Financial Lifecycle, Institutions, and Business Documents: Key Concepts for Economics and Finance

What is the personal financial lifecycle?

The stages of a person's life that influence income, expenses, savings, and financial decisions.

What are the typical stages in the financial lifecycle?

Education → Early career → Family formation → Peak earning → Retirement.

What is the main financial focus during early career?

Low income, high expenses, minimal savings, possible debt.

What are the financial characteristics of the peak earning stage?

High income, higher savings, investments, insurance, retirement planning.

What is the key financial challenge during retirement?

Reduced income, reliance on savings/pensions, managing longevity risk.

What is the common mistake students make regarding financial lifecycle stages?

Describing stages without linking them to financial decisions.

What are financial institutions?

Organisations that provide financial services like saving, lending, investing, and insurance.

What are examples of financial institutions?

Commercial banks, central banks, insurance companies, investment firms.

What is the role of commercial banks?

Accept deposits, provide loans, facilitate payments.

What is the role of central banks?

Control money supply, set interest rates, regulate banks.

What is financial intermediation?

Channeling funds from savers to borrowers.

Why are financial institutions important to the economy?

They promote investment, growth, and financial stability.

What risk do insurance companies manage?

Financial risk through risk pooling.

What is a common exam warning regarding financial institutions?

Don't confuse institutions with financial markets.

What are business documents?

Formal records used in business transactions.

What are examples of business documents?

Invoice, receipt, purchase order, delivery note.

What is the purpose of an invoice?

Requests payment and records sale details.

What is the purpose of a receipt?

Proof of payment.

Why are business documents important?

Legal evidence, accounting accuracy, transparency.

What is a common exam mistake regarding business documents?

Mixing up invoice vs receipt timing.

What are economic indicators?

Statistics used to assess economic performance.

What are key examples of economic indicators?

GDP, inflation rate, unemployment rate.

What does GDP measure?

Total value of goods and services produced.

What is inflation?

Sustained increase in general price level.

What does the unemployment rate indicate?

Percentage of labor force without jobs.

What is the difference between leading and lagging indicators?

Leading predict trends; lagging confirm trends.

Why are economic indicators important to governments?

Policy formulation and economic planning.

What is a common exam pitfall regarding economic indicators?

Explaining indicators without stating implications.

Who are consumers?

Individuals who purchase goods and services for personal use.

What factors influence consumer behavior?

Income, price, preferences, advertising.

What is consumer sovereignty?

Consumers' ability to influence what is produced.

Why are consumers important to businesses?

They generate revenue and determine demand.

What is an example of consumer rights?

Right to safety, information, choice.

What is a common exam trap regarding consumers?

Confusing consumers with customers in B2B contexts.

What is market research?

Gathering and analyzing data about consumers and markets.

What is primary research?

First-hand data (surveys, interviews).

What is secondary research?

Existing data (reports, statistics).

What is the difference between quantitative and qualitative data?

Numerical vs descriptive.

Why do businesses conduct market research?

Reduce risk, understand demand, improve decisions.

What is a limitation of market research?

Cost, bias, outdated data.

Why is the sampling method important?

It affects accuracy and reliability.

What is a common exam killer point regarding market research?

Always link research results to business decisions.

What is cash flow?

Movement of cash in and out of a business.

What are examples of cash inflows?

Sales revenue, loans.

What are examples of cash outflows?

Wages, rent, utilities.

Why is cash flow important?

Businesses fail due to lack of cash, not lack of profit.

What is the difference between positive and negative cash flow?

Inflows > outflows vs outflows > inflows.

What is a cash flow forecast?

Estimate of future cash movements.

What is a common exam mistake regarding cash flow?

Confusing cash flow with profit.

What is an income statement?

Shows business profit or loss over a period.

What are the key components of an income statement?

Revenue, expenses, net profit.

What is the formula for net profit?

Revenue − Expenses.

What is gross profit?

Revenue − Cost of sales.

What are examples of operating expenses?

Rent, wages, utilities.

What is the purpose of income statements?

Assess profitability and performance.

What is a limitation of income statements?

Doesn't show cash position.

What is a common exam red flag regarding income statements?

Forgetting time period.

What is globalisation?

Increasing interconnection of economies.

What are the drivers of globalisation?

Technology, trade liberalisation, transport.

What are the benefits of globalisation to businesses?

Larger markets, lower costs.

What are the benefits of globalisation to consumers?

More choice, lower prices.

What are the disadvantages of globalisation?

Job losses, inequality, cultural erosion.

What is the role of MNCs?

Spread production across countries.

What is a common exam tip regarding globalisation?

Always balance pros and cons.

What is demand?

Quantity consumers are willing and able to buy.

What is the law of demand?

Price ↑, quantity demanded ↓.

What is supply?

Quantity producers are willing and able to sell.

What is the law of supply?

Price ↑, quantity supplied ↑.

What is market equilibrium?

Where demand equals supply.

What are causes of demand shift?

Income, tastes, substitutes.

What are causes of supply shift?

Costs, technology, taxes.

What is the difference between shortage and surplus?

Price below equilibrium vs above.

What is a common exam death sentence regarding demand and supply?

No diagram explanation.

What is the difference between work and employment?

Employment is paid work under a contract.

What is voluntary work?

Unpaid work for social benefit.

What are types of employment?

Full-time, part-time, self-employed.

What are the benefits of employment?

Income, stability, skills.

What are the benefits of volunteering?

Experience, social contribution.

Why does financial planning matter across the lifecycle?

To match income, expenses, savings, and risk at each stage.