Question 1

Patricia McDonald has determined that the value of her liquid assets is $4,500,the value of her real estate is $128,000,the value of her personal possessions is $62,000,and the value of her investment assets is $73,000.She has also determined the value of her current liabilities is $7,500 and the value of her long term liabilities is $98,000.What is Patricia's net worth?

Accepted Answer

The answer of Patricia McDonald has determined that the value...

Question 2

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

Accepted Answer

The best financial document to consult to determine a person's solvency is the balance sheet. This statement provides a snapshot of a person's financial health by showing their assets (what they own), liabilities (what they owe), and net worth (the difference between assets and liabilities). This information can help assess whether a person has enough assets to cover their debts and whether they have a positive net worth.

Question 3

A personal balance sheet:

Accepted Answer

A personal balance sheet reports what an individual or a family owns (assets) and owes (liabilities), providing a snapshot of their net worth at a specific point in time. It does not predict income and expenses, report income and expenses, analyze debt payment activities, or predict net worth for economic entities.

Question 4

Kathy Stumbaugh has determined that the value of her assets is $46,000 and the value of her debts is $32,000.The difference between these two is $14,000.The $14,000 could be referred to as her:

Accepted Answer

The $14,000 difference between Kathy's assets and debts is known as her net worth. This represents the value of her overall wealth, taking into account both what she owns (assets) and what she owes (debts). This term is commonly used in personal finance to help individuals assess their financial health and plan for the future.

Question 5

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

Accepted Answer

The difference between the planned amount and the actual amount spent is a surplus, as they spent less than they budgeted for.

Question 6

Kyle Burroughs has decided to put $25 more per week in his savings account.He knows this will reduce his ability to go out to eat each week but thinks building his savings is important.This would be an example of:

Accepted Answer

This is an example of opportunity cost, as Kyle is sacrificing his ability to go out to eat in the short-term in order to save more money in the long-term.

Question 7

Changes in the cost of living are:

Accepted Answer

The cost of living can vary greatly in different geographic areas due to differences in factors such as housing costs, transportation expenses, and taxes. For example, the cost of living in New York City is generally higher than in smaller cities or rural areas. Therefore, option A is the best choice because it acknowledges this variation.

Question 8

During the past month,Jennifer Ernet had income of $3,000.During the month,her net worth declined by $200.If no other financial activities occurred,this means Jennifer's payments for the month were:

Accepted Answer

Net worth will decrease if outflows are greater than inflows. Outflows = $3,000 - (-$200) = $3,200.

Question 9

Patricia McDonald has determined the following information about her own financial situation.Her checking account is worth $850 and her savings account is worth $1,200.She owns her own home that has a market value of $98,000.She has furniture and appliances worth $12,000 and a home computer and laptop worth $3,300.She has a car worth $12,500 and owes $7,800 on her auto loan.She has also purchased some stock worth $5,500 and she has a retirement account worth $38,550.What is the total value of her assets?

Accepted Answer

To find the total value of her assets, we need to add up all the values she has listed:

Checking account: $850
Savings account: $1,200
Home value: $98,000
Furniture/appliances: $12,000
Computer/laptop: $3,300
Car: $12,500
Stock: $5,500
Retirement account: $38,550

Total value of assets = $850 + $1,200 + $98,000 + $12,000 + $3,300 + $12,500 + $5,500 + $38,550 = $171,900

Therefore, the best choice is E.

Question 10

Jennifer Rodrick uses a computer to help her record her spending each month.She updates her records weekly.This activity would be an example of:

Accepted Answer

The activity described involves managing her money by tracking her spending with the help of a computer. Updating her records weekly suggests that she is using this information to form a budget and make decisions about her spending.

Question 11

A family has a net worth of $156,000 and liabilities of $167,000,what is the amount of their assets?

Accepted Answer

The net worth of a family is the difference between their assets and liabilities. So, we can use the formula:
Net worth = Assets - Liabilities
$156,000 = Assets - $167,000
Assets = $156,000 + $167,000
Assets = $323,000
Therefore, the amount of their assets is $323,000, which is option D.

Question 12

When it comes to savings,most Americans:

Accepted Answer

Studies have shown that a majority of Americans struggle with saving and do not have adequate emergency funds or retirement savings. The savings rate has also decreased in recent years. Therefore, option C is the correct answer.

Question 13

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

Accepted Answer

Increased savings and investments lead to an improvement in a person's financial position, as they have more assets and financial security.

Answer: B, D, E are incorrect choices as they all involve negative financial actions, such as reducing earnings or taking on debt. Choice A is also incorrect as increased liabilities lead to a decrease in a person's financial position.

Question 14

Nick Boss has a savings account with $550 in it.He knows that he can withdraw this money whenever he wishes.This would be an example of:

Accepted Answer

A liquid asset is one that can be easily and quickly converted into cash without loss of value. In this case, Nick's savings account is a perfect example of a liquid asset since he can withdraw the money whenever he wishes without any penalty or loss of value.

Question 15

Sean Carter needs to store monthly statements from his bank,his credit card company and from his savings and loan.Where is the most appropriate place for Sean to store this information?

Accepted Answer

A home file cabinet is the most appropriate place for storing monthly financial statements as it is easily accessible and secure for personal documents.

Question 16

Karen Price has created a financial statement for herself that lists all of the assets she owns as well as the debts she owes.This would be an example of:

Accepted Answer

A balance sheet is a financial statement that provides a snapshot of an individual's or a company's financial position by listing assets, liabilities, and owner's equity. Karen Price's financial statement lists her assets and debts, making it a balance sheet. Options A, B, D, and E are not relevant to this scenario.

Question 17

A decrease in net worth could be the result of:

Accepted Answer

Net worth is calculated by subtracting the total liabilities from the total assets. A decrease in net worth means that liabilities have increased or assets have decreased. Option B represents a situation where outflows (expenses) are greater than inflows (income) leading to a decrease in net worth.

Question 18

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

Accepted Answer

A budget deficit occurs when actual expenses are greater than planned expenses. This means that more money was spent than what was budgeted for, resulting in a negative balance or shortfall. A budget surplus, on the other hand, would occur when actual expenses are less than planned expenses.

Question 19

Which one of the following cash outflows should be listed first on a Cash Flow Statement?

Accepted Answer

Fixed expenses should be listed first on a Cash Flow Statement as they are regular, predictable, and necessary expenses that occur consistently, such as rent or mortgage payments.

Question 20

Which one of the following is the best example of a long-term goal for a married couple with no children?

Accepted Answer

Providing for retirement income is a long-term goal that will benefit the married couple in their future years. The other options, such as buying a new car or completing college, may be important but are not necessarily long-term goals for a married couple with no children. Increasing life insurance and savings are also good choices, but providing for retirement income is the most appropriate option for a long-term goal.

Quiz 3: Money Management Strategy: Financial Statements and Budgeting