The best way to create a budget is to buy an expensive software package.

A. True
B. False
Setting goals is an important element of financial wellness. Setting goals...
A. Could cover the short term which is within the year
B. Could cover an intermediate term which is up to five years
C. Could cover long term which is more than five years away
D. Gives you an objective view of spending
E. All of the above
Cash flow is the movement of money in and out of your household. True or False?
A. True
B. False
The way to measure cash flow is to: (There are two correct answers)
A. Track all of your income and expenses
B. Track your spend and savings based on your pay schedule
C. Leave out what you put into savings
Special purchases, such as presents and holiday gifts, need to be figured into the budget. The
best way to do this is figure the total amount of the purchases and divide it by 12 months.
A. True
B. False
If your expenses are running high you could, (check all that apply).
A. Look for ways to spend less.
B. Cut back on eating out.
C. Give up on tracking
Once a budget is determined, it should always remain as is.
A. True
B. False
You can adjust your budget by making small changes in your habits.
A. True
B. False
It's never too late to start saving.
A. True
B. False
Overspending can cause a stressful situation. By looking at your spending and your saving and
setting goals you are on the right track to feeling more confident about your financial health.
A. True
B. False

Which activity can pose the greatest threat to your wallet?

Getting a latte at Starbucks every day
Taking out student loans to pay for college
Spending without a plan

If you apply for a store credit card, how do they decide if they approve youor turn you down
on the spot?
They make sure you look good in their clothes
They check out your credit score
They make sure you have spent a set amount of money at their store

How much money should you keep in your emergency fund?

3% of your current salary
The equivalent of 3 months' living expenses
Nothingjust use your credit card in case of emergencies

If you're trying to build good credit, what is the most important thing you can do?
Throw away your credit cards and dont take out any loans
Maintain a balance on your credit cards and pay the minimum every month
Pay your bills on time

What's the main difference between debit cards and credit cards?
Debit cards have a higher interest rate than credit cards
Debit cards work like a check while credit cards work like a loan
They're really the same thing

What's the best way to buy a flat-screen TV?

Buy it on a rent-to-own plan
Buy it on a credit card and pay it off over time
Buy it on a credit card and pay in full when the bill comes due

When can you start putting money into a retirement account?

When you turn 21
When you begin earning income
When you get married

What happens if you sign a year-long lease for an apartment and then have to move out after 6
months?
You lose your security deposit
You may have to pay the rent for the time remaining on the lease
You can just cancel the lease

Definition:
1. Predicts revenues, costs and expenses for a period longer than one year, sometimes as long
as 5-10 years into the future - Long-Term Financial Forecast
2. Process where a firm compares actual revenues, costs, etc. with the projected ones -
Financial Controls
3. Borrowed funds needed for a period of longer than one year - Long-Term Financing
4. Large organizations that invest their own funds or the funds of others - Institutional
Investors
5. Funds raised through operations within the firm of through sale of ownership in the firm -
Equity Financing
6. Sum of borrowed money not backed by specific assets. Usually only given to established,
reliable firm. - Unsecured Loan
7. Financial plan that sets for the managements expectation and allocates specific use of
resources throughout the firm on the basis of those expectations - Budget
8. Organizations that make short-term loans to borrowers who offer tangible assets as collateral.
They usually accept higher risk companies but charge higher interest rates. - Commercial
Finance Companies
9. Goal is to optimize the firms profitability and make the best use of its money - Financial
Planning
10. Ties together all of a firms budgets. The projections of dollar allocations to various costs and
expenses needed to operate the business given the projected revenues. - Operating Budget
11. Reserve account in which bond issuer periodically retires some part of the principal prior to
maturity so enough capital will be accumulated by the maturity date to pay off the bon - Sinking
Funds
12. Bonds not backed by collateral - Debenture Bonds
13. Promissory note that requires the borrower to repay the loan in specified instalments. - Term-
Loan Agreement
14. Predicts revenues, costs and expenses for a period of one year or less - Short-Term
Financial Forecast
15. People who make recommendations to top executives regarding strategies for improving the
financial strength of a firm - Financial Managers
16. Provide loans of 3-7yrs on average but may be up to 20yrs. Debt from loans by these is tax
deductible. - Lending Institutions
17. Predicts cash inflows and outflows in future periods based on expected costs, revenues and
expenses - Cash Flow Forecast
18. That the greater the risk a lender takes in making a loan, the higher the interest rate
required. - Risk-Return Tradeof
19. Funds raised through various forms of borrowing that must be repaid - Debt Financing
20. Borrowed funds needed for one year or less - Short-Term Financing
21. Bonds backed by tangible collateral. - Secure Bonds
22. Written contract with a promise to pay a specific sum at a specific time; given to firms with
no credit or a bad credit rating - Promissory Note
23. Exact date that the issuer of bonds must pay the principal back to the bondholder(s). -
Maturity Date
24. Corporate certificate indicating that a person has lent money to a firm. Company issuing
these is legally bound to make regular interest payments to investors and repay entire prim -
Bonds
25. The job of managing a firms resources so it can meet its goals and objectives - Financial
Management
26. Practice of buying goods and services now and paying for them them later. A percentage
discount is often offered for early payment. - Trade Credit
27. Function in a business that acquires funs for the firm and manages those funds within a firm
- Finance
28. Estimates a firms projected cash inflows and outflows, used to plan for any cash shortages
or surpluses during a given period - Cash Budget
29. Line of credit guaranteed by the bank. Usually a fee is charged for this. - Revolving Credit
Agreement
30. Highlights a firms spending plans for major asset purchases that often require large sums of
money - Capital Budget
31. Process of selling accounts receivable for cash - Factoring
32. Provide loans for businesses. Often reluctant to provide loans to small firms unless they seem
promising and well organized. Close contact after the loan is issued is also helpful - Commercial
Banks & Financial Institutions
33. A small loan from a close relation willing to finance the business. Best to avoid these. -
Family and Friends Loan
34. Given amount of unsecured borrowed sum of money a bank will lend to a business. May
increase if credit rating improves and/or business grows. - Line of Credit
35. Sum of borrowed money backed by something valuable, such as property or assets. Failure to
pay will result in lender taking control of the collateral. - Secured Loan
36. Unsecured promissory notes of $100k or more that mature in 365 days or less. Only large
firms with good credit can sell them - Commercial Paper
37. Can be used to make purchases and pay back at a later date. Charge large amount of
interest and should only be used as a last resort. - Credit Cards

