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Chapter 2

FIN 2050 Chapter Notes - Chapter 2: Safe Deposit Box, Financial Institution, Money ManagementPremium

2 pages87 viewsFall 2016

Course Code
FIN 2050
Shon Anderson

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Chapter 2
Key Terms
Assets- cash and other property with a monetary value
Balance Sheet- also known as a net worth statement is a statement of what you own and what you owe
(assets and liabilities)
Budget- a specific plan for spending income (also known as spending plan)
Budget Variance- the difference between the amount budgeted and the actual amount you end up
receiving or spending
Cash Flow- the actual inflow and outflow of cash during a given time period
Cash flow statement- also known as personal income and expenditure statement is a summary of cash
receipts and payments for a given period of time such as a month or even a year
Current liabilities- debts that must be paid within a short time, usually less than a year
Deficit- the amount by which actual spending exceeds planned spending
Discretionary income- money left over after paying for housing, food and other necessities
Income- inflows of cash to an individual or a household
Insolvency- the inability to pay debts when they are due because liabilities far exceed the value of assets
Liabilities- amounts owed to others
Liquid assets- cash and items of value that can easily be converted to cash
Long term liabilities- debts that are not required to be paid in full until more than a year from now
Money management- day to day financial activities that are need to manage current personal economic
resources while working toward long term financial security.
Net worth- the difference between total assets and total liabilities
Safe deposit box- a private storage area at a financial institution with maximum security for valuables
Surplus- the amount by which actual spending is less than planned spending
Take home pay- earnings after deductions for taxes and other items; also called disposable income
Know how to find these:
Debt Ratio – liabilities divided by net worth
Current Ratio- liquid assets divided by current liabilities
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