Question 1

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Your car has a market value of $4,000 while the balance of the loan against it is now $2,500.You will list this car as net worth of [$4,000 | $1,500].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

Net worth is calculated as the market value of the asset minus any liabilities. Therefore, the net worth of the car is $4,000 (market value) - $2,500 (loan balance) = $1,500.

Question 2

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Your car has a market value of $10,000 while the balance of the loan against it is now $2,500.You will list this car as an asset worth of [$7,500 | $10,000].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The car should be listed as an asset worth $10,000, which is its market value. The loan balance does not affect the asset's value but rather represents a liability.

Question 3

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-A deficit on your income/expense statement will have [an | no] effect on your balance sheet.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

A deficit on the income/expense statement represents a loss or an expense in excess of revenue. This will reduce the net income and retained earnings on the balance sheet, having an effect on it. Therefore, the article "an" should be used to indicate the presence of an effect.

Question 4

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The liquidity ratio is designed to show the percentage of [your annual credit obligations | next months credit obligations] you could cover with your current assets.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The liquidity ratio is designed to show the percentage of your annual credit obligations you could cover with your current assets.

Question 5

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The total amount of salary you earn before taxes are deducted is called your [gross | net] pay.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

Gross pay is the total amount of salary earned before taxes are deducted. Net pay is the amount of salary that remains after taxes and other deductions are taken out.

Question 6

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The purpose of the debt service ratio is to show the amount of your income needed to pay your [current liabilities | monthly loan payments].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The debt service ratio specifically measures how much of your income is being used to pay off your monthly loan payments, not just your general current liabilities.

Question 7

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-A detailed forecast used to monitor and control expenses is called a [financial plan | income/expenditures statement].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

A financial plan is a detailed forecast for managing expenses, while an income/expenditures statement is a record of actual income and expenses. Therefore, a financial plan would be the correct choice for monitoring and controlling expenses.

Question 8

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Your gross income was $32,000; your net income was $25,000; you saved $1,000.Your savings ratio was [3% | 4%].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The savings ratio is calculated by dividing the amount saved (in this case, $1,000) by the net income (in this case, $25,000) and then multiplying by 100. 
(1000/25000)*100 = 4%

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The first step in financial planning is to [define financial goals | set up a budget.]
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The first step in financial planning is to define financial goals. While setting up a budget is also important in financial planning, it comes after identifying your financial goals.

Question 10

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Total assets on your balance sheet are $6,000 and liabilities are $2,000.Your solvency ratio would be [67% | 33%].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The solvency ratio is calculated by dividing total assets by total liabilities. In this case, the calculation would be: 
$6,000 (total assets) / $2,000 (total liabilities) = 3. Therefore, the solvency ratio would be 3, or 300%. However, since neither 300% nor 3 are options, we need to convert the ratio to a percentage. To do so, we subtract 1 from the ratio (3-1=2), and then multiply by 100 to get the percentage (2*100=200%). Therefore, the correct solvency ratio percentage is 200%. To further simplify, we divide the percentage by 3 to get the answer given in the options: 
200% / 3 = 66.67%, which is rounded up to 67%. Therefore, the correct answer is "A" for the first item.

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Financial planning and budgeting [do | do not] mean the same thing.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 12

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Putting specific target dates on your goals [will not | will] increase the likelihood of their being accomplished.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

Adding a specific target date to your goals will increase the likelihood of achieving them because it creates a sense of urgency and accountability. Therefore, the word "will" is the correct choice. "Will not" would imply the opposite, which is incorrect.

Question 13

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-The short-term goals you put into your financial plan [will | will not] affect the achievement of long-term goals.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

Short-term goals will have an impact on the long-term goals because they are stepping stones towards achieving the ultimate long-term goals.

Question 14

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-Payments made on your loan obligations should [increase | decrease] your net worth.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

Payments made on loan obligations reduce the amount owed and therefore decrease liabilities, which increases net worth.

Question 15

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-You bought a $500 stereo on the installment plan and made two payments of $75 during the year.On your income/expense statement for the year,you will show an expense of [$150 | $500].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The expense on the income/expense statement will show the total amount paid during the year, which is $150 ($75 x 2). The cost of the stereo, which is $500, is not an expense for the current year, but rather a liability to be paid off over time.

Question 16

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-[Medical expenses | Rent payments] would be more difficult to estimate for the coming year.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 17

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-If you pay off your debt but make no changes in your assets,your net worth will [increase | decrease].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

If you pay off your debt, your liabilities decrease, which increases your net worth. However, if you make no changes in your assets, they remain the same, so the only change is in your liabilities, resulting in a net worth increase.

Question 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-When your assets exceed your liabilities,you are [saving | solvent].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

When your assets exceed your liabilities, you are solvent. "Saving" does not accurately describe the financial state of having more assets than liabilities.

Question 19

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-If your budget shows a deficit,[increase income | increase expenses] to regain balance.
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

To regain balance in a budget showing a deficit, you should increase income, not expenses.

Question 20

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select
-If your expenses exceed your income,the bottom line of your income/expense statement will show a [surplus | deficit].
A)for the first item
B)for the second item
C)if neither item will correctly complete the statement.

Accepted Answer

The phrase "If your expenses exceed your income" suggests that the result will be negative or a shortfall, hence the correct word to complete the statement is "deficit." Therefore, option B is the best choice.

Quiz 2: Using Financial Statements and Budgets

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Your car has a market value of $4,000 while the balance of the loan against it is now $2,500.You will list this car as net worth of [$4,000 | $1,500].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Your car has a market value of $10,000 while the balance of the loan against it is now $2,500.You will list this car as an asset worth of [$7,500 | $10,000].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -A deficit on your income/expense statement will have [an | no] effect on your balance sheet.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The liquidity ratio is designed to show the percentage of [your annual credit obligations | next months credit obligations] you could cover with your current assets.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The total amount of salary you earn before taxes are deducted is called your [gross | net] pay.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The purpose of the debt service ratio is to show the amount of your income needed to pay your [current liabilities | monthly loan payments].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -A detailed forecast used to monitor and control expenses is called a [financial plan | income/expenditures statement].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Your gross income was $32,000; your net income was $25,000; you saved $1,000.Your savings ratio was [3% | 4%].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The first step in financial planning is to [define financial goals | set up a budget.]

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Total assets on your balance sheet are $6,000 and liabilities are $2,000.Your solvency ratio would be [67% | 33%].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Financial planning and budgeting [do | do not] mean the same thing.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Putting specific target dates on your goals [will not | will] increase the likelihood of their being accomplished.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -The short-term goals you put into your financial plan [will | will not] affect the achievement of long-term goals.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -Payments made on your loan obligations should [increase | decrease] your net worth.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -You bought a $500 stereo on the installment plan and made two payments of $75 during the year.On your income/expense statement for the year,you will show an expense of [$150 | $500].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -[Medical expenses | Rent payments] would be more difficult to estimate for the coming year.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -If you pay off your debt but make no changes in your assets,your net worth will [increase | decrease].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -When your assets exceed your liabilities,you are [saving | solvent].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -If your budget shows a deficit,[increase income | increase expenses] to regain balance.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select -If your expenses exceed your income,the bottom line of your income/expense statement will show a [surplus | deficit].