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Business Studies A-Level 🌙 > Learning Aim A > Flashcards

Learning Aim A Flashcards

1
Q

What are the 4 functions of money?

A

Unit of account

Means of exchange

Store of value

Legal tender

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2
Q

What is Unit Of Account?

A

Allows the use of money to place value on goods and services

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3
Q

What is Means Of Exchange ?

A

Money is used to sell, buy or trade goods and services.

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4
Q

What is Store Of Value ?

A

Money has value and can be stored, e.g. in banks.

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5
Q

What is Legal Tender ?

A

Money is the legal means to pay for goods and services. It is the national currency of a country.

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6
Q

Role Of Money (6) ?

A

Personal attitudes

Life stages

Culture

Life events

External influences

Interest rates

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7
Q

Why plan expenditure?

A
  • Control costs
  • Avoid debt
  • Set financial targets and goals
  • Avoid bankruptcy
  • Counter the effects of inflation
  • Generate income and savings
  • Maintain good credit rating
  • Remain solvent
  • Avoid legal action
  • Insurance against loss or illness
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8
Q

Different ways to pay ?

A

Cash
Debit Card
Credit Card
Cheque
Electronic transfer
Direct debit
Standing order
Pre-paid card
Contactless card
Charge card
Store card
Mobile banking
BACS
CHAPS

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9
Q

Advantages of paying with Cash?

A

Most widely accepted form of exchange

Physical not virtual

Makes budgeting easier

Consumers feel more confident when using

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10
Q

Disadvantages of paying with Cash?

A

Can be lost or stolen

Threat of counterfeit

Only really appropriate on purchases up to a certain amount

Cannot be used online

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11
Q

Advantages of paying with Debit Card?

A

No need to carry cash

Secure method of payment with low risk of theft

Widely accepted

Offers degree of protection on purchases

Suitable for online transactions

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12
Q

Disadvantages of paying with Debit card ?

A

Short time lapse between making transaction and money being withdrawn from customers account

May result in overspending

Not accepted or appropriate for small transactions

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13
Q

Advantages of paying with Credit card ?

A

Allows period of credit, interest free

Most cards widely accepted

Loyalty schemes often offered

Offers degree of protection on purchases

Suitable for online transactions

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14
Q

Disadvantages of paying with Credit card ?

A

Interest is charged on balances not paid off within one month

Can encourage overspending and may lead to debt

Interest charged on cash withdrawals

Limit set on amount of credit allowed

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15
Q

Advantages of paying with a Cheque ?

A

Low risk form of payment as the cheque can only be cashed by named payee

Widely accepted for face-to-face and postal transactions

No need to provide change as can be written for exact amount

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16
Q

Disadvantages of paying with Cheque?

A

Expensive for consumer if bank refuses to clear cheque

Time delay between writing and receiving cheque may cause overdraft

Old fashioned

Easy to make errors when writing, creating problems when cashing out

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17
Q

Advantages of paying through Electronic transfer ?

A

Almost instantaneous

Provides record of payment

No additional costs incurred

Easy to use for one-off and more frequent transactions

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18
Q

Disadvantages of paying through Electronic transfer ?

A

Risk of loss is the transfer is incorrectly set up

Not appropriate for face-to-face transactions

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19
Q

Advantages of paying with Direct debit ?

A

Easy way to make regular payments E.g. utility bills

Amount paid can vary to ensure the payment matches the required amount

Quick and easy to set up

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20
Q

Disadvantages of paying with Direct debit ?

A

If mistakes are made, it’s payees responsibility to claim back lost money

The payer determines amount paid each time therefore making budgeting and planning harder for payee

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21
Q

Advantages of paying through Standing order ?

A

Same amount paid each time

Easy to set up and cancel

No need to remember to make regular, standard payments

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22
Q

Disadvantages of paying through Standing order ?

A

Payments taken regardless of consumers balance, potentially leading to overdraft

Payments will continue until cancelled

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23
Q

Advantages of paying with a Pre-paid card ?

