AP®︎ Business with Personal Finance: Unit 3 Flashcards

Retaining part of current income instead of spending it, creating a personal asset for future purchases, emergencies, or living expenses

A resource of value owned or controlled by a business or consumer

The rate charged for the use of borrowed money

A plan that directs a predetermined amount of income to savings each pay period through payroll allocation or automatic transfer

A designated plan that may reduce or postpone taxes on eligible money saved for retirement

A designated account offering tax advantages to eligible individuals who save for qualified health-related expenses

The tendency to prefer an immediate reward over a larger or more valuable future benefit

The tendency for spending to rise as income rises, which can prevent increased income from producing greater savings

An unplanned purchase made with limited consideration of its effect on other financial priorities

Analysis of political, economic, social, technological, environmental, and legal forces in the external environment

An increase in the prices of goods and services that reduces the purchasing power of money

The quantity of goods and services that a given amount of money can buy

A for-profit financial institution that accepts deposits, makes loans, and provides payment and other financial services

A nonprofit, member-owned financial institution that accepts deposits, makes loans, and provides other financial services

An account or financial product used to hold money for future use, with options differing in interest, liquidity, risk, fees, and insurance protection

A federally insured deposit account that may offer higher interest and convenient cash access but require a larger balance or higher fees than a savings account

A federally insured deposit account that usually pays higher interest in exchange for leaving funds deposited for a set term; early withdrawal commonly results in a penalty or lost interest

A federally insured deposit account designed for frequent transactions that usually pays little or no interest and may charge fees

A fee charged when a financial institution pays a transaction that exceeds the available account balance

Government protection of covered deposits, generally up to 250,000 dollars as of 2024, if an insured financial institution fails

An account used to store money for convenient sending or spending that typically pays no interest and may lack federal deposit insurance

An account holding volatile digital assets that typically pay no deposit interest and are not protected by federal deposit insurance

Receiving money or purchasing power under an agreement to repay it later, ordinarily with interest or fees

The amount still owed to a lender; a personal liability requiring future payments

Money borrowed and repaid under agreed terms, ordinarily with interest and any applicable fees

An asset pledged to secure a loan that the lender may claim if the borrower defaults

A loan backed by an asset the lender may claim if the borrower defaults, usually resulting in a lower interest rate

A loan not backed by specific collateral, generally carrying a higher interest rate because lender recovery is less certain

Nontraditional financial providers or products offering services or fast credit, often at high fees or interest rates

A small, high-cost, short-term loan expected to be repaid from the borrower’s next paycheck

Laws that require clear credit disclosures, prohibit lending discrimination, regulate credit reporting, and restrict abusive debt-collection practices

A lender’s assessment of how likely a potential borrower is to repay as agreed

Failure to meet the repayment obligations in a credit agreement

A record of a consumer’s credit accounts, balances, payment history, inquiries, and related information compiled by a credit bureau

An organization that collects consumer credit information and compiles credit reports

A numerical estimate of credit risk based on information about a consumer’s past use and repayment of credit

Debt carrying a relatively high interest rate that can grow quickly and should generally receive priority in repayment

Income or savings used to pay part of a major purchase at purchase, reducing the amount financed

Help managing difficult debt through options such as refinancing, consolidation, or a counselor-administered debt-management plan

A legal process that may discharge some debts and establish a supervised repayment plan for others

An event involving money or another item of financial value that affects financial position

A debt or other financial obligation owed by a business or consumer

The value of a business attributable to its owners: owners' equity = assets − liabilities

The value of a consumer’s assets remaining after liabilities are subtracted: net worth = personal assets − personal liabilities

A report summarizing a business’s financial activity, performance, or condition

Common financial accounting and reporting standards requiring publicly held corporations to disclose positive and negative information consistently for each reporting period

A person or group within a business, such as an owner, manager, or employee, that uses financial information or is affected by business decisions

A person or group outside a business, such as an investor, lender, supplier, customer, or government agency, that uses its financial information

The business unit that identifies and records financial transactions and prepares financial statements

Accounting that provides information and analysis to managers and other internal stakeholders for planning, control, and decision making

Accounting that provides financial information and analysis primarily to external stakeholders such as shareholders, investors, and lenders

The business unit that analyzes accounting data and recommends strategies to maintain or improve financial performance

A professional who helps consumers evaluate their financial position and plan decisions about saving, borrowing, investing, retirement, and other uses of money

One-time expenditures plus initial expenses associated with launching a new business or product

Recurring costs tied to producing or delivering specific goods or services

Costs of running the business that are not tied directly to producing or delivering a specific good or service

Recurring expenses whose total does not change with the production or service level within the period considered

Recurring expenses that increase as production or service levels increase and decrease as those levels decrease

A goods producer’s direct costs, typically including raw materials, production supplies, production labor, and manufacturing-facility costs

A service provider’s direct costs, commonly including direct labor, service-related travel, and materials used to deliver the service

The cost of using and maintaining a business location, including rent, utilities, property taxes, and related facility expenses

Goods or materials a business expects to sell or use in production; a current asset that must generally be sold to become cash

Operating spending intended to create or improve products, services, or production processes

Coverage purchased through premiums to reduce financial losses from specified accidents, injuries, or property damage

Insurance that provides covered employees with benefits for work-related injuries or illnesses and protects employers from certain related losses

Money provided to a business to acquire resources, operate, or grow; unlike revenue, it is not earned from sales

Funding a business with the entrepreneur’s personal savings or other personal resources

The point at which revenue for a period equals all costs for that period, producing neither profit nor loss

Planning, monitoring, and controlling cash inflows and outflows so enough cash is available to meet obligations

Capital obtained through loans or bonds that must be repaid with interest but does not give the lender ownership

Raising capital by selling ownership shares, giving investors a claim on future value and profits and possibly some control

Money lent to a business under an agreement requiring repayment of principal, ordinarily with interest and fees

An ownership share in a corporation that may be sold privately or publicly; its holder is an investor and shareholder

A financial asset representing a loan from an investor to a corporation, which pays interest to the bondholder

A market where current owners sell existing financial assets to other buyers, usually without providing new capital to the business

The cost of borrowing to the business and income received by the lender

A distribution of a corporation’s profits to shareholders; it is not guaranteed because earnings may be reinvested

The gain from selling an asset for more than its purchase price: selling price − purchase price

The yearly gain relative to the original asset price: (income + capital gain) ÷ purchase price × 100%.

