...Personal finance is the process of which an individual or a family undergoes to budget, save, and spend their money over time, taking into account various financial risks and future life events. To me, personal finance means all of the above and that I am financially successful. To be financially successful means that I am able to pay off all debts (credit card, car, etc), provide and support my family by living an adequate lifestyle, have enough money to be able to pay for unexpected events or problems like car problems, a broken wrist, or a leaky roof and to still have enough money left over to be able to go on trips and do other fun things. The first step towards financial success starts with your job. You need to make enough money to support...
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...investment. It is like an investment because you invest in assets in this case it would be a new firm, the assets or firm come with a risk that it might not pan out, but if it works you receive the revenue which leads to profits after you cover your expenses and that leads to your return, which you can return to the business in retained earnings or pay out dividends to your shareholders. But there is an opportunity cost in this because if your business doesn’t work out you lose that money and you could have invested it in another company something that could have made you money. The opportunity cost is the next best option to the one you actually chose. It would be if you invest in your own company or you could put your money in an oil company. If your company doesn’t work out the opportunity cost would be investing in the oil company that could have been very successful and you lost that opportunity to invest in that. So you are taking contributed capital, which is your money you are putting into the company and take loans from banks to start up your business along with selling you stock to investors who will pay you to buy the stock then the business will pay the stockholder interest through out the period and the whole loan back eventually, which would be a amortized loan. Compared to an interest only loan and a discount loan. Taking the loans from the banks would be considered long term debt, which is tax deductable, which can make debt more favorable to use to finance your company...
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...Week 4 Homework 1) What is your new value for the money market hedge? Would this affect your initial decision from reading through section 11-2d? Discuss the drawbacks from using different hedging technique. When looking at the numbers of the different hedges I found that the call option and forward contract did not change due to the increase in interests rates however the money market hedge did. The discount borrowing rate seems to be the number I see changing that effects the Roll over USD rate for 1-year. Under 5% interest rate it changes to .9524, 6% see .9434, and 9% sees .9174. In each scenario this changes the rollover USD number to $120,247.62 under 5%, $119,113.21 under 6%, and $115,834.86 under the 9% percent rates. The money market hedge seems to take more into account then the other two methods The drawback of using a money market hedge according to Picardo, (n.d.), is that “The money market hedge, like a forward contract, fixes the exchange rate for a future transaction. This can be good or bad, depending on currency fluctuations until the transaction date. For instance, in the previous example of fixing the euro rate, you would feel really smart if the euro was trading at say 1.40 by vacation time (since you had locked in a rate of 1.3550), but less so if it had plunged to 1.30”. So while it is a good idea for the small time investor for larger investors such as major corporations it may be too costly and not meet their needs. The drawback of a call option...
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...this costs money in terms of research and marketing e.g. advertising campaigns and setting up retail outlets. Finance is needed to pay for simple expenses such as the cost of renting of removal vans, through to relocation packages for employees and the installation of machinery. A business may want to market their product as they are in a competitive market and competitors are always updating their merchandise. Explain the difference between internal and external Internal sources is finance which comes mainly frown own funds, profits and depreciation The main internal sources of finance for sole proprietors are: Owner's funds are when a buyer finances the purchase directly. This often occurs when the buyer can’t obtain funding through a conventional mortgage lender. · Selling personal assets · Profits · Depreciation External sources are capital obtained from financial institutions, such as banks, and from individuals willing to provide finance. Loan cap This is the most common way of external finance; this is through borrowing from a bank. It can be either a loan or an overdraft which is set over a period of time, which can vary from 2-5 years. There is an interest rate on the loan. Share cap Limited companies use this source of finance it can come from private investors or venture capital funds. Venture capital providers want to invest businesses that are going to have some dynamic growth...
