Rent and insurance payments are examples of variable expenses. fixed expenses. l
ID: 2650503 • Letter: R
Question
Rent and insurance payments are examples of
variable expenses.
fixed expenses.
long-term liabilities.
short-term liabilities.
Matthew is concerned about his ability to save money regularly and has prepared a budget. Which of the following budget classifications would be most appropriate for Matthew's budget?
Savings as a fixed expenditure
Saving whatever may be left over
Savings as a variable expenditure
Question 3
A successful financial plan includes
explicitly stated financial goals.
specified values that underlie the plan.
all of these.
logical and consistent financial strategies.
Question 4
A cash-flow statement is also known as a(n) ____ statement.
taxable income
net worth
income and expense
asset-and-liability
Question 5
A long-term goal is one that is projected to be acheived beyond how much time?
five year
ten years
six months
one year
Question 6
A balance sheet includes ____, ____, and ____.
income; expenses; net worth
assets; expenses; liabilities
income; liabilities; net worth
assets; liabilities; net worth
Question 7
Disposable income is income
after all employer withholding including taxes.
minus fixed expenditures.
before taxes.
after all employer withholding except taxes.
Question 8
Which of the following would be classified as a long-term liability?
Education loan balance
Credit card debt
Bank card debt
All of these
Question 9
Stephen Scott's monthly pay stub indicates that his monthly gross income is $3,800. However, $800 is withheld for income and Social Security taxes, $200 is withheld for his health and disability insurance, and another $200 is contributed to his pension plan. How much is Stephen's disposable income?
$2,800
$3,000
$2,600
$3,800
Question 10
Which of the following provides information about a person's financial condition at a specific point in time?
Federal tax return
Balance sheet
All of these
Income and expense statement
Question 11
The two most useful financial statements are ____ and ____.
federal tax returns; income and expense statements
balance sheets; wills
cash-flow statements; balance sheets
wills; federal tax returns
Question 12
Which of the following is the best example of a well-stated financial goal?
Pay off your credit cards as soon as possible
Purchase a three-bedroom home in five years
Buy a $3,000 computer in 18 months
Buy a $2,000 stereo
Question 13
The first step in the budgeting process is
setting financial goals.
evaluating.
organizing.
decision making.
Question 13
The first step in the budgeting process is
setting financial goals.
evaluating.
organizing.
decision making.
Which of the following is a characteristic of a cash-flow statement?
It shows if you were able to live within your income for the period covered.
All of these.
It covers a period of time, usually one month or one year.
The statement includes three sections: income, expenses, and surplus (or deficit).
Question 15
The formula for calculating net worth is
income minus liabilities.
assets minus expenses.
income minus expenses.
assets minus liabilities.
Question 16
Food, clothing, and entertainment are examples of
long-term liabilities.
short-term liabilities.
fixed expenses.
variable expenses.
Question 17
To construct a balance sheet, you need to compile dollar values for your assets and liabilities. Good sources from which to begin are
checkbook or savings account records.
all of these.
investments.
receipts of various payments.
Question 18
Discretionary income is used to pay for things like
housing.
vacations.
utilities.
food.
Question 19
A short-term goal is one that is projected to be acheived within how much time?
one month
three months
one year
five years
Question 20
The advantages of having organized financial records include
helping you take advantage of all available tax deductions.
all of these.
enabling you to review the results of financial transactions.
helping you save money as well as make money.
A.variable expenses.
B.fixed expenses.
C.long-term liabilities.
D.short-term liabilities.
Explanation / Answer
1. The Correct Answer is FIxed Expense i.e Option B, because Fixed expenses are the expenses which remains fixed irrespective of levels of production, while the variable expenses are the expenses which keeps on chnaging with the changes in levels of production, Since Insurance and Rent are the expenses which remains same and fixed whether the production increases or decreases, hence it is a Fixed Expense.
Why the other options are incorrect:
Option A is incorrect, as Vaiable expenses keeps on changing with chnages in production, but this kind of expenditure remains fixed,hence this is a incorrect option.
Option C and D is incorrect, as these are not the liabilities, and these are the expenses that are necessary for running of business.
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2. The Correct option B, as the savings are the part which is left over after making all the monthly expenditures, hence option which is correct is savings whatever is left over.
