DECA: Financial Analysis
double declining depreciation
(1) compute the asset's straight-line depreciation rate (2) double the straight-line rate (3) compute depreciation expense by multiplying this rate by the asset's beginning of period book value This method is useful because the object might be more productive in the beginning than later.
types of financial services providers (financial institutions)
- Central banks - responsible for the oversight and management of all other banks. In the US, the central bank is the Federal Reserve Bank which is responsible for conducting monetary policy and supervision and regulation of financial institutions. Individual consumers do not have direct contact with a central bank. - Retail and commercial banks - Both types offer checkings and savings accounts, certificates of deposit, personal (consumer) and mortgage loans, credit cards and business banking accounts - Internal Banks - these work similarly to conventional banks by they perform services through online platforms instead of brick and mortar locations - Credit Unions - serve a specific demographic per their field of membership. Credit Unions are owned by their numbers and operate for their benefit. Credit Unions are non-profit - Savings and loan associations - are mutually held and provide no more than 20% of total lending for commercial lending. - Investment banks and companies - do not take deposits - they help individuals, businesses, and governments raise capital through the issuance of securities. Investment companies pool funds from individual and institutional investors to provide them access to the broader securities market. - Brokerage firms - assist individuals and institutions in buying and selling securities among available investors. - Insurance companies - help individuals or business transfer the risk of loss - Mortgage companies - self-explanatory.
common management accounting performance measures
- balanced scorecard - strategic performance management system. It helps companies set their strategic, define their action plans, develop their KPIs metrics. Need perspectives - financial, customers, internal processes, learning and growth (human capital, organizational capital, information capital). Need an action plan and also metrics. - customer profitability analysis - eliminates losing customers and selects profitable ones with whom relationships should be developed
Forms of Dividends
- cash dividend - on the date of declaration, the BOD resolves to pay a certain dividend amount in cash to those investors holding the company's stock at a specific date - stock dividend - issuance by a company of its common stock to its common shareholders - property dividend - nonmonetary dividend to investors, rather than making a cash or stock payment - scrip dividend - a company may not have sufficient funds to issue dividends in the near future, so instead, it issues a scrip dividend which is just a promissory note to pay later. - liquidating dividend - when the BOD wishes to return the capital originally contributed by shareholders as a dividend
issuance of stock from a corporation
- common stock - shareholders get to vote for BOD, share in P/L (dividends not guaranteed since residual interest after preferred), protected against dilution of ownership. - preferred stock - stockholders usually don't have voting rights but they receive dividend payments before common and have priority over common if bankruptcy occurs.
corporate bonds
- higher market interest rates ->lower bond prices and vice versa. - straight coupon bonds - pay a fixed interest rate for the entire life of the issue. At maturity the amount paid consists of the interest from final period plus principle. - Floating rate bonds - just like straight but interest is based on a non-constant rate - Participating bonds - have a minimum interest but many pay more if the issuer's profits increase. - Income bonds - pay at the most the specified interest rate but may pay less if the issue's profits decline. - Zero-coupon bonds - do not pay interest and have no investment risk. Bondholders earn a capital gain by purchasing at a discount - If another bond comes out with a lower yield rate, the price of the existing bond will rise since the coupon amount has to be the same and vice versa.
seven internal accounting controls
- separation of duties - the further duties are separated, the less chance any single employee has of committing fraudulent acts. - accounting system access controls - controlling access to keep unauthorized users out of the system. - Physical audit of assets - Standardized financial documentation - can help maintain consistency - Daily or weekly trail balances - can help provide regular insight into the state of the system - Periodic Reconciliations in accounting systems - Approval authority requirements - requiring specific managers to authorize certain types of transactions can add a layer of responsibility.
nature of short-term financial management
- short term financial management refers to the utilization of the firm's current assets and liabilities to maximize shareholder wealth. - working capital is very important to short term financial management - central to short term financial management is an understanding of the firm's cash conversion cycle. - the operating cycle is the time between ordering materials and collecting cash from receivables - the cash conversion cycle is the time between when a firm pays its suppliers for inventory and collecting cash from the sale of the finished product.
divestiture concepts
- spinoff - is the creation of an independent company through a sale or distribution of new shares of an existing business or division of a parent company. The spun-off companies are expected to be worth more as independent entities rather than as parts of a larger business. - sell off - a parent firm sells some of the assets in its portfolio which can include both physical assets and business subsidiaries. The parent firm fully relinquishes its ownership and control over the business unit. - equity carve out - the partial IPO of a company's subsidiaries; the sale of a part of a business unit in the public market - Tracking stocks - special types of stocks issued by the parent company for one or more of its subsidiaries that are directly tied to the performance of the specific subsidiaries.
