Finance, Insurance, and Pension Institutions Quiz

Study Notes

Cash Flow Statement

A personal cash flow statement helps understand how much money flows into (inflows) and out of (outflows) one's finances, showing the net cash flow.
Cash inflows include:
- Salaries
- Interest from savings accounts
- Dividends from investments
- Capital gains from the sale of financial securities
- Money received from the sale of assets like houses or cars
Cash outflows include:
- Rent or mortgage payments
- Utility bills
- Groceries
- Gas
- Entertainment (books, movie tickets, restaurant meals, etc.)
Net cash flow is the result of subtracting outflow from inflow.

Banking and Financial Institutions

Banking is the business activity of accepting and safeguarding money, then lending it out to conduct economic activities.
Banks serve as the principal caretaker of the economy's money supply.
Banks offer added conveniences like:
- Direct deposit
- Bank cards
- Credit cards

Financial Institutions

Finance companies specialize in providing personal loans.
Insurance companies collect premium and compensate against the risk of loss of life and properties.
Pension funds accept savings to provide pension and other retirement benefits to employees.
Mutual funds invest in financial instruments or assets for the mutual benefit of its members.

Banking Services

Checking services: a deposit account that allows deposits and withdrawals.
Credit card financing: funding that allows borrowing with an interest rate.
Debit card: a payment card that deducts money directly from a consumer's checking account.
Interest rate: a percentage charged on the total amount borrowed or saved.

Time Value of Money

Importance:
- In investment decisions
- In capital budgeting decisions
Techniques:
- Future Value (FV) techniques: calculating future values of cash flows
- Present Value (PV) techniques: measuring the current value of an amount of money
Formulas:
- FV = PV x (1 + r) n
- PV = FV / (1 + r) n

Financial Planning

Set personal priorities and financial goals
Create and stick to a budget
Establish an emergency fund
Save for retirement
Schedule regular progress reports
Pay off debts

Money Market Funds and Accounts

Money Market Funds:
- Invest in high-quality, short-term debt
- Preserve capital while obtaining a nominal yield
- Managed by professional fund managers
Reasons for investing in Money Market Funds:
- Highly Liquid
- Higher Returns than a Savings account
- Affordable
Money Market Deposit Accounts (MMDAs):
- Special type of bank or credit union savings account
- Higher interest rate than regular passbook savings accounts
- Check-writing and debit card privileges
- Restrictions that make them less flexible than regular checking or savings accounts
Pros and Cons of Money Market Accounts:
- Pros:
  - Safety
  - Interest
  - Access
- Cons:
  - Transactional Limits
  - Introductory Interest Rates
  - Safety Insurance

Description

Test your knowledge on finance companies, insurance companies, and pension funds. Learn about the roles and functions of non-depository institutions, contractual saving institutions, and financial institutions providing retirement benefits.