1 Copyright © 2017 Pearson Education, Inc. Personal Finance, 6e (Madura) Chapter 2 Planning with Personal Financial Statements 2.1 Personal Cash Flow Statement 1) For most people, the first step in finding where their money goes each month is to correctly assess their true net income. Answer: FALSE Diff: 2 Question Status: Revised 2) Salary or wages are the only cash inflows for working people. Answer: FALSE Diff: 1 Question Status: Previous edition 3) Your cash outflows are the same as your liabilities such as the amount you owe on your car or home. Answer: FALSE Diff: 3 Question Status: Revised 4) Net cash flows are the difference between cash inflows and cash outflows and can be either positive or negative. Answer: TRUE Diff: 1 Question Status: Previous edition 5) The primary goal of financial planning is to A) increase earnings. B) maximize cash inflows. C) maximize wealth. D) minimize financial risk. Answer: C Diff: 1 Question Status: Revised 6) The personal cash flow statement measures A) the rate of cash flow. B) cash outflows only. C) cash inflows and outflows. D) cash inflows only. Answer: C Diff: 2 Question Status: Previous edition 2 Copyright © 2017 Pearson Education, Inc. 7) The cash flow statement reports a person's or family's A) net worth. B) current income and payments. C) plan for borrowing. D) value of investments. Answer: B Diff: 1 Question Status: Previous edition 8) Creating a cash flow statement requires that you determine A) assets. B) liabilities. C) cash used for expenses. D) market value of investments. Answer: C Diff: 2 Question Status: Previous edition 9) Which of the following is not a cash inflow? A) Interest received B) Dividend income C) Car payment D) Salary Answer: C Diff: 1 Question Status: Previous edition 10) Jim has $1,000 income from his job and $200 stock dividend income this month. This month Jim has rent and utilities of $300 and he spent $300 on groceries and $200 on clothing. What is his cash inflow this month? A) $1,200 B) $400 C) $600 D) $500 Answer: A Diff: 2 Question Status: Previous edition 11) Cash outflows are also called A) assets. B) expenses. C) income. D) liabilities. Answer: B Diff: 1 Question Status: Previous edition 3 Copyright © 2017 Pearson Education, Inc. 12) Which of the following is not a cash outflow? A) Salary B) Rent C) Telephone bill D) Car payment Answer: A Diff: 1 Question Status: Previous edition 13) Jim has $1,000 of salary and $100 of dividend income this month. This month he also has rent and utilities of $300 and he spent $200 on groceries and $100 on clothing. What is Jim's net cash flow this month? A) $400 B) $600 C) $500 D) $1,100 Answer: C Diff: 2 Question Status: Revised 14) A document that shows your cash inflows and cash outflows is called a(n) . Answer: personal cash flow statement Diff: 1 Question Status: Revised

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