Personal Finance Final Review – Flashcards
Unlock all answers in this set
Unlock answersquestion
Earliest types of trade
answer
Bartering
question
Economics of all cultures are based on
answer
Trade
question
Historians believe that the Chinese developed the first
answer
Metal currency
question
Gross Income
answer
Total income before any deductions are taken
question
Net Income
answer
Take-home pay
question
Voluntary Salary Deduction
answer
Money you have given permission to have deducted from your paycheck
question
Involuntary Salary Deduction
answer
Money taken from your gross pay that you have no control over
question
Fixed Expenses
answer
Expenditures that are constant from one time period to another
question
Discretionary Spending
answer
Expenditures that are under your control
question
Fixed Income
answer
Income that does not vary form one time period to another
question
Prinicipal
answer
The initial amount of money that was invested or borrowed
question
Salaried Employee
answer
Someone who receives a regular salary for employment
question
Insolvent
answer
Unable to discharge liabilities or repay debts
question
Corporate structure may be defined as
answer
The way a business is organized
question
APR
answer
Abbreviation of annual percentage rate, the interest rate applied annually to a loan or a credit card balance
question
Budget
answer
To plan the allocation, expenditure, or use of money
question
Income Potential
answer
The amount of money that is anticipated to be received over a period of time, either as a payment for work, goods, or services, or as profit on capital
question
APY
answer
Abbreviation of annual percentage yield, the rate of return earned in the course of one year, taking compounding into account, expressed as a percentage
question
Refinancing
answer
To obtain a new loan for something on different terms, often involving the paying off of an existing high-interest loan by means of a newer, lower-interest one
question
Withdraw
answer
To take money out of an account
question
Cash Reserves
answer
Cash and other liquid assets such as demand deposits or treasury bills that an individual possesses
question
Cost of living
answer
The amount of money spent on food, clothing, accomodation, and other basic necessities.
question
Lease
answer
A long-term rental
question
Bumper-to-bumper warranty
answer
A guarantee which covers the entire car, with few (if any) exceptions
question
Depreciation
answer
The amount or percentage by which something decreases in value over time
question
Insurance Premiums
answer
The payment made to obtain insurance
question
Reliability
answer
Able to be trusted with financail responsibility; high likelihood of paying back debt (f)
question
Sticker price
answer
The retail value of something; the price that something is advertised as costing (j)
question
Wholesale value
answer
The cost of something when bought directly from the manufacturer (b)
question
Used car cost
answer
Wholesale value minus depreciation, plus taxes, registration and licensing fees (a)
question
Kelley Blue Book
answer
Online resource for car pricing (c)
question
Which of the following is not true concerning Income Tax Refunds?
answer
It is advantageous to receive a large sum of money in the form of a refund so that you can use the money to pay down debt.
question
When claiming dependents, they must meet the following criteria EXCEPT:
answer
The dependent must reside with you for the entire year.
question
If you opt to put money in a medical flexible spending account rather than trying to amass enough medical expenses to itemize on your tax return, you are taking advantage of ______.
answer
An exclusion
question
A form of taxation in which everyone pays an equal rate of taxes is called a ______.
answer
Flat tax
question
A form of taxation in which the highest income earner pays the largest percentage of taxes is called a ______.
answer
Progressive tax
question
A form of taxation in which the lowest income earners pay the largest percentage of taxes is called a _______.
answer
Regressive tax
question
Which of the following is not considered part of your gross income?
answer
Bartered goods and services OR Everything of value that you received from April 15th to December 31st
question
Which of the following is not true about your adjusted gross income?
answer
It is your income plus your deductions
question
Which of the following is true about standard deductions?
answer
They are tax breaks that you can claim without having to itemize
question
A dollar-for-dollar reduction in your tax payment is called a ______.
answer
Credit
question
Insurance
answer
An arrangement by which a company gives customers financial protection against loss or harm in return for payment.
question
Risk management
answer
Determining, minimizing, and preventing accidental loss in a business, for example, by taking safety measures and buying insurance.
question
The company that sells insurance.
answer
Insurer
question
Premium
answer
The amount of money charged for a certain amount of insurance coverage.
question
Deductible
answer
The amount an insured person must pay before making a claim against an insurance policy before an insurer will pay any compensation. (j)
question
Coverage
answer
The amount of type of protection provided by an insurance policy. (a)
question
Actuary
answer
A statistician who calculates insurance premiums, risks, dividends, and annuity rates. (e)
question
Liability
answer
A fixed dollar amount of coverage for damages that an insured becomes legally liable to pay due to an accident or other negligence. (g)
question
Claim
answer
An application for payment under an insurance policy. (h)
question
Policy
answer
A contract of insurance. (c)
question
Which of the following best defines health insurance?
answer
A type of insurance whereby the insurer pays the medical costs of the insured
question
Which of the following illustrates the main difference between Medicare and Medicaid?
answer
Medicare helps to insure the elderly, while Medicaid focuses on low-income individuals and families.
question
Which of the following is not true about managed care?
answer
Your employer is responsible for all co-payments.
question
Which of the following statements is true about Medicaid?
answer
Medicaid was established to help ensure that people living below the poverty level could receive health care.
