Credit card usage in the United States is substantial. Many startup companies use E credit cards as a way to help meet short-term financial needs. The most common forms of debt for startups are use of credit cards and loans from relatives.
Suppose that you start up Fantastic Sandwich Shop. You invested your savings of $20,000 and borrowed $70,000 from your relatives. Although sales in the first few months are good, you see that you may not have sufficient cash to pay expenses and maintain your inventory at acceptable levels, at least in the short term. You decide you may need to use one or more credit cards to fund the possible cash shortfall.
Instructions
(a) Go to the Internet and find two sources that provide insight into how to compare credit card terms.
(b) Develop a list, in descending order of importance, as to what features are most impor- tant to you in selecting a credit card for your business.
(c) Examine the features of your present credit card. (If you do not have a credit card, select a likely one online for this exercise.) Given your analysis above, what are the three major disadvantages of your present credit car
Credit card usage in the United States is substantial. Many startup companies use E credit cards as a way to help meet short-term financial needs. The most common forms of debt for startups are use of credit cards and loans from relatives.
Suppose that you start up Fantastic Sandwich Shop. You invested your savings of $20,000 and borrowed $70,000 from your relatives. Although sales in the first few months are good, you see that you may not have sufficient cash to pay expenses and maintain your inventory at acceptable levels, at least in the short term. You decide you may need to use one or more credit cards to fund the possible cash shortfall.
Instructions
(a) Go to the Internet and find two sources that provide insight into how to compare credit card terms.
(b) Develop a list, in descending order of importance, as to what features are most impor- tant to you in selecting a credit card for your business.
(c) Examine the features of your present credit card. (If you do not have a credit card, select a likely one online for this exercise.) Given your analysis above, what are the three major disadvantages of your present credit car
Related questions
Rent and insurance payments are examples of
| A. | variable expenses. | |
| B. | fixed expenses. | |
| C. | long-term liabilities. | |
| D. | short-term liabilities. |
Matthew is concerned about his ability to save money regularlyand has prepared a budget. Which of the following budgetclassifications would be most appropriate for Matthew'sbudget?
| A. | Savings as a fixed expenditure | |
| B. | Saving whatever may be left over | |
| C. | Savings as a variable expenditure | |
Question 3
A successful financial plan includes
| A. | explicitly stated financial goals. | |
| B. | specified values that underlie the plan. | |
| C. | all of these. | |
| D. | logical and consistent financial strategies. |
Question 4
A cash-flow statement is also known as a(n) ____ statement.
| A. | taxable income | |
| B. | net worth | |
| C. | income and expense | |
| D. | asset-and-liability |
Question 5
A long-term goal is one that is projected to be acheived beyondhow much time?
| A. | five year | |
| B. | ten years | |
| C. | six months | |
| D. | one year |
Question 6
A balance sheet includes ____, ____, and ____.
| A. | income; expenses; net worth | |
| B. | assets; expenses; liabilities | |
| C. | income; liabilities; net worth | |
| D. | assets; liabilities; net worth |
Question 7
Disposable income is income
| A. | after all employer withholding including taxes. | |
| B. | minus fixed expenditures. | |
| C. | before taxes. | |
| D. | after all employer withholding except taxes. |
Question 8
Which of the following would be classified as a long-termliability?
| A. | Education loan balance | |
| B. | Credit card debt | |
| C. | Bank card debt | |
| D. | All of these |
Question 9
Stephen Scott's monthly pay stub indicates that his monthlygross income is $3,800. However, $800 is withheld for income andSocial Security taxes, $200 is withheld for his health anddisability insurance, and another $200 is contributed to hispension plan. How much is Stephen's disposable income?
| A. | $2,800 | |
| B. | $3,000 | |
| C. | $2,600 | |
| D. | $3,800 |
Question 10
Which of the following provides information about a person'sfinancial condition at a specific point in time?
| A. | Federal tax return | |
| B. | Balance sheet | |
| C. | All of these | |
| D. | Income and expense statement |
Question 11
The two most useful financial statements are ____ and____.
| A. | federal tax returns; income and expense statements | |
| B. | balance sheets; wills | |
| C. | cash-flow statements; balance sheets | |
| D. | wills; federal tax returns |
Question 12
Which of the following is the best example of awell-stated financial goal?
| A. | Pay off your credit cards as soon as possible | |
| B. | Purchase a three-bedroom home in five years | |
| C. | Buy a $3,000 computer in 18 months | |
| D. | Buy a $2,000 stereo |
Question 13
The first step in the budgeting process is
| A. | setting financial goals. | |
| B. | evaluating. | |
| C. | organizing. | |
| D. | decision making. |
Question 13
The first step in the budgeting process is
| A. | setting financial goals. | |
| B. | evaluating. | |
| C. | organizing. | |
| D. | decision making. |
Which of the following is a characteristic of a cash-flowstatement?
| A. | It shows if you were able to live within your income for theperiod covered. | |
| B. | All of these. | |
| C. | It covers a period of time, usually one month or one year. | |
| D. | The statement includes three sections: income, expenses, andsurplus (or deficit). |
Question 15
The formula for calculating net worth is
| A. | income minus liabilities. | |
| B. | assets minus expenses. | |
| C. | income minus expenses. | |
| D. | assets minus liabilities. |
Question 16
Food, clothing, and entertainment are examples of
| A. | long-term liabilities. | |
| B. | short-term liabilities. | |
| C. | fixed expenses. | |
| D. | variable expenses. |
Question 17
To construct a balance sheet, you need to compile dollar valuesfor your assets and liabilities. Good sources from which to beginare
| A. | checkbook or savings account records. | |
| B. | all of these. | |
| C. | investments. | |
| D. | receipts of various payments. |
Question 18
Discretionary income is used to pay for things like
| A. | housing. | |
| B. | vacations. | |
| C. | utilities. | |
| D. | food. |
Question 19
A short-term goal is one that is projected to be acheived withinhow much time?
