Business Exam Gizmo Notes

Vocabulary flashcards defining fundamental concepts in investments, debt, interest rates, and budgeting from the Business Exam Gizmo Notes.

Investment

Using money to buy an asset or financial product with the aim of earning a return or increasing wealth.

Income (Investment)

Money received from an investment, often regularly (e.g. rent, dividends, interest).

Capital growth

An increase in an investment's value over time (e.g. property bought for $400,000$ later valued at $500,000$).

Savings account

Money kept in a bank account that earns interest; low risk and accessible, but interest may be low and inflation can reduce purchasing power.

Shares

A small ownership portion of a company that offers potential dividends and capital growth, but prices can fall and returns are not guaranteed.

Term deposit

Money deposited with a bank for a set period at an agreed rate; predictable return and lower risk than shares, but money is less accessible.

Managed fund

Money pooled from investors and managed professionally; provides diversification, but charges fees and returns are not guaranteed.

Property (Investment)

Buying land or a building as an investment; offers potential capital growth and rental income, but has high purchase and upkeep costs and takes time to sell.

Investment risk profile

A person's willingness and ability to take investment risks.

Conservative risk profile

An investment profile where the investor prefers lower risk and more stable returns (e.g. savings, term deposits).

Balanced risk profile

An investment profile where the investor accepts some risk for a mix of income and growth (e.g. diversified managed funds).

Growth risk profile

An investment profile where the investor accepts higher risk for more potential growth (e.g. shares, property).

High growth/aggressive risk profile

An investment profile where the investor is willing to accept significant risk for potentially higher returns.

Debt

Money borrowed from a person, bank or financial institution that must be repaid, usually with interest.

Car loan

Money borrowed to buy a vehicle, repaid over time with interest.

Home loan (mortgage)

Money borrowed to buy property, usually repaid over many years with interest.

Personal loan

Money borrowed for personal costs or purchases.

Credit card

A way to borrow for purchases where the amount spent must be repaid, and interest may apply if not paid by the due date.

Good debt

Borrowing for something that may build wealth or improve future earning potential, such as a home loan or education loan.

Bad debt

Borrowing for unnecessary spending or purchases that lose value, especially at high interest (e.g. excessive credit-card debt).

Principal

The original amount borrowed.

Interest

The cost of borrowing.

Debt avalanche

A debt repayment strategy where you pay minimums on all debts, then extra toward the highest-interest debt first; often reduces total interest.

Debt snowball

A debt repayment strategy where you pay minimums on all debts, then extra toward the smallest balance first; can build motivation.

Variable interest rate

An interest rate that can change during the loan; repayments may fall if rates decrease, but rates can rise, making repayments higher and less predictable.

Fixed interest rate

An interest rate that stays the same for an agreed period; provides predictable repayments and protection from rate rises, but may miss out on rate cuts.

Budget

A financial plan showing expected income and expenses over a set period; helps control spending, save, pay bills, and avoid unnecessary debt.

Income (Budgeting)

Money coming in, such as wages/salary, allowance, government payments, interest, and investment income.

Expenses

Money going out, such as rent/mortgage, food, utilities, transport, phone, entertainment, and loan repayments.

Surplus

When income is greater than expenses; calculated as $\text{Surplus} = \text{income} - \text{expenses}$.

Deficit

When expenses are greater than income; calculated as $\text{Deficit} = \text{expenses} - \text{income}$.

Balanced budget

A budget condition where income equals expenses.