Essential Concepts in Business, Finance, and Economics
1. Study Skills
- Cornell Notes: Use three sections—notes, cues (key terms/questions), and a summary.
- Time Management: Plan your time, avoid procrastination, and break tasks into smaller steps.
2. SMART Goals
| Letter | Meaning | Description |
|---|---|---|
| S | Specific | Clear and exact goal. |
| M | Measurable | Progress can be tracked. |
| A | Achievable | Realistic and possible to do. |
| R | Relevant | Fits your needs or future plans. |
| T | Time-bound | Has a set end date or deadline. |
3. Economic Decisions and Systems
Fundamental economic questions: What, how, and for whom to produce.
Economic Systems
- Traditional
- Command
- Market
- Mixed
4. Economic Activity and Measurements
- GDP (Gross Domestic Product): Total value of goods and services produced within a country.
- Unemployment Rate: Percentage of the labor force that is jobless.
- Inflation: The rate at which prices for goods and services increase over time.
Supply and Demand Terms
| Term | Meaning |
|---|---|
| Supply | The amount of a product available. |
| Demand | How much people want a product. |
| Equilibrium | The point where supply equals demand. |
5. Factors of Production
- Land: Natural resources used in production.
- Labor: The workers and human effort involved.
- Capital: Tools, machinery, and buildings used to produce goods.
- Entrepreneurship: The ability to start and run businesses, taking risks for profit.
6. Scarcity
The fundamental economic problem: Not enough resources to meet all wants and needs.
7. International Economic Basics
- Export: Goods sold to other countries.
- Import: Goods bought from other countries.
8. Ethics and Social Responsibility
Acting honestly, fairly, and in an environmentally friendly manner in business operations.
9. Entrepreneurs
Individuals who start and run businesses, taking financial risks in pursuit of profit.
10. Types of Business Ownership
| Type | Advantages | Disadvantages |
|---|---|---|
| Sole Proprietorship | Easy to start, full control. | Unlimited personal liability. |
| Partnership | Share skills, easier setup. | Shared profits, potential conflict. |
| Corporation | Ability to raise money, limited risk for owners. | Costly setup and more regulations. |
| LLC (Limited Liability Company) | Mix of corporation and partnership benefits. | Rules and regulations vary by state. |
11. Profit
The money remaining after all business expenses have been paid.
12. Career Clusters and Interests
Career Clusters: Groups of similar jobs; career choice should be based on personality and skills.
13. Career Exploration and Job Seeking
- Career Exploration: Use reliable websites to research potential interests.
- Working Papers: Required documentation for minors to legally work.
- Job Application: Form used to provide personal and job history information.
- Resume: A concise summary of your experiences, skills, and education.
- Cover Letter: An introductory letter explaining why you are interested in the job.
- References: Individuals who can speak positively about your character and work ethic.
- Interview Basics: Arrive early and dress professionally.
- Thank You Letter: Follow-up communication sent after the interview.
14. Budgeting Basics
- Pay Yourself First: The practice of saving money before spending on expenses.
- Fixed Expenses: Costs that remain the same each month (e.g., rent, mortgage).
- Variable Expenses: Costs that change monthly based on usage (e.g., food, utilities).
15. Banking and Compensation
Account Types
| Account Type | Primary Use |
|---|---|
| Checking Account | Used for daily transactions and spending. |
| Savings Account | Earns interest; primarily used for saving goals. |
| Money Market Account | Offers higher interest rates than savings, often with some withdrawal limits. |
| CDs (Certificates of Deposit) | Money is locked away for a set time period in exchange for higher interest. |
- Liquidity: The ease and speed with which an asset can be converted into cash.
- Check Writing: Requires filling in the date, payee name, amount, and signature.
- Endorsements: Signing the back of a check to cash or deposit it.
- Simple Interest Formula: I = P × R × T (Interest = Principal × Rate × Time).
Pay Stub Terms
| Term | Meaning |
|---|---|
| Gross Pay | Total earnings before any deductions are taken out. |
| Net Pay | Take-home pay; earnings remaining after deductions. |
| FICA | Federal Insurance Contributions Act (includes Social Security and Medicare taxes). |
| Overtime | Wages paid at time and a half (1.5 times the regular rate) for hours worked over 40 per week. |
16. Credit and Debt Basics
- Credit: The ability to borrow money or access goods/services now with the promise to pay later.
- Net Worth Formula: Net Worth = Assets – Liabilities.
- Assets: What you own (e.g., car, cash, investments).
- Liabilities: What you owe (e.g., loans, credit card balances).
- Collateral: An asset pledged to secure a loan (e.g., house, car); it can be seized if the loan is defaulted.
Credit Card Terms
| Term | Meaning |
|---|---|
| APR (Annual Percentage Rate) | The yearly interest rate charged for using credit. |
| Minimum Payment | The smallest amount you must pay monthly to keep the account in good standing. |
| Credit Limit | The maximum amount you are allowed to charge on the card. |
| Paying Minimum Only | Leads to high interest accumulation and a long payoff period. |
| How Companies Earn | Through interest charges, late fees, and transaction fees. |
Credit Reporting
- Credit Reports: Detailed history of your borrowing and repayment activities.
- Agencies (Bureaus): Experian, Equifax, and TransUnion.
- Credit Score: A numerical rating of creditworthiness (670+ is generally considered good).
- Score Impact on Loans: A higher score typically results in a lower interest rate on loans.
17. Insurance Fundamentals
Insurance Terms
| Term | Meaning |
|---|---|
| Insurance | Financial protection purchased against potential loss or damage. |
| Premium | The regular payment required for insurance coverage. |
| Deductible | The amount the insured must pay out-of-pocket before the insurance company begins to cover costs. |
| Co-pay | A set fee paid by the insured for specific services (common in health insurance). |
| Coverage Limit | The maximum amount the insurance policy will pay out for a covered loss. |
Types of Insurance
- Auto Insurance
- Health Insurance
- Life Insurance
- Disability Insurance
- Property Insurance
- Homeowners Insurance
- Long-Term Care Insurance
18. Investment Principles
| Term/Concept | Meaning |
|---|---|
| Types of Investments | Stocks, bonds, mutual funds, and real estate. |
| Saving vs. Investing | Saving is safe and liquid; Investing aims for growth but involves risk. |
| Risk | The chance of losing some or all of the money invested. |
| Diversification | Spreading risk by investing capital across various assets and sectors. |
| Early Investing | Starting early allows more time for money to grow significantly via compound growth. |
End of Notes
Note: This content is for informational purposes only.