Finance, Tax, and Personal Finance Key Concepts Quizlet

What is marginal utility?

The additional satisfaction gained from consuming one more unit of a good or service.

What distinguishes compound interest from simple interest?

Compound interest is earned on both the principal and previously accumulated interest.

What does the marginal tax rate represent?

The tax rate applied to the last dollar earned.

What is a chronological résumé?

A résumé organized by work experience listed in reverse chronological order.

What does a cost-of-living adjustment compare?

The relative cost of living expenses between different geographic locations.

What is the primary purpose of worker's compensation?

To provide income and medical coverage for employees injured on the job.

What is the benefit of a flexible spending account (FSA)?

It allows employees to pay for specific expenses using pretax dollars.

What components are displayed on a balance sheet?

Assets, liabilities, and net worth.

When is a budget considered balanced?

When total income equals the sum of spending and savings.

What is the effect of tax credits compared to tax deductions?

Tax credits reduce tax liability directly, whereas deductions reduce taxable income.

How are long-term capital gains typically taxed?

At a lower rate than ordinary income.

What is the tax status of municipal bond interest?

It is generally excluded from federal income tax.

What does 'accelerating deductions' mean in tax planning?

Paying deductible expenses earlier in the year to realize tax benefits sooner.

What is the purpose of filing Form 1040X?

To amend a previously filed tax return.

What are the three core focuses of monetary asset management?

Liquidity, safety, and yield.

What is the primary advantage of a money market account?

It offers higher interest rates than standard savings while maintaining liquidity.

How do stored-value cards function?

They act as small, prepaid accounts.

What is a finance charge?

The total dollar cost of borrowing money.

What is the role of credit bureaus?

To collect, maintain, and report credit information on consumers.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 involves the liquidation of assets, while Chapter 13 involves a court-approved repayment plan.

What is the typical liability limit for unauthorized credit card charges?

$50.

What is the difference between a secured and an unsecured loan?

A secured loan requires collateral, whereas an unsecured loan does not.

What does an acceleration clause allow a lender to do?

Demand full repayment of the loan immediately if a default occurs.

What is 'residual value' in the context of a lease?

The expected value of the asset at the end of the lease term.

What is a dealer holdback?

A portion of the dealer's profit that is returned by the manufacturer after a sale.

What is an express warranty?

A written guarantee provided by the manufacturer.

What is the standard down payment required for a mortgage to avoid PMI?

20%.

What is the difference between front-end and back-end ratios in mortgage lending?

The front-end ratio evaluates housing costs relative to income, while the back-end ratio evaluates total debt relative to income.