Why other options are incorrect:
Since savings are neither fixed or variable, it is amount which is saved once the routine expenditures are incurred,hence this options is incorrect.
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3. The Correct option is C as a good financial plan as:
a. Explicity stated financial goals.
b. Specified value that underlie the plan
As a good plan should should write what is to be achived, after that the respective values should be written so that the plan can be detailed in values.
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4. The Correct option is D i.e Asset-and- Liabilty Statement, as through Cash FLow Statement the assets and liabilities which are affected is determined.
Why other options are incorrect:
The other options are incorrect,because while computing taxable income the expenditures which are due but not paid are also considered, but they are not considered while computation of cash flows.
Similiarly Net worth is the owners equity wherein the cash flow has no role and only paid up capital, profit and retained earnings plays an important role.
The income and expense statement is a statement which considers the flow of income and expense hence cash flow is not affected.
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5. The Correct Option is A Five years, as to achieve anything one should target at least 5 years.
Why other options are incorrect:
Option B and option C of 10 and 20 years are incorrect becasue after 5 years to n number of years it is treated as long term goals, option D is incorrect as 1 year is short term review and hence cannot be treated as long term plan.
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6. The Correct option is D the Balance sheet includes Assets, Liabilities and Net Worth,
Why other options are Incorrect: The other options are incorrect as the income, expenses forms part of income and expense account and not of Balance sheet.
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7. The Correct option is D as the withholding income is computed after adding all the personal expenses and thereafter reducing the taxes.
The other options are incorrect as only the personal income is taken after taxes, hence option A is ruled out, Since fixed expenditure has no role hence option B is ruled out, Option C is incorrect as it is incomplete, it is before taxes but after taking into consideration personal income.
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8. The Correct option is A as the long term liability is a liability which is to be paid in over 1 year, hence education loan is to be paid in over 1 year.
The other option are incorrect as the Debit card payment and credit card payments are to be made within 1 year.
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9. The Correct option is B as the Disposable Income is a difference between Current income and taxes payable, hence it is computed as a difference between $ 3,800 and $ 800.
The other options are incorrect as pension payment and payment towards social security plan is not considered.
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10. The Correct option is D as income and expense statement provides an idea of the condition at the specific point of time, the other options are incorrect as Balance sheet provides the idea of assets and liabilities and tax return provides the staus of payment of taxes.
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11. The Correct statement is Cash flow statement and Balance Sheet as it displays the postion of cash and assets and liabilities.
The other options are incorrect as wills is something very personal, federal tax returns is dependent on past.
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12. The correct option is B as the goals should be precise and well defined and purchase of 3 bedroom flat in 5 year is a well defined statement, as time period and target both are mentioned, while other options are incorrect as in option A time is not mentioned, in option C quantum is not mentioned, and in option D amount is not mentioned.
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13. The Correct option is A setting of financila goals, as oncegoals are set then only further steps can be initiated.
The other options are incorrect as analyzing, evaluating and decision making takes place only when financial goals are determined.
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14. The Correct option is B as cash flow statement covers the Cash inflow period, time and also the surplus, deficit etc.
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15. The networth is calculated as a difference between assets and liabilities hence option D is incorrect.
Option A, B and C are incorrect as Income and expense are not considered in networth.
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16. The Correct option is D as Food, Clothing etc needs keeps on changing and is not constant, the other options are incorrect, as it is not short term and long term liabilites as it is an expenditures and since it keeps on changing hence it is not a fixed expenditure.
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17. The Correct option is B all of these as to construct a Balance Sheet, revenue, expenditures, income and expenses all are required, hence option B is a correct option.
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18. The Correct option is D as the Discretionary income is income which is left for payment of things like food, shelter etc, hence option D is correct.
The other options are incorrect, as it is the income which is spent over the necessities, hence option A, B and C are incorrect.
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19. The Correct option is D within FIve year, as the goals as for the achivement of short term goals 5 years are appropriate, the other options ae incorrect as the time period of 1 month, 3month and 5 years are very short.
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20. The Correct option is B all of these, as good financial records helps in making money, ensures efficient collection of tax, helps in review of financial statements, as if there is any deviation it can be corrected.