question
What is life insurance?
answer
Insurance that assists your loved ones with income in the event of your death
question
John T. works on the assembly line in an automobile factory. One day, he falls off the roof of his home while cleaning his rain gutters and injures his back. He soon learns that he will have to be off his job for close to a year while his back heals. Which of the following insurance will he need to cover losses from his absence?
answer
He may potentially be covered by disability insurance provided by his employer until he returns to work.
question
Which of the following statements is not true about HMO insurance?
answer
In an HMO you can choose your own primary care physician (PCP), but specialists must be referred by the PCP.
question
Which of the following statements is not true about disability insurance?
answer
The only way to get disability insurance in through your employer.
question
Which of the following might be considered positive aspects of HMO's?
answer
Out-of-pocket expenses are usually low
question
Which of the following might be considered a negative aspect of HMO's?
answer
Not easy to receive specialized care
question
Allows one to save money in a retirement fund before taxes
answer
401k (j)
question
Designates what should happen to a person's wealth upon his/her death
answer
Will (g)
question
First roadblock to savings
answer
Impatience (h)
question
Shows you how your savings will grow over a set period of time
answer
Interest calculator (e)
question
Allows for a more secure future
answer
Savings (b)
question
Money owed
answer
Debt (f)
question
Second roadblock to savings
answer
Seasonal Spending (i)
question
Federal programs that provide retirement, disability, and life insurance benefits
answer
Social Security (d)
question
Keeps you from overspending
answer
Budget (c)
question
Most important part of a savings plan
answer
Setting a goal for savings (a)
question
A FICO score represents all of the following EXCEPT:
answer
The amount of money in your retirement account.
question
On average, compared to a person with good credit, a person with poor credit will pay ______ for insurance?
answer
20% to 50% more
question
How long does it take to rebuild your credit history?
answer
7 years
question
Secured debt means a lender gives you money in exchange for what?
answer
Collateral
question
Which type of debt is the least attractive for a consumer?
answer
Unsecured debt
question
When an asset, such as a car, decreases in value over time what is it called?
answer
Depreciation
question
If you miss one payment on a credit cared, what is generally the penalty?
answer
A late payment fee
question
If you miss two payments on a credit card, what is generally the penalty?
answer
A higher interest rate and a late payment fee
question
If you have $1,000.00 on a credit card and the interest rate is 23.7% per year, how much interest will you pay for one year?
answer
$237.00
question
How many monthly payments are there in a 30-year loan?
answer
360
question
Savings plan or method you can employ to save money over time (b)
answer
Savings investment
question
A financial goal to be achieved within a period of time less than twelve months (f)
answer
Short-term goal
question
A financial goal to be achieved within a period of twelve months or more (h)
answer
Long-term financial goal
question
The part of the purchase price of a high-priced item that the buyer pays, usually in cash, and its not included in the loan amount (e)
answer
Down payment
question
A one-time payment not expected to recur (c)
answer
Lump sum
question
An individual who tends to prefer higher risk (possibly higher reward) investments (j)
answer
Risk seeking
question
An individual who tends to prefer lower risk (lower return) investments (a)
answer
Risk averse
question
An investment by an individual or venture capital corporation used to start a new or unusual undertaking (g)
answer
Venture capital
question
A firm that acts as an intermediary between a company that needs additional money and potential investors (i)
answer
Investment bank
question
A document representing the money an individual deposits into a financial institution for a set period of time as a specified interest rate (d)
answer
Certificates of deposit
question
What can be the best type of safety net in hard times?
answer
Mortgage
question
Generally, you need to live in a home __ years to break even on closing costs.
answer
Three
question
What is generally the most complicated financial transaction the average American will ever undertake?
answer
Buying a home
question
Real estate is considered a/an ____ investment.
answer
Illiquid
question
Individual mortgage interest rates are generally determined by what?
answer
The individual's credit score
question
What is PMI?
answer
Personal mortgage insurance
question
Who dictates how much insurance a homeowners must carry on their property?
answer
The bank that holds the mortgage
question
Assuming you have a 30-year-fixed-rate-loan, you're paying ____% interest during the first few years.
answer
90
question
Why is investing in gold beneficial?
answer
It is considered a stable investment.
question
What type of insurance may a homeowner need?
answer
All of the above. (Hurricane, flood, and firestorm)
question
Which of the following is not one of the three types of business arrangements in the United States?
answer
Sole partnership
question
With a sole partnership, who pays the taxes?
answer
the owner
question
Which of the following would not be considered an advantage of a sole proprietorship?
answer
a proprietor is also responsible for his or her own health insurance
question
What can a proprietor do to minimize person risk and liability?
answer
Form a limited liability company
question
Why are partnerships often favored over corporations?
answer
A partnership structure eliminates and dividend tax levied upon profits by the owners
question
What are the two types of partnerships
answer
limited and general
question
Which of the following would not be considered an advantage of a partnership?
answer
each general partner is deemed the agent of the partnership
question
As a generic legal term,_______means any group of persons with a legal entity.
answer
Corporation
question
Who regulates a corporation?
