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Read the information supplied and answer the questions which follow - Leaving Cert Business - Question 5 - 2012
Question 5
Read the information supplied and answer the questions which follow. Elaine McGrath works as an Assessor for Insure2Burse Ltd. Her job includes processing claims fr... show full transcript
Worked Solution & Example Answer:Read the information supplied and answer the questions which follow - Leaving Cert Business - Question 5 - 2012
Step 1
Explain the three underlined terms.
Answer
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PAYE: PAYE, or Pay As You Earn, is a direct tax deducted from employees' wages by their employer, calculated at a specified rate and remitted to the Revenue Commissioners. It is a statutory deduction from gross wages/salaries.
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PRSI: PRSI, or Pay Related Social Insurance, is a mandatory scheme that contributes to social welfare benefits such as unemployment and disability benefits. It is also deducted at a specified rate from gross earnings and supports various social welfare programs.
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Tax Credit: A tax credit reduces the total amount of tax owed by the taxpayer, depending on individual circumstances. It can vary based on personal circumstances such as marital status or dependents.
Step 2
Explain two of the following Principles of Insurance and give one example in each case: (i) Insurable Interest
Answer
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Insurable Interest: This principle states that for insurance to be valid, the insured must have an interest in the subject matter of the insurance. For example, a homeowner has an insurable interest in their property, meaning they would suffer a financial loss if it were damaged.
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Indemnity: This principle ensures that an insured person receives compensation equivalent to their financial loss without profit. For instance, if a car valued at €10,000 is damaged and only €8,000 can be recovered, the insured will receive €8,000, reflecting the loss sustained.
Step 3
Explain the insurance terms: (i) Claim
Answer
- Claim: A claim is a formal request made by the insured to their insurance company to obtain compensation for a loss suffered. When a risk covered by the policy occurs, the insured submits a claim, providing necessary documentation to validate their request.
Step 4
Step 5
Calculate Elaine’s Net Annual take home pay:
Answer
To calculate Elaine’s net annual take-home pay:
- Gross Income: €32,000
- Deductions:
- PAYE: 20% of €32,000 = €6,400
- PRSI: 4% of €32,000 = €1,280
- USC: 3% of €32,000 = €960
- Total Deductions = €6,400 + €1,280 + €960 - €3,600 (Tax Credit) = €5,040
- Net Take Home Pay:
- €32,000 - €5,040 = €26,960
Step 6
Choose either Term Loan or Leasing and outline two advantages of your chosen source of finance.
Answer
- Term Loan: One advantage of a term loan is that it often comes with lower interest rates compared to other finance options, making it more affordable in the long run.
- Immediate Ownership: Another advantage is that upon completion of repayments, the borrower fully owns the asset, offering future flexibility such as selling or modifying the vehicle.