Introduction to finance and accounting Flashcards
Define Borrowing
Lending ( getting ) money from a variety of places such as banks for a cost - often interest.
Define Saving
Lending ( giving ) money to a variety of places such as banks for gain - often interest.
What is meant by the term “ principle “
The amount of money that is saved or borrowed at the start of a business.
What is meant by the term “ Interest “
The amount of money earned when saving or borrowing.
What is “Interest rates”?
The mathematical basis of calculating how much is earned on savings or borrowings expressed as a percentage.
Who sets Interest rates?
Countries set their own interest rates through a central bank.
Define Compound Interest
Interest that is paid not only on the principal of a loan or deposit, but also on the accumulated interest from previous periods of the loan or deposit.
Define Simple Interest
Interest that is paid only on the principal of a loan and not on any interest from previous periods of the loan or deposit.