Personal Finance Final Review

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

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