A

Can set budget in advance

If lost or stolen, the loss is limited to the remaining balance

Effective way of controlling amount spent by E.g. children for school etc.

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24
Q

Disadvantages of paying with a Pre-paid card ?

A

No protection if lost

May require initial fee to set up or purchase card

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25
Q

Advantages of paying with a Contactless card ?

A

Gaining in popularity

Secure method of making payments

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26
Q

Disadvantages of paying with a Contactless card ?

A

Often only accepted for relatively small transactions

Still not widely accepted as seen as new technology

If lost or stolen and card hasn’t been cancelled, it can still be used

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27
Q

Advantages of paying with a Charge card ?

A

Reduces risk of running up debts

Allows a short period of credit

Avoids need to carry cash

Often offers additional perks

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28
Q

Disadvantages of paying with a Charge card ?

A

Must be paid in full amount each month

Often an annual fixed fee is applied

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29
Q

Advantages of paying with a Store card ?

A

Allows for short period of credit that is interest free

Offer loyalty schemes, discounts and special promotions or privileges

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30
Q

Disadvantages of paying with a Store card ?

A

Only accepted in issuing store or linked associations

Interest is paid on outstanding balances

May encourage overspending- resulting in debt

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31
Q

Advantages of paying through Mobile Banking ?

A

Convenient, can be used anytime anywhere

Secure method of payment

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32
Q

Disadvantages of paying through Mobile banking ?

A

Features are limited and hence mobile banking doesn’t offer all functionality of online banking

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33
Q

Advantages of paying through BACS ?

A

Faster payment allows almost instant transfers, guaranteed within 2 hours

Can be accessed in number of ways E.g. in branch, over phone and online

No additional costs

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34
Q

Disadvantages of paying through BACS ?

A

Faster payment isn’t offered by all banks and branches- therefore leading to default BACS with up to three days transfer time

Limit is set on amount that can be transferred at a given time

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35
Q

Advantages of paying through CHAPS ?

A

Transfers can be made the same day assuming instructions are received prior to a set time e.g. 2pm at Barclays

No limit to how much can be transferred at any given time

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36
Q

Disadvantages of paying through CHAPS ?

A

Usually a fixed charge per transaction regardless of amount transferred

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37
Q

4 types of Current accounts ?

A

Standard

Packaged premium

Basic

Student

38
Q

What is a Standard current account ?

A

Normal account offered to customers with a reasonable credit rating. Includes standard features such as ability to pay and withdraw money, cheque book, debit card, interest payments on positive balances and pre-agreed overdraft limit.

39
Q

What is a Packaged premium current account ?

A

Account offers additional features to a standard account such as, car and house insurance, credit card protection, breakdown cover and cash back on certain transactions.

40
Q

What is a Basic current account?

A

Account offers limited features, designed for those who may find it difficult to open a bank account due to poor credit rating. Will not offer overdraft facility and won’t pay interest or positive balances.

41
Q

What is a Student Current account ?

A

Account designed specifically to meet the needs of learners. Include agreed overdraft limit and incentives to join bank E.g. free rail cards or cash.

42
Q

Advantages of Standard Current account ?

A

No charges on credit balances

Offers holder wide range of facilities E.g. cheque book, debit/cash card and possible overdraft facility

Convenient for receiving regular payments E.g. wages and making regular withdrawals

43
Q

Disadvantages of Standard current account ?

A

Potential high charges on the use of an overdraft facility

Standard features online e.g. no additional perks

44
Q

Advantages of a Packaged premium account ?

A

-no charges on credit balances

-offers wide range of facilities E.g. cheque book, debit/cash card and possible overdraft facility

-Convenient for regular payments E.g. wages and making withdrawals

  • offers additional perks at packaged price, cheaper than acquiring them individually
45
Q

Disadvantages of a packaged
Premium account ?

A

-additional monthly charge is frequently applied

-package offered may not offer value for money or meet the needs of the individual account holder

46
Q

Advantages of a basic account ?

A
  • available to customers with low credit rating

-offers easy first step for individuals to gain access to basic banking facilities E.g. ability to pay in and withdraw cash

47
Q

Disadvantages of a basic account ?