answer
the government of the state, province, or national government with which it is registered
question
Which of the following is not a legal characteristic of a corporation?
answer
legal protection from law suits
question
work capital
answer
money required to keep a business going (j)
question
equity financing
answer
selling common stock or preferred stick to investors in order to raise money (f)
question
debt financing
answer
borrowed money; money that must pay paid back (e)
question
business plan
answer
formal plan that sets out the future strategy and financial development of a business (b)
question
marketing plan
answer
defines your market; details action necessary to achieve a specified marketing objective (g)
question
operational plans
answer
work plans that describe how a company will put its goals into action (a)
question
project frameworks
answer
describe the goals of a particular project, usually for a specified period of time (c)
question
financial accounting
answer
concerned with recording, classifying, summarizing, interpreting, and communicating financial information about a business (i)
question
management accounting
answer
information used within an organization that provides information for managers and employees to help them in performing their jobs (h)
question
auditing
answer
the examination of financial records to make sure that they re authentic and correct (d)
question
money used to support new or unusual undertakings (j)
answer
venture capital
question
a pooled investment vehicle that primarily invest capital of third-party investors in enterprises that are too risky for the standard capital markets (f)
answer
venture capital fund
question
one who provides capital, usually in cash-in exchange for shares in a company-for high risk investments (e)
answer
venture capitalist
question
a business with a limited operating history (b)
answer
startup company
question
an estimate of ones income (g)
answer
projected income statement
question
money put aside for unexpected expenses or events (a)
answer
reserve capital
question
a type of budget for spending and saying future income (c)
answer
financial plan
question
may also refer to an annual projection of income expenses for a company (i)
answer
financial forecast
question
refers to the means by which cash will be acquired to cover future expenses (h)
answer
finance plan
question
one way to figure out the cost of starting a business (d)
answer
interviews
question
What is an entrepreneur?
answer
One who opens a new business
question
Which of the following is the best definition of probable operating costs?
answer
Amount of money required to keep a business running
question
What may be offered to clients when banks find the risk too high?
answer
Private money
question
Which of the following is a start-up cost associated with opening a business?
answer
Equipment, Legal Fees/Licensing, Insurance
question
What is a term used widely among real estate investors to refer to non-traditional means of real estate financing, or financing techniques not commonly used?
answer
Creative financing
question
What does OPM stand for in leveraging OPM?
answer
Other peoples money
question
Generally a loan obtained from a bank will be_____loan
answer
term
question
which of the following is not a type of retail bank?
answer
Bond Bank
question
What type of banks were traditionally banks which engaged in trade financing?
answer
Merchant
question
Which of the following is an example of an unsecured bank loan?
answer
Credit card debt, Bank overdrafts, Corporate bonds
question
Which of the following is not a core module of accounting?
answer
Debt Collection
question
What is a general ledger also known as?
answer
A nominal ledger
question
Which of the following is not one of the seven basic accounting categories?
answer
Investment
question
The listing of the account names and the sum of the account balances is called what?
answer
A trial balance
question
Which of the following should be included in a general ledger?
answer
Date, Description, Total amount for each account
question
Why kind of statement is also known as a profit and loss statement?
answer
income statement
question
What kind of statement shows how changes in balance sheet and income accounts affected cash and cash equivalents?
answer
Cash flow statement
question
A balance sheet is often described as a____ of the companies financial condition on a given date
answer
Snapshot
question
What is the purpose of an income statement?
answer
To show managers and investors whether the company made or lose money during the period being reported
question
Deductions
answer
Taxes, insurance, and saving plans deducted from a paycheck (b)
question
Methods of paying employees
answer
Commision, hourly rate, and salary (d)
question
Commision
answer
Fee paid for providing a service, usually a percentage of the total amount of the business transacted (e)
question
Hourly rate
answer
Type of payment where an employee is only paid for the hours worked (g)
question
salary
answer
A payment amount that is paid yearly, and is then divided into weekly, biweekly, or monthly payments throughout the year (i)
question
standard deductions
answer
Deductions that are untaxed (j)
question
withholdings
answer
The amount of an employees income that an employer sends directly to the federal, state or local tax authority (a)
question
specific required deductions
answer
Social Security, Medicare, federal, and state taxes (f)
question
voluntary deductions
answer
Health insurance, retirement plans, life insurance, and stock purchase plans (h)
question
payroll register
answer
Provides a summary of the payroll information for each pay period (c)
question
The two components of___ are variable costs and fixed costs
answer
total cost
question
what is the margin of safety?
answer
How much sales can fall before a business starts taking a loss
question
What are expenses that change as conditions change?
answer
Variable costs
question
What are expenses that do not change called?
answer
fixed costs
question
Which of the following are examples of possible fixed costs?
answer
neither of the above
question
Which of the following are example of possible fixed costs?
answer
both of the above
question
What is known as the rate of business expansion through increasing output and sales as opposed to mergers, acquisitions, and takeovers?
answer
Organic Growth
question
What is known as the rate at which business expands by increasing output and business reach
answer
inorganic growth
question
what is another term for profit planning?
answer
profit mapping
question
What is known as the price at which a seller projects that a buyer will buy a product?
answer
target price
