Financial Algebra Definitions Flashcards

Questions and Answers

What is credit?

An arrangement to receive cash, goods, or services now and pay for them in the future.

Who are debtors?

Those who use credit.

What is a creditor?

A person or institution to whom money is owed.

What is an asset?

Everything you own, which is material. Signup and view all the answers

What does earning power refer to?

One's ability to earn money. Signup and view all the answers

What is a credit rating?

A quantified report of your ability to meet one's obligation imposed by a credit reporting agency. Signup and view all the answers

What is a credit reporting agency?

A company that compiles information of those who use credit. Signup and view all the answers

What is a FICO score?

The most popular way of quantifying one's credit score. Signup and view all the answers

What is an installment plan?

A service that allows customers to pay for a service or item over a period of time. Signup and view all the answers

What is a down payment?

A payment of a part of the installment plan, which is done at the beginning. Signup and view all the answers

What is interest?

A sum paid or charged for the use of money or for borrowing money. Signup and view all the answers

What is a finance charge?

The total dollar amount of all interest and fees you pay for the use of credit. Signup and view all the answers

Study Notes

Credit and Debt Concepts

Credit: Arrangement to receive cash, goods, or services immediately, with payment deferred to a later date.
Debtors: Individuals or entities that utilize credit to make purchases or acquire services.
Creditor: An individual or institution that extends credit, to whom money is owed by the debtor.

Financial Assets and Earning Potential

Asset: Any tangible or material item owned by an individual or entity that has value.
Earning Power: Indicator of an individual’s potential or ability to generate income through employment or investments.

Credit Assessment and Reporting

Credit Rating: A numerical representation of an individual's creditworthiness provided by a credit reporting agency.
Credit Reporting Agency: Organizations that gather and maintain consumer credit information, selling reports to creditors to assess the risk of lending.
FICO Score: The most widely recognized method for calculating an individual’s credit score, influencing lending decisions.

Payment Structures and Costs

Installment Plan: Financing option allowing consumers to make payments on a product or service over a specified period, easing immediate financial burden.
Down Payment: An initial payment made towards an installment plan, typically a percentage of the total amount, required upfront.
Interest: A percentage-based charge applied to borrowed funds, representing the cost of using credit over time.
Finance Charge: Total cost incurred for borrowing, inclusive of all interest and associated fees, reflecting the expense of accessing credit.

Description

Test your understanding of key terms in Financial Algebra with these flashcards. Each card presents a definition that will help you grasp essential concepts like credit, debtors, and assets. Perfect for mastering foundational financial vocabulary.