parts of cash flow
1) operations - net cash provided or used by the firm's core business functions. The function of the CFO (not normal CFO) is to make the accrual type net income into more of a cash based income by either deducting from income or adding to income. 2) Financing - net cash provided by (or repaid to) debtholders and equityholders 3) Investing - net cash provided (or used) by the purchase or sale of fixed assets or securities or investments.
cash management principles and procedures
1. encourage collection of receivables 2. delay payment of liabilities 3. keep only necessary levels of assets 4. plan expenditures 5. invest excess cash - there should be a segregation of duties so that one person is not responsible for everything - receiving funds - payment systems, generating cash receipts - custody of funds - cash should be stored securely - depositing of funds - to bank accounts - reconciling funds - compare transaction and account balances to fiscal records
(practice with this)🎇Explain the nature of balance sheets (FI:093) (SP)🎇
A balance sheet includes all the business's assets, liabilities and owner's equity. Assets are all the things that you own and are classified as current or fixed. Liabilities are all the things that you owe to someone else and are classified as current or long term. Owner's equity is the assets-liabilities.
Describe types of financial-services providers (FI:075) (CS)
A commercial bank is an institution that offers a full range of financial services, such as checking, savings, and lending. A savings and loan association is a service provider that may specialize in savings accounts and mortgage loans, but now offers a wide range of services. Mutual savings banks specialize in savings accounts and mortgages. Credit unions are nonprofit institutions that are owned by its members. Traditionally, the members of a credit union have a common bond such as employment with the same company. Credit unions offer a full range of financial services.
Apply for a consumer loan (FI:625) (SP)
A consumer loan is just an amount of money lent to a person for personal, family, or household purposes. To apply for a loan you need to be above 18, and have a SSN. After you have gathered all of your needed documents that are going to be asked for in the application, you can start the application process either in person or online on the bank's website.
Develop personal budget (FI:066) (CS)
A personal budget is a plan for saving and spending your money based on your income and expenses. Start your budget by defining your needs and your goals, considering both short- and long-term goals. Write them down in a list, with a target date or time frame to reach them. Next you will need to prioritize your goals, arranging the items in order of importance. Then you must estimate your income and your expenses. In your income estimate, include your wages or salary but count only your net (take home) pay. Estimate your expenses in two categories: fixed and variable. Also, check your progress monthly and review your spending carefully so you know if you have to cut back your expenses or increase your income.
Discuss the role of ethics in accounting (FI:351) (SP)
Accountants deal with the intimate financial details of individuals and organizations. Some have the ability to execute million-dollar transactions, and others assist with safeguarding retirement funds of cab drivers and social workers. Ethical codes are the fundamental principles that accounting professionals choose to abide by to enhance their profession, maintain public trust, and demonstrate honesty and fairness.
Explain the concept of accounting (FI:085) (CS)
Accounting is the measurement, processing and communication of financial information about economic entities in a company or organization. Accounting is key in order to maintain your sales, inventory, profitability, tax liabilities, etc. Accounting handles most of the technical financial aspects of a company.
(practice with these)🎇Describe the nature of income statements (FI:094) (SP)🎇
An income statement is a summary of the business income and expenses during a specific period of time. It is used to calculate, profit/losses, cost/expenses, revenue.
Describe the concept of insurance (FI:081) (CS)
An insurance policy is a contract between a business or individual and an insurance company to cover risks. There are many types of risks including economic risks, natural risks, and human risks. Insurance companies estimate the probability of loss due to risk and determine a rate to charge for the policy; this is called the premium. There is property insurance which protects buildings, health insurance which protects the health of people, car insurance for cars, liability insurance which covers for damage that a business or a person could be liable for, etc. This is different from a risk-retention: Risk retention is a company's decision to take responsibility for a particular risk it faces, as opposed to transferring the risk over to an insurance company. Companies often retain risks when they believe that the cost of doing so is less then the cost of fully or partially insuring against it. This leads to risk retention groups: A risk retention group (RRG) is a state-chartered insurance company that insures commercial businesses and government entities against liability risks.
Read and reconcile bank statements (FI:070) (PQ)
Bank account reconciliation is when you account for the differences between the bank statement and your records (usually your checkbook register). The balances may differ because you have written checks that have not yet cleared the bank, or perhaps because you have deposited money into your account after the bank statement was prepared. To reconcile your account, start by comparing the checks you have written with those listed on the bank statement. List any outstanding checks on the reconciliation form. Subtract the total amount of outstanding checks from the ending balance on the statement. Next, add any recent deposits not on the statement to the reconciliation form. Finally, subtract any fees and add any interest as found on your bank statement to your reconciliation form. Now you should find that the adjusted bank balance and the balance in your records is the same. If there is an error, report it to your bank.
