EXAM 2 Flashcards
(125 cards)
1
Q
student loans, auto loans, mortgages, personal loans are examples of _
credit card debt is an example of _
A
pre-determined loans
not pre-determined loans
2
Q
allocating cost of tangible/physical asset over its useful life
A
depreciation
3
Q
money borrowed to purchase depreciating assets
A
bad debt
4
Q
US student loan debt is the _ highest consumer debt category, behind mortgage debt
A
2nd
5
Q
How do IRS tax brackets work?
A
you pay a baseline amount based on which tax bracket you fall into, and then a % on the amount over the minimum salary in that bracket
6
Q
when filing taxes with the IRS, you can file _ or _
A
married separately
married joint
7
Q
you don’t take home entire salary - (5) categories taken out for taxes:
A
federal and state social security medicare local deductions
8
Q
income without deductions, taxes, or other contributions
A
gross
9
Q
income after deductions, taxes, or other contributions
A
net
10
Q
emergency fund should be _ months worth of expenses
A
3-6, 2-3, $1000 (all stated in notes)
11
Q
credit score is used by lenders to determine risk when _ (3)
A
starting business
buying house
buying car
12
Q
US credit score -
Canada -
A
300-850
300-900
13
Q
ways to determine credit scores (5):
A
payment history credit utilization length of credit history types of credit in use new credit
14
Q
USA credit bureaus
A
transunion
equifax
experian
15
Q
higher your credit score = _ interest rate
A
lower
16
Q
3 areas other than loans that use credit score:
A
landlords, cell phone, utility companies
17
Q
assets can be used as collateral by a lender in a _ loan
A
secured
18
Q
an asset a borrower offers to a lender to secure a loan
A
collateral
19
Q
original sum of money borrowed in a loan
A
principal
20
Q
amount charged as a percentage of a principal
A
interest rate %
21
Q
the interest rate plus other costs (origination fees, charges, closing costs, discount points)
A
annual percentage rate (APR) %
22
Q
1st day after you miss a payment on your loan
A
delinquency
23
Q
if you are more than _ days delinquent on student loans, they will report to 3 national credit bureaus
A
90
24
Q
failure to pay interest on principal on a loan to the agreed terms
A
default
25
combining multiple loans into one loan, usually weighted average of your interest rates
consolidate
26
taking new loan to pay off existing loans and combining them into one, usually to seek better interest rates and repayment terms
refinance
27
agreement between student and lender to reduce/postpone repayment of a student loan for a designed period (INTEREST MAY OR MAY NOT ACCRUE)
deferment
28
```
agreement between student and lender to reduce/postpone repayment of a student loan for a
designated period (INTEREST STILL ACCRUES)
```
forbearance
29
no longer required to make payments on your loans due to your job (_) or circumstances such as disability (_)
forgiveness, cancellation
| discharge
30
your gross income minus deductions (adjustments) that are used to determine your taxable income
AGI - adjusted gross income
things you can take out pre-taxed:
-HSA, student loan interest, 401k contribution
31
AGI minus 1.5x poverty guidelines for your family size: _
| use?
- discretionary income and loans
| - lenders use it to show how much money you have to spend after your obligations
32
made eligible to undergrads with financial need, interest is paid while you're in school and 6 months after
direct subsidized loans
33
made eligible to undergrad, grad, and professional students - don't need to demonstrate financial need, school determines how much, INTEREST ACCRUES while in school
direct unsubsidized loans
34
made eligible to grad or professional degrees - can borrow up to cost of attendance
grad plus loan
35
loan for those with exceptional financial need
| -school is lender, not all participate
Perkins loan
36
loans that I have:
direct subsidized (5.05%), direct unsubsidized (5.05%), HPL (5%)
37
payments are a fixed amount that ensures your loans are paid ff within 10 years
standard repayment
38
payments are lower at first and increase, usually every 2 years, and are for an amount that will ensure your loans are paid off within 10 years
graduated repayment
39
payments may be fixed or graduated, and will ensure your loans are paid off within 25 years
extended repayment
40
reduce monthly payment amount to make debt more manageable
income-driven repayment plans
41
PAYE - pay as you earn:
_% of discretionary income
period of _ years
_ required
10
20
partial financial hardship
42
```
REPAYE - revised pay as you earn:
_% of discretionary
_years if all undergrad; _years if any are grad/professional
_ required
_ is eligible
```
10
20; 25
NO partial financial hardship required
any direct loan borrower
43
income-based retirement (IBR):
_% of discretionary income
repayment period _
10-15
| 20-25
44
income-contingent repayment (ICR):
lesser of _% discretionary income OR what you'd pay in fixed over _ years
repayment period: _
20; 12
| 25
45
forgives remaining balance of direct loans after 120 qualifying payments under qualifying plans while working for a qualifying employer
Public Service Loan Forgiveness
46
the amount of money insurance company charges to provide coverage
premium
47
amount of money the policyholder agrees to pay before insurance company covers a loss
deductible
48
person designated to receive proceeds of insurance policy
beneficiary
49
additional benefits of an insurance policy provided at an additional cost
rider
50
creditors will often require _ for a business loan
life insurance
51
partners may want _ to purchase share in event of death
life insurance
52
pays specific lump sum to loved ones, specified period of time
term life insurance
53
both death benefit and premium are fixed
level term (majority of policies)
54
coverage decreases over life of the policy at a predetermined rate
decreasing term
55
life insurance mostly used for personal asset protection (small business protection)
decreasing term
56
with decreasing term, premiums are usually _, and reductions usually occur _
constant; monthly or annually
57
one year term policy
-premiums start _
good for _
yearly renewable term
low and increase
young people
58
not worth anything at the end of the term if not used
term life points
59
coverage for whole life
permanent life (cash value insurance or whole life)
60
with permanent life, there are typically 2 parts:
savings/investment - can be used for medical expenses or child's college
