Understanding Assets and Liabilities

What is an asset?

• Something you owe money on

• A debt that needs to be paid

• Something of value that you own

• A monthly bill

Which of the following is an example of a liability?

• A savings account

• A car loan

• A collection of rare coins

• A bicycle you own

What is the main difference between an asset and a liability?

• Assets are always physical items, liabilities are not

• Liabilities increase your wealth, assets do not

• Assets are things you want, liabilities are things you need

• Assets add value to your finances, liabilities subtract from it

Which of these is considered an asset?

• Credit card debt

• A mortgage

• A smartphone

• A personal loan

What is a liability?

• Something that puts money in your pocket

• An item that always increases in value

• A financial obligation or debt

• A type of investment

If you have more assets than liabilities, what does this mean?

• You have a negative net worth

• You have a positive net worth

• Your finances are balanced

• You need to acquire more liabilities

Which of these is an example of an asset for a business?

• Employee wages to be paid

• Inventory of products to sell

• Rent due for the store location

• Loans taken from the bank

What is the term for the total value of all assets minus all liabilities?

• Gross worth

• Total assets

• Net worth

• Liability sum

How does paying off a credit card balance affect your assets and liabilities?

• Increases assets, no change in liabilities

• No change in assets, decreases liabilities

• Decreases assets, decreases liabilities

• Increases assets, decreases liabilities

Match the following terms with their definitions:

• The difference between assets and liabilities

• Liability

• Something you own that has value

• Asset

• Something you owe

• Net Worth