Personal Balance Sheet Changes Quiz 9

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What is a personal cash flow statement?

A document that includes only large expenses
A document that measures a person's cash inflows and outflows (correct)
A document that forecasts cash flows
A document that lists only cash inflows

Which of the following is considered a cash inflow in a personal cash flow statement?

Large expenses
Dividends (correct)
Expenses
Salaries

What are liquid assets?

Assets that can be easily sold without a loss in value (correct)
Assets that do not hold any financial value
Assets that always result in a loss when sold
Assets that cannot be sold easily

What are net cash flows in a personal cash flow statement?

The difference between cash inflows and cash outflows (B) Signup and view all the answers

How is a personal balance sheet created?

By recording assets and liabilities at a specific point in time (C) Signup and view all the answers

What are current liabilities?

Debts that will be paid within a year (C) Signup and view all the answers

What are household assets?

Items normally owned by a household, like a home or car (A) Signup and view all the answers

Which of the following is NOT included in a personal cash flow statement?

Assets (B) Signup and view all the answers

What is the purpose of forecasting cash flows?

To predict future cash inflows and outflows (C) Signup and view all the answers

What do stocks represent?

Certificates representing partial ownership in a firm (C) Signup and view all the answers

What do bonds represent?

Certificates issued by borrowers to raise funds (C) Signup and view all the answers

How is net worth calculated?

Difference between what you own and what you owe (A) Signup and view all the answers

What is Stephanie's decision regarding increasing her salary?

She is satisfied with her current job and has no plans to search for another job. (D) Signup and view all the answers

How does Stephanie plan to increase her monthly net cash flows?

By decreasing recreation expenses by $100 per month. (A) Signup and view all the answers

What adjustment did Stephanie identify in her budget to increase monthly net cash flows?

Reducing recreation expenses by $100 per month. (B) Signup and view all the answers

What was Stephanie's original savings goal per year?

$4,800 (B) Signup and view all the answers

How much does Stephanie plan to save monthly by reducing recreation expenses?

$500 (B) Signup and view all the answers

What is the main way Stephanie plans to increase her savings according to the text?

Decreasing the amount spent on recreation. (D) Signup and view all the answers

What impact can favorable economic conditions have on the personal balance sheet?

Increase job opportunities and income (D) Signup and view all the answers

What builds wealth according to the text?

Investing in assets with net cash flows without increasing liabilities (B) Signup and view all the answers

What can decrease liabilities and increase net worth according to the text?

Using net cash flows to decrease liabilities (A) Signup and view all the answers

How can net worth change even if net cash flows are zero?

By changing the value of assets or investments (C) Signup and view all the answers

Which category of assets does not change for Stephanie Spratt when she purchases a new car?

Stocks (B) Signup and view all the answers

What does the liquidity ratio measure in the context of a personal balance sheet?

Liquidity (C) Signup and view all the answers

How does unfavorable economic conditions impact the personal balance sheet?

Result in lost jobs and income (C) Signup and view all the answers

What impact does purchasing a new car have on Stephanie Spratt's net worth?

It remains unchanged. (A) Signup and view all the answers

What happens to Stephanie Spratt's personal balance sheet if she purchases a new car?

Her assets and liabilities increase by the same amount. (B) Signup and view all the answers

How does the purchase of a new car affect Stephanie Spratt's household assets?

It does not affect household assets. (C) Signup and view all the answers

What is the impact of Stephanie Spratt's mortgage on her personal balance sheet if she purchases a new car?

The mortgage remains unchanged. (C) Signup and view all the answers

What happens to Stephanie Spratt's total liabilities after the purchase of a new car?

They increase. (D) Signup and view all the answers