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BUSN380 Week 3 TCO 3 Chap 7 Notes - Advantages & Disadvantages of Credit

BUSN380 Week 3 TCO 3 Chap 7 Notes - Advantages & Disadvantages of Credit

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BUSN380 Week 3 Notes ADVANTAGES of CREDIT The use of credit provides immediate access to goods & services, flexibility in money management, safety and convenience, a cushion in emergencies, a means of increasing resources, and a good credit rating if you pay your debts back in a timely manner. An intelligent decision as to its use demands careful evaluation of your current debt, your future income, the added cost, and the consequences of overspending. DISADVANTAGES of CREDIT Although credit allows more immediate satisfaction of needs and desires it does not increase total purchasing power. Credit purchases must be paid for out of future income so it ties up the use of future income. Furthermore if your income does not increase to cover rising costs, your ability to repay credit commitments will diminish. Before buying goods and services on credit, consider whether they will have lasting value, whether they will increase your personal satisfaction during present and future income periods,
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Unformatted text preview: and whether your current income will continue or increase. Paying for purchases over a period of time is more costly than paying for them with cash, due to monthly finance charges and the compounding effects of interest. TCO 3: Given various methods and techniques of basic money management, the successful student will analyze various methods of managing credit decisions. Key concepts to know : -Explain the pitfalls of credit card debt. -Explain how a personal cash flow statement can assist in the determination of the ability to service personal borrowings. -Discuss the importance of identifying discretionary spending patterns. Skills to Master: -Calculating the Amount for a Home Equity Loan.-Calculating Debt-to-Equity.-Calculating the Net Worth.-Determing Whether or not to Use Credit.-Analyzing the Opportunity Cost of Using Credit. BUSN380 Week 3 Notes-Analyzing Credit-related Problems....
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