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Finance > Unit 2 > Flashcards

Unit 2 Flashcards

(85 cards)

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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
Self-employment
people working for themselves and being able to pick what work to do and when
26
Standing order
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.
27
Unearned income
income from savings, investments, etc, that is not received for doing work.
28
Bad debts
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.
29
Capital
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.
30
Consumer debt
the amount of debt built up by members of the public rather than the government.
31
Credit rating
an assessment of the risk that the borrower poses for the lender.
32
Deposit
a sum of money placed by a customer with a bank.
33
Good debts
debts that are used to buy something that will increase in value or result in something positive happening.
34
Endowment policy
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.
35
Equity
the difference between the value of a property and the mortgage on it.
36
Capacity for loss
the amount of money that a person could afford to lose (or needs to risk) when trying to achieve their objectives.
37
Corporate bonds
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
Risk tolerance
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
Shares
the name derives from the fact that the shareholder actually owns a share in the company.
40
Stock market
a system that regulates the way shares are issued, valued and sold, and through which shares are traded.
41
Volatility
a measure of the extent to which a value goes up or down over a period of time. High volatility means higher risk.
42
Brand snobbery
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
Competition and Markets Authority
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
Consumer Contracts Regulations and the Consumer Rights Act
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
Teleshopping
shopping from a company that promotes its products on a dedicated TV channel, and sells them over the phone or online.
46
Value Added Tax
a government tax levied on sales of most goods and services.
47
Value for money
getting the best goods for the money available.
48
Benefits in kind
certain benefits, given to an employee by an employer, which are treated as income.
49
HMRC
Her Majesty’s Revenue & Customs.
50
Income tax
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
National Insurance (NI)
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
Net income
what we have left after income tax and NI have been deducted; what we have available to spend.
53
P45
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
P60
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
PAYE
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
Personal allowance
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
Bacs
a payment clearing scheme that allows electronic payments to be made between bank accounts.
58
Channel
A way of accessing a bank's services
59
CHAPS
the electronic Clearing House Automated Payment System, which is used for very high-value payments and payments between large companies.
60
Cheque
a written order by the account holder to pay someone else.
61
Chip and PIN
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
Clearing
the process by which a cheque or card payment goes through the banking system
63
Contactless payments
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
Consumer spending
spending by ordinary people.
65
Infrastructure
the important physical systems of a nation – for example, transport, communication, water and sewage, and power.
66
Non-essential spending
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
Unexpected spending
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
Bank rate (or base rate)
the interest rate set by the Monetary Policy Committee( MPC)for the Bank of England to lend to UK banks.
69
Central bank
the institution responsible for managing a country’s currency, interest rates and the supply of money in circulation.
70
Consumer Prices Index (CPI)
the official government measure of UK inflation.
71
Deflation
where prices fall over time.
72
Inflation
general increases in the price of goods and services over time.
73
Monetary Policy Committee (MPC)
part of the Bank of England that is responsible for controlling UK inflation and setting interest rates.
74
Variable rate (to do with interest)
the interest rate changes each time the provider changes it
75
Assets
personal possessions and investments that have a value if sold.
76
Bankruptcy order
a court order to recover debts from an insolvent person, under the supervision of a trustee in bankruptcy.
77
Consumer borrowing
borrowing by members of the public rather than the government.
78
County court judgment (CCJ)
a court order for the repayment of a debt.
79
Credit reference agencies
companies that collect data on the conduct of people’s financial accounts.
80
Debt consolidation
rolling up existing debts into one new loan.
81
Debt relief order
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
Individual voluntary arrangement (IVA)
an agreement between a debtor and their creditors to pay some of the debts over a set term, usually five years.
83
Insolvency
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
Payment default
when the borrower fails to make payments on a credit agreement.
85
Recession
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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