Understanding Loans
This term refers to the amount of time you are given to repay a loan.
What is the loan term?
This is the initial amount you agree to borrow from a lender.
What is the principal?
This is something valuable you promise to give the lender if you can't repay the loan.
What is collateral?
This is the money a business brings in from selling its products or services.
What is revenue?
This side of the balance sheet shows what a business owns.
What are assets?
This is the percentage used to calculate how much extra you will pay the lender over time.
What is the interest rate?
This is the fee you pay for borrowing money, usually expressed as a percentage.
What is interest?
This type of loan is backed by collateral, like a car or a house.
What is a secured loan?
These are the costs of running a business, such as rent, wages, and supplies.
What are expenses?
This side of the balance sheet shows what a business owes.
What are liabilities?
This type of interest rate remains constant for the entire duration of your loan.
What is a fixed rate?
This type of interest is only calculated on the original amount borrowed.
What is simple interest?
This type of loan doesn’t require collateral and is based on your creditworthiness.
What is an unsecured loan?
This is the amount left after subtracting expenses from revenue.
What is net income?
This part of the balance sheet represents the owner’s claim to the business after all liabilities are subtracted from assets.
What is owner’s equity (or stockholder's equity)?
This type of interest rate can increase or decrease depending on market conditions.
What is a variable rate?
This type of interest is calculated on the original amount plus any previously earned interest.
What is compound interest?
This is a person who agrees to take responsibility for your loan if you don’t repay it.
What is a cosigner?
If a business has more expenses than revenue, it reports this instead of a profit.
What is a loss?
A balance sheet is often described as this because it provides a view of a company's financial position at a specific point in time.
What is a snapshot?
Between fixed and variable rates, this one is typically riskier for borrowers because their payments can go up unexpectedly.
What is a variable rate?
You might prefer this type of interest if you're the borrower and want to avoid paying interest on interest.
What is simple interest?
Lenders typically prefer this type of loan because there’s less risk of losing money.
What is a secured loan?
This is what an income statement tells you about a business during a specific period of time.
What is whether the business made a profit or loss?
This represents the residual interest in the assets of a company after deducting liabilities, essentially showing the value of the company owned by shareholders or the owner.
What is equity?