A
  • limited facilities E.g. no debit card or overdraft facility
48
Q

Advantages of a student account ?

A

-course fees and student loans can be handled easily

-bonuses offered are designed to meet the needs of the learners e.g. discounts on travel or small lump sum of cash payment

49
Q

Disadvantages of a student account ?

A

-overdraft facilities could encourage overspending

-charges for overspending are high

-limited facilities

50
Q

Different types of borrowing (6) ?

A

Overdraft

Personal loan

Hire purchase

Mortgage

Credit card

Payday loan

51
Q

Advantages of an overdraft ?

A

Interest is charged only on the amount outstanding

Overdraft facility can be pre-arranged and only used if needed

Provides a short term solution to cash flow problems

52
Q

Disadvantages of a overdraft ?

A

When used, interest charges can be high

Penalty charges for going over a prearranged limit are often high

Not the cheapest form of borrowing

May encourage overspending

53
Q

Advantages of personal loans ?

A

Regular pre agreed payments make planning and budgeting easier

Usually only issued to individuals who can prove their ability to make the repayments

Useful when looking to purchase a specific item of medium to high value E.g. a car or home improvement

54
Q

Disadvantages of a personal loan ?

A

May have to be secured against and asset meaning of payments aren’t made the asset can be taken away

Not really suitable for short term loans

55
Q

Advantages of hire purchase ?

A

Spreads the cost of an expensive item over a period of time

Credit is secured against a specific item

Often allows customer to afford something now that they couldn’t otherwise afford e.g. 4 years interest free on furniture

56
Q

Disadvantages of hire purchase ?

A

Interest charges may be higher than other traditional loans

Ownership of an asset may be legally kept by seller until final payment is made

Agreements can be manipulated to make a purchase seem appealing

57
Q

Advantages of mortgages ?

A

Allows customer to spread cost or expensive items over long period of time E.g. purchase of a house is often spread over 25 years

Interest rates can sometimes be fixed or tracked against a standard rate of interest, reducing the risk of fluctuations

58
Q

Disadvantages of mortgages ?

A

Interest payments can vary- this therefore seriously affects the borrowers ability to repay or meet other expenses

Failure to meet repayments may lead to loss of a home and seriously affect an individual’s future credit rating

Penalties may apply to early repayment

59
Q

Advantages of credit cards as form of borrowing ?

A

Card holder can pay above minimum rate if they wish therefore speeding up the rate or repayment and reduce interest incurred

Can be used for items of multiple sizes and value, to a limit without the need to secure against and asset

Provides some protection on purchases

60
Q

Disadvantages of borrowing through credit cards ?

A

Can encourage overspending- leading to debt

Interest rates are often higher than on a personal loan

61
Q

Advantages of a payday loan ?

A

Help solve immediate short term cash flow problems

Relatively easy to secure

62
Q

Disadvantages of a pay day loan ?

A

Interest rates are very high and the amount to be repaid can quickly spiral out of control

63
Q

Different types of saving and investment (6) ?

A

Individual savings accounts (ISA’s)

Deposit and savings accounts

Premium bonds

Bonds and gilts

Shares

Pensions

64
Q

Advantages of individuals savings accounts (ISAs) ?

A

Tax is not charged on interest earned allowing the saver to keep all of the rewards for saving

Interest rates are sometimes slightly higher than in alternative savings accounts

65
Q

Disadvantages of individuals savings accounts (ISAs) ?

A

Notice is often required to make withdrawals and a limit may be set on the amount of withdrawals made

If more withdrawals are made than set out in agreement then a penalty may cancel out tax savings

Limit set on annual amount that can be placed in an ISA

66
Q

Advantages of deposit and savings accounts ?

A

Interest is earned on positive balances

Accounts sometimes require regular deposits of a set amount - forcing the saver to follow a savings plan

67
Q

Disadvantages of deposit and savings account ?