insurance/death benefit
61
coverage throughout life and savings can grow at guaranteed rate (like savings account)
whole/ordinary life (most common permanent life policy)
62
permanent life that offers savings element in addition to death benefit, but offers different types of structures based on market performance
universal/adjustable life
63
combines death protection with a savings account that an be invested in stocks, bonds, and money market mutual funds
variable life
64
combines features of universal and variable life insurance
- risk/reward of variable
- adjust premiums and death benefit with universal
variable-universal life
65
1/_ of 20 year olds will be out of work for at least a year from a disabling condition before they reach retirement age
4
66
private disability insurance plans can expect to replace _% of income
50-70
67
disability where you are unable to perform the duties of any occupation
any occupation
68
disability where you can't do principal duties f your own occupation
own occupation
69
same requirements as own occupation, but the definition of disabled included people not working at the time of their disablement
modified own occupation
70
pays if the insured has loss of income due to illness or injury
loss of income disability
71
waiting period before you can receive benefits after suffering injury/illness
elimination period
72
short term vs long term coverage for disability insurance
3-6 months; longer, can be up to 65 or even life
73
HSA
put money in tax free
74
FSA
must utilize before end of the year or it is gone
75
SMART goals:
specific, measurable, achievable, results, time
76
100% of investment is guaranteed
principal guaranteed
77
large % of investment is put in cash, short-term money market securities, and government backed securities
principal secure (does not guarantee the principal or interest)
78
higher returns over medium to long term, market fluctuations can cause negative returns
growth, balanced and income funds
79
a share of ownership of a company
stocks
80
an interest-bearing security with a maturity date
bonds
81
variety of investments, not just one company
mutual funds
82
process of allocating funds between stocks, bonds, and cash equivalents so investment returns can be maxed for a given set of income sources, anticipated expenses and retirement goals
asset allocation
83
income paid out as interest or dividends, divided by current price of investment
yield
84
% measure of how much a capital asset gains or loses in value over time
capital gains or losses
85
how easy it is to turn asset into cash
liquidity
86
roth IRA:
| no age restriction for contribution; grows tax free, withdrawals are not taxed (unlike _ IRA)
traditional
87
person pension plan deducted from salary
401k
88
options for certain tax-exempt organizations
| -enters pretax, grows tax-deferred, taxed on withdrawal
403b
89
number of years it takes to double your investment
rule or 72
90
calendar year vs fiscal year
jan 1 - dec 31
| 12 consecutive months ending on the last day of any month except december
91
cash accounting:
receipts are recorded when _
expenses are recorded when _
received
| paid
92
for cash accounting:
| procedure done in December, paid by insurance in January
recorded for January
| record on accounts receivable for December
93
revenue and expenses are recorded when they are incurred
accrual accounting
94
you cannot use cash accounting if you _
maintain inventory, are a corporation, gross receipts >5 million
95
accrual accounting is beneficial for _
to see if you want to buy or sell practice, showing progress
96
cons of accrual accounting, you may pay taxes on _
money you don't receive if pts dont pay their bills
97
business tangible vs intangible assets
tangible - building furniture, equipment
| in-noncompete, goodwill
98
investment of capital, to acquire property/equipment that has useful life of more than 1 year or to make permanent improvements that increases value
capital expenditure
99
smaller purchases that don't have a useful life of more than a year
deductible expense
100
spreading cost of tangible asset over time of more than one year
depreciation
101
paying off debt of intangible (debt) asset with a fixed payment schedule
amortization
102
capital expenditures cannot be deducted all at once; must be done through _ or _
depreciation of amortization
103
assets =
liabilities (debts) + owners equity (net worth)
104
consumed or exchanged for cash within one year or less (cash, accounts receivable, inventory)
current assets
105
consumed or exchanged for cash not within one year (property, plant, equipment)
fixed assets
106
book vs market value?
book - what you paid
| market - what it is actually worth
107
expected to be paid in one year or less (accounts payable, salaries, loan payments)
current liabilites
108
not expected to be paid in one year (loans)
long-term liabilities
109
residual difference between assets and liabilties
owners equity
110
prepaid vs accrued expenses
prepaid - paid, but haven't used it yet (auto insurance)
| accrued - used, but haven't paid it yet (employee wages)
111
amount earned from providing services and goods
revenues
112
amount incurred to provide services and goods
expenses
113
difference between net sales and cost of goods sold
gross profit
114
net profit =
revenue - expenses
115
working capital =
current assets - current liabilities
116
current ratio:
business' liquidity or cash position:ability to satisfy short-term debt (2:1)
currents assets/current liabilities
117
quick ratio (acid test):
```
compares most liquid assets to current liabilities (1:1)
current assets (less inventories)/current liabilities
```
118
debt to owner's equity:
measures financial leverage (1:1)
| total liabilities/ owner's equity
119
inventory turnover ratio:
how many times inventory is sold/replaced in time period
| COGS/average inventory
120
gross profit margin (percentage):
source for paying additional expenses (70%)
| gross profit/revenue (sales)
121
income margin (percentage):
income as percentage of gross sales (at least 27%)
| net income/ sales
122
projections for the next year
pro forma
123
professional break even point, only considering services
chair cost
| professional overhead/practitioner hours
124
chair cost per patient
fixed costs/ # of complete exams = amount you need to make to break even
125
chair cost per hour
fixed cost / number of hours worked seeing patients
