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Finance > Unit 2 > Flashcards

Unit 2 Flashcards

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1
Q

Annual Equivalent Rate (AER)

A

the equivalent interest rate, restated from the nominal rate, if we allow for the effect of compounding over the year.

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2
Q

Bond

A

a savings account that offers a fixed rate of interest for a fixed term.

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3
Q

Credit union

A

a financial co-operative run by, and for the benefit of, its members. • Financial Conduct Authority (FCA) – the UK regulator responsible for the •way in which financial firms market and sell their products.

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4
Q

Individual savings account (ISA)

A

a tax-free savings and investment account.

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5
Q

Insolvency

A

when a company cannot afford to pay its debts; similar to ‘bankruptcy’ for an individual.

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6
Q

Interest

A

money earned by putting money ‘on deposit’ in a deposit account.

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7
Q

Lifetime ISA (individual savings account)

A

a form of ISA available to people aged between 18 and 40 that lets them save up to £4,000 a year and receive a 25% government bonus.

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8
Q

Prudential Regulation Authority (PRA)

A

the UK regulator responsible for making sure that financial firms are authorised to operate in the UK and are financially sound.

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9
Q

Cash flow

A

the flow of money into and out of an account.

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10
Q

Cash flow forecasting

A

predicting when money will move in and out of the account and identifying pressure points in a budget.

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11
Q

Chancellor of the Exchequer

A

the British Cabinet minister responsible for financial and economic matters, and in charge of the Treasury (the government’s economic and finance ministry).

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12
Q

Direct debit

A

an electronic payment out of an account, for example to pay a bill. The amount of a direct debit and how often it is taken can vary.

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13
Q

Discretionary expenditure

A

things that we might like to buy if we have the money, but that aren’t essential to our standard of living.

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14
Q

Earned income

A

income from working, either as an employee or from self-employment.

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15
Q

Employment

A

working for an employer, who can dictate when, where and how the employee will perform their job.

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16
Q

Essential expenditure

A

bills that are essential to a person’s (or family’s) way of life.

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17
Q

Gross domestic product (GDP)

A

the total value of all goods produced and services provided by a country; in simple terms, what the country has earned in the year.

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18
Q

Mandatory expenditure

A

bills that must be paid by law.

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19
Q

Net disposable income

A

what is left after taking regular expenditure away from net income.

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20
Q

Net income

A

income after tax and other deductions have been taken off.

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21
Q

Overdraft

A

a borrowing facility offered to bank account holders, which allows them to be temporarily overdrawn up to an agreed amount

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22
Q

Overdrawn

A

when a person has no money in their bank account but still takes money out (ie they have ‘overdrawn’ on their account).

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23
Q

Payday lender

A

a company that provides short-term loans to people who need to borrow until their next pay day, when the loan should be paid back

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24
Q

Regular expenditure

A

bills and spending that occurs each month

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25
Q

Self-employment

A

people working for themselves and being able to pick what work to do and when

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26
Q

Standing order

A

an electronic payment out of an account. In contrast to a direct debit, a standing order is used to make regular payments of the same amount.

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27
Q

Unearned income

A

income from savings, investments, etc, that is not received for doing work.

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28
Q

Bad debts

A

debts that are used to buy things that have no real value, lose value quickly, produce no income or don’t really improve the borrower’s situation.

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29
Q

Capital

A

the money or other assets owned by an individual or a business. In the case of a financial service provider (ie bank or lender), it refers to the funds provided by the shareholders, not deposits from customers.

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30
Q

Consumer debt

A

the amount of debt built up by members of the public rather than the government.

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31
Q

Credit rating

A

an assessment of the risk that the borrower poses for the lender.

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32
Q

Deposit

A

a sum of money placed by a customer with a bank.

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33
Q

Good debts

A

debts that are used to buy something that will increase in value or result in something positive happening.

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34
Q

Endowment policy

A

an insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Endowment policies are often used as a way of saving over the long term.

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35
Q

Equity

A

the difference between the value of a property and the mortgage on it.

36
Q

Capacity for loss

A

the amount of money that a person could afford to lose (or needs to risk) when trying to achieve their objectives.

37
Q

Corporate bonds

A

are similar to gilts (see below) in the way that they work, but the borrower would be a large company, rather than the government.

38
Q

Risk tolerance

A

how the individual feels about the possibility that the value of their savings could fluctuate over time and that they could even lose some of their funds.

39
Q

Shares

A

the name derives from the fact that the shareholder actually owns a share in the company.

40
Q

Stock market

A

a system that regulates the way shares are issued, valued and sold, and through which shares are traded.

41
Q

Volatility

A

a measure of the extent to which a value goes up or down over a period of time. High volatility means higher risk.

42
Q

Brand snobbery

A

when people are prepared to spend more on something because it has a certain brand name, rather than buy a cheaper alternative that will serve its purpose just as well but does not have the name.

