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vocab part 1 - 11 Opportunity cost trade off Sometimes it...

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1.) Cash inflow: anything that generates income ex salary 2.) Cash outflow: spending 3.) Net cash flow: inflow minus cash outflow 4.) Liabilities: something that costs you money, you can have an asset as well as liability ex. House but mortgage 5.)Assests: anything you own. Ex. Money that puts in your pocket, something that appreciates, dividends 6.) Net worth: assets minus liabilities( reoccurring bills) 7.) Savings ratio: savings during a period divided by your disposable income(income after all expenses) at that time 8.) Liquidity: turning into cash easily 9.) Debt to asset ratio: the total liabilities over your total assets. The higher your debt ratio the worst it is. You want a high liquid ratio 10.) Liquidity ratio: liquid assests divided by current liabilities/expenses
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Unformatted text preview: 11.) Opportunity cost: trade off. Sometimes it is not possible to estimate. Ex. New car vs an old car; the cost 12.) Present Value: Worth at the current time being. Ex. 6,000 dollars now. With interest in future it will be more. 13.) Future Value: what something is projected to cost whether it is an increase or a decrease 14.) Annuities: a payment by intervals that you pay each month/ year, generating some sort of interest and is compounding as well. Ex. A retirement, life insurance (paying the premiums and is invested) 15.) Present value of an Annuity Simple interest-rarely used Interest= Principal*Rate*time Note the term interest will mostly be used to describe compound interest...
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