Which of the Following Is an Example of the Precautionary

question 50

Multiple Choice

Which of the following is an example of the precautionary motive for saving?

• A)Pat puts $400 per month in his 401(k)retirement account.
• B)Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
• C)Gerry and Terry put $2,000,000 in a trust fund that will go to their children when the parents die.
• D)Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years.

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Definitions:

Statement of Financial Position

A financial report that shows the assets, liabilities, and equity of a company at a specific point in time, providing a snapshot of its financial health—also known as a balance sheet.

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, often with predetermined dividend payments.

Common Shares

A type of equity ownership in a corporation, with voting rights and the potential to receive dividends.

Debt to Total Assets Ratio

A financial metric indicating the proportion of a company's assets financed through debt, reflecting financial leverage and risk.