Personal Finance

The simple objective of financial planning is to make the best use of your resources to achieve your financial goals.

• True

• False

Opportunity cost refers to

• money needed for major consumer purchases.

• what you give up or forego as a result of making a decision.

• the amount paid for taxes when a purchase is made.

• evaluating different alternatives for financial decisions.

If you do not have access to money to cover cash needs, you may have insufficient liquidity.

• True

• False

Budgeting helps set goals by estimating _________on a monthly basis to determine how much to save and spend.

• assets and income

• liabilities and expenses

• income and expenses

• net worth and income

Which of the following is not a way that insurance is designed to protect your wealth?

• Protecting the assets that you own

• Limiting your exposure to potential liabilities

• Protecting your income

• Protecting your investments from downturns in the stock market

If you do not budget for unexpected expenses in a given month, you will likely experience a(n)

• cash shortage

• cash surplus

• increase in assets

• decrease in liabilities

A personal finance plan specifies financial goals and describes

• saving, investing, and asset valuation.

• spending, saving, and credit card financing.

• spending, financing, and investment plans.

• saving and spending only.

Cash flows are affected by financial planning decisions. Which of the following is correct?

• Car payments you make are cash outflows.

• Investments you make in stock are cash inflows.

• Your routine monthly expenses are cash inflows.

• Your income is a cash outflow.

A person's net worth would increase as a result of

• reducing amounts owed to others.

• reducing earnings.

• decreasing the value of assets.

• increasing spending on current living expenses.

The best measure of a person's or family's wealth is

• the amount of salary earned annually.

• net worth

• the total dollar value of investment assets.

• the market value of real estate including the personal home.