Question

Which of the following statements concerning cash flow planning is correct?

		The goal is to maximize net cash flow.
		The goal should be to invest for the future, rather than maintaining current lifestyle.
		The goal should be to identify strengths and weaknesses in the client’s cash flows.
		The goal is to optimize net cash flow.

Banks will typically grant home equity loans or lines of credit up to what loan-to-value percentage?

		20 percent
		40 percent
		60 percent
		80 percent

PITI should be no more than _____ of gross income or one week’s take-home pay.

		18
		24
		28
		36

Which of the following is NOT accurate specific to a cosigner?

		Because Mike is a cosigner on a loan for his brother Fabio, Mike has agreed to accept responsibility for repayment of the debt.
		As a recent college graduate, it is likely that Megan will need a cosigner on her first loan.
		Dan has agreed to cosign on an auto loan for his girlfriend Amber. If Amber stops making payments on the car after a bad breakup, Dan will not be held responsible since he is not directly related to Amber.
		Even though Shannon is a cosigner on her younger sister’s loan, she will not directly benefit directly from the loan.

All the following are advantages of budgeting, EXCEPT:

		It helps reveal inefficient uses of resources.
		It fosters creativity and judicious risk-taking.
		It provides a way of measuring progress toward goals.
		It heightens awareness of and attention to the need to set financial goals.

Answer 1

1.

The goal of cash flow planning is to optimize net cash flow. Cash flow planning helps an individual in indentify when he receive cash (cash inflow) and when he has to pay cash (cash flow). So, cash flow planning optimize use of cash.

Option (D) is correct answer.

2.

Bank will typically grant home equity loans or liens of credit upto 80% loan to value. That is bank provide loan upto 80% of total value of home.

Option (D) is correct answer.

3.

PITI should be no more than 24% of gross income or one week’s take-home pay.

Option (B) is correct answer.

4.

Because Mike is a cosigner on a loan for his brother Fabio, Mike has agreed to accept responsibility for repayment of the debt.

Option (A) is correct answer.

5.

Budgeting is process of forecast about future expenses. So, budget helps in measuring progress toward goals. Budget heightens awareness of and attention to the need to set financial goals. It fosters creativity and judicious risk-taking.

Option (A) that is It helps reveal inefficient uses of resources, is not an advantage of budget.