Passage C

Practice Tests
Diagnostic Pre-Test for Effective Reader
Passage C

Read the passage below and answer the questions that follow.

Exhibit 1.6 How Financial Planning Affects Your Cash Flows 21. According to the context, the word budgeting as it is used in line 2 most nearly means

A. the act of saving money for retirement

B. the act of allocating money in order to spend it wisely

C. the act of managing money with regard to spending, saving, and paying yearly taxes

D. the act of paying bills and having enough money for living expenses

22. The stated main idea sentence of paragraph four is

A. If you need more cash inflows beyond your income, you may decide to rely on savings that you have already accumulated or obtain loans from creditors.

B. If your income exceeds the amount that you wish to spend, you can use the excess funds to make investments or to repay some or all of the principal on existing loans.

C. Thus, your investment decisions can serve as a source of funds or a way of using additional funds.

D. There is no stated main idea sentence in this paragraph. It is implied.

23. Essentially, the major details of paragraph five are

A. the steps to creating a financial plan

B. the step of establishing financial goals

C. making purchases, getting out of debt, and improving credit history

D. paying off student loans and making credit card payments

24. Which sentence expresses the central point of this passage?

A. A financial plan includes several components which are all related to one another.

B. An important component of a financial plan is budgeting.

C. Allowing for financing for major purchases is critical to a financial plan.

D. Planning for retirement is an important focus of a financial plan.

25. What is the relationship between the parts of the following sentence?

"If you need more cash inflows beyond your income, you may decide to rely on savings that you have already accumulated or obtain loans from creditors." (lines 27–28)

A. addition

B. time order

C. contrast

D. cause and effect

26. The author uses an overall organizational pattern that

A. lists the components of a financial plan and some of the decisions that are involved.

B. compares and contrasts different types of financial plans.

C. demonstrates the causes and effects of poor decision-making with regard to financial planning.

D. provides definitions of terms used in financial planning with examples to illustrate.

27. "An effective financial plan enhances your net worth and therefore builds your wealth." The above sentence is a statement of

A. fact

B. opinion

C. bias

D. informed opinion

28. The author's primary purpose is to

A. persuade the reader of the necessity to hire a financial planner to help manage the complex decisions of managing money.

B. inform the reader about the various components of financial planning.

C. convince the reader to establish a savings account and a retirement fund early in life in order to be prepared for the future.

D. provide entertaining stories about the financial mistakes made by young people and the resulting pitfalls.

29. The overall tone of this passage is

A. factual and unbiased

B. subjective and encouraging

C. emotional and anxious

D. biased and gloomy

30. Based upon the flow chart in Exhibit 1.6, the components that can add or change your cash flow are

A. Retirement and Investing

B. Protecting Assets and Income

C. Products and Services

D. Budgeting, Liquidity, and Financing