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Business Studies > A4 > Flashcards

A4 Flashcards

1
Q

What are the different types of borrowing?

A 
Bank overdraft
Short/medium term personal loan 
Hire purchase 
Mortgages 
Credit cards
Payday loans
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2
Q

What is a bank overdraft?

A
  • An agreement with the bank to overspend on the account up to an agreed limit
  • Good to cover a short term cash flow problem
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3
Q

What are the advantages of a bank overdraft?

A

Businesses and individuals are able to borrow what they need to over short falls in cash flow.

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4
Q

What are the disadvantages of a bank overdraft?

A

Interest is charged according to the amount overdrawn and the time involved this is a very expensive form of finance

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5
Q

What is a short/medium term personal loan?

A

A specific sum of money is borrowed for a fixed period. Typically 3 to 10 years.
It may be used to buy something expensive like a car, sofa or house improvements

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6
Q

What are the advantages of a personal loan?

A

Financial planning is made easier as repayments are made in regular instalments.

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7
Q

What are the disadvantages of a personal loan?

A

Interest has to be payed on the loan. The interest rate tends to be higher for short compared to medium term loans.

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8
Q

What is a mortgage?

A

These are loans for the purchase of land or buildings. They are usually for vast sums of money and are paid back over 20 - 35 years

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9
Q

What are the advantages of a mortgage?

A

The loan allows the company to purchase land or buildings. The business has no longer to pay back the loan. The land or buildings are the security for the loan.

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10
Q

What are the disadvantages of a mortgage?

A

Loans are usually only given when large sums of money are needed. Interest has to be paid on the loan.

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11
Q

What is a credit card?

A
  • Issued by financial institutions not necessarily banks

- They allow customers to delay payments for goods and services

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12
Q

What are the advantages of a credit card?

A
  • Allows a period of credit that is interest free
  • Most are widely accepted
  • Suitable for online transactions
  • Offers a degree of protection on purchases
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13
Q

What are the disadvantages of a credit card?

A
  • Interest is charged on balances not paid within one month
  • Interest is paid on cash withdrawals typically 2.5%
  • Can encourage a customer to overspend and get into debt
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14
Q

What is a payday loan?

A

This is a short term source of finance used to bridge the gap between now and your next pay check.

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15
Q

What are the advantages of a payday loan?

A
  • They help meet cash shortages and temporary cash flow problems.
  • They are easy to apply for and get
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16
Q

What are the disadvantages of a payday loan?

A
  • Interest rates are high some can be up to 1000%

- If you can’t repay it straight away the amount to be repaid can spiral out of control

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17
Q

What are the different types of saving or investment?

A 
Individual savings accounts 
Deposits and savings accounts 
Premium bonds 
Bonds or gilts 
Shares 
Pensions
18
Q

What is an individual savings account?

A

This type of savings account does not charge tax on the interest received

19
Q

What are the advantages of an ISAs?

A
  • Tax is not charged on the interest earned so the saver benefits
  • Interest rates in these accounts are slightly higher than other types of saving accounts.
20
Q

What are the disadvantages of an ISAs?

A
  • There is a limit set on the amount you can deposit into an ISAs over a year
  • There can be a limit on how many withdrawals you can do per month.
21
Q

What are deposits and savings accounts?

A

These are accounts where interest is paid to the account holder on the balance.

22
Q

What are the advantages of deposits and saving accounts?

A
  • Interest is paid on positive balances.

- Accounts can sometimes require regular amounts to be deposited forcing the saver to follow a savings plan

23
Q

What are the disadvantages of deposits and savings accounts?

A
  • Interest earned is taxed

- The rate of interest paid on savings is lower than the rate of interest charged on borrowing.

24
Q

What are premium bonds?

A

It is a government scheme that allows people to save a set amount of premium bonds. The holder does not get interest but has the chance to win big cash prizes every month.

25
Q

What are the advantages of premium bonds?

A
  • The money can easily be withdrawn without a penalty.

- Is a chance you could earn more compared to your savings with interest.

26
Q

What are the disadvantages of premium bonds?

A
  • There is no guarantee that you will win and therefore you could potentially have no earning.
  • Is a maximum amount of bonds you can have
27
Q

What are bonds or gilts?

A

These are fixed term securities where the lender lends money to the government or companies in return for interest payments.

28
Q

What are the advantages of bonds or gilts?

A
  • You receive regular fixed returns on your money.

- You can spread risk across a range of markets

29
Q

What are the disadvantages of bond or gilts?

A
  • There is a risk that you may lose some or all your investment if the bond or gilt value falls
30
Q

What are shares?

A

Shares can be brought in companies and the person owning the share becomes a part owner in the company.

31
Q

What are the advantages of shares?

A

You can purchase shares in a company in return for a dividend. The dividend received depends on the amount of shares you purchased.

32
Q

What are the disadvantages of shares?

A
  • Share prices can go up or down so you run the risk of losing your investment.
  • It is a potentially high risk form of investment
33
Q

What is a pension?

A
  • These are long term savings plan where individuals will make contributions to their pension plan throughout their working lives.
  • Pensions can be state, company or private
34
Q

What are the advantages of having a pension?

A
  • Pension plans encourage individuals to save for their retirement
  • Regular payments are deducted from wages at source so people are forced into saving their
35
Q

What are the disadvantages of having a pension?

A
  • Movement from Job to job may mean that one policy will stop and another starts.
  • You can’t accurately predict what you will receive in the end
36
Q

What are savings?

A

Savings are amounts of money you put away in a bank or building society. By putting the money away you are giving it up to being able to spend it now however banks pay interest on it.

37
Q

What are investments?

A

Involves making a compliment to a project in the hope it is successful and make money.

38
Q

What is an investment?

A

Shares in a business
Art
Gold
Diamond antics

39
Q

What are the different types of insurance?

A 
Car 
Health 
Home and contents 
Travel 
Pet 
Life assurance and insurance
40
Q

What is car insurance?

A
  • If you drive a car in a road you legally have to have car insurance.
  • It’s covers thefts as well as accidents
  • It protects the driver, passengers and other road users
41
Q

What are the advantages of having car insurance?

A
  • It meets legal requirements

- It protects you from all types of damage

42
Q

What are the disadvantages of having car insurance?

A
  • Higher risk means it costs more e.g young drivers

- Normally you have to pay upfront in the event of a claim. This is called an excess.

Business Studies (20 decks)

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