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personal financial planning
Personal Financial Literacy 2nd Edition Jeff Madura, K. Michael Casey, Sherry J. Roberts, Roberts Madura Casey - Solutions
(a) Give an example of a current liability and a long-term liability.(b) What’s an example of how a current liability can be converted into a long-term liability?
(a) What are bonds?(b) What are stocks?(c) What are mutual funds?(d) Describe how each of these provides a return on your investment.
(a) Briefly define and give examples of each category of asset.(b) Why do you think stocks are not considered liquid assets?
(a) What is the purpose of a personal balance sheet?(b) How can a personal balance sheet help you when you are making financial decisions?
(a) Suppose you want to change your budget to increase your savings.Explain what you could do.
(a) Describe the process of creating an annual budget.
(a) How do you assess the accuracy of your budget?(b) How can finding forecasting errors improve your budget?
(a) What is the purpose of a budget?(b) How can a budget help when you are anticipating cash shortages or a cash surplus?
What is the difference between current liabilities and long-term liabilities?
What is the difference in liquid assets, household assets, and investments?
What is a forecast error?
What is the importance of budgeting to your financial plan?
What are the steps in creating a personal balance sheet?
What are the steps involved in creating a budget?
Understand the importance of budgeting in your financial plan?
Describe the steps involved in creating a personal balance sheet?
Explain the steps involved in creating a budget?
Which of the following is a correct statement?a. If cash inflow exceeds cash outflow, a person has a surplus to save or invest.b. An expense is considered a cash inflow.c. Fixed expenses should be paid before variable expenses.d. Cash outflow can be reduced by buying everything on credit.
A financial plan shoulda. be followed as it is written until the goals set in the plan are achieved.b. be evaluated periodically and revised as needed.c. only be revised when a person’s job changes.d. remain the same unless a person changes financial goals.
A high school student starts a lawn mowing business. His riding lawn mower cost $1,000; gas for the season is $2,000. He spends $500 for gas driving to and from jobs, $300 for supplies and repairs, and $200 for a trimmer. Each of his 20 customers pays $40 a week for a 20-week season. What is the
Which one of the following does not show a correct match?a. Cash inflow: scholarship awardb. Cash inflow: interest paid on a loanc. Cash outflow: insurance premiumsd. Cash outflow: tuition
Which is a true statement about goals?a. A person should only work on one goal at a time.b. Intermediate-term goals are those that can be accomplished in one to five years.c. A person should accomplish short-term goals before starting on any other goals.d. A short-term goal should be tied to a
Which is the correct order for making financial decisions?a. Put goals in writing, rethink goals if necessary, have a plan of action, set specific goals.b. Be realistic about goals, put goals in writing, implement goals, have specific goals.c. Set specific goals, put goals in writing, have a plan
A person’s cash outflow includesa. liquid assets a person has accumulated.b. money spent by a company to pay a person’s salary.c. payments by a person to a retirement account.d. the difference between the asking price of two houses for sale in the same neighborhood.
The best description of cash inflow is moneya. received from different sources, such as salary and interest earned on bank accounts.b. spent for items that must be included in a budget, such as rent and utilities.c. invested in financial products, such as stocks and bonds.d. left after paying for
Brainstorm each step in financial planning. Some questions you might want to ask: What decisions do you need to make at each step? What might happen to change your financial plans along the way?
This chapter has outlined the steps for making financial decisions. Using the example in Figure 3.2, develop a chart that is similar to help you begin planning for your future after graduation.This may include saving for college, buying a car, or getting a job. Using paper, spreadsheet software, or
As a team, develop a public service announcement (PSA) about the steps involved in good financial decision making. A PSA is an audio or video presentation that brings awareness to the public. This one should tell the importance of financial planning for teens. Think about what you have learned in
Think about a purchase you want to make, or an event you want to attend in the next few months. This might be an MP3 player, a new audio system for your car, or a day at a spa that includes a new hair style, nails (manicure and pedicure), and a massage. It might be tickets to see your favorite
Dennis has decided on a car to purchase. He has a financial plan that he put together in his economics class. During that class, Dennis decided that a car purchase would need to wait until he had enough in his savings account for a good down payment.Gregory, Dennis’ friend, is going to sell his
If you want to increase your income next year by $1,000, how many additional hours will you need to work per month if you make $7 an hour?
