1. Personal Finance
Chapter 4 Review

2. True/False
1. Consumers should always make quick decision about financial matters. They can always figure out how to pay for it later.
2. Financial resources are money or other items of value that people can use to acquire goods and services.
False
True

3. True/False
3. A personal balance sheet lists your income and expenses for a period of time.
4. Luxury items fill physical needs and not emotional wants.
5. A person’s actual income, saving, and spending may not be exactly as planned on their budget.
False- Assets and liabilities
False
True

4. True/False
6. Our needs and wants tend to be unlimited, while our financial resources tend to be limited.
7. Keeping good records is not important to good budgeting or computing of variances.
8. All assets increase in value over time.
True
False

5. True/False 9. A budget is not a critical part of managing your money.
10. When your estimated expenses are less than your actual expenses, the result is an unfavorable variance.
11. Basic needs include items that make life more enjoyable, such as a television.
False

6. True/ False
12. The term wants refers to items people desire for reasons beyond survival and basic comfort.
13. A financial planner is trained to help people with advice about how to invest earnings, plan for retirement, and manage other financial matters.
True

7. 14. A person budget $40 for entertainment but spent $60
14. A person budget $40 for entertainment but spent $60. What is the percent of variance?
50% favorable
50% unfavorable
33% favorable
33% unfavorable
B- 50% Unfavorable

8. 15. A person budgeted $75 for entertainment but spent $50
15. A person budgeted $75 for entertainment but spent $50. What is the percent of variance?
50% favorable
50% unfavorable
33% favorable
33% unfavorable
C- 33% Favorable

9. 16. The amount of income of income your planned for March was $2,500
16. The amount of income of income your planned for March was $2,500. The amount you actually received was $2,800 resulting in a
$250 favorable variance
$300 favorable variance
$250 unfavorable variance
$300 unfavorable variance
D- $300 Unfavorable variance

10. 17. A financial plan should include
Personal Goals
Financial Goals
A timeline for reaching goals
All of the above
D- All of the Above

11. 18. Which of these is the correct sequence for the five-step financial planning process?
Gather information, set goals, analyze information, develop a timeline, implement and evaluate the plan
Gather information, analyze information; set goals; develop a timeline; implement and evaluate the plan
B- Gather information, analyze information; set goals; develop a timeline; implement and evaluate the plan (#2)

12. 19. The amount you budgeted to spend on food for June was $250
19. The amount you budgeted to spend on food for June was $250. The amount you actually spent was $235, resulting in a
$10 favorable variance
$15 favorable variance
$15 unfavorable variance
$20 favorable variance
$20 unfavorable variance
B- $15 Favorable

13. 20. What is the first step in creating a personal budget?
Balance the budget
Estimate your expenses
Estimate your income
Plan the amount you will save
C- Estimate your Income

14. 21. The amount of money a person has to spend after needs are met is called
Net income
Profit
Disposable income
Discretionary income
None of the above
D- Discretionary Income

15. 22. Expenses that do not change every month, such as rent
Fixed Expenses

16. 23. A spending or savings plan based on expected income and expenses
budget

17. 24. A benefit or an item you give up when you choose to buy another benefit or item
Opportunity cost

18. 25. The choice to give up a particular benefit or item to get another that you think is more desirable
Trade off

19. 26. Any debt owed that must be repaid
Liability

20. 27. Money and items of value that you own
assets