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22 Cards in this Set
- Front
- Back
Liquidity
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The relative ease and speed with which you can convert non cash assets into cash. In effect, it involves having access to your money when you need it.
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Estate planning
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Planning for your eventual death and the passage of your wealth to your heirs.
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Inflation
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An economic condition in which rising prices reduce the purchasing power of money
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Compound interest
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Interest paid on interest. This occurs when interest paid on an investment is reinvested and added to the principal, thus allowing you to earn interest on the interest, as well as on the principal
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Diversification
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Acquisition of a variety of different investments instead of just one to reduce risk.
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Personal balance sheet
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A statement of your financial position on a given date. It includes the assets you own, the debt or liabilities you have incurred, and your level of wealth, which is referred to as net worth.
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Assets
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what you own
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Net worth or equity
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A measure of the level of your wealth. It is determined by subtracting the level of your debt or borrowing from the value of your assets
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Fair market value
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What an asset could be sold for rather than what it cost or what it will be worth sometime in the future
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Tangible asset
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A physical asset, such as a house or a car, as opposed to an investment.
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Blue book
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A listing of used-car prices, giving the average price a particular year and model sells for and what you might expect to receive for it as a trade-in
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Insolvent
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The condition in which you owe more money than your assets are worth
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Income statement
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A statement that tells you where your money has come from and where it has gone over some period of time
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Variable expenditure
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an expenditure over which you have control. That is, you are not obligated to make that expenditure, and it may vary from month to month
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Fixed expenditure
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An expenditure over which you have no control. You are obligated to make this expenditure, and it is generally at a constant level each month
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Budget
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A plan for controlling cash inflows and cash outflows. Based on your goals and financial obligations, a budget limits spending in different categories
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Current ratio
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A ratio aimed at determining if you have adequate liquidity to meet emergencies, defined as monetary assets divided by current liabilities
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Months living expenses covered ratio
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A ratio aimed at determining if you have adequate liquidity to meet emergencies, defined as monetary assets divided by annual living expenditures divided by 12
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Debt ratio
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A ratio aimed at determining if you have the ability to meet your debt obligations, defined as total debt or liabilities divided by total assets.
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Long term debt coverage ratio
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A ratio aimed at determining if you have the ability to meet your debt obligations, defined as total income available for living expenses divided by total long term payments
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Savings ratio
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a ratio aimed at determining how much you are saving, defined as income available for saving and investments divided by income available for living expenditures
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Ledger
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A book or notebook set aside to record expenditures
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