Required subject matter of understandings reasons for personal financing: are many reasons why people require finance wealth creation are various types of finance available involving different terms and conditions leisure activities, e.g. travel When calculating the cost of finance, differentiation must be purchase of major assets, e.g. home, car made between: Education flat and effective interest rate main forms of personal finance: daily versus monthly calculation of interest. credit cards When obtaining finance, appropriate risk management, overdrafts such as income protection and/or salary continuance (personal, home, equity, investment) insurance, and wills should be investigated. calculating the cost of finance: A cash budget and Balance Sheet are often required by the fees lender before finance can be obtained. interest rate When deciding upon the type of finance, ensure comparisons are made in like incentive schemes (“gimmicks”) risk management obtaining finance personal cash budget personal Balance collateral decision making based on comparison of calculations the use of spreadsheets to aid decision making reasons for personal investment: There are several reasons why people will invest; one is the need to generate income to achieve financial capital growth independence. income generation Individuals may invest directly in the main forms of main forms of investments: investment, or indirectly through superannuation and/or cash managed funds. fixed interest Investments can be based or international. property The effect of economic trends (including inflation and shares recession) on investments must always be considered. factors affecting investment decisions: Mathematical formulae can be used to calculate the PV purpose (present and FV (future value) of an investment. diversification There is a relationship between risk and return. direct investment versus managed funds Franked dividends provide a tax advantage to investors. time frame When making an investment, differentiate between simple and compound interest. risk When calculating the return on an investment, is an taxation important indicator. the change in purchasing power of the dollar All accountants are not Certified Financial Planners. gearing (including negative gearing) Independent financial planners are who accept a fee costs associated with investing: rather than a commission on the investment. brokerage entry and exit costs management fees taxation the effect of compounding over time calculation of the net return on investment decision making based on the investment for a “best” specific purpose comparison and analysis of the performance of an investment portfolio over time the use of spreadsheets to aid decision making the role of accountants: compliance, e.g. taxation incidental advice Accounting for Grazing or Accounting for Mining (ES 14)
Required subject matter of understandings reasons for personal financing: wealth creation leisure activities, e.g. travel purchase of major assets, e.g. home, car Education main forms of personal finance: credit cards overdrafts (personal, home, equity, investment) calculating the cost of finance: fees interest rate incentive schemes (“gimmicks”) risk management obtaining finance personal cash budget personal Balance collateral decision making based on comparison of calculations the use of spreadsheets to aid decision making are many reasons why people require finance are various types of finance available involving different terms and conditions When calculating the cost of finance, differentiation must be made between: flat and effective interest rate daily versus monthly calculation of interest. When obtaining finance, appropriate risk management, such as income protection and/or salary continuance insurance, and wills should be investigated. A cash budget and Balance Sheet are often required by the lender before finance can be obtained. When deciding upon the type of finance, ensure comparisons are made in like reasons for personal investment: capital growth income generation main forms of investments: cash fixed interest property shares factors affecting investment decisions: purpose diversification direct investment versus managed funds time frame risk taxation the change in purchasing power of the dollar gearing (including negative gearing) costs associated with investing: brokerage entry and exit costs management fees taxation the effect of compounding over time calculation of the net return on investment decision making based on the “best” investment for a specific purpose comparison and analysis of the performance of an investment portfolio over time the use of spreadsheets to aid decision making the role of accountants: compliance, e.g. taxation incidental advice There are several reasons why people will invest; one is the need to generate income to achieve financial independence. Individuals may invest directly in the main forms of investment, or indirectly through superannuation and/or managed funds. Investments can be based or international. The effect of economic trends (including inflation and recession) on investments must always be considered. Mathematical formulae can be used to calculate the PV (present and FV (future value) of an investment. There is a relationship between risk and return. Franked dividends provide a tax advantage to investors. When making an investment, differentiate between simple and compound interest. When calculating the return on an investment, is an important indicator. All accountants are not Certified Financial Planners. Independent financial planners are who accept a fee rather than a commission on the investment. Accounting for Grazing or Accounting for Mining (ES 14)