How much is Kaden’s monthly cash inflow if he earns $80 a week but about 20% is withdrawn from his check for taxes?
Can you afford to buy a $50 video game every month if you make$40 a week and spend an average of $150 a month on food and gasoline?
You make $50 a week and you want to buy a car with an expected payment of $200 a month. Is that a feasible goal?
Assume your phone bill averages $45 a month and you have a car payment that is $140 per month. You also spend about $20 a week on food. How much are your monthly expenses?
Connor intended to save $150 a month for the next 18 months to purchase a fishing boat. However, after 10 months he has only managed to save $1,200. What will Connor need to do in order to accomplish his original goal?
Kage expects to work an average of 12 hours a week next semester.Assuming he makes $9.50 an hour and works the entire 17-week semester, what is his forecast for income next semester?
Echo wants to put a $1,000 down payment on a car 10 weeks from now. She works about 10 hours per week at her current job. She brings home about $8 an hour after taxes are withdrawn from her check. Is it possible for her to save the $1,000?
(a) What must you do when you revise one part of your financial plan?(b) Why might you need to revise your financial plan?
(a) What is the difference between a high and a low tolerance for risk?(b) Explain how risk and an individual’s tolerance for it can affect planning.
(a) Using the metaphor of a roadmap, to what feature do different options for reaching financial goals compare?(b) What are the benefits of picking multiple options for achieving financial goals?
(a) Identify at least three different possible sources of income.
(a) Explain how speeding progress toward a short-term goal might slow progress toward a long-term goal.
(a) Why is it necessary to identify your current financial position before making further financial plans?(b) Explain why a person’s current financial position might affect his or her financial plans.
(a) What is the role of forecasting in financial planning?(b) How does forecasting relate to one’s decision about education?
(a) What are the three different types of financial goals?(b) What key quality must all financial goals have?
(a) Explain how cash inflow and outflow affects the components of your financial plan.
What is the difference between a short-term goal and a long-term goal?
What is the difference between a fixed expense and a variable expense?
What is the difference between cash inflow and cash outflow?
What are the steps of financial decision making?
What is cash inflow and cash outflow?
Explain the steps in financial decision making?
Differentiate between cash inflow and cash outflow?
A 21-year-old college graduate starting her first full-time job wants to buy a home by age 30. Why should she include this goal in her financial plan?a. She can apply for a mortgage now while she is young and rates are low.b. She is more likely to achieve her goal if she starts saving and investing
Why is insurance a method of managing risk?a. Insurance protects assets from being lost or damaged.b. Insurance limits a person’s financial loss if an asset is lost, stolen, or damaged.c. A person’s liabilities are reduced when insured assets are lost or stolen.d. A person’s budgeted monthly
“Good credit management” meansa. making purchases with credit or debit cards.b. using credit to make purchases that cost more than $1,000 and paying the minimum required each month.c. using credit to make purchases when the buyer knows she can quickly pay the amount owed.d. making most
A person increases liquidity when hea. buys more items on credit and fewer items with cash.b. uses money saved to buy an asset like a car.c. uses cash to pay off credit card debt.d. makes weekly deposits in a bank savings account.
A financial plan does not includea. managing risk.b. retirement planning.c. bankruptcy.d. investing.
A person has a house worth $100,000, a mortgage of $90,000, savings of $5,000, a car valued at $10,000, a $7,000 car loan, and $3,000 in credit card debt. This person’s net worth isa. $115,000.b. $100,000.c. $15,000.d. $5,000.
A person increases his net worth bya. buying a new car with a 10% down payment from savings and a 90% loan.b. making purchases with a credit or debit card.c. increasing assets and decreasing liabilities.d. transferring money from a savings account to a checking account.
A financial plan is created like aa. map of the world.b. blueprint for building a house.c. bank account statement.d. receipt for an item purchased with a credit card.
With the class divided into seven groups, each group will pick one of the components of a financial plan and develop a presentation to explain that component. This presentation may be a demonstration, report, PowerPoint presentation, or skit.
You have learned the seven components of financial planning. Using word processing or presentation software, or paper, develop a diagram of each step. Be sure to include an example for each step.