1. Should the $500 entry to the Cash account be a debit?

Yes
No
2. Should the $500 entry to Mary Smith, Capital be a debit?
Yes
No
Use the following information for questions 3 through 6:
A company using the accrual method of accounting performed services on account in August.
The services were for $2,000 and the company gave the customer credit terms that state the
amount is to be paid to the company in September.
3. Assuming that the company prepares monthly income statements, what will be the account
debited for $2,000 in August?
Cash
Accounts Receivable (The account Accounts Receivable should be debited in August.
Accounts Receivable, an asset, was increased in August.)
Service Revenue
4. Which account should the company credit for $2,000 in August?
Cash
Accounts Receivable
Service Revenue (You should credit revenues when they are earned)
5. In September when the company receives the $2,000 from the customer, which account
should the company debit?
Cash (We always debit Cash when cash is received.)
Accounts Receivable
Service Revenue
6. In September when the company receives the $2,000 from the customer, which account
should the company credit?
Cash

Accounts Receivable (When an asset such as Accounts Receivable is decreased, you

credit the account)
Service Revenue

1. A mortgage payment would count on your budget as a:

fixed expense (A mortgage payment is a fixed expense because you can predict you'll pay it on
a consistent basis. Other fixed expenses include other loan payments, tuition, rent and fixed
utilities that don't vary from month to month.)
unfixed expense
discretionary expense

2. In case you lose your job tomorrow, about how much should you have in your emergency
fund?
enough to live comfortably for two to three days
enough to live comfortably for two to three weeks
enough to live comfortably for two to three months (A typical financial planner will advise
you to try to make an emergency fund with enough money to get by two to three months without
any other income.)

3. Which of the following accounts is the best place to keep an emergency fund?
money market account (Using a money market account for an emergency fund can help you
make money on your savings while you aren't using it. Money markets draw more interest than
basic savings or checking accounts, and you can still get to the money if you need it.)
savings account
checking account

4. What's a smart way to save money on prescription drugs?

buy half your dosage
buy generic (Generic prescription drugs are chemically identical to brand name, so it is cheaper
and not unsafe to defer to generic. Just ask your doctor to prescribe the generic version of your
drugs.)
neither of the above -- you shouldn't scrimp on drugs
5. Which of the following is NOT a smart way to stay on budget?
delay paying of credit card debt (A large part of improving your financial situation means
getting out of debt, and the longer you wait to pay off credit card debt, the more you'll have to
pay in the long run. Making a grocery list and using cash are both good ways to stay on track.)
make a grocery list
use cash

6. What is a discretionary expense?

an expense that you may or may not need depending on your situation
an expense that you want but don't need (A discretionary expense is one that you don't
need but would like to have.)
an expense that you need but don't want

7. At the grocery store, you can save money by buying:

pre-seasoned meat
pre-cubed meat
plain cuts of meat (While pre-cubed, pre-pounded or pre-seasoned meats or poultry can save
you preparation time, they cost a lot more than plain cuts of meat. If you can spare a few
minutes to cut, pound or season your meat, you'll find the savings are significant.)

8. Which of the following would be the most appropriate alternative to an emergency fund?
a credit card
a home equity line of credit (Some critics say that putting money into an emergency fund is
illogical if you have a Home Equity Line of Credit (HELOC). HELOCs come with checks that you
can write immediately in the case of an emergency, and you can repay the money once you are
past the disaster. However, you must figure in the interest and fees. Using HELOCs can be
dangerous if you're not careful.)
parents

9. Which of the following is a benefit of staying within budget?

happier marriage
less stress
both of the above (Money difficulties are known to cause stress, which in turn even make your
immune system weaker. In addition, money problems and arguments are a major cause of
divorce.)
10.