100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Financial Literacy Exam 1 Questions with Complete Solutions $10.49   Add to cart
Quickly navigate to
Preview
  2.  
  3. Financial Literacy
  4.  
  5. Financial Literacy

Exam (elaborations)

Financial Literacy Exam 1 Questions with Complete Solutions
 0 view  0 purchase
  • Course
  • Financial Literacy
  • Institution
  • Financial Literacy

5 steps of the financial planning process - Answer-1) evaluate your financial health- budgeting, financial statements, ratios- help you see where you are 2) define goals- should be specific, need for liquidity, protection (insurance), minimize taxes when possible 3) develop specific plan- set up ...

[Show more]

Preview 2 out of 5  pages

Document information

  • October 12, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • financial literacy exam 1 questions with complete
  • 5 steps of the financial planning process answer

Written for

  • Financial Literacy
  • Financial Literacy

Seller

avatar-seller
lectknancy

Reviews received

Content preview

Financial Literacy Exam 1 Questions
with Complete Solutions
5 steps of the financial planning process - Answer-1) evaluate your financial health-
budgeting, financial statements, ratios- help you see where you are
2) define goals- should be specific, need for liquidity, protection (insurance), minimize
taxes when possible
3) develop specific plan- set up 3-6 month emergency fund
4) implement plan- budget, start saving, minimize taxes, should change with
time/circumstances
5) review periodically- monitor and adjust- can't let plan go on autopilot

10 principles of financial planning - Answer-1) the best protection is knowledge- don't
listen to everything on tv or online
2) have a plan
3) time value of money- compound interest, rule of 72
4) taxes matter- every dollar of tax savings is a dollar saved
5) stuff happens- importance of liquidity (access to cash)-unexpected expenses will
happen
6) spend smartly
7) protect your assets and income- insurance
8) risk and return- more return you want, more risk you have to take; diversification-
spread out investments

asset - Answer-something you own that has value and can be sold
ex- cash, checking account, savings account, accounts receivable, house, car, etc.

liability - Answer-something you owe
ex- credit card bill, accounts payable, mortgage

classifications of assets - Answer-monetary assets- cash, CD's, money market
investments- stocks
retirement plans- 401k, IRA
house- primary residence
car-
personal property- small stuff you own- tv, furniture

classifications of liabilities - Answer-current- bills due within 1 year
long term- mortgage, auto loans, student loans

balance sheet - Answer-financial statement that is a snapshot in time- shows assets
and liabilities and shows net worth

net worth - Answer-assets - liabilities

, shows how much you own compared to what you owe

income statement - Answer-revenues - expenses = net income
shows over a period of time

ratios - Answer-ratios allow you to compare balance sheet/income statement to targets

current ratio - Answer-monetary assets / current liabilities

monthly living expenses covered ratio - Answer-monetary assets / monthly living
expenses

debt ratio - Answer-total debt or liabilities / total assets

long term debt coverage ratio - Answer-take home pay / monthly long term debt
payments

savings ratio - Answer-(take home pay - expenses) / income available for living
expenditures

gross income vs take home pay - Answer-gross income is total income before taxes
take home pay= gross income - taxes - 401k contributions

discretionary expenses - Answer-expenses you have control over- can adjust them
anytime

non discretionary - Answer-expenses you don't have control over- can adjust about
once a year

Future value - Answer-FV= PV * (1+i)^n

Present value - Answer-PV = FV / (1+i)^n

annuity due - Answer-payment comes at beginning of period

ordinary annuity - Answer-payment comes at end of period

progressive tax system - Answer-taxed at every rate as you move up the tax bracket-
the more income you have, the higher % you pay in taxes

income - Answer-ordinary-wages, tips, lottery
capital earnings- from stocks- short term or long term
passive- rental property income if not in real estate business

tax bracket creep - Answer-brackets go up every year adjusted for inflation

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller lectknancy. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $10.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

77529 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$10.49
  • (0)
  Add to cart