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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