Applied Business Practices

Final Exam Review

Credit

– Borrowing money with the promise to repay in the future

• Installment Loan

–Loan in which you make monthly payments for a specific amount of time

Credit

• Finance Charge– Total dollar cost of credit including interest and

all other charges

• Interest– Cost of borrowing

Credit

• Comparing Credit Cards– Annual Fees– Interest rates– Other Fees– Benefits– Introductory rates

• Most common type of credit card– Bank Card

Credit

• Character– Willingness to repay

• Capacity– Ability to repay the debt

• Capital– Value of your assets

Credit

– Collateral• Property pledged to back a loan

– Co-signer• Person who signs on a loan with you and will be responsible

for the repayment if you don’t

Credit

• Credit Report– shows the debts you owe, how often you

use credit and whether you pay your debts on time

• Credit Bureau– Company that gathers information on your

credit

Credit

• Truth in Lending– Must provide the total cost of credit before

signing an agreement

• Equal Credit Opportunity Act– Prohibits creditors from denying a person

credit because of age, race, gender, or marital status

• akes

Credit

• Consumer Credit Reporting Reform Act– Now the burden of proof of unfavorable credit is now

on the credit reporting agency not the consumer

• Fair Debt Collecting Act– bans threats and other inappropriate actions when a

creditor is trying to collect debt

Credit

• Bankruptcy– Legal process of reducing or eliminating an amount

owed

Taxes• Tax Return

– Set of forms used by taxpayers to calculate tax obligation

• Form W-4– Provides the information of the amount to

withhold from your paycheck.– Completed by the Employee

• Allowances– More allowances = less withheld from paycheck

Taxes

• Withholding– Deducting money from your wages to collect

payroll taxes

• Gross Income– Amount you earn before taxes are withheld

• Net Income– Amount you receive after withholdings are

deducted from your gross pay.

Taxes

• Form W-2– Summary of your earnings and withholdings

for the year for a job

• Withhold too much = Refund

• FICA – Law requiring payment of Social Security

and Medicare taxes

Taxes

• IRS– Agency that collects taxes

• Employers and Employees pay the same amount of Social Security and Medicare taxes

• Taxes are due April 15

• Dependents – people you financially support

Taxes

• Estate Taxes– Taxes on property received when someone

dies

• Excise Tax– Collected on sale of specific goods or

services• Gas• Firearms• Air travel

Taxes

• Sales Tax– Taxes added to items purchased

• Sin Tax– Taxes on items harmful to your health

• Business (License) Tax– Tax paid for certification– May be accompanied by a test

Taxes• Federal Government Spends on:

– Social Security, Medicare, other retirement– National defense– Welfare

• State/Local Government Spends money on:– Roads– Schools– Unemployment

• Fill out a 1040 tax return when– Give to charities– Have dependents

Moving out on Your Own

• Landlord– Owns rental property

• Lease– Legal agreement that gives you the right to

live at a property for a specific time

• Purpose of a lease– Protect landlord and tenant

Moving Out On Your Own

• Security Deposit– Money the landlord will hold to cover for

damages

• Rent should be no more than 1/3 of monthly income

• Renter’s Insurance covers– Tenant’s belongings

Moving Out on Your Own

• Mortgage– Loan to buy a home

• You can afford 2.5 times your annual income when buying a home

• Fixed Expenses– Savings, rent, insurance

• Variable– Going out to eat, shopping, going to movies

Moving Out on Your Own

• Energy label– Predict the cost of running an appliance

• Appraisal– Tells the value of a home

• Lien– Claim against a property

Buying a Car

• Insurance– Bodily Injury Liability

• Covers other people in other car

– Property Damage Liability• Covers other car or property

– Collision• Covers your car when you are at fault in accident

– Comprehension• Covers for any non-collision damages such as theft

or a tree falls on car

Buying a Car

• Test drive a car for– 30 to 45 minutes

• Signs of Engine trouble– Blue or black exhaust

• As-Is Warranty– Buyer pays for all repairs

Buying a Car

• Invoice Price– Price the dealer pays

• Margin– Amount you negotiate when buying a car

(between invoice and sticker)

• Fair price to offer for a car is 10 – 13% over invoice price

Buying a Car

• Good source to use when buying a car is– Consumer Reports (or Consumer

Reports.org)

• Odometer– Measures miles traveled

• To get best price for TRADE-IN– Sell it yourself