Prelim 1

Question 1

Debt Ratio

Answer 1

Liabilities/Net Worth

Question 2

Current Ratio

Answer 2

Liquid Assets/Current Liabilities

Question 3

Liquidity ratio

Answer 3

Liquid Assets/(Expenses - Income Taxes)

Question 4

Debt Payment ratio

Answer 4

(Mortgage pmt + credit card pmt)/ (Income - taxes)

Question 5

Savings Ratio

Answer 5

Net Cash / (Income - Taxes)

Question 6

Mortgage Debt Ratio

Answer 6

(Mortgage + real estate taxes + home owners insurance) / Income

Question 7

Career Opportunities are affected by

Answer 7

• High interest rates
• Price increases
• Decreased demand for goods and services

Question 8

What are the main sources of networking

Answer 8

• Community organizations
• Professional Organizations
• Business contacts

Question 9

What are major employment benefits

Answer 9

Retirement plans, Health insurance, Life Insurance, Long-term disability, Dental insurance, Subsidized day-care facility, Vision and hearing plans,

Question 10

Progressive tax

Answer 10

Imposes higher rates on high income taxpayers

Question 11

Regressive tax

Answer 11

-Disproportionate burden on low income people
-Any tax that applies the same to all people is regressive since it takes a bigger bite out of lower income families’ disposable income
(Examples are sales tax, FICA tax, excise tax)

Question 12

What are the four types of taxes

Answer 12

• taxes on purchases
• taxes on property
• taxes on wealth
• taxes on earnings

Question 13

How do you calculate total tax liability

Answer 13

• > Total Income- Minus Adjustments =Adjusted Gross Income
• > Adjusted Gross Income- Minus Exemptions per dependent- Standard or Itemized Deductions =Taxable Income

Calculate Tax from Tax Tables - Credits = Tax Liability

Question 14

Tax form: how much tax credit do you receive for each child?

Answer 14

1,000

Question 15

Tax form: How do you calculate adjusted gross income?

Answer 15

Total income - adjustments ( IRA or Alimony)

Question 16

Tax form: What percentage of medical expenses are deducted

Answer 16

Medical expenses - 10% interest of adjusted gross income.

Question 17

Tax forms: What is the exemption for married couples?

Answer 17

$12,600

Question 18

What is the exemption for a single person

Answer 18

$6,200

Question 19

How is Social Security Tax calculated?

Answer 19

6.2% of income up to $127,200

Question 20

How is Medicare tax calculated?

Answer 20

1.45% of income (no limit)

Question 21

What is FICA made up of

Answer 21

Social Security and Medicare

Question 22

Tax liability (flow)

Answer 22

Gross income –> (+/-)adjusted income –> (-) exemptions for married or single –> (-) deduction/schedule A –> taxable income * (what is the tax based on the tax sheet) –> actual tax amount –> (-) tax credits –> (-)tax withheld =

Total taxes

Question 23

Itemized deductions

Answer 23

Medical, NYS IT, R/E taxes, Interest (any secured by home), Charity, Misc (2% adjusted gross income limit)