Demonstrate the wise use of credit (FI:071) (CS)
Before deciding to use credit, ask yourself if you can afford the item in the first place. You must be certain that the benefits of making the purchase now on credit outweigh its costs, including fees and interest charges. There are many ways to use credit wisely. For instance, you may be able to combine several purchases into one, thus making only one monthly payment. You will likely need a credit card for major and expensive purchases. It is often safer, and more convenient, to use a credit card when shopping or travelling. The wise use of credit will allow you the opportunity to build a better credit history, which means you are seen as a reliable person to other lenders. When using credit, avoid the temptation to buy more than you can afford. Failing to repay a loan or credit card balance will damage your credit history, and could lead to you losing your property or source of income.
Describe the nature of budgets (FI:106) (SP)
Budgets are just fixed amounts of money that the company or an individual has set aside for a particular part of their expenses. Budgets are very important in order to see exactly where your money is going and where you can cut costs and save your money. However, budgets can also be very flexible because the amount of money and the ideas that a company has is constantly changing.
Discuss the nature of cost allocation (FI:663) (SP)
Cost allocation is the process of identifying, aggregating, and assigning costs to cost objects. A cost object is any activity or item for which you want to separately measure costs. Examples of cost objects are a product, a research project, a customer, a sales region, and a department. Cost allocation is used for financial reporting purposes, to spread costs among departments or inventory items. Cost allocation is also used in the calculation of profitability at the department or subsidiary level, which in turn may be used as the basis for bonuses or the funding of additional activities. Cost allocations can also be used in the derivation of transfer prices between subsidiaries.
Explain forms of financial exchange (cash, credit, debit, electronic funds transfer, etc.) (FI:058) (PQ)
Credit enables a client to take a mini loan and buy goods or services and promise to pay later. This can be used by businesses to increase their customer base so that people who do not have cash right away can also be customers. Cash is just a physical representation of money that you can use to buy goods and services. Debit is just when you have your own money in a bank account and you can buy goods and services with that. This is your own money, so you get interest on it. There are two main types (I think?): checking and savings. Electronic funds transfer just means that you can electronically transfer funds. Electronic funds transfer (EFT) are electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff.
Explain the purposes and importance of credit (FI:002) (CS)
Credit is very important since it allows a customer to be able to buy goods and services at a time when all the money needed is not available. So, by allowing credit, you are able to get all the customers to buy something even if they don't have the money right then and there. You can enhance your sales revenue this way because you are turning down less customers.
Identify types of currency (paper money, coins, banknotes, government bonds, treasury notes, etc.) (FI:059) (PQ)
Currency is just tokens accepted as money in a country. Paper money includes banknotes, cheques, drafts, notes. They represent money in a liquid form. Banknotes are promissory notes intended to serve as money. Government bonds are a debt instrument used by the government to get capital to fund the country. Treasury notes and debt obligations issued by the government, with maturity between 1 to 7 years. They are the safest investments in the world since the U.S. government guarantees them. This low risk means they have the lowest interest rates of any fixed-income security.
Describe the relationship between economic conditions and financial markets (FI:574) (SP)
Economic conditions refer to the present state of the economy in a country or region. Investors use indicators of economic conditions to adjust their views on economic growth and profitability. An improvement in economic conditions would lead investors to be more optimistic about the future and potentially invest more as they expect positive returns. The opposite could be true if economic conditions worsen.
financial planning process
Establish the goal/relationship Gather data Analyze data Develop a plan Implement the plan Monitor the plan EGADIM
Explain the nature of estate planning (FI:572) (CS)
Estate planning is making a plan in advance and naming whom you want to receive the things you own after you die. You need to plan your estate to ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it.
Discuss the role of ethics in finance (FI:355) (SP)
Finance has a lot to do with sensitive business information since it is very interconnected to money. This is why financial professionals have to act ethically: not embezzling money, not disclosing confidential information, etc.
Explain the role of finance in business (FI:354) (CS)
Finance passes through every part of a firm's operations. Few decisions are made without input from the people in financial management. Financial branches are consulted on how much inventory they have and what best next action they should take based on their financial data.
Explain the nature and scope of financial globalization (FI:575) (SP)
Financial globalization, defined as global linkages through cross-border financial flows, has become increasingly relevant for emerging markets as they integrate financially with the rest of the world. The scope in this day and age is the whole world which is connected through the internet and many other technologies.
Set financial goals (FI:065) (CS)
Financial goals are influenced by two main factors: the time frame in which you want to achieve your goals, and the type of need that inspires your goals. Goals can be short-term (usually one year or less to achieve), intermediate (two to five years), or long-term (more than five years). Also, some goals may happen every year, while others occur only occasionally. How you establish your financial goals may also depend on whether a goal you have set involves a consumable good that you would use up quickly, a durable good that lasts longer and usually costs more, or something intangible, such as your health or an education. Keep in mind that while setting financial goals, they should be realistic, specific, have a clear time frame, and should help you decide on what action to take.
