unit 5: personal/business finance

assets give example

item of value- car

accounts receivable/AR

someone owing you money

liability

debt

accounts payable/AP

you owing someone else money

creditors

the people you owe money to

equity

amount of money a person/business has

what is the balance sheet equation

assets=liabilities+ owners equity

A=L+OE

who are the four people who use the balance sheet

owners

creditors

investors

government

why are the assets(left side) listed in a certain order on the balance sheet

goes from easiest things to convert to cash to hardest

what does capital mean?

how much money you have

what was the name of the person with capital next to it on the balance sheet?

K. Dubhord

what is always listed first on the liabilities side of the balance sheet?

A/P

profit

how much money you get after taking out all the expenses

revenue

amount that business earns after a sale

expenses +example

what the business has to spend money on in order for the business to run- wages

what is the more formal word for profit?

net income

what is net loss

when expenses are more than profit

how are you supposed to represent net loss?

with a bracket around the number

what are the three things found on a balance sheet?

assets

liabilities

OE

what are the three things found on an income statement?

revenue

expenses

net profit/loss

budgeting

balancing your expenses w/ your income

what is the 50/30/20 rule

budgeting method to manage money effectively, simply, sustainably

what are the three categories of the 50/30/20 rule

50%-needs

30%- wants

20%- savings

stocks

individual shares of a company

what are the two ways to make money from stocks?

dividends-when business makes money

capital gains-buy low, sell high

who is the stock guru/billionaire?

Warren Buffet

what are bonds?

IOU-loan money to banks

what gets money first if a company goes bankrupt- stocks or bonds?

bonds

which type of bond has the highest rating?

AAA

what are the riskiest bonds to buy?

BB/junk bonds

what is the best bond to buy, what is the minimum amount you can invest, and when can you buy it?

Canada Saving Bond

min. $100

can only be bought between Oct.-Dec

what are mutual funds?

basket of all types of funds

what are GICs, what is the minimum amount you can invest

Guaranteed Investment Certificates

lending your money

min. $500

true or false: the interest rate is higher on a GIC

true

what is compound interest?

making money off of money you’ve invested already

what do you need for compound interest to work? (2)

reinvestment earnings

time

who said that compound interest is the greatest mathematical discovery of all time?

albert einstein

what is the rule of 72+ the calculation?

the number of years it takes for money to double

72 years divided by interest rate

what is the number one bank in Canada?

RBC

what is the fed?

the central bank of the US

what does the IMF do?

helps all the countries with temporary problems

what does the world bank do?

help poor countries w/infratructure