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...or expansion capital for your business without placing the risk of loss. You can also make a profit that you can re-invest or put aside. A good return on an investment can maximise earning potentialDisadvantageIt is always possible to lose money on any investment you make. Let’s say you invest a certain amount of money into something that value can change or the interest rates might change meaning that you get less money that you invested into. Another disadvantage to bringing in investors is that you give up an element of control over the company. | Owner’s savings | The owner of the business has to use their own personal savings to start the business Advantages: They are a good source of finance for a business as interest does not need to be paid to someone else while the money is being used and the business remains totally in the control of the owner. DisadvantageIt can be limited and once you sell off your assets or spend the saving you will need a different source of finance | Capital from Profits | A business which is operating is able to invest the money that it makes as profits back in the businessAdvantageThis means that even greater profits may be made in the future. Another advantage is that there is capital availablefor growth. Improvements and expansion are expensive but necessary to remain competitive.DisadvantageOne is that the company has to pay federal and state taxes. It also is limited to certain companies as they might not be able to use capital from profits...
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...Annuities, Sinking Funds, and Amortization Math Analysis and Discrete Math – Sections 5.3 and 5.4 I. Warm-Up Problem Previously, we have computed the future value of an investment when a fixed amount of money is deposited in an account that pays interest compounded periodically. Often, however, people do not deposit money and then sit back and watch it grow. Rather, money is invested in small amounts at periodic intervals. Consider these problems: 1. Chrissy deposits $200 each year into a savings account that has an annual interest rate of 8% compounded annually. How much money will Chrissy have in her account after three years? Hint: Make up a table of how much she has in her account by year. 2. Ben saves $50 per month in a credit union that has an annual interest rate of 6% compounded monthly. How much money will Ben have in his account after he has made six deposits? Page 1 of 7 II. Generalization Let's generalize the situation. Suppose we deposit P dollars each payment period for n payment periods at rate of interest i per payment period. a. Consider the first deposit only. During how many payment periods does interest get applied to this investment? ____________ Using the compound interest formula, how much is this part of the investment worth? Call this quantity A1. __________________________ b. Consider the second deposit only. During how many payment periods does interest get applied to this investment? ____________ Using the compound interest formula, how much is...
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...company’s financial investor managers were under the impression that buying those types of bonds were the way to go. However, Outfitters decided to play it save and invest conservatively. As Benjamin Franklin quoted "Necessity never made a good bargain". In other words, do not invest funds that are needed prematurely, in hopes of an unrealistic high return. The Outfitter financial managers were patient with their finances. Because the Outfitters had a steady cash flow, they invested cautiously. The Outfitters outcome wasn’t as awful as some other firms. Although corporations are faced with challenges, patience is an asset. Firms like Countrywide Financial, Lehman Brothers, and American International Group all had issues with liquid assets. Because of this, they all invested heavily into ARS which in turn made their investment options unstable. When companies as large as these firms do not have enough cash in the bank or liquid assets, it puts them at an increase disadvantage to withstand a financial crisis. Case in point, when the economy went south in 2008, these companies were not able to inject cash back into their businesses because they had taken on too much debt. The bonds they had were worth less because of the high default ratio. When the market failed the companies were unable to pay their debts and essentially became insolvent. Selecting the appropriate investment options for any firm is an extremely cumbersome ordeal. Most large firms have entire departments...
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...student loans to support myself through the rest of my college education. My parents pay for insurance payments for my car, cover my phone bill, and provide me with medical insurance. I pay for all the rest of my expenses, including rent, food, gas, and all other daily expenses. I currently have no investments and no substantial assets with a value of over $1000. I graduate in May and have signed a contract with KPMG to start work as an auditor in August after I complete the CPA. I will be auditing companies in the telecommunications industry as well as the financial industry. My starting salary is $47,500 a year plus benefits. I use a car that my parents bought me to commute right now but will purchase my own car and become 100% financially independent of them when I start work in the fall. B. Balance Sheet- (Find in Appendices- #1) C. Cash Flows Statement/Income Statement- (Find in Appendices- #2) D. Mission/Vision Statement Mission Statement- To secure financial stability with minimal leverage by age 50. To have the ability to be generous with my money and consistently give a larger percentage away every year while maintaining my standard of living. Vision Statement- When I start my job I plan to make sure to save a good amount of my money while I am still single. I plan to contribute the maximum matching amount of money each month to my 401k through KPMG. I also plan to invest a good portion of money in a variety of index funds, mutual funds, and a few stocks...