Prepare a group presentation about the steps of a financial plan. Create a brochure or newsletter that shows the steps of making a financial plan. Imagine that this brochure or newsletter might be used for a PTO meeting at your school, placed in the guidance counselor’s office, or sent home with
Many of you will continue your education after high school graduation.Research three post-secondary (college/university, technical college, vocational school) or training programs that you might want to attend following high school. Collect data for each of these that include the following
Danielle has been invited to her friend’s house for an afternoon pool party. It is going to be a great time, and all her friends are planning to go—if they can get a ride. Danielle is the only one who has access to a car at the moment. The trouble is, the car she has access to is owned by her
What is the value of your total assets if you have a car worth$4,000, you owe $1,500 on the car loan, and you have a baseball card collection valued at $750?
If you intend to begin saving 25% of your income and you bring home $50 a week, how much will you save in one year?
Assume you took $2,500 in cash out of your savings account and bought a car worth $2,500. How much did your net worth change?
You have a car worth $3,200. You owe $1,400 on the loan. You also owe $320 on a credit card. How much are your total liabilities?
Assume you work 12 hours per week and make $7.50 per hour.How much is your annual income?
Kedra would like to buy a vehicle that is priced at $4,100. Assume she has saved 20% of the purchase price for a down payment. How much money does she need to finance?
Assume you make $10 an hour and work 20 hours a week. In addition, you receive $1,200 a year in income from a trust fund. What is your total annual income?
Maria has a car that she could sell for about $7,000 according to her uncle who is a used car dealer. However, she still owes $2,200 on her car loan. She has $1,100 in her checking account and $300 in cash. What is Maria’s net worth?
(a) Why is it important to communicate your financial plans?
(a) How do your financial goals fit into your financial plan?(b) Why should goals be described in detail?
(a) What is the primary objective of investing?(b) Why would you not invest all the money you have available?
(a) What is the purpose of insurance?(b) Explain how owning a car or house exposes you to financial risk.
(a) What factors determine how much you can borrow?(b) Can you rely on a lender to lend you the appropriate amount of money? Explain.
(a) What is liquidity?(b) What two factors are considered in managing liquidity?(c) How are they used?
(a) What factors influence income?(b) Why is an accurate estimate of expenses important in budget planning?(c) How do tax laws affect the budgeting process?
(a) How is your net worth calculated?(b) Why is knowing your net worth important?
(a) Define budget planning.(b) What elements must be assessed in budget planning?
(a) What are the components of a financial plan?
What is meant by managing your risk?
What is the difference in money management and credit management?
Why is it important to have a personal financial plan?
What are the components of a financial plan?
What is the purpose and function of a financial plan?
Identify the key components ofa financial plan?
Describe the purpose of a financial plan?
A person decides to bike to school rather than drive his car. The opportunity cost related to this decision isa. the money that is saved by not buying as much gas for the car.b. the exercise that riding the bike provides.c. the time that might be saved by driving the car.d. the shorter route from
When a person decides to use the services of a certified financial planner, the person willa. no longer need to check on how her money is invested.b. make a steady profit on the money invested by the planner.c. need to make all investments with the same planner.d. check in regularly with the
The following statement about financial advice on the Internet is true.a. If the information has been posted to the Internet, it is reliable information.b. If the information comes from a company that is selling financial products, it is sound, objective information.c. There are a number of
Money in an emergency fund should be used to pay fora. items that suddenly go on sale.b. necessary expenses when a person loses a job or is unable to work because of illness or injury.c. large expenses such as a house or college education.d. long-term investments such as stocks.
Which person’s goal is correctly matched with a sound financial plan to achieve the goal?a. Buying a new computer for college in the fall: depositing 25% or more of weekly take-home pay in a bank savings account.b. Having a down payment for a house in 10 years: saving 1% of takehome pay in a
Which is a true statement about the relationship between education and a person’s earning power?a. The age a person starts to work determines earning power more than the person’s education.b. The average person with an associate’s degree can expect to earn 20% more than a high school graduate
Which is a true statement about Americans saving for retirement?a. Most Americans save more money than they need for retirement.b. Americans do not need to save for retirement since Social Security will cover expenses during retirement years.c. Fewer than half of Americans have a retirement
The best definition of personal financial planning isa. a process of mapping decisions for spending, borrowing, and saving and investing in order to achieve financial goals.b. an investment schedule established by a financial advisor to help a person pay a debt.c. the process of determining how
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