Chapter 2

Question 1

personal financial
statement (or net
worth statement)

Answer 1

a
snapshot of your equity at a
given point in time, derived
from a listing and total of your
assets and of your liabilities

Question 2

liquidity

Answer 2

the characteristic
describing how quickly an asset
can be turned into cash without
substantial loss of value

Question 3

cash value (of life
insurance)

Answer 3

amount of funds
received if the policy is canceled

Question 4

liability

Answer 4

debt or obligation that you owe

Question 5

net worth

Answer 5

amount left over if you sold all your assets and repaid all your debts
(assets minus liabilities)

Question 6

personal cash flow statement

Answer 6

document that measures your cash inflows and outflows in order to show your net cash flow for a specific time period

Question 7

opportunity cost

Answer 7

cost of an alternative that must be forgone in order to pursue
another option

Question 8

budget variance

Answer 8

difference between a planned expenditure and the actual
amount spent