following two columns of items to answer the matching questions below:
net cash flows

A)a summary of assets, liabilities and net worth
B)the difference between cash inflows and outflows
C)items owned by a household such as a home or car
D)a financial statement that measures cash inflows and outflows

Question 7

Net cash flows are the difference between cash inflows and cash outflows and can be either positive or negative.

Question 8

Salary or wages are the only cash inflows for working people.

Question 9

The main source of cash flow for most people is

A) salary and wages.
B) dividends.
C) interest.
D) parents.

Question 10

Jim has $1,000 income from his job and $200 stock dividend income this month.This month Jim has rent and utilities of $300 and he spent $300 on groceries and $200 on clothing.What is his cash inflow this month?

A) $1,200
B) $400
C) $600
D) $500

Question 11

For most people,the first step in finding where their money goes each month is to correctly assess their true net income.

Question 12

Use the following two columns of items to answer the matching questions below:
balance sheet

A)a summary of assets, liabilities and net worth
B)the difference between cash inflows and outflows
C)items owned by a household such as a home or car
D)a financial statement that measures cash inflows and outflows

Question 13

When you retire,which of the following will be key sources of cash flow?

A) C and D
B) Salary and wages
C) Interest and dividends
D) Social security and 401K

Question 14

Creating a cash flow statement requires that you determine

A) assets.
B) liabilities.
C) cash used for expenses.
D) market value of investments.

Question 15

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

A) net worth.
B) current income and payments.
C) plan for borrowing.
D) value of investments.

Question 16

A document that shows your cash inflows and cash outflows is called a(n)________.

Question 17

The personal cash flow statement measures

A) the rate of cash flow.
B) cash outflows only.
C) cash inflows and outflows.
D) cash inflows only.

Question 18

The primary goal of financial planning is to

A) increase earnings.
B) maximize cash inflows.
C) maximize wealth.
D) minimize financial risk.

Question 19

Cash outflows are also called

A) assets.
B) expenses.
C) income.
D) liabilities.

Question 20

Use the following two columns of items to answer the matching questions below:
cash flow statement

A)a summary of assets, liabilities and net worth
B)the difference between cash inflows and outflows
C)items owned by a household such as a home or car
D)a financial statement that measures cash inflows and outflows

Question 21

One of the problems in making a monthly budget is that some expenses fluctuate quite a bit from month to month.

Question 22

One advantage of budgeting several months in advance is that you will be warned of potential deficiencies and can determine how to cover them.

Question 23

During the final stage in the life cycle,retirement,people experience higher incomes from their demanding careers.

Question 24

Which of the following usually affects cash inflows the most?

A) The education and income of your parents
B) Your job skills
C) Your personal consumption behavior
D) The size of your family

Question 25

Forecasting for more than a month at a time is not helpful because you can't plan for unexpected expenses in the future.

Question 26

At which time do cash inflows tend to be the highest?

A) College
B) Retirement
C) 20 years into a career
D) First job out of college

Question 27

Cash flow can be increased by all of the following except

A) increasing credit card purchases.
B) working overtime.
C) selling stock.
D) getting a second job.

Question 28

Some people with large incomes spend their entire paychecks within a few days,while others with small incomes may be big savers.

Question 29

Which factor does not affect a household's cash inflows?

A) Monthly spending on non-essentials
B) Stage in career
C) Type or level of job
D) Number of family members employed

Question 30

Getting financial help from family and friends is easy and should be your first option in case of an emergency.

Question 31

The main sources of cash outflows for most people are

A) every expenditure is a cash outflow.
B) mortgage or rent payments.
C) car payments.
D) college loan payments.

Question 32

Individuals who switch from a low-demand industry to a high-demand industry usually earn higher incomes.

Question 33

All of the following affect cash outflows except

A) the size of your family.
B) your age.
C) your education level.
D) your personal consumption behavior.

Question 34

Cash inflows tend to be higher for younger individuals and lower for individuals in their 50s.