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... He won’t tell you that the road out of debt is always easy. Ramsey gives a step by step approach to getting out of debt, saving and investing for the future, but he also gives you more. People in financial trouble, such as myself, need more than a method; they need hope. Ramsey offers hope by telling you from his personal experience and the experiences of others. This book gives the wisdom you need, but additionally gives testimony after testimony of people who were in serious debt and became debt free, as I am on my way to becoming by following his advice to, deal with your denial, don’t swallow the lie that debt is a tool, start a lifetime quest to learn more about money, setting up a budget, and taking the baby steps toward financial freedom. Deal with your denial Before chapter one begins, Dave Ramsey explains that his book is neither sophisticated nor complicated. I found this to be true as I began reading along. Given that I was already feeling defeated about my financial situation, Dave Ramsey did very well by providing several laughing opportunities through his bold, no nonsense approach. Honestly evaluate your current financial condition. Don’t take comfort in the fact that you’re like everybody else. Most others are in perilous financial condition. Running Head: Financial Book Review: “Total Money Makeover” 3 “Seventy percent of Americans live paycheck to paycheck” Bernard Poduska’s Ensign Article, “Debt Doesn’t Have to...
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...like plywood, moldings, and sash and door products. The company was formed in 1981 by Mark Butler in partnership with his brother-in-law, who Mark then bought out in 1988. The company has experienced significant growth over the past few years, and is expecting to continue to see sales growth in the coming year. Although the company has experienced increasing sales and claims to be profitable, it has been experiencing a cash shortage and Mark feels that it is going to be necessary to borrow more money in addition to the debt that he has already incurred over the course of the past few years in order to continue business. The bank that Butler has been conducting business with, Suburban National Bank, has a maximum allowable loan value of $250,000. Mark has had a difficult time staying below this debt limit, and only has been able to do so by relying on trade credit. Suburban has also now decided that it will begin requiring Butler to secure any additional debt with real property as collateral. Another larger bank, Northrop National Bank, is a larger establishment and has discussed the possibility with Mark of possibly extending a line of credit to Butler of up to $465,000. Although Mark believes that the $465,000 is more than he will need to borrow, he likes the idea of having the flexibility of the additional cash. Mark is faced with the decision of whether or not to pursue borrowing a larger amount of additional funds from the new bank, Northrop National, which would result...
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...Financial Perspective The financial perspective for Target can be broken down into three main categories. First, how efficient is the company, second, how profitable is the company, and finally, what is the company’s debt load. Below are two tables that I created to illustrate Target’s financial strengths and weaknesses that will be used to support my analysis. The first table is a Buffet and DuPont analysis that was summarized using key statistics found on Rueters.com. The second table illustrates Target’s debt obligation and its earnings to forecast the expected rate of return (profitability). The data for the second table was found on Morningstar.com. Table 1 Table 2 Basic Valuation of Target | 1. Vigilant management | 2. Stable and understandable | 3. Undervalued | | D/E | CR | | | EPS | BVPS | DPS | LOGEST growth rate | | 6.38% | | 2003-09 | 0.92 | 1.56 | | 2003 | 2.01 | 0 | 0.26 | IGR/SGR calculation | | | | 2004-09 | 0.69 | 1.69 | | 2004 | 3.51 | 14.55 | 0.3 | | ROA | 5.03% | | 2005-09 | 0.64 | 1.5 | | 2005 | 2.71 | 16.16 | 0.36 | | ROE | 14.84% | | 2006-09 | 0.55 | 1.32 | | 2006 | 3.21 | 18.2 | 0.44 | Capacity utilization | | 1 | | 2007-09 | 0.99 | 1.6 | | 2007 | 3.33 | 18.42 | 0.52 | | RR | 0.595 | | 2008-09 | 1.28 | 1.66 | | 2008 | 2.86 | 18.22 | 0.6 | | L0*/A0 | 0.268 | | 2009-09 | 0.99 | 1.63 | | 2009 | 3.3 | 20.61 | 0.66 | | IGR | 4.26% | | 2010-09 | 1.01 | 1.71 | | 2010 | 4 | 22 | 0.84...