| A. | one month | |
| B. | three months | |
| C. | one year | |
| D. | five years |
Question 20
The advantages of having organized financial records include
| A. | helping you take advantage of all available tax deductions. | |
| B. | all of these. | |
| C. | enabling you to review the results of financialtransactions. | |
| D. | helping you save money as well as make money. |
Question 11
The two most useful financial statements are ____ and____.
| A. | federal tax returns; income and expense statements | |
| B. | balance sheets; wills | |
| C. | cash-flow statements; balance sheets | |
| D. | wills; federal tax returns |
Question 12
Which of the following is the best example of awell-stated financial goal?
| A. | Pay off your credit cards as soon as possible | |
| B. | Purchase a three-bedroom home in five years | |
| C. | Buy a $3,000 computer in 18 months | |
| D. | Buy a $2,000 stereo |
Question 13
The first step in the budgeting process is
| A. | setting financial goals. | |
| B. | evaluating. | |
| C. | organizing. | |
| D. | decision making. |
Question 13
The first step in the budgeting process is
| A. | setting financial goals. | |
| B. | evaluating. | |
| C. | organizing. | |
| D. | decision making. |
Which of the following is a characteristic of a cash-flowstatement?
| A. | It shows if you were able to live within your income for theperiod covered. | |
| B. | All of these. | |
| C. | It covers a period of time, usually one month or one year. | |
| D. | The statement includes three sections: income, expenses, andsurplus (or deficit). |
Question 15
The formula for calculating net worth is
| A. | income minus liabilities. | |
| B. | assets minus expenses. | |
| C. | income minus expenses. | |
| D. | assets minus liabilities. |
Question 16
Food, clothing, and entertainment are examples of
| A. | long-term liabilities. | |
| B. | short-term liabilities. | |
| C. | fixed expenses. | |
| D. | variable expenses. |
Question 17
To construct a balance sheet, you need to compile dollar valuesfor your assets and liabilities. Good sources from which to beginare
| A. | checkbook or savings account records. | |
| B. | all of these. | |
| C. | investments. | |
| D. | receipts of various payments. |
Question 18
Discretionary income is used to pay for things like
| A. | housing. | |
| B. | vacations. | |
| C. | utilities. | |
| D. | food. |
Question 19
A short-term goal is one that is projected to be acheived withinhow much time?
| A. | one month | |
| B. | three months | |
| C. | one year | |
| D. | five years |
Question 20
The advantages of having organized financial records include
| A. | helping you take advantage of all available tax deductions. | |
| B. | all of these. | |
| C. | enabling you to review the results of financialtransactions. | |
| D. | helping you save money as well as make money. |
Question 11
Ronald's gross income is $60,000, and his living expensesconsume 75 percent of his gross income. According to financialexperts, Ronald should set aside ____ to cover emergencies.
| A. | $5,000 to $10,000 | |
| B. | $22,500 to $45,000 | |
| C. | $11,250 to $22,500 | |
| D. | $15,000 to $30,000 |
Question 12
Which of the following is not a benefit of a savingsaccount?
| A. | A way to achieve short-term savings goals | |
| B. | Builds funds for large, irregular expenses | |
| C. | Protection against inflation | |
| D. | A way to save for your child's education |
Question 13
Stock brokerage firms typically offer
| A. | money market mutual fund accounts. | |
| B. | savings accounts. | |
| C. | certificates of deposit. | |
| D. | checking accounts. |
Question 14
Absent-minded Alfred lost his ATM card on May 1. He reported itmissing the next day; however, $600 had been withdrawn from hischecking account. According to the Electronic Funds Transfer Act,how much of this $600 loss is Alfred responsible for?
| A. | $600 | |
| B. | $50 | |
| C. | $500 | |
| D. | $0 |
Question 15
A check drawn on a financial institution, backed by thefinancial institution's finances, and made out to a specific payeeis called a
| A. | cashier's check. | |
| B. | money order. | |
| C. | certified check. | |
| D. | traveler's check. |
Question 16
If Gus Solis believes interest rates are going to fall in thenear future and remain low for several years, Gus should now
| A. | invest in a long-term, fixed-rate certificate of deposit. | |
| B. | bury his money in fruit jars in the back yard. | |
| C. | invest in a variable-rate certificate of deposit. | |
| D. | invest in a short-term, fixed-rate certificate of deposit. |
Question 17
Which of the following could be the most expensive way ofprotecting yourself from fees should you overdraft your checkingaccount?
| A. | An automatic funds transfer agreement | |
| B. | Paying the overdraft/bounced check fee | |
| C. | Opt-in overdraft/bounce protection | |
| D. | An automatic overdraft loan agreement |
Question 18
Not-for-profit, common-bond financial institutions that areowned by their members are called
| A. | credit bureaus. | |
| B. | mutual savings banks. | |
| C. | savings banks. | |
| D. | credit unions. |
Question 19
The Federal Deposit Insurance Corporation (FDIC) currentlyinsures against loss of up to ____ per person in an individualaccount at any one institution.
| A. | $50,000 | |
| B. | $100,000 | |
| C. | $250,000 | |
| D. | $500,000 |
Question 20
Which of the following types of payment instruments could youget at your local post office?
| A. | Traveler's check | |
| B. | Cashier's check | |
| C. | Certified check | |
| D. | Money order |