Question 35

The most common error people make is to underestimate cash inflows and overestimate cash outflows.

Question 36

Which cash inflow will probably be discontinued after retirement?

A) Dividend and interest received from investments
B) Pension payments
C) Salary
D) Social Security benefits

Question 37

Detecting future cash flow shortages improves with practice in the budgeting process.

Question 38

Careful budgeting and controlled spending lead to self-reliance and a feeling of financial freedom.

Question 39

If both a husband and wife are employed,their consumption will tend to

A) increase.
B) decrease.
C) stay the same.
D) None of the above; the employment of spouses is unrelated to consumption behavior.

Question 40

A personal cash flow statement is usually the starting point for an individual's or family's budget.

Question 41

Which of the following is not an asset you might find on a personal balance sheet?

A) Liquid assets
B) Inventory
C) Household assets
D) Personal investments

Question 42

Long-term liabilities are debts that will be paid at least three years into the future.

Question 43

Stocks are considered liquid assets since they are easy to sell without a loss in value.

Question 44

If spending exceeds the amount of your income over a period of time,your best option is probably to

A) reduce your spending.
B) sell some of your assets.
C) increase your work hours.
D) get a second job.

Question 45

Which of the following is not an appropriate approach to solving the problem of an annual budget deficiency?

A) Liquidate enough savings or investments to make up the deficiency
B) Increase short-term, flexible expenditure items
C) Renegotiate terms for long-term expense items
D) Increase income by getting an additional part-time job

Question 46

If you do not budget for unexpected expenses in a given month,you will likely experience a(n)

A) cash shortage.
B) cash surplus.
C) increase in assets.
D) decrease in liabilities.

Question 47

In budgeting,it is useful to compare ________ with the budgeted amounts to determine the accuracy or error of the budget and adjust it as necessary.

A) actual inflows
B) actual outflows
C) both actual inflows and outflows
D) current assets

Question 48

The term "liquid assets" refers to

A) the earnings on savings.
B) financial assets that can be easily sold without a loss in value.
C) the amount of insurance coverage a person has.
D) a person's inability to pay his or her debt.

Question 49

Which of the following is a liquid asset?

A) Cash in a savings account
B) A swimming pool
C) Real estate
D) Stock held in a retirement account

Question 50

Many individuals tend to ________ their cash inflows and ________ their outflows.

A) underestimate; overestimate
B) overestimate; underestimate
C) minimize; maximize
D) not know; accurately know

Question 51

A high debt ratio indicates an excessive amount of debt and should be reduced over time to avoid any debt repayment problems.

Question 52

A cash flow statement that is based on forecasted cash flows for a future time period is called a(n)

A) cash outflow.
B) net cash flow.
C) income statement.
D) budget.

Question 53

Which of the following is not a liquid asset?

A) Cash in your pocket
B) Money in a savings account
C) Corporate stock you own outright
D) Money in your checking account

Question 54

A budget will not do which of the following?

A) Help determine if cash outflows will be sufficient to cover cash inflows
B) Anticipate cash shortages
C) Determine the excess you have to invest
D) Determine the additional payments you can make to reduce personal debt

Question 55

Allison anticipates an additional car expense two months from now of $400 for new tires that she has not previously budgeted for.What action should Allison take?

A) Nothing; wait another month to consider the expense since she doesn't need the tires for another two months.
B) Plan to use her credit card to purchase the tires. Then she won't have to use her excess cash.
C) Revise her car expenses over the next two months to allow for the additional cost of the new tires.
D) Ask her parents for the money for the new tires.

Question 56

Budgeting is a starting point for developing your financial plan.A good understanding of cash inflows and outflows,or what you make and spend is essential.Describe one way to increase your cash inflows and one way to decrease your personal outflows.

Question 57

Allison expects her monthly cash inflow after taxes to be $3,000.She also has the following monthly expenses: Rent,$750; student loan payment,$200; utilities,$150; food,$300; recreation,$600; car expenses,$200; clothing,$150. What is Allison's net cash flow for the current month?

