Study Guide: Exam 1
35 Cards in this Set
| Front | Back |
|---|---|
|
Flexibility
|
The ability for your plan to change as your situation or goals change
|
|
Liquidity
|
the relative ease and speed with which you can convert non cash assets into cash
|
|
Protection
|
Your ability to meet the unexpected large expenses without destroying your plan
|
|
Minimization Of Taxes
|
Your ability to pay as little as possible to Uncle Sam
|
|
Estate Planning
|
planning for your eventual death and the passage of your wealth to your heirs
|
|
Inflation
|
An economic condition in which rising prices reduce the purchasing power of money
|
|
Compound Interest
|
Interest paid on interest
|
|
Diversification
|
acquisition of a variety of different investments instead of just one to reduce risk
|
|
Personal Balance Sheet
|
A statement of your financial position on a given date
|
|
Assets
|
what you own
|
|
Monetary Assets
|
cash of other assets that can be easily liquidates
|
|
Investment Assets
|
Assets that are invested for the future
|
|
Retirement Plans
|
Investments made by you or your employer to save money for retirement
|
|
Liabilities
|
Something that is owed or borrowing of money
|
|
Net Worth or Equity
|
A measure of the level of your wealth. Determined by subtracting debt from assets
|
|
Fair Market Value
|
What an asset could be sold for rather than what is cost or what it will be worth sometime in the future
|
|
Tangible Asset
|
A physical asset, such as a house or car
|
|
Insolvent
|
The condition in which you owe more money than your assets are worth
|
|
Personal Income Statement
|
A statement that tells you where your money has come from and where it has gone over some period
|
|
Variable Expense
|
An expense over which you have control.
|
|
Fixed Expense
|
An expense over which you have no control
|
|
Budget
|
A plan for controlling cash inflows and outflows
|
|
Current Ratio
|
Monetary Assets / Current Liabilities
|
|
Month's Living Expenses Covered Ratio
|
Monetary Assets / ( annual living expenses/ 12)
|
|
Debt Ratio
|
Total Debt / Total Assets
|
|
Long-term Debt Coverage Ratio
|
Total income available for spending / Total long-term debt payments
|
|
Savings Ratio
|
Income available for saving and investments / Income available or living expenses
|
|
Time Value of Money
|
The concept that a dollar received today is worth more than a dollar received in the future and, therefore, comparisons between amounts in different periods cannot be made without adjustments to their values
|
|
Reinvesting
|
Taking money that you have earned on an investment and plowing it back into that investment
|
|
Rule of 72
|
A helpful investment rule that states you can determine how many years it will take for a sum of money to double by dividing 72 by the annual growth rate
|
|
Discount Rate
|
the interest rate used to bring future dollars back to the present
|
|
Annuity
|
A series of equal dollar payments coming at the end of each period for a specific number of periods
|
|
Compound Annuity
|
An investment that involves depositing an equal sum of money at the end of each year for a certain number of years and allowing it to grow
|
|
Amortized Loan
|
A loan paid off in equal installments
|
|
Perpetuity
|
An annuity that continues forever
|
HACE 3200: Exam 1