Personal finance encompasses the application of finance principles and techniques to individuals rather than business organizations and non-profit making entities. Variations in the finance methods used exist between the two. However, the salient principles of finance remain the same. For example, in personal finance one can find budgeting techniques like cash budgets that are used in order to plan in advance cash disbursements in comparison with cash income. This will enable an optimal utilization of cash in line with the main objectives of the individual. This adheres with the same finance principle of organizations, where cash budgets are prepared to ensure a sound cash flow in line with business plans. Another important aspect of personal finance entails the building of a retirement fund. The working age of an individual is normally within the age region of 18 to 60. At retirement age a person will cease working and will rely upon the retirement fund build during his working time frame. A vast spectrum of retirement funds is available in the business arena. Personal finance is thus used in order to short-list the most optimal mediums of retirement funds available for that individual. Such short-listing will be conducting in line with the salient aims of such person. Retirement fund methods are not applied to business organization, where additional finance is either invested in the growth of the firm or distributed to its equity investors. However the same principle still rests under both scenarios of maximizing stakeholders wealth.
2. How inflation affects your income and consumption Explain with example.
Inflation comprises an aggregate increase in prices resulting from either higher aggregate demand andor greater cumulative costs. Whenever inflation takes place, assuming all other variables remain constant, the income of the population per se will remain the same. However, the disposable income of the population will diminish if the same level of consumption is kept. For example, let us hypothetically presume that an individual in quarter 1 earns an income of 500 per week. During such quarter the money spent on basic needs like food amounted to 100 per week, leaving to a disposal income of 400 per week to be spent on consumables or saved in banks. If due to inflation the expenditure on basic needs increases by 120 per week, the disposable income will decrease to 380 per week if the same level of spending is kept. In instance of inflation, one cannot presume that the level of consumption remains the same because it will be altered especially for luxury goods. A decrease may also take place for goods meeting basic needs, where the individual will shift to inferior goods that hold a lower cost. For example, an individual holds a basic wage of 150 per week and due to inflation to cost of food increased from 100 to 120 per week. This individual may diminish the level of consumption or shift to inferior goods to keep the same expenditure. Thus inflation does not directly affect income, but negatively alters the disposable income and consumption of the population.
3. Explain the steps in successful career planning. Give Examples.
There are six salient steps in successful career planning. One should first outline his strengths and abilities, which will aid himher to pinpoint the key areas of success together with weaknesses that may be rectified by remedial actions like further education. Examples of skills range from communication, analytical and technical skills. Information about career data that the individual wishes to pursue should then be gathered. This will enable the person to identify more clearly the employability in such post. For example if a writer career is pursued and this individual is not proficient in written communication, this implies that heshe should mitigate such weakness through further education in order to apply for such a job. Tapping into the network of the career field will also further outline the job roles and duties. Such tapping can be undertaken by discussing the job with relatives andor friends that are engaged in it. Research into the labor market pertinent to the desired job should also be conducted to outline the labor supply and job availability. Once a person has gather all the aforesaid preliminary data, career tests should be undertaken to further enlighten if such job is up to the individuals expectations. Examples of these tests are aptitude and personality style tests. Finally, job shadowing should be adopted, which encompasses observation of someone working in such job. Volunteering can also provide a first hand experience of such job and portray more clearly if this job is what the individual is seeking.
4. Explain City Index and how it is used. Give Examples.
City index encompasses a numerical scale that covers a particular element. A city index may comprise numerical figures that can aid in the identification of particular buildings and the distinction between different areas. Another city index used in stock markets aids in the classification of business organizations. For example, the CAC 40 Index is a stock market index that outlines the 40 top companies listed in the stock market of Paris. The FTSE 100 index is an index present in the United Kingdom stock market, which highlights the 100 largest companies enlisted in Englands stock market. A city index is very useful because it aids in the identification of a specific item. For example an investor is risk averse and heshe dislikes investing in risky business enterprises. However, heshe is keen to invest in the stock market of less risky organizations. In such a stance, it would be advisable to select a company listed in the FTSE 100 if the investment is conducted in the United Kingdom, because such organizations are well established and the risk of corporate bankruptcy is lower when compared with a new firm. Thus an index encapsulates a classification and a distinction of a specific item. Such index is also beneficial to financial analysts and consultants. Such individuals have a wide spectrum of investors and the city index of the stock market would help them to classify such investors in different categories depending on their investment demand and needs.
5. Financial statements measure your financial health and progress. Explain this statement. Give Examples.
Financial statements portray the statement of affairs of an organization for a particular period. If one conducts a time series examination or a cross section analysis of an organization, one can convey financial information that is helpful in assessing the firms financial health. A time series examination comprises analyzing the movement in key variables over time. For example, if one considers the net income for a firm in 2007, 2008, 2009, which amounted to 12 million, 10 million and 7 million. Such figures indicate that the profitability of the company is declining and weakening the financial health of the company. A cross sectional analysis encompasses examining key variables or ratios of a company in comparison with another firm operating in the same or similar industry or the industry average. For instance, to examine the working capital management of a company one may compute the current ratio, which outlines the ability of the current assets to cover the current liabilities. If the current ratio of company A stands at 1.4x and the industry current ratio is at 2.5x, one can contend that the working capital management of the company is poor in relation to its industry, implying a deteriorating financial health. The financial health is assessed on three grounds being, profitability, financial position and financial stability. The information on profitability is mainly gathered from the Income Statement, while that of the latter is attained from the Balance Sheet. Hence, one can contend that the financial statements are a key medium for financial analysis.
6. Explain the steps in calculating your income tax. Give Examples.
There are three main steps that are adopted in the computation of the income tax. Such steps rely on salient regulations and practice pertinent in the determination of the income tax. Such regulations and practices are highlighted in the aforesaid three steps, which are explained below. The first one comprises computation of the affective tax rate by relying on the past tax return. For example, if last years income was 50,000 and the tax paid amount to 7,000, then the effective tax rate is 14 (7,00050,000) x 100. This step should be taken cautiously especially when alterations in the tax regulations have been enacted by the Government. One has to remember that new laws may alter the effective tax rate and in such instances one cannot rely on past income tax rates. The second step consists of computing the tax of this year. Thus one needs to take the income of this year and multiply it by the effective tax rate computed in step one. For instance, if the income of this year is 60,000, then the tax should amount to 8,400 (60,000 x 14). The last, but not least is the determination of the quarterly payments that have to be affected for this years income tax liability. Since in a year there are four quarters, one need to divide the tax liability by four to compute the effective tax due per quarter. Thus using the same above example, the quarterly tax payments amount to 2,100 per quarter (8,4004).
Categories:
0 comments:
Post a Comment