Deck 2: Planning With Personal Financial Statements

Question 1

Which of the following is not a cash outflow?

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

Answer 1

Salary

Question 2

Use the following items to answer the matching questions below:

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

Answer 2

B

Question 3

Use the following items to answer the matching questions below:

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

Answer 3

C

Question 4

The personal cash flow statement measures

A) cash inflows.
B) cash outflows.
C) cash inflows and outflows.
D) All of these are part of the cash flow statement.

Question 5

Use the following items to answer the matching questions below:


-cash flow statement

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

Question 6

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

Question 7

Which of the following is not a cash inflow?

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

Question 8

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 9

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

Question 10

Use the following items to answer the matching questions below:

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

Question 11

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

Question 12

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

Question 13

The primary goal of financial planning is to

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

Question 14

Creating a cash flow statement requires that you determine

A) all cash coming in for the period.
B) liabilities.
C) cash used for expenses.
D) A and C are both correct.

Question 15

The main source of cash flow for most people is

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

Question 16

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

Question 17

Cash inflows can include

A) dividends.
B) interest income.
C) income.
D) All of these are cash inflows.

Question 18

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 19

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

Question 20

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

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

Question 21

Which cash inflow is more likely to be discontinued after retirement?

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

Question 22

High income earners always have positive cash flow.

Question 23

Cash inflow can be increased by all of the following, except

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

Question 24

Cash inflows tend to increase as a person gets older since they tend to spend less once they have their education and home purchase behind them.

Question 25

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

Question 26

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 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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 32

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 33

The only sources of cash outflows for most people are

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

Question 34

Health insurance and auto insurance premiums are not cash outflows because they prevent large expenditures which are outflows.

Question 35

Cash inflows tend to increase as a person gets older since they are further along in their careers.

Question 36

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 37

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

Question 38

Which of the following usually affects cash flow the most?

A) The size of your family
B) Your job skills
C) Your personal consumption behavior
D) All of these

Question 39

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

Question 40

Which factor affects a household's cash flows?

A) Monthly spending on non-essentials
B) Stage in career
C) Type or level of job
D) All of these

Question 41

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

Question 42

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 43

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

Question 44

How would you assess the accuracy of your budget?

A) Compare your cash inflow forecast vs. actual cash inflows.
B) If you have money left at the end of the month, the budget is fine.
C) Compare cash outflow forecast vs. actual cash outflows.
D) A and C are both necessary.

Question 45

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

Question 46

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 47

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 48

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 49

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 50

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 51

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 52

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

Question 53

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 54

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

A) reduce your spending.
B) get a second job.
C) increase your work hours.
D) All of these

Question 55

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 56

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 57

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

Question 58

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

Question 59

A budget will not do which of the following?

A) Help determine how much risk a family should take on investments
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 60

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

Question 61

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 62

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 widely reported both online and in The Wall Street Journal.

Question 63

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

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

Question 64

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 65

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 into a retirement account

Question 66

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 67

Which of the following results in an increase in liquid assets?

A) Take advantage of company matching funds in 401(k)
B) Increase your contribution to 401(k)
C) Have $200 from each paycheck automatically sent to a credit union savings account
D) Sell stock held in a retirement account and hold proceeds in cash

Question 68

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 69

Investment assets include all of the following, except

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

Question 70

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 71

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 72

The difference between assets and liabilities is called

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

Question 73

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 74

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.

Question 75

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

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

Question 76

Long-term liabilities include all of the following, except

A) the monthly payment due on a credit card.
B) the mortgage on a home.
C) a three-year auto loan.
D) a student loan.

Question 77

Corporate stocks, government or corporate bonds, or mutual funds, are called

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

Question 78

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 79

Balance sheet assets should be valued at

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

Question 80

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) stock.
D) bond.