2026–2027 Personal Financial Planning Test Bank (Gitman, Joehnk, Bill, 13th Edition): 1,500+ Questions with Answers & Explanations – Chapters 1–15 (Financial Statements, Taxes, Cash Management, Credit, Loans, Insurance, Investments, Retirement, Estate Pla

Test Bank for Personal Financial Planning, 13th Edition,
by J. Gitman, Michael D. Joehnk, and R Billingsley.
Chapter 1—Understanding the Financial Planning Process


TRUE/FALSE

1. Standard of living is defined as the necessities, comforts, and luxuries desired by an individual or group.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

2. Your average propensity to consume is the percentage of each dollar of income, on the average, that is
spent for current needs rather than savings.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

3. A good financial plan completed when one is in their 30s will typically last a lifetime.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Synthesis

4. Financial planning is a continuing, life-long process.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

5. Financial planning can improve your standard of living.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

6. Current consumption is inversely related to saving for the future.

ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Analysis

7. About 20% of Americans say retirement planning is their most pressing financial concern.

, ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

8. The most effective way to achieve financial objectives is through financial planning.

ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

9. Defining financial goals is an important first step in personal financial planning process.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

10. Two persons with equal average propensities to consume will not necessarily have equal standards of
living because of differences in income.

ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Evaluation

11. The need for financial planning declines as your income increases.

ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Synthesis

12. Current consumption effects future consumption.

ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Analysis

13. A person who has $2,000 monthly income and spends $1,800 monthly has an average propensity to
consume of 90%.

ANS: T PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Evaluation

14. A person making $35,000 and spending $30,800 has an average propensity to consume of 80%.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Evaluation

15. Most families find it difficult to discuss money matters.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2

, NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

16. Average propensity to consume refers to how much of your money you plan to save in your financial
plan.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

17. Tangible assets are earning assets that are held for the returns they promise.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

18. Financial assets are paper assets, such as savings accounts and securities.

ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

19. Mutual funds are examples of financial assets.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Application

20. Spending for your child's private-school education is an example of deferred consumption.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Application

21. Wealth can be defined as the total value of all the things you own.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

22. Wealth is the key consideration is establishing financial goals as it is the measure of value in financial
transactions.

ANS: F PTS: 1 DIF: Challenging OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

23. Financial assets include investments such as stocks and bonds.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-1
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates

, KEY: Bloom's: Analysis

24. Utility refers to the amount of satisfaction a person gets from buying certain items.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

25. A successful financial plan will be based on a person's goals.

ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

26. Your personal value system will shape your attitude toward money and wealth accumulation.

ANS: T PTS: 1 DIF: Moderate OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

27. It is possible to draw up one financial plan that will work for most people.

ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

28. Financial planning is a dynamic process.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

29. The first step in the financial planning process is to develop financial plans and strategies to achieve
goals.

ANS: F PTS: 1 DIF: Moderate OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge

30. Money can be an emotional factor that may affect a person's financial plans.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Comprehension

31. Long-term goals are typically for periods of over 6 years.

ANS: T PTS: 1 DIF: Easy OBJ: LO: 1-2
NAT: BUSPROG: Reflective thinking STA: DISC: Financial Markets and Interest Rates
KEY: Bloom's: Knowledge