43
Q

Competition and Markets Authority

A

a government department responsible for promoting competition for the benefit of consumers. It took over many of the responsibilities of the Office of Fair Trading (which closed in 2014).

44
Q

Consumer Contracts Regulations and the Consumer Rights Act

A

a set of rules and requirements for traders selling over the internet or otherwise at a distance (such as via the telephone) designed to protect consumers.

45
Q

Teleshopping

A

shopping from a company that promotes its products on a dedicated TV channel, and sells them over the phone or online.

46
Q

Value Added Tax

A

a government tax levied on sales of most goods and services.

47
Q

Value for money

A

getting the best goods for the money available.

48
Q

Benefits in kind

A

certain benefits, given to an employee by an employer, which are treated as income.

49
Q

HMRC

A

Her Majesty’s Revenue & Customs.

50
Q

Income tax

A

a form of tax on all income received by an individual. It helps to fund general government spending, and is charged at the rates of 20%, 40% or 45% of income above a certain amount, known as the personal allowance.

51
Q

National Insurance (NI)

A

a form of tax on earned income paid by employees, employers and self-employed people. The money raised pays for the National Health Service, the state pension and a number of other state benefits.

52
Q

Net income

A

what we have left after income tax and NI have been deducted; what we have available to spend.

53
Q

P45

A

the form that employees receive when they change jobs. It states how much they earned and how much tax they paid in their last job.

54
Q

P60

A

the form all employees receive at the end of the tax year, telling them how much they were paid and how much tax was deducted.

55
Q

PAYE

A

Pay As You Earn is the way that income tax is collected from employees. Their employer deducts tax each time they are paid, which means they don’t have a big tax bill to pay at the end of the tax year.

56
Q

Personal allowance

A

every individual is allowed to receive a certain amount of income before they have to pay tax. There is a standard allowance that applies to most people, but some people have a different personal allowance because of their circumstances.

57
Q

Bacs

A

a payment clearing scheme that allows electronic payments to be made between bank accounts.

58
Q

Channel

A

A way of accessing a bank’s services

59
Q

CHAPS

A

the electronic Clearing House Automated Payment System, which is used for very high-value payments and payments between large companies.

60
Q

Cheque

A

a written order by the account holder to pay someone else.

61
Q

Chip and PIN

A

the UK smart-card payment system for debit and credit cards, which uses a computer chip within the card itself, and a personal identification number (PIN) chosen by the customer.

62
Q

Clearing

A

the process by which a cheque or card payment goes through the banking system

63
Q

Contactless payments

A

where payment is made just by touching a card on a card reader in a shop, although sometimes the buyer may also be asked to enter their PIN for security.

64
Q

Consumer spending

A

spending by ordinary people.

65
Q

Infrastructure

A

the important physical systems of a nation – for example, transport, communication, water and sewage, and power.

66
Q

Non-essential spending

A

spending on items that we want, but which are not essential to surviving. Examples would include holidays and luxury items such as an iPad.

67
Q

Unexpected spending

A

when a need to spend arises that was not expected; not emergencies, but times when there is a need to buy or pay for something that wasn’t planned for in advance.

68
Q

Bank rate (or base rate)

A

the interest rate set by the Monetary Policy Committee( MPC)for the Bank of England to lend to UK banks.

69
Q

Central bank

A

the institution responsible for managing a country’s currency, interest rates and the supply of money in circulation.

70
Q

Consumer Prices Index (CPI)

A

the official government measure of UK inflation.

71
Q

Deflation

A

where prices fall over time.

72
Q

Inflation

A

general increases in the price of goods and services over time.

73
Q

Monetary Policy Committee (MPC)

A

part of the Bank of England that is responsible for controlling UK inflation and setting interest rates.

74
Q

Variable rate (to do with interest)

A

the interest rate changes each time the provider changes it

75
Q

Assets

A

personal possessions and investments that have a value if sold.

76
Q

Bankruptcy order

A

a court order to recover debts from an insolvent person, under the supervision of a trustee in bankruptcy.

77
Q

Consumer borrowing

A

borrowing by members of the public rather than the government.

78
Q

County court judgment (CCJ)

A

a court order for the repayment of a debt.

79
Q

Credit reference agencies

A

companies that collect data on the conduct of people’s financial accounts.

80
Q

Debt consolidation

A

rolling up existing debts into one new loan.

81
Q

Debt relief order

A

an arrangement for someone with debts not exceeding £20,000, limited assets and little disposable income to write off the debts after 12 months.

82
Q

Individual voluntary arrangement (IVA)

A

an agreement between a debtor and their creditors to pay some of the debts over a set term, usually five years.

83
Q

Insolvency

A

when an individual’s debts exceed their assets and they cannot meet the loan repayments on the debt; they are said to be ‘insolvent’.

84
Q

Payment default

A

when the borrower fails to make payments on a credit agreement.

85
Q

Recession

A

a period of at least six months when the amount of goods and services that a country is producing is shrinking. This has wide-scale negative effects on the economy.

Finance (4 decks)

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