study guide test 1
study guide test 1 Finance 101
Popular in Accounting
Popular in Business, management
This 5 page Study Guide was uploaded by rebecca goodrich on Friday January 22, 2016. The Study Guide belongs to Finance 101 at University of Alabama - Tuscaloosa taught by Dr. in Winter 2016. Since its upload, it has received 32 views. For similar materials see Accounting in Business, management at University of Alabama - Tuscaloosa.
Reviews for study guide test 1
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 01/22/16
Rosa Smith and Rebecca Goodrich Ch.1-4 Personal Finance test 27 questions 1. Financial Planning: the best way to achieve financial objective is through personal financial planning, which helps define our financial goals and develop appropriate strategies to reach them. a. We shouldn’t solely depend on employee or government benefits such as steady salary or adequate funding from employer- paid pensions or Social Security- to retire comfortably b. You are always revising personal financial plan c. Creating flexible plans and regularly revising them is the key to building a sound financial future d. Spending money wisely is key to financial planning e. Goal of Financial planning- to be able to save while doing your regular Standard of living i. Standard of living- the necessities, comforts, and luxuries we have or desire 1. Tied to quality of life 2. Financial assets: intangible, paper assets, such as savings accounts, and securities a. They determine how wealthy we are b. Assets: are the items you own whether it was purchased with cash or finance using debt. 3. Inflation: A state of the economy on which general price level is increasing. (pg20) Most common is (CPI Consumer Price Index) based on changes on goods and services. 4. Budget : another type of financial report based on expected income and expenses, Budgets are forward looking.(pg 27) 5. Goal dates: target points in the future when you expect to have achieved or completed certain financial objectives. (pg,9) Long term financial goals should indicate wants and desires for a period covering about 6 years out to the next 30 or 40 years. Short term or immediate financial goals are set each year and cover a 12 month period. Short term goals include making substantial regular contributions to savings or investments in order to accumulate your desired net worth Short term goals become the key input for the cash budget, a tool used to plan for short term income and expenses 6. Expensive income statements: when evaluating you should be concerned with the bottom line.-shows cash surplus or deficit. (pg37) a. The balance sheet equation is Assets- Liabilities = Net Worth i. Assets on left ii. Liabilities on right iii. Net worth- Bottom right 7. Calculating the amount of taxable income consider (pg56) Tax rate Tax credits Tax forms and schedules Procedures for determine tax liability 8. What the Book says about Net income after taxes a. Use it when dealing with a saving ratio i. – Cash surplus divided by net income indicates relative amount of cash surplus achieved during a given period 9. Tax rate : vary with amount of reported taxable income but also with filing status. 10.Consumer price income (CPI): relate to inflation, inflation tends to give an allusion of something that doesn’t exists.(pg20) 11.Bracket Creep- A situation where inflation pushes income into higher tax brackets. The result is an increase in income taxes but no increase in real purchasing power. 12.Mortgage Are all taxes pre payers required license? Effective January 18, 2013, the IRS has suspended RTRP requirements. Tax return preparers covered by this program are NOT currently required to complete competency testing or secure continuing education. 13.Amount personal exemption: $3700 14.What is the primary determinate quality of life? Quality of life is tied to your standard of living. Employer benefits may also include your employer may offer a wide variety of employee benefits plans, especially if you work for a large firm. life health and disability insurance; tuition reimbursement for continuing education, pension, profit-sharing, and 401K retirement plans; flexible spending accounts for child care and health care expenses; sick leave, personal time, and vacation days; and other miscellaneous benefits such as employee discounts and subsidized cafeterias or parking. 1. Although other factors- geographical location, public facilities, local cost of living, pollution, traffic, and population density- also affect quality of life, wealth is commonly viewed as a key determinant 15.Budgets are forward looking. 16.Income is directly related to? Depend on age, marital status, education, geographic location choice career 17.Balance sheet equation is? Assets –Liability= net worth Assets: Liability: 18.Income expensive state: study this (pg37)(32) Try to keep your debt service ratio somewhere under 35% Debt service ratio: includes current liability and considers only mortgage, installment and personal loan obligations. Saving ration: done most effectively with after tax-income, -Income and expensive statement has three major parts(pg32) 1. Income 2. Expense 3. Cash surplus (deficit) 19.You can report income because you have to pay taxes FICA (Federal Insurance Contributions Act) (pg52) 20.The five categories filing status.(pg51) December 31 1. Single taxpayers: 2. Married filing jointly 3. Married filing separately 4. Head of household 5. Qualifying widow or widower with dependent child 21.Three types individuals income (pg53) active, Portfolio Passive Active Income- Income earned on the job, such as wages and salaries, bonuses and tips,; also includes most other forms of noninvestment income, such as pension income and alimony Portfolio income- Earnings- interest, dividends and capital gains generated from most types of investment holdings; includes savings accounts, stocks, bonds, mutual funds, options, and futures Passive income- A special category that includes income derived from real estate, limited partnerships, and other forms of tax shelters. The amount of allowable, deductible expenses associated with portfolio and passive income is limited to the amount of income derived from these two sources 22.Capital Gain- occurs whenever an asset is sold for more than its original cost a. Ex: Buy a stock at cost C, and selling it at cost C+x Capital gains are taxed at different rates depending on the holding period 23.Formula to pay taxes 24. Steps to computing your taxable income a. Determine (AGI) adjusted gross income i. Gross income (all income subject to income taxes) ii. Minus iii. Adjustments to gross income [tax-deductible expenses and retirement plan contributions] b. Calculate Taxable income i. Take AGI ii. Subtract (Larger of itemized deductions or the standard deduction) c. Calculate Tax Liability i. Calculate tax on income using tax tables or tax rate schedules ii. Subtract tax credits iii. Add other taxes 25.Where do city governments get their taxes :Property taxes Property taxes make up the largest category of state and local government revenue at 35%, with sales and gross receipts close behind at 34%, according toa new analysis by the Tax Foundation. The corporate income tax brings in the smallest amount of any major tax, providing only about 3% of the money taken in by state and local tax collectors. IN Tennessee the largest percentage of revenue comes from sales tax 26.Adjusting 4 different things 27.Which is not an adjustment 28. Allowable AGI- certain employee, personal retirement, insurance, and support expenses like a. Educator expenses (limited) b. Higher education tuition costs (limited) c. IRA contributions (limited) d. Self-employed taxes paid (limited to 50% of the amount paid) e. Self-employed health insurance payments f. Penalty on early withdrawal of savings g. Alimony paid h. Moving expenses (some limits) 29.Which of the following tax with held from 30._______ Important dates: December 31 is the last day of your tax year April 15- last good day to file your taxes October 15- last day to file your taxes You can report ______ from January to May because of ___ -
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'