Financial Literacy (Unit 6) Quiz

What is a budget in financial terms?

• The total amount of money being transferred into and out of a business or household

• An estimate of income and expenses for a set period of time

• A person who purchases goods and services for personal use

• The process of comparing the price of different products or services

Answer explanation

A budget in financial terms is an estimate of income and expenses for a set period of time, making it the correct choice among the options provided.

What does the term 'cash flow' refer to?

• The cost required for something; the money spent on something

• An individual's total pay before accounting for taxes or other deductions

• The total amount of money being transferred into and out of a business or household

• A reduction in the value of an asset with the passage of time

Answer explanation

Cash flow refers to the total amount of money being transferred into and out of a business or household, encompassing both income and expenses.

What is the purpose of a cost benefit analysis?

• To justify the extension of credit based on repayment history and credit score

• To compare the price of different products or services

• To analyze business decisions by summing the benefits of an action and subtracting the associated costs

• To reduce the value of an asset over time

Answer explanation

The purpose of a cost benefit analysis is to analyze business decisions by summing the benefits of an action and subtracting the associated costs.

What is a dependent in financial terms?

• A reduction in the value of an asset with the passage of time

• A person who relies on another, especially for financial support

• The cost required for something; the money spent on something

• An individual's income after taking taxes and deductions into account

Answer explanation

A dependent in financial terms refers to a person who relies on another, especially for financial support.

What is depreciation?

• The total amount of money being transferred into and out of a business or household

• A person who relies on another, especially for financial support

• A reduction in the value of an asset with the passage of time

• The cost required for something; the money spent on something

Answer explanation

Depreciation is a reduction in the value of an asset over time, making it the correct choice.

What is considered an expense?

• An individual's total pay before accounting for taxes or other deductions

• The cost required for something; the money spent on something

• The total amount of money being transferred into and out of a business or household

• A person who purchases goods and services for personal use

Answer explanation

The correct choice defines an expense as the cost required for something; the money spent on something.

What is the role of a financial advisor?

• To provide the same total amount regardless of changes in the amount of sales, production, or some other activity

• To ensure an individual's total pay before accounting for taxes or other deductions

• To be employed to provide financial services or guidance to clients

• To levy a tax by a government directly on income

Answer explanation

The role of a financial advisor is to be employed to provide financial services or guidance to clients.

What is a fixed expense?

• An expense that will be the same total amount regardless of changes in the amount of sales, production, or some other activity

• An individual's total pay before accounting for taxes or other deductions

• The total amount of money being transferred into and out of a business or household

• A reduction in the value of an asset with the passage of time

Answer explanation

A fixed expense is an expense that will be the same total amount regardless of changes in the amount of sales, production, or some other activity.

What is gross income?

• An individual's total pay before accounting for taxes or other deductions

• The cost required for something; the money spent on something

• The total amount of money being transferred into and out of a business or household

• A person who relies on another, especially for financial support

Answer explanation

Gross income refers to an individual's total pay before accounting for taxes or other deductions, making it the correct choice.

What is income tax?

• A tax levied by a government directly on income, especially an annual tax on personal income

• The federal health insurance program for people who are 65 or older

• A general increase in prices and fall in the purchasing value of money

• A requirement, necessary duty, or obligation

Answer explanation

Income tax is a tax levied by a government directly on income, especially an annual tax on personal income.