Which of the following would cause an immediate decrease in your net worth?

Question

BlackTom AI · Accepted Answer

To assess which action immediately lowers your net worth, we need to recall that net worth = assets minus liabilities at a given moment. Any transaction that increases liabilities without a matching asset increase will reduce net worth right away.
Option 1: Buying a $30,000 car with a $30,000 loan. This creates an asset (the car) worth 30k and an equal liability (the loan) of 30k. Net worth remains the same immediately because assets and liabilities increase by the same amount. It’s a swap of one asset for another liability, not a net change.
Option 2: Paying off $1,000 of credit card debt from your checking account. Here you reduce a liability (credit card debt) by 1k and reduce an asset (checking account) by 1k. Since both sides change by the same amount, net worth does not change right away. You’re transferring value out of one asset to reduce a liability, keeping the difference constant.
Option 3: Purchasing a $2,000 vacation on a credit card. This action increases liabilities by 2k (credit card balance) while assets remain unchanged in the moment (no immediate cash asset added). The immediate effect is a lower net worth by 2k because you’ve increased what you owe without adding immediate value. This option directly reduces net worth now.
Option 4: Transferring $500 from checking to savings. This is simply a reallocation between two assets; total assets stay the same and there is no change in liabilities. Net worth stays unchanged since the overall asset base is the same.

25400 Financial Literacy - Spring 2025 In-class Quiz 1

Which of the following would cause an immediate decrease in your net worth?

查看解析

登录即可查看完整答案

类似问题

Your financial net worth is a comparison of what you own to what you owe – just like a business balance sheet.

Which of the following statements is/are correct? Net worth represents the personal equity that the individual has in his assets and can never be less than zero. If Lisa purchased a car using 30% cash and 70% debt, her net worth would increase by 30%.

Net Worth can be defined as:

Net Worth can be defined as:

Net Worth can be defined as:

Question at position 14 The Real World Application for Module 2 on Emma Chamberlain states that her estimated net worth by age 22 was: $8 million$12 million$15 million$10 million

Question at position 1 The Real World Application for Module 2 on Emma Chamberlain states that her estimated net worth by age 22 was:$12 million $8 million$15 million$10 million

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单