Unit 2 Topic 5

Question 1

Arrears

Answer 1

An unpaid overdue debt

Question 2

Audit

Answer 2

An evaluation of a person’s finances

Question 3

Balance

Answer 3

Income minus expenses

Question 4

Budget

Answer 4

A plan of expected incomings and outgoings over a set time period such as a month.

Question 5

What term is given to the government’s spending plan, which the Chancellor sets out in the House of Commons?

Answer 5

Budget

Question 6

Budget deficit

Answer 6

A situation in which outgoings exceed income

Question 7

Fill the gaps:
A cash flow analysis —> Putting a _______ budget together by looking at ____ _______ and ________ and calculating the ___ balance at the end of a specified time period.

Answer 7

Monthly
Cash inflows
Outflows
Net

Question 8

Cash flow forecast

Answer 8

A plan of expected incomings and outgoings over several time periods, such as the next three months or a year.

Question 9

What is this definition describing?
An independent organisation that maintains records of people’s credit history - that is, what they have applied to borrow, what they have actually borrowed and whether they have paid it back. The data is provided by lenders.

Answer 9

A credit reference agency

Question 10

Define : Credit report
Who are they held by?
When are they checked?

Answer 10

Details of money borrowed and repaid by an individual. These records are held by credit reference agencies and providers will check them when a prospective customer applies for a borrowing product.

Question 11

Creditworthiness

Answer 11

The extent to which an individual is seen as being likely to pay back any money they borrow

Question 12

Direct debit

Answer 12

An electronic payment out of an account

Question 13

Financial planning

Answer 13

Planning one’s expected incomings and outgoings over the short, medium or long term

Question 14

What term is this definition describing?
An individual’s ability to react to unexpected events. A financial plan should take such events into account, allowing a person to make changes to the plan when necessary.

Answer 14

Flexibility

Question 15

Liabilities
Give an example?

Answer 15

Current financial obligations, eg an overdraft or an outstanding credit card balance.

Question 16

Net worth

Answer 16

The sum of a person’s assets minus all debts and obligations.

Question 17

What is the difference between an authorised overdraft and an unauthorised overdraft?

Answer 17

An authorised overdraft is agreed with the bank in advance within certain limits.
Exceeding those limits or going overdrawn without permission is an unauthorised overdraft, and attempted withdrawals may not be honoured

Question 18

Self-employment

Answer 18

Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and being paid a wage or salary

Question 19

Define : Standing order
What are they used for?

Answer 19

An electronic payment out of an account. Standings orders are used to make regular payments of the same amount

Question 20

Name 3 features of a budget

Answer 20

Flexibility
Documentation
Realism

Question 21

Name 3 examples of planned events

Answer 21

Marriage
Retirement
A new job

Question 22

Name 4 factors that influence planned events

Answer 22

A person’s family situation
A person’s financial situation
A person’s personality
A person’s attitude to risk

Question 23

Name 4 consequences of failing to carry out financial planning

Answer 23

Less likely to achieve wants an aspirations
No control over finances + unaware of expenditure
Damage to their finance footprint
Debt

Question 24

Name 5 features of effective financial planning

Answer 24

Realistic
Clear
Timely
Flexible
Documented