Cash Flow Analysis

Question 1

Concept

are compliations of personal financial data that describe an individual’s or family’s current financial condition

Answer 1

financial statements

Question 2

Concept

describes an individual’s or family’s financial condition on a specified date by showing assets, liabilities, and net worth

Answer 2

balance sheet

Question 3

Concept

• lists and summarizes income and expense transactions that have taken place over speicific period of time

Answer 3

cash-flow statement
* also called income and expense statement

Question 4

Concept

What you are worth after subtracting liabilities from assets

Answer 4

net worth

Question 5

Concept

everything you own that has monetary value

Answer 5

assets

Question 6

Concept

are your debts, the amounts you owe to others

Answer 6

liabilities

Question 7

Concept

include cash and low-risk near-cash items that can be readily converted to cash with little or no loss in value such as checking and savings account

Answer 7

monetary assets
* also known as liquid assets or cash equivalents

Question 8

Concept

• include tangible and intangible items that have a relatively long life and high cost
• acquired for the monetary benefits they provide

Answer 8

investment assets

Question 9

strategies

to increase your net worth

Answer 9

• increase assets
• decrease liabilities
• cut back on spending

Question 10

sections

cash-flow statement

Answer 10

• income—total income received
• expenses—total expenditures made
• surplus—net gain or net income

Question 11

Concept

the only transaction srecorded are those involving actual cash received or cash that was spent

Answer 11

cash basis

Question 12

Concept

are usually paid in the same amount during each time period, and they are typically inflexible and often contractual

Answer 12

fixed expenses

Question 13

Concept

are expenditures over which an individual has considerable control

Answer 13

variable expenses

Question 14

Concept

monetary assets divided by monthly expenses

Answer 14

liquidity ratio

Question 15

Concept

total assets divided by total debt

Answer 15

asset-to-debt ratio

Question 16

Concept

annual debt repayments divided by income x 100

Answer 16

debt-to-income ratio

Question 17

Concept

are documents that evidence financial transactions, such as bills, receipts, credit card receipts and statements, bank records, tax returns

Answer 17

financial records

Question 18

Concept

is a requrest for an extension of credit, either orally or in written form

Answer 18

Credit application

Question 19

Purpose

credit application

Answer 19

it demands information that sheds light on your ability and willingness to repay debts

Question 20

Concept

a credit offer in which a bank aims at certain consumers based on their borrowing histories

Answer 20

prescreened

Question 21

Concept

• an alternative to prescreened, which is an offer sent without any prior screening

Answer 21

invitation-to-apply

Question 22

Concept

it is a conditional offer of credit from a credit card issuer based on a pre-qualification of the individual’s credit

Answer 22

pre-approved

Question 23

Concept

lenders may offer the lowest interest rates to applicants with the highest credit scores

Answer 23

tiered pricing

Question 24

Law

prohibits credit discrimination on the basis of race, color, national origin, sex, etc

Answer 24

Equal Credit Opportunity Act (ECOA)

Question 25

Factors used in

the FICO score

Answer 25

1. payment history
2. amounts owed
3. length of credit history
4. taking on more debt
5. types of credit used

Question 26

Concept

This is a business practice in which a customer agrees to have goods or services to be provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing

Answer 26

negative option

Question 27

Most of the information in your credit report must be removed after this length of time

Answer 27

7 years

Question 28

Concept

indicates if there are enough cash assets to meet the debt obligations. A high ratio is desired.

Answer 28

asset-to-debt ratio

Question 29

Concept

drawn on the account of the financial institution itself and, thus, backed by the institution’s finances

Answer 29

cashier’s check

Question 30

Concept

is a checking instrument bought for a particular amount witha fee assessed based on the amount of the order

Answer 30

money order

Question 31

List

reasons why interest rates change

Answer 31

1. monetary policy changes
2. Federal government borrowing
3. businesses borrowing
4. loan rates rise or fall

Question 32

Concept

When income begins to exceed expenses on a regular basis, it is wise from a monetary asset management point of view to do what

Answer 32

move the excess funds into an account that pays more interest

Question 33

Concept

• is any of avariet of interest-earning accounts that pays slightly higher interest rates
• they offer check writing privileges

Answer 33

money market account

Question 34

complete the statement

A common cause of tension in personal relationships is …

Answer 34

conflict over money

Question 35

Strategies for

increasing your children’s ease in handling money

Answer 35

1. give them the opportunity to manage an allowance
2. encourage them work
3. set reasonable limits
4. teach them to make good choices
5. help them learn patience

Question 36

Strategies for

managing financial disagreements

Answer 36

• use positive “I” statements
• be honest and talk regularly