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Week 2 (Tutorial Exercises)

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21 views5 pages

Week 2 (Tutorial Exercises)

Uploaded by

Tam Jason
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Week 2 (Tutorial Exercises)

Chapter 2 Measuring Your Financial Health and Making a Plan &


Chapter 3 Understanding and Appreciating the Time Value of Money

1) Planning and budgeting requires


A) control.
B) financial restraint.
C) discipline.
D) all of the above.

2) The first section of a balance sheet represents your


A) net worth.
B) financial goals.
C) assets.
D) liabilities.

3) When measuring your current financial health it is important to create


A) positive net worth.
B) a personal balance sheet.
C) an income statement.
D) positive net income.
E) both B and C.

4) Assets that you purchase for the purpose of accumulating wealth to satisfy your financial
goals are called
A) monetary assets.
B) intangible assets.
C) investment assets.
D) all of the above.

5) Liabilities are best described as


A) monetary items of value that you own.
B) financial debts and obligations that you owe.
C) your net worth.
D) assets that depreciate over time.
E) intangible obligations.

6) ________ can be more than or less than the price you paid for a given asset, depending on
what others are willing to pay for that asset today.
A) Net value
B) Fair market value
C) Intrinsic value
D) Sentimental value

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7) Your ________include cash, checking and savings account balances, and money market
funds.
A) monetary assets
B) tangible assets
C) physical assets
D) investment assets

8) The term "fair market value" refers to


A) what an asset could be sold for today.
B) what you paid when you purchased an asset.
C) what an asset will be worth at some point in the future.
D) how the price of an asset has changed since its original purchase.

9) Your financial situation is insolvent when


A) your expenses exceed your income.
B) your assets are less than your liabilities.
C) your net worth is positive.
D) your debt ratio is too high.

10) Which of the following are not typically found on a balance sheet?
A) Monetary assets
B) Mortgage interest payments
C) Home's current market value
D) Interest earned on a CD
E) Both B and D

11) Which financial planning document should you use to measure your current financial
condition?
A) Budget
B) Cash budget
C) Balance sheet
D) Income statement
E) Statement of financial ratios

12) Items on the balance sheet that represent amounts owed to others are termed
A) assets.
B) liabilities.
C) revenues.
D) expenses.
E) none of the above.

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13) When including an asset such as a car on your balance sheet
A) list its current value as indicated in a blue book or site like www.edmunds.com.
B) list the original purchase price of the vehicle.
C) list the amount it would cost to purchase a new model of this vehicle.
D) none of the above.

14) A physical asset such as a high-definition, flat-screen TV or a Harley Davidson motorcycle is


called a(n)
A) financial asset.
B) liability.
C) tangible asset.
D) investment.

15) Your net worth, or your general level of financial worth, is found by
A) subtracting your expenses from your income.
B) dividing your monetary assets by your current liabilities.
C) subtracting your liabilities from your assets.
D) dividing monthly debt (less a mortgage payment) by monthly income.
E) subtracting current liabilities from monetary assets.

16) A personal income statement is prepared


A) on an accrual basis.
B) on a cash basis.
C) based on actual cash flows.
D) Both B and C.

17) Practical uses of an income statement include


A) determining whether you are spending more than you earn.
B) spotting problem areas of overspending.
C) determining if money is available for saving or investing.
D) knowing where your money is going.
E) all of the above

18) An expenditure over which you have no control and are obligated to make is a
A) repeating expenditure.
B) fixed expenditure.
C) constant expenditure.
D) long-term expenditure.
E) contractual expenditure.

19) An expenditure that you can control over time and that you can manage is a(n)
A) variable expenditure.
B) fixed expenditure.
C) constant expenditure.
D) short-term expenditure.
E) adjustable expenditure.
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20) How would an income statement help you create a financial plan?
A) Spot potential areas of gambling.
B) Determines whether you are earning more than you spend
C) Determines your net worth
D) Allows you to track future income

21) An expenditure over which you have control and are not obligated to make, and which may
vary from month to month is called a ________ expenditure.
A) fixed
B) flexible
C) liquid
D) vacillating

22) An expenditure over which you have no control, are obligated to make, and is generally at a
constant level each month is called a ________ expenditure.
A) fixed
B) flexible
C) stationary
D) discretionary
E) none of the above

23) Your ________ is found by dividing monetary assets by current liabilities and is a good
measure of liquidity.
A) debt ratio
B) current ratio
C) net worth
D) net cash flows

24) Your ________ is found by dividing total debt or liabilities by total assets.
A) debt ratio
B) current ratio
C) net worth
D) asset ratio

25) Which of the following would you calculate if you were concerned about your financial
resources with regards to unplanned money emergencies?
A) Liability ratio
B) Debt ratio
C) Long-term debt coverage ratio
D) Current ratio
E) None of the above

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26) The ________ Principle states that a dollar today is worth more than a dollar in the future.
A) Future value of money
B) Discounted value of money
C) Adjusted value of money
D) Time value of money
E) Annuity value of money

27) The current value in today's dollars of a future sum of money is called
A) future value.
B) adjusted value.
C) compounded value.
D) present value.
E) discounted value.

28) The dollar value of an investment at some future point in time is also known as
A) future value.
B) present value.
C) compounded annuity.
D) the time value of money.
E) calculated value.

29) Allowing the interest that you earn on an investment to stay in the investment and to earn
interest on the interest you have already earned is called what?
A) The power of of present value
B) The power of compound interest
C) The power of simple interest
D) The power of time
E) The power of future value

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