#1
Which of the following is an example of passive income?
Dividend from stocks
ExplanationIncome earned with minimal effort or active involvement.
#2
What is the purpose of a budget in financial decision making?
All of the above
ExplanationTo plan, allocate, and track financial resources for achieving financial goals.
#3
Which of the following is considered a fixed expense in personal finance?
Rent or mortgage payments
ExplanationA recurring, predictable expense that remains constant over time.
#4
What is the main purpose of an emergency fund?
To cover unexpected expenses
ExplanationA reserve fund for unforeseen financial challenges.
#5
Which of the following best describes 'earned income'?
Income received from employment
ExplanationIncome from salary, wages, or self-employment.
#6
In financial terms, what does ROI stand for?
Return on Investment
ExplanationA measure of the profitability of an investment.
#7
Which of the following is considered a liability on a balance sheet?
Accounts Payable
ExplanationObligations or debts owed by a company.
#8
Which of the following is an example of active income?
Royalties from book sales
ExplanationIncome earned through active participation or effort.
#9
What is the primary characteristic of capital gains income?
It is earned through investment appreciation
ExplanationProfit from the increase in value of investments over time.
#10
What type of income is generated from owning shares of a company?
Portfolio income
ExplanationIncome from dividends, interest, and capital gains from investments.
#11
What is the primary objective of diversification in investment?
To reduce risk
ExplanationSpreading investments to minimize the impact of poor-performing assets.
#12
Which of the following is NOT a factor in determining creditworthiness?
Education level
ExplanationCreditworthiness is assessed based on financial history, not education level.
#13
What is the key advantage of a Roth IRA compared to a Traditional IRA?
Withdrawals are tax-free in retirement
ExplanationTax-free withdrawals on qualified distributions in retirement.
#14
What is the primary purpose of a credit score?
To determine eligibility for loans and credit cards
ExplanationAssesses creditworthiness for borrowing.
#15
Which financial ratio is used to assess a company's ability to pay its short-term obligations?
Current Ratio
ExplanationRatio of current assets to current liabilities, indicating short-term solvency.