A) $2,350
B) $650
C) ($650)
D) $3,000

Question 58

A(n)________ is a forecast of your future cash inflows and outflows.

Question 59

Lucky Louie has the following cash inflows and outflows: $500 rent,$200 car payment,$100 car repair,$100 discretionary purchases,$300 food,$150 electric bill,$3,500 monthly salary after deductions for tax,etc.,$200 cell phone,$400 repayment of loan to dad,and $500 planned spending on weekend fun.What is Lucky's net cash flow?

A) $1,050
B) $200
C) $1,150
D) Not enough information regarding paycheck

Question 60

Which of the following would increase your liquid assets?

A) Buying a new car
B) Making regular deposits to a savings account at your bank
C) Buying rental property
D) Putting more of your salary in a retirement account

Question 61

Student loans,car loans,and housing loans are good examples of

A) long-term liabilities.
B) current liabilities.
C) short-term debts.
D) personal obligations.

Question 62

Which of the following statements about stocks is not true?

A) Stocks represent partial ownership of a firm.
B) Corporations issue stocks to obtain money for various projects.
C) Investments in stocks are considered liquid assets.
D) The market value of stocks changes daily.

Question 63

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.

Question 64

An investment company that sell shares to individuals and then invests the proceeds in stocks or bonds is called a

A) current liability.
B) mutual fund.
C) stocks.
D) bonds.

Question 65

Which of the following is not a true statement about mutual funds?

A) They are managed by professional managers.
B) Proceeds are only invested in stocks.
C) A minimum investment is required.
D) The value of shares is reported in The Wall Street Journal.

Question 66

Property such as a person's home,car,and furniture is called

A) liquid assets.
B) household assets.
C) major property assets.
D) investment assets.

Question 67

Which of the following is not considered an asset for a family?

A) Cash in a checking account
B) A mortgaged home
C) A leased car
D) Furniture

Question 68

Liabilities can be calculated by

A) adding assets to net worth.
B) subtracting net worth from assets.
C) adding assets to income.
D) subtracting expenses from assets.

Question 69

Another term for your wealth calculated by deducting the amount that you owe from the value of the things you own is

A) gross income.
B) net income.
C) net property.
D) net worth.

Question 70

Debts that are to be paid off within a year are called

A) intermediate-term liabilities.
B) one-year liabilities.
C) current liabilities.
D) insignificant debts.

Question 71

The difference between assets and liabilities is called

A) surplus.
B) deficit.
C) net income.
D) net worth.

Question 72

Jennifer has assets of $100,000 and $10,000 of debt.She could

A) borrow more money, since her debt ratio is low.
B) apply for a bank loan, but expect to be turned down.
C) borrow approximately $200,000 at below market rates.
D) not borrow more money until she pays off her current debt.

Question 73

A personal balance sheet summarizes

A) income and expenses.
B) cash inflows and outflows.
C) assets, net worth, and income.
D) assets, liabilities, and net worth.

Question 74

In the balance sheet,a(n)________ in assets ________ net worth.

A) increase; increases
B) decrease; increases
C) Both A and D are correct.
D) decrease; decreases

Question 75

Balance sheet assets should be valued at

A) original purchase price.
B) replacement value.
C) insured value.
D) market value.

Question 76

Investment assets include all of the following except

A) stocks.
B) automobiles.
C) bonds.
D) rental property.

Question 77

Long term liabilities include all of the following except

A) the amount due on a credit card.
B) the mortgage on a home.
C) three year car loan.
D) a student loan.

Question 78

When a person owns corporate stocks,government or corporate bonds,or mutual funds,these are called

A) liquid assets.
B) household assets.
C) investment assets.
D) retirement assets.

Question 79

Corporations issue stocks for all of the following reasons except

A) to purchase new machinery.
B) to expand into new markets.
C) to fund a plant expansion.
D) to loan money to shareholders.

Question 80

The amount you would receive if you sold an asset today is called the asset's

A) market value.
B) book value.
C) sales value.
D) cost.