PFM Assessment Task 1 Flashcards
What is Budgeting used for?
- Used to estimate the expenses and income over a period of time
What are the benefits of budgeting?
- Helps to manage money more effectively
- Monitor performance
- Improve decision making
- Identify problems before they occur
- Plan for the future
Whats the difference between Needs and wants? Give examples.
Needs – things necessary for survival
Eg. Food, water, shelter, clothing
Wants – not necessary for survival but make our immediate lives better
Eg. New car, big house, designer clothing
What is Opportunity Cost?
Opportunity Cost is the value of the lost alternative to which the economic resources could have been allocated.
What is the difference between simple and compound interest?
Simple Interest – is the interest that is paid on the principal amount only
Compound Interest – is interest that is paid on the principal and interest as well.
The interest earns interest
What do banks/ products offer customers?
- financial advice
- offering credit/ debit cards
- Cheques
- Accepting deposits
- Investment and savings accounts
- overdrafts
- ATM’s
- internet banking
How do banks make money?
Accepting money as savings (from customers) at a low interest rate and then lending that money at a higher interest rate
What are credit cards and debit cards?
Credit Card – linked to a line of credit offered by the company that issues the card
Debit Card – users can only access funds in their accounts
What is inflation?
- Is the gradual rise in prices over time
- Inflation erodes the value of money over time
Why should you invest?
Grow your money and wealth in order to improve financial well being
What is the formula for calculating networth?
Assets (E.G Owned Property) - Liabilities (E.G Car loan) = Net worth
What are shares?
Unit of ownership in a company.
How do you make money in terms of shares?
- Dividends : investor is entitled to a percentage of profit the company makes
- Capital Gain : buying shares in the belief that they will increase in value over time
What is property?
Land, buildings and houses
How do you make money in terms of property?
- Rent received
- Appreciation in the value of land
What is Capital Gains Tax?
Capital Gains Tax is the tax that is paid on the gain achieved through an increase in price paid for a property and what it is sold for
What is Gross Rental Yield and Net Rental Yield?
Gross Rental Yield – is amount of money you receive from your tenant
Net Rental Yield – is the amount you pocket after all of your costs, such as maintenance costs
What are Bonds?
Bonds are like loans that you make to a government or corporation on which you receive interest payments over time.
What are commodities?
Basic goods that is used in commerice that is interchangeable. E.G: wheat, oil, gold, silver, copper, dairy.
What are Collectors Items?
Examples: art, cards, cars, clothing, jewellery
What are NFT’s?
- A Non-fungible token is anything digital (song, video, artwork, gif etc.) that has been recorded and stored on the Ethereum blockchain.
- Ownership of these NFTs can be bought and sold like any commodity and the owners details are recorded.
What are NFT’s?
- A Non-fungible token is anything digital (song, video, artwork, gif etc.) that has been recorded and stored on the Ethereum blockchain.
- Ownership of these NFTs can be bought and sold like any commodity and the owners details are recorded.
What is Cryptocurrency?
Cryptocurrencies are a type of digital currency (or token) that allows people to make payments directly to each other via a digital ‘wallet’ online.
What is Risk v Reward?
The higher the risk the higher the reward. Higher risk investment include shares, NFT, Crypto
