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Chapter 2 Financial Planning

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 

Planning to buy a car in one year is an example of a _____ goal.
A.
short-term
B.
medium-term
C.
long-term
D.
realistic
 

 2. 

Monthly rent payments are an example of a(n) _____ expense.
A.
fixed
B.
variable
C.
discretionary
D.
emergency
 

 3. 

Which of the following is a benefit of making charitable contributions?
A.
Tax deductions on an individual’s income tax return.
B.
A feeling of fulfilling social responsibility.
C.
Being philanthropic is known to make individuals feel happier and relieve stress.
D.
All of the above.
 

 4. 

Data _____ is the process of studying data with the goal of discovering new information that can help with making decisions.
A.
processing
B.
inputting
C.
analysis
D.
synthesis
 

 5. 

When a budget period ends, fill in the _____ column and total each section.
A.
Estimated
B.
Actual
C.
Variance
D.
Planned
 

 6. 

In a cash flow statement, what are expenses called?
A.
Cash Inflow
B.
Actual Inflow
C.
Cash Outflow
D.
Actual Outflow
 

 7. 

Cash and savings that can be converted to cash quickly and easily are _____.
A.
current assets
B.
current liabilities
C.
fixed assets
D.
long-term liabilities
 

 8. 

Obligations to be paid over a long period of time are _____.
A.
current assets
B.
current liabilities
C.
fixed assets
D.
long-term liabilities
 

 9. 

In what stage of the family life cycle does marriage usually occur?
A.
beginning stage
B.
expanding stage
C.
developing stage
D.
launching stage
 

 10. 

In what stage of the family life cycle does retirement usually occur?
A.
expanding stage
B.
developing stage
C.
launching stage
D.
aging stage
 

Matching
 
 
Match the following terms with their definitions.
A.
nature of financial planning
B.
short-term goal
C.
long-term goal
D.
fixed expense
E.
discretionary expense
F.
pay yourself first
G.
emergency fund
H.
charitable contribution
I.
social responsibility
J.
discretionary income
K.
net worth
L.
liability
M.
recordkeeping
N.
money management software
O.
personal financial crisis
 

 11. 

Amount of money that can be easily accessed in case of a job layoff, illness, or unexpected expense.
 

 12. 

Amount spent for an item that a person could do without.
 

 13. 

Money that remains after a person has paid all of his or her expenses.
 

 14. 

Process of setting up an organized system for important documents.
 

 15. 

Personal financial strategy that can help you save money.
 

 16. 

Donation of money or other property.
 

 17. 

Goal that may take several years to achieve.
 

 18. 

Computer program used to organize daily finances and keep track of income, spending, saving, debts, investments, and other financial data.
 

 19. 

Set amount that must be paid each budget period.
 

 20. 

Difference between what is owned and what is owed.
 

Completion
Complete each statement.
 

 21. 

A(n) ______________________________ is the time between birth and death.
 

 

 22. 

A plan for the use of money over time is a(n) ______________________________.
 

 

 23. 

Any form of money received is ______________________________.
 

 

 24. 

To have ______________________________ is to have an abundance of money and other assets.
 

 

 25. 

An organization that aids people in need is known as a(n) _____________________________.
 

 

 26. 

An item of value that is owned is a(n) ______________________________.
 

 

 27. 

A(n) ______________________________ statement that is a written record of an individual’s current financial situation.
 

 

Short Answer
 

 28. 

What is the first step in developing a financial plan?
 

 29. 

How is a person’s net worth determined?
 

 30. 

Name a potential cause of personal financial crisis.
 

EXTRA CREDIT (10 pts each)
 

 31. 

Maxwell and Molly’s income for the month of April is $3400. They have budgeted $2120 for fixed expenses and $875 for variable expenses.  If their spending during the month of April goes as planned, how much discretionary income will Maxwell and Moll have for the month?
 

 32. 

Becky’s assests include a car worth $8000; a laptop computer worth $600; $3750 in savings; and $200 cash.  Her liabilities include a $3700 tuition bill for one semester; $875 balance on her credit car; a $60 cell phone bill; and $50 she borrowed from a friend.  What is her current net worth?  Is it positive or negative?
 



 
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