Financial Literacy

Question 1

What is Financial Literacy?

Answer 1

The ability to understand the and effectively use various financial skills, including personal financial management, budgeting, and investing.

Question 2

What are Economics?

Answer 2

The study of human and group activities related to work and the use of resources to achieve satisfaction.

Question 3

What is Scarcity?

Answer 3

Scarcity refers to limitations - insufficient resources, goods, or abilities to achieve the desired outcomes.

Question 4

What is a market?

Answer 4

A place or situation where buyers and sellers interact for purposes of trade or exchange.

Question 5

What is a price?

Answer 5

The sum of money paid for goods and services in a market.

Question 6

What is a want?

Answer 6

A want is something we desire.

Question 7

What is a need?

Answer 7

A need is something we require.

Question 8

What is supply?

Answer 8

The quantity of goods or services offered for sale in a market.

Question 9

Demand

Answer 9

The quantity of goods and services that will be purchased in a market.

Question 10

Supply and Demand Curve

Answer 10

See image

Question 11

Accounting

Answer 11

Accounting is the process of identifying, measuring, interpreting and communicating financial and other information to interested parties.

Question 12

Assets

Answer 12

A resource with economic value that an individual, company or country owns or controls with the expectation that it will provide a future benefit.

Question 13

Liabilities

Answer 13

Liabilities are items or amounts that a business owes.

Question 14

Income

Answer 14

Money received, especially on a regular basis, for work or through investments.

Question 15

A salary

Answer 15

A salary is based on one year’s work and is usually paid in equal weekly, fortnightly or monthly payments.

Question 16

The accounting process

Answer 16

1. A transaction occurs
2. Source documents are produced.
3. Journals are written.

Question 17

Wage

Answer 17

A wage is usually a weekly or fortnightly payment based on the number of hours of work completed.

Question 18

Commission

Answer 18

A commission is earned when employees are paid a percentage of the value of goods that they sell.

Question 19

Expenses

Answer 19

Generally, expenses are the costs incurred in or required for something.
In a business, expenses refers to the money spent and the costs incurred in pursuing revenue.

Question 20

Fixed Expenses

Answer 20

Those that are the same for each period.

Question 21

Variable Expenses

Answer 21

Vary across the course of the budget.

Question 22

Liquidity

Answer 22

The degree to which an asset can be quickly bought or sold in the market without a significant change in price.

Question 23

Rate of Return

Answer 23

The annual income from an investment expressed as

Question 24

Risk and Return

Answer 24

The higher the risk, the greater the return. The lower the risk, the lower the return.

Question 24

Capital Growth

Answer 24

Profit made on an investment or purchase of an asset, measured by the increase in its value over the cost price.

Question 25

Shares

Answer 25

A share (or a stock) represents part ownership in a business.

Question 26

Diversification

Answer 26

An investment strategy that lowers a portfolio's risk to help achieve more stable returns. It involves investing across different asset classes and then further diversifying by buying different assets across the asset class.

Question 27

Term deposits

Answer 27

A term deposit is a cash investment held at a financial institution. Money is invested for an agreed rate of interest over a fixed amount of time, or term. They facilitate greater capital security and a set return. The money can only be withdrawn at the end of the period – or earlier with a penalty attached.

Question 28

Cryptocurrency

Answer 28

Crypto-assets (crypto) also known as cryptocurrencies, coins or tokens are digital assets that do not have a physical form. They may not be backed by physical assets.

Question 29

Indebtedness

Answer 29

Indebtedness refers to the state of being indebted to another party for an amount of money borrowed.

Question 30

Good debt

Answer 30

When money is borrowed to purchase an item that will increase in value (appreciating asset). Helps generate income and increase net worth. Often there are tax incentives for good debt investments.

Question 31

Bad Debt

Answer 31

When money is borrowed to purchase items that decrease in value over time (depreciating assets). Limits what can be done with money as interest payments and fees drain away savings.

Question 32

Personal Loans

Answer 32

A personal loan is a smaller loan than a mortgage, and is usually used to finance a car or make home renovations.

Question 33

Sources of Personal Loans

Answer 33

Banks Credit Unions Financiers

Question 34

Insurance

Answer 34

Insurance is a risk-transfer, loss-spreading arrangement. Its purpose is to distribute risk through providing a mechanism by which individuals and organisations purchase, by way of a premium, insurance products to mitigate that risk. Risk is then transferred to the insurer which indemnifies them against future events that may cause loss.

Question 35

Budget

Answer 35

A budget is a planning device to help a person or business achieve their financial goals.

Question 36

Surplus and Deficit

Answer 36

SURPLUS If a consumer’s income is greater than their expenses, money can be saved and invested or they can spend more. DEFICIT If expenses are greater than income a consumer is overcommitted and needs to either earn more or spend less.

Question 37

Who Pays Tax?

Answer 37

INDIVIDUALS When they earn income (wages, commission etc.), they pay income tax. BUSINESSES Businesses pay tax on profits (sole traders – within the owner’s tax return; companies – 30% flat rate as they are an individual legal entity).

Question 38

Tax File Numbers

Answer 38

Your tax file number (TFN) is your personal reference number in the tax and super systems.

Question 39

Tax Return

Answer 39

A form provided by the Australian Taxation Office on which a taxpayer reports taxable income with permitted deductions and exemptions, and computes their tax liability. They cover the financial year from 1 July to 30 June.

Question 40

Tax Deductions

Answer 40

Money which has been spent to earn income (which hasn't been reimbursed) can be claimed as a tax deduction if a record is held to prove it.