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Finance > Basic Rules > Flashcards

Basic Rules Flashcards

1
Q

Disposable Income

A

Personal Income - Taxes

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2
Q

Discretionary Income

A

= Disposable Income - Financial Obligations

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3
Q

Examples of Financial Obligations

A

Insurance, Rent/Mortgage, Car payments, Retirement Savings, Child’s education… etc

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4
Q

Features & Examples of Macro Environment

A
  • Beyond control of Any Company
  • government policy (fiscal policy, regulatory policy)
  • competition, technology, weather, religion, economy, culture, political situation, war
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5
Q

Micro Environment

A
  • company has total or some control
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6
Q

4 P’s of Marketing

A
  • Product - name, color, message
  • Price - the strategy (skimming pricing, ex iPhone vs penetrating pricing)
  • Place - mass distribution vs select stores
  • Promotion - advertising, publicity, sponsorship
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7
Q

Circular Flow

A

Continuous flow of money within a society

One purchase/payment (transaction) leads to another transation

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8
Q

Total National Debt

A

$30 trillion

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9
Q

Population of Labor Force

A

158 million

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10
Q

US’s Debt/GDP ratio

A

130%

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11
Q

Current unemployment rate

A

3.6%

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12
Q

Types of Accounting

A
  • Managerial Accounting
  • Financial Accounting
  • Intermediate Accounting
  • Auditing
  • Taxation (I & II)
  • International Accounting
  • Advanced Accounting
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13
Q

Properties of Financial Accounting

A

MACRO LEVEL
provides high level financial information to:
- insiders (top management, employees, shareholders)
- outsiders (IRS, SEC, competitors, potential investors)

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14
Q

Properties of Managerial Accounting

A

MICRO LEVEL

- manufacturing costs

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15
Q

Types of Manufacturing costs (3 categories)

A
  • Materials
  • Labor
  • Manufacturing Overhead
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16
Q

Manufacturing Cost - Materials breakdown into…

A

Direct & Indirect Materials

Though IM is mainly MOH

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17
Q

Labor Costs - breakdown into…

A

Direct and Indirect Labor

Though IL is mainly MOH

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18
Q

Manufacturing Overhead (MOH) examples

A
  • Indirect Material
  • Indirect Labor
  • Factory Rent
  • Factory Insurance
  • Factory Depreciation
  • Factory Supplies
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19
Q

Indirect Labor (Examples)

A
  • supervision
  • overtime
  • idle time
  • legal advising
  • QC staff
  • administrative
  • materials handling
  • procurement
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20
Q

Indirect materials - definition

A

Goods that are part of the overall manufacturing process, but are not integrated into the final product. They cannot be linked to a specific product or job.

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21
Q

Example - Indirect Materials

A
  • PPE
  • cleaning supplies
  • disposable tools
  • fittings and fasteners
  • adhesives
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22
Q

Example Direct Labor

A
  • technicians on production line
  • welders, painters, machinists

Note: they get factored into the direct cost of production of the product

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23
Q

GAAP

A

Generally Accepted Accounting Principles

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24
Q

Is GAAP limited to the US or international?

A

International (though not all countries)

25
Q

Cycle of Money

A

Movement of money from lender to borrower and back again

[loans are investments from the perspective of the lender who is buying a future cash flow from the borrower who is selling the future cash flow.]

26
Q

3 Legal forms of Business

A
  • Sole Proprietorship
  • Partnership (General or Limited)
  • Corporations
27
Q

Pros of Sole Proprietorship

A
  • don’t need permission to take action
  • easy to set up, do not need a charter
  • pay taxes on individual rate, so no double taxation like a corporation
28
Q

Cons of Sole Proprietorship

A
  • unlimited liability
  • if owner dies, the business dies
  • owner has difficulty to expand the business > limited opportunities to raise capital due to limited collateral
29
Q

Properties of General Partnership

A
  • jointly owned by 2+ individuals, spelled out the % each owns
  • partners have unlimited liability - both financially and legally
  • partners can take strategic decision
  • all partners pay taxes on an individual basis (part of personal income tax)
30
Q

Difference between Limited and General Partners

A

in limited, their liabilities are limited to the amount of money they invested in the partnership

31
Q

Properties of Corporations

A
  • legal entity separate from the owners (shareholders)
  • separates owners and the managers
  • advantageous to owners because shareholders have limited liability
32
Q

3 Values of common stock

A
  • Par Value
  • Market Value
  • Book Value
33
Q

Definition: Par Value of Common Stock

A

A value which is written on the stock/share

Very low value (few cents, may be a few $ in certain industries)

34
Q

Definition: Market Value of common stock

A

Value of the stock which is being traded in stock exchanges

35
Q

Definition: Book Value of Common Stock

A

Value of the company stock from an accounting point of view

36
Q

Book Value of a Stock =

A

= (Total Stockholder’s Value - anything that belongs to preferred stock)/Total # of outstanding shares

37
Q

Definition Call Premium

A

= Callable Price - Par Value

38
Q

Default Value of Par Value of Preferred Stock

A

$100

39
Q

Value of FICA Tax (Social Security Portion)

A

6.2%

40
Q

Value of FICA Tax (Medicare portion)

A

1.45%

41
Q

Finance relies on strong

A

Accounting

42
Q

4 filing statuses on the W_4 form

A

Single
Married filing jointly
Married filing separately
Head of household

43
Q

The US has what time of income tax rate

A

Graduated

44
Q

You will pay zero federal income tax withholding if

A

you are in the zero tax bracket

45
Q

$12550, single is the limit for which tax bracket

A

zero income bracket

46
Q

STIW means

A

State income tax withholding

47
Q

what is the state income tax of Massachusetts

A

5.05%

48
Q

FICA stands for

A

Federal Insurance Contributions Act

49
Q

SSA was established in ____ by ___

A

1936, FDR

50
Q

The banking industry is charging consumers $____ per year in service charges and fees

A

$15 billion

51
Q

What percentage of Americans do not have anything saved for retirement

A

48%

52
Q

How many Americans are living below the poverty line

A

35 million

53
Q

what is the federal poverty line

A

$24k/year

54
Q

Marty Walsh was appointed

A

US Secretary of Labor

55
Q

Grounding of 737 Max airplane is an example of

A

Macro environment - government policy intervenes in company’s decision

56
Q

Weather impact is an example of

A

Macro environment

57
Q

Things to control in a product

A

Name (chevy Nova)
Color
Message

58
Q

Skimming Pricing is

A

Setting initial price very high, and then reduce it

Ex. iPhone

59
Q

Penetrating pricing is…

A

Setting initial price very low, then after you capture the market you increase the price
Ex. Japanese cars in the USA

Finance (9 decks)

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