FCS 340 CH. 1-3 EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026

FCS 340 CH. 1-3 EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026 Higher consumer prices are likely to be accompanied by _______ interest rates - Answers Higher The study of how wealth is created and distributed - Answers economics The Fed - Answers The Federal Reserve System What is the main responsibility of the Fed? - Answers Maintain an adequate supply of money The "Obtaining component of financial planning is defined as - Answers You obtain financial resources from employment, investments, or ownership of a business---Obtaining financial resources is the foundation of financial planning, since these resources are used for all financial activities What does liquidity refer to? - Answers The ability to convert financial resources into usable cash with ease What goals should be considered as a part of the saving component of financial planning? - Answers Main Goal---Have an Emergency Fund A formalized report that summarizes your current financial situation, analyzes your financial needs, and recommends future financial activities. - Answers Financial Plan What determines the success or failure of a financial plan? - Answers What resources are you using... What do you have access to and how are you using those. MUST HAVE resources. Involves financial plans that are more than 5 years off, such as retirement, money for children's college education, or the purchase of a vacation home. - Answers Long Term Goals Will be achieved within the next year or so, such as saving for a vacation, or paying off small debts. - Answers Short Term Goals Have a time frame of two to five years. - Answers Intermediate What are the characteristics of a well-written goal? - Answers S- Specific M- Measurable A- Action-oriented R- Realistic T- Time-based What is opportunity cost? - Answers What a person gives up by making a choice What is the time value of money? - Answers Increase in an amount of money as a result of interest earned The amount of interest is determined by multiplying the amount in savings by the__________period - Answers time Future value calculations are also referred to as - Answers compounding What is inflation risk? - Answers The amount to which current savings will grow based on a certain interest rate and certain time period When should you evaluate and revise your actions in your financial plan? - Answers Any time you have major life changing event. Retire, Marriage, New job, etc Give an example of a long-term financial strategy - Answers Retirement; money for children's college education ;purchase of a vacation home. Give an example goal of a short-term financial objective - Answers saving for a vacation or paying off small debts. What type of records should be kept in a home file? - Answers Personal and employment records Money management records Tax records Financial services records Credit records Consumer purchase and auto records Housing records Insurance records Investment records Estate planning and retirement records Medical receipts What type of financial documents would most likely be stored in a safe-deposit box? - Answers Birth certificates Marriage certificate Adoption and custody papers Mortgage papers and titles List of insurance policy numbers Stock and bond certificates Copy of will Name two personal financial statements that you construct yourself - Answers Balance sheet and cash flow statement What does a personal balance sheet present? - Answers A financial statement that reports what an individual or a family owns and owes; also called a net worth statement or statement of financial position. Assets - Answers Cash and other property with a monetary value Liquid assets - Answers cash and items of value that can easily be converted to cash Liabilities - Answers Amounts owed to others Current Liabilities - Answers debts that must be paid within a short time, usually less than a year. Long-term Liabilities - Answers debts that are not required to be paid in full until more than a year from now What is an example of a long-term liability? - Answers Mortgage, Medical bills, Tax payments How do you compute a person's net worth? - Answers Assets - Liabilities = Net Worth What does it mean to be insolvent? - Answers Inability to pay debts when due, Liabilities far exceed assets How can a person increase net worth? - Answers Increase savings Reduce spending Increase the value of investments and other possessions Reduce amounts owed PAY OFF DEBT Increase earnings, decrease spending What is a cash flow statement? - Answers A financial statement that summarizes each receipts and payments for a given period; also called a personal income and expenditure; Step 1- Records Income, Step 2- Record cash outflows, Step 3- Determine Net Cash Flow the total amount of an employee's earnings before deductions are taken out - Answers Gross pay earnings after deductions for taxes and other items; also called disposable income. - Answers Take-home pay