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Exam 2: Money Management Strategy: Financial Statements and Budgeting

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Question 51

True/False

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Insolvency is the inability to pay debts by the due date, because liabilities exceed the value of assets.

A) True
B) False

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Question 52

Multiple Choice

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Opportunity cost refers to:

A) current spending habits.
B) changing economic conditions that affect a person's cost of living.
C) storage facilities to make financial documents easily available.
D) trade-offs associated with financial decisions.
E) avoiding the use of consumer credit.

F) A) and E)
G) B) and E)

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Question 53

Multiple Choice

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Ben Chase needs to pay off some of his debts over the next few months. Which item on his balance sheet would help him decide what amounts are due in the near future?

Which of the following financial documents would most likely be stored in a safety deposit box?

Leveraged investing in common shares is expected to increase your net worth.

This year Taylor's gross income is $70,000. Her deductions for federal and provincial taxes, CPP contributions and employment insurance are $13,500. She also had after-tax investment earnings of $6,000. Taylor's take-home pay is:

If budgeted spending is less than actual spending, this is referred to as a deficit.

Given the following, what is the individual's net worth? $\begin{array} { | l | r | l | r | } \hline \text { Bank account } & \$ 2,500 & \text { Student loan } & \$ 9,500 \\\hline \text { Monthly gross income } & \$ 3,200 & \text { RRSP } & \$ 10,250 \\\hline \text { Annual car payments } & \$ 3,600 & \text { Unpaid vet bills } & \$ 600 \\\hline \text { Jewellery } & \$ 5,000 & \text { Car loan } & \$ 1,900 \\\hline \text { CSV (whole life) } & \$ 1,500 & \text { Car (resale value) } & \$ 2,500 \\\hline \text { Annual medical expenses } & \$ 500 & \text { GICs } & \$ 2,060 \\\hline\end{array}$

During the last month, Mary Jane had expenses of $5,000 and an increase in net worth of $700. This means Mary Jane's income for the month was:

Warranties are commonly associated with ____________ purchases.

Payments that do not vary from month to month are ____________ expenses.

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

Furniture, jewelry, and an automobile are examples of liquid assets.

Which of the following payments would be considered a variable expense?

If expenses for a month are greater than income, an increase in net worth will result.