Finance Test 1 Notes

Finance Test 1 Notes - Test 1 Study Sheet Financial...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Test 1 Study Sheet Financial Planning Step 1: Evaluate your Financial Health Step 2: Define Your Financial Goals Step 3: Develop a Plan of Action Step 4: Implement Your Plan Step 5: Review your progress, reevaluate, and revise your plan Financial Principles Principle 1: The Best Protection is Knowledge Principle 2: Nothing happens without a Plan Principle 3: The Time Value of Money Principle 4: Taxes Affect Personal Finance Decisions Principle 5: Stuff Happens, or the Importance of Liquidity Principle 6: Waste Not, Want Not – Smart Spending matters Principle 7: Protect Yourself against Major Catastrophes Principle 8: Risk and Return Go Hand in Hand Principle 9: Mind Games and Your Money Principle 10: Just Do It! Monetary Assets Basically a liquid asset—one that is either cash or can easily be turned into cash with little or no loss in value. Examples: cash you hold, checking and savings account balances, and money market funds. Financial Assets Non-physical assets, for example bank accounts, shares. Valuation of Assets and Liabilities When you estimate the value of all your assets, list them using their fair market value, not what they cost or what they will be worth a year from now. In listing your liabilities, be sure to include only the unpaid balances on those liabilities. Utility The total satisfaction received from consuming a good or service Inflation An economic condition in which rising prices reduce the purchasing power of money. Financial Goals There are three time horizons 1- short term, 2- intermediate term, 3- long term. Short term goals such as buying a television or taking a vacation, which can be accomplished within a 1-year period. An intermediate-term goal may take from 1 year to 10 years to accomplish. A long-term goal is one for which it takes more than 10 years to accumulate the money.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Personal Income Statement A statement that tells you where your money has come from and where it has gone over some period of time. Income Where your money comes from; include such items as wages, salary, bonuses, tips, royalties, and commission, retirement income, investment income, etc. Fixed and Variable Expenditures Fixed Expenditures are expenditures over which you have no control. You are obligated to make this expenditure, and it is generally at a constant level each month. Variable Expenditures are expenditures over which you have control. That is, you not obligated to make that expenditure, and it may vary from month to month. Deficit When liabilities exceed assets or expenditures exceed income Surplus When assets exceed liabilities or income exceeds expenditures Balance Sheet A balance sheet tells you how much wealth you have accumulated as of a certain date. Assets
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/15/2012 for the course FINA 369 taught by Professor Ms.scull during the Fall '11 term at South Carolina.

Page1 / 9

Finance Test 1 Notes - Test 1 Study Sheet Financial...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online