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PF: Chapter 2
Chapter 2: Money Management Strategies and Skills
Question | Answer |
---|---|
Assets | Everything you own, including liquid assets, real and personal property, and investments. |
Debt payment ratio | A financial ratio that measures the percentage of disposable income required to make debt payments. |
Debt ratio | Total debt divided by total assets. |
Debts | Everything you owe to others, including unpaid bills, credit card balances, car loans, student loans, and mortgages. Also known as liabilities |
Fixed expenses | Expenses that are a constant dollar amount each period. |
Gross income | Income before taxes and expenses. |
Insolvency | The inability to pay debts as they come due. |
Liquid assets | Cash and near-cash assets that can be easily converted to cash without loss of value. |
Liquidity ratio | A financial ratio that measures the ability to pay household expenses out of liquid assets in the absence of regular income. |
Market value | The price that something can be sold for today. |
Mortgage debt service | The total dollar amount of monthly mortgage principal, interest, property taxes, and homeowner’s insurance. |
Mortgage debt service ratio | The ratio of mortgage debt service to gross income. |
Net worth | The amount of wealth you would have left after paying all your outstanding debts. |
Personal balance sheet | A statement that details the value of what you own and what you owe to others to arrive at an estimate of your net worth. |
Personal cash flow statement | A summary of income and expenditures over a period of time. |
Personal financial statement | A statement that summarizes your financial information. |
Savings ratio | A financial ratio that measures the percentage of after-tax income going to savings. |
Variable expenses | Expenses that vary in amount from period to period. |