Page 579 - Introduction to Business

CHAPTER 15 Personal Financial Planning 553

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You’ve read the chapter, studied the key terms, and the exam is any day now. Think you are ready to ace it? Take
this sample test to gauge your comprehension of chapter material. You can check your answers at the back of
the book.

True/False Questions 2. In general, college-educated people _____
Please indicate if the following statements are true or than less-educated people.
false: a. earn more and spend less
1. Net worth is the difference between your b. earn about the same but spend more
assets and your liabilities. c. earn less and spend more
d. earn more and spend more
2. The purpose of personal financial planning
e. earn less and spend less
is to meet current and future financial
needs through a combination of effective 3. According to the AICPA, the last stage in an
planning and implementation of those average person’s life is
plans. a. employment.
3. Liabilities are items that represent a past b. marriage.
outlay of cash. c. empty nest.
d. retirement.
4. To stay motivated and to keep your
e. death.
financial plans on track, you should
probably not establish clear goals. 4. _____ is the term used to describe the flow
of money into and out of your accounts,
5. Financial planning advice can be obtained
that is, cash inflows and outflows.
from several different experts, such as
stockbrokers, insurance agents, lawyers, a. Financial derivatives
bankers, and accountants. b. Cash flow
c. Warp flow
6. Having a checking account is not essential
d. Liquid flow
for managing personal finances.
e. Asset flow
7. The goal of the bank reconciliation is to find
5. _____ life insurance provides no-frills
the “true” cash balance in your checking
insurance protection and does not include
account and to enable you to discover any
a savings element. This type of insurance is
errors made either by you or by the bank.
relatively inexpensive when you are young,
8. As a rule, higher rewards are earned only by
but premiums increase with age.
riskier investments.
a. Term
9. Failure to maintain adequate records may
b. Whole
increase your tax liability and result in
c. Disability
penalties.
d. Variable
10. Repaying debts enhances your credit rating e. Permanent
and ensures that credit will be available if
6. All of the following are disadvantages of a
needed in the future.
two-income family except
Multiple-Choice Questions a. day-care concerns.
b. hectic schedules.
Choose the best answer.
c. fast-food diets.
1. _____ refers to how easily an asset can be
d. higher income.
converted into cash.
e. paid housekeepers.
a. Neutrality
7. _____ can be defined as the probability that
b. Convertibility
you will lose all or part of your investment.
c. Liquidity
a. Hedging risk
d. Equalization
b. Bad luck
e. Diversification
c. Investment risk
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