A person’s or institution’s willingness to accept financial risk

The principle that investments offering greater potential returns generally involve greater risk of loss

A written document explaining a business’s goals, value proposition, market, strategy, operations, financial projections, and funding needs

A clear statement of the benefits an offering provides and why target customers should choose it over alternatives

The systematic collection and analysis of information about customers, competitors, demand, and market conditions

A plan for reaching target customers and persuading them to buy through decisions about product, price, promotion, and distribution

Evidence-based estimates of a business’s future revenue, expenses, profit, cash flow, and financial position

A business plan’s statement of how much financing is sought, what form it should take, and how the money will be used

An evidence-based estimate of a business’s economic value, used to assess ownership shares and repayment capacity

Evidence that a defined market wants a product enough to support viable sales

A financial statement comparing revenue with costs over a specified period to determine net profit or loss

Income generated by a business’s core activities before costs are deducted

Profit after direct costs are deducted; gross profit = revenue − COGS.

Operating expenses associated with marketing and selling products, such as advertising and salespeople’s salaries

Operating expenses for administering the business, such as office salaries, office rent, insurance, supplies, and utilities

Profit before interest and taxes; operating profit = gross profit − operating expenses

The cost of borrowing money through loans, including bonds, but not repayment of loan principal

Income before taxes; pretax income = operating profit − interest expense

Taxes owed on positive pretax income and reported as an expense on the income statement

The final profit earned for owners during the period; net profit = pretax income − taxes

Gross profit ÷ total revenue × 100; evaluates pricing and management of direct costs

Operating profit ÷ total revenue × 100; evaluates selling, administration, and control of operating expenses

Net profit ÷ total revenue × 100; measures overall profitability and the percentage of revenue flowing to owners as income

Comparing financial results with projections, past performance, and competitors or industry performance to assess whether expectations are being met

Percent change = [(current value − initial value) ÷ initial value] × 100

An income statement using estimated future revenues, costs, interest, and taxes to predict profit or loss for a future period

A financial plan that estimates income and expenses and allocates available money among spending, saving, debt payments, and other goals for a future period

Income remaining after taxes and other payroll deductions

A financial statement showing a business’s assets, liabilities, and owners’ equity at a specific point in time

Assets = Liabilities + Owners’ Equity

The ease with which an asset can be converted into cash

Highly liquid assets used for day-to-day operations, including cash, short-term investments, accounts receivable, and inventory

Money owed to a business by its customers; a current asset

Less-liquid assets a business expects to hold for an extended period, including fixed assets and long-term investments

Physical resources, such as buildings, plants, and equipment, used to operate a business rather than held for immediate sale

Valuable nonphysical assets, such as patents, brand names, and trademarks, that can create potential revenue

Obligations due within one year, including accounts payable, short-term debt, current payments on long-term debt, and accrued operating expenses

Money a business owes to suppliers; a current liability

Operating expenses a business has incurred but has not yet paid; a current liability

Obligations due beyond one year, such as mortgages, bank loans, and long-term bonds

The owners’ residual claim on a business, calculated as total assets − total liabilities

A business’s cumulative profits that have not been distributed to owners as dividends

Current assets − current liabilities; it is positive when current assets exceed current liabilities

A financial position in which total assets exceed total liabilities

Household assets − household liabilities; used to assess financial progress, loan applications, and retirement readiness

A financial statement showing how actual cash inflows and outflows changed a business’s cash balance during a reporting period

A transaction that increases cash, recorded when the business actually receives the cash

A transaction that decreases cash, such as a payment to employees, suppliers, lenders, shareholders, or the government

Total cash inflows exceed total cash outflows, increasing the business’s cash balance

Total cash outflows exceed total cash inflows, decreasing the business’s cash balance

Cash flow tracks actual cash received and paid, while profit is revenue minus costs and expenses; either can be positive when the other is negative

Using money for a purpose other than its authorized business purpose, even if the money is not permanently stolen

The illegal use of deception or concealment to avoid taxes owed, unlike lawful tax planning or tax avoidance

The theft or fraudulent appropriation of money or property by someone who was entrusted with access to or control over it

Offering, giving, requesting, or receiving something of value to influence a decision improperly

Intentional deception intended to produce an improper benefit or cause another party to act in reliance on false information

Transparency provides entitled stakeholders relevant financial information clearly, completely, and promptly; lack of transparency conceals, delays, obscures, or selectively discloses it

An examination by an independent accounting firm of records and evidence to assess whether financial statements fairly present the business’s condition and performance

Standards maintained by a professional organization that establish ethical expectations for members and may exceed minimum legal requirements

Making judgments from evidence rather than personal gain, favoritism, pressure, or conflicts of interest

Protecting private information and sharing it only with authorized parties or as required by law, without using secrecy to conceal fraud

Business mechanisms that reduce opportunities for misconduct, clarify authority, create evidence, and increase the chance of detection