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...established leader in North America for manufacturing chocolate and chocolate related products. In determining whether to invest in Hershey, their liquidity, solvency and profitability will be examined. In investigating Hershey’s financial reports identifying any short-term financial problems should be relatively simple. For 2009 the Hershey Corporation had a current ratio of 1.52, which indicates that Hershey was able to meet their 2009 near-term operating needs sufficiently. Knowing that a company is not having any problems paying their bills in a timely manner is definitely a huge positive. A working capital of $474,806 helps to confirm that Hershey’s had plenty of cash on hand to handle short-term obligations. Although their current cash debt coverage ratio is .98 and not above a 1, which indicates that they were unable to repay all of their debts within one year, their high level of inventory turnover shows that they have a consistent stream of incoming cash flows to remain in good standings with their debtors. The liquidity of the Hershey Corporation for 2009 would allow them to cover financial obligations in a timely manner with minimal cost to the corporation as a whole. Hershey’s debt-to-assets ratio was at a 79% in 2009, which means that majority of their assets were financed through equity. Looking from a creditor’s stand point, since their debt-to-assets ratio is below a 1 if creditors demanded repayment Hershey’s would be able to make repayment. Based on their...
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...major categories of risk? Please provide examples. (Topic heading: Main categories of risk controls) Seven categories of risk are outlined. These are summarised in the table below: Type of risk Liquidity Definition The risk of not being able to pay back what you owe due to the inability to convert assets into cash quickly, without materially moving the price. Example Holding long-term property investments that cannot be converted into cash quickly to pay obligations as they fall due. Funding The risk of funding support not being met by investors or bankers. An existing financier (e.g. bank) withdraws its funding commitment as a result of poor performance by the entity. Interest rate The risk of a change in interest rates impacting borrowing costs, interest income and/or asset/debt values. Central bank increases the cash rate and your company has a floating rate loan pegged to the cash rate. Foreign exchange The risk of the foreign exchange rate fluctuating, impacting the currency conversion of revenues, expenses, assets and/or liabilities. Includes transaction, translation, competitive/economic and accounting exposures. If the AUD falls, an Australian importer of clothing from the US pays more AUD for the same amount of clothing. Commodity price The risk of the change in price of a commodity, whether used as an input or generated as an output. The price of iron ore falls as a result of a lack of confidence in general economic conditions...
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...strong suit of Walgreens as they posted an increase of 22% from the previous year at 4,431 million in cash from operations. Cash from operation includes their daily sales transections; this is a company’s bread and butter. Walgreens seems to have been in a skid the past three years posting decreased cash from operations in those years, but has since caught up to its previous highs. Another major item is their net income in cash, which was 2,127 million in 2012. It is slightly less from the previous three years, which should raise concerns in Walgreens management. This was a result of an increase in investments by the company; which saw a rise from 1,525 million to 5,860 million in year 2012. Walgreens issued 3 billion in long-term debt that will benefit the company in future cash endeavors. Walgreens has had an increase in their cash from operations in 2012. The past three years however have not seen either a static grown or loss. Walgreens has exchanged growth and loss in cash from operations in the past four years, which shows some weakness in Walgreens management of cash flow....
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...needs to look at all aspects of spending, as well as income. Looking over my spending in comparison to my income leaves me with a surplus at the end of each month to save or invest. My personal financial goals are mainly to pay off my debts quicker and not paying as much in interest to the debtors. My initial financial plan is to pay more each month to my unsecured creditors and get them paid off quicker and save on interest. Getting these credit card paid off will help with cash flow because I will not be paying as much out and able to save more. I have cash flow coming from both my full time job and from the Montgomery GI Bill through the Veterans Affairs. With both of these incoming cash flows it makes my monthly income look to be greater than it is going to be when I graduate from school. This is because the GI Bill will no longer pay me a monthly stipend after I have graduated from school. Without this stipend, my monthly income will drop by $1700. A $1700 monthly decrease will put a serious hurt on my ability to pay more on my unsecured credit. My plan is to pay as much of that unsecured credit off while still receiving the GI Bill payments of $1700 a month. Like most people in school, I am hoping that my college degree will assist me in making a greater income. Looking to the future if I pay off as much of the unsecured credit as I can with my extra monthly money I will be left with only my secure credit, one car payment and mortgage payment. The monthly bills for...
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