A

Interest earned is taxed

Percentage range of interest paid on savings is likely to be lower than interest on borrowing therefore benefits of savings are lost if the customer is borrowing at the same time

68
Q

Advantages of premium bonds ?

A

Chance of winning more than could be earned in interest

Can be easily withdrawn with no loss or penalty

69
Q

Disadvantages of premium bonds ?

A

No guaranteed return on investment

Maximum amount reviewed annually by government

Amount invested loses value due to inflation

70
Q

Advantages of bonds and gilts ?

A

Regular fixed returns

Spreads risk across range of markets

71
Q

Disadvantages of bonds and gilts ?

A

Risk of losing value on investment of bond or gilt value falls

Interest payments may not be recieved if issuer is unable to make payments

72
Q

Advantages of shares ?

A

Share prices fluctuate offering potential high reward

Shareholders returns can include dividend payments and increase is share value

As part owners, additional benefits may include discounts and special offers

For some, shared ownership is more than just saving, it may create interest, it’s a pastime

73
Q

Disadvantages of shares ?

A

Share prices fluctuate- creating high risk

No guarantee on any reward or return as all of an investment can be lost

74
Q

Advantages of pensions ?

A

Encourages people to save throughout their working life for retirement

Depending upon policy, savings may be boosted by employers contributions

Regular payments deducted therefore they are tied into making regular contributions- helping save more

75
Q

Disadvantages of pensions ?

A

Movement between jobs may cause policy to stop and another start. Therefore potentially reducing overall outcome of savings

Final outcome is hard to predict

If compulsory, payments are deducted, potentially affecting short term living standards

76
Q

Risks involved with saving money ?

A

Low risk as money is saved and guaranteed to be available in future

Inflation may reduce the spending power of money saved

77
Q

Rewards of saving money ?

A

Interest payments

Financial security

Peace of mind

78
Q

Risks of investments ?

A

May go wrong and all or some of the value may be lost

No guarantee on return

79
Q

Rewards of investment?

A

If successful, potential for high financial return

Can be exciting. People will invest in hope of high returns

80
Q

Different types of insurance products (6) ?

A

Car

Home and contents

Life assurance and insurance

Travel

Pet

Health

81
Q

Advantages of car insurance ?

A

Meets legal requirements

Protects self against theft of damage

Protects against damage caused to third party

82
Q

Disadvantages of car insurance?

A

Premiums can be high depending on assessed level of risk E.g. expensive for young drivers

Potential excess to be paid E.g. first £500 of damage is still responsibility of car owner

83
Q

Advantages of home and contents insurance ?

A

Protects against damage which may otherwise be too expensive to repair, resulting in loss of home

Contents are protected both when inside and outside of home

84
Q

Disadvantages of home and contents insurance ?

A

Premiums are an additional expense to home ownership

Some items cannot be replaced due to value E.g. a painting or inherited piece or jewellery

85
Q

Advantages of life assurance and insurance ?

A

Provides peace of mind to family following bereavement of home owner

Helps family deal with financial aspect of the death

86
Q

Disadvantages of life assurance and insurance ?

A

If policy holder doesn’t die within the period of life insurance, then no payment is made

87
Q

Advantages of travel insurance ?

A

Provides protection for personal belongings while away from home

Covers medical costs on holiday

Protects against cancellation and sometimes delays

88
Q

Disadvantages of travel insurance ?

A

Person who has lost the items is likely to have to pay upfront to replace and cover medical costs then reclaim later

Additional cost when travelling abroad

89
Q

Advantages of pet insurance?

A

Avoids expensive vet fees

If vet fees are too high, pet insurance can help prevent the pet being put down

90
Q

Disadvantages of pet insurance ?

A

Additional Monthly expense to protect against the unexpected

91
Q

Advantages of health insurance?

A

Some compensation is provided when I’ll which can reduce the financial burden and stress, allowing patient to concentrate on recovery

If used for private care, often results in quicker treatment and better facilities

92
Q

Disadvantages of health insurance?

A

Pay for something you hope you won’t use

Premiums can be expensive depending on the degree of cover wanted

Will not cover pre-known conditions

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