Describe the need for financial information (FI:579) (CS)
Financial information includes raw data, reports and records. Financial information is used to math company resources to its planned activities and identify additional resources that may be needed or secured. Other pieces of information include tax liabilities, sales, inventory, labor, profitability, etc. You need to this kind of financial information in order to make smart decisions about the current state of your company.
Explain types of financial markets (e.g., money market, capital market, insurance market, commodities markets, etc.) (FI:337) (SP)
Financial markets are where traders buy and sell assets. These include stocks, bonds, derivatives, foreign exchange, and commodities. The markets are where businesses go to raise cash to grow. It's where companies reduce risks and investors make money. The stock market, mutual funds, bond and commodities market, (when stock prices go up, bond prices go down). The primary market is where newly issued securities are sold, usually by investment bankers. After the initial selling, or initial public offering (IPO), securities are traded on the secondary market. Examples of secondary markets include the New York Stock Exchange, the American Stock Exchange, and the NASDAQ. These exchanges are auction markets where buyers and sellers physically come together to trade. The over-the-counter market (OTC) is a network where securities transactions are done by telephone and Internet instead of on an exchange floor. Usually, smaller and newer businesses are traded OTC. The NASDAQ is an OTC market.
Pay bills (FI:565) (CS)
First get all your bills in a pile and then organize them into categories so that they are easier to deal with. Then, choose a payment method that best suits you and your needs. Direct debit is the usually the best option. ALways make sure that you are paying your bills on time, so keep on top of the bills and don't let them get on top of you.
Explain the time value of money (FI:062) (CS)
If your money is in a bank account, your money will increase because of interest over time. You can have simple interest and compound interest. Simple interest just means that you get a fixed interest every year. Compound interest means that you get interest on the amount of money in your bank account right which includes the money from last year as well, not just the principal amount.
Discuss the nature of cost accounting budgets (FI:662) (SP)
In cost accounting, a budget is a financial plan that includes both financial and non-financial information. Its most obvious features are a projection of revenue (how much you anticipate selling) and expenses (how much you anticipate spending). The budget can also contain non-financial information, such as how many employees you think you need.
cost accounting systems
Job order costing - used for different products of a firm. There is a difference between the Actual vs. Applied costs. Actual costs are something that the company will track and applied are based on predetermined rate. Manufacturing overhead is the rate of the cost driver times the cost driver. Process costing - used for one product firm - homogeneous product - goes through departments instead of individual jobs. Look at notes Activity-based costing - allocating overhead to products. Interview staff to find out how much time they spend on each of the activities. Then, the percent * overhead/driver = rate. Use rate later for all products.
Explain legal considerations for finance (FI:356) (SP)
Legal considerations in finance include all the laws that an accountant has to follow in the workplace when dealing with clients and the business's money. There are many acts that govern these legal considerations including the Sarbanes-Oxley act.
Explain legal responsibilities associated with financial exchanges (FI:063) (CS)
Legally speaking, a sale is a contract in which ownership of goods transfers immediately from the seller to the buyer for a price. If the transfer of ownership will take place at a future date, it is called a contract to sell, rather than a sale. According to the Uniform Commercial Code (UCC), goods are tangible, movable personal property. Payment occurs when the buyer delivers the agreed price and the seller accepts it. The receipt of goods is when the buyer takes physical possession of the goods. A court may find that a contract is unconscionable, or grossly unfair to one party or another. In such a case, the contract may be voided or limited.
Manage investment portfolio
Management styles - - passive management - for investors willing to accept market returns. Using a fixed asset allocation with a portfolio comprised of index funds would be examples of passive management. - active management - the portfolio manager attempts to meet investment objectives through asset allocation investing and strategies that fit the portfolio owner. Asset allocation - - strategic asset allocation - portfolio mix is fixed according to the investor's profile. Ignores valuation. - tactical asset allocation - the portfolio mix is not fixed but can be changed when conditions change Investing strategies - Value investing - discount to their intrinsic value. It looks at which stocks are undervalued. - Contrarian investing - go against the herd - growth at a reasonable price - growth companies but not overvalued - growth stock investing - regardless of valuation. Looking at the fastest growing stocks. Risk management - Diversification rates - set up definitive rules and abide by them - Maximum portfolio drawdown - a measurement of a portfolio decline from a peak to its lowest point.
Explain the nature of managerial cost accounting (e.g., activities, costs, cost drivers, etc.) (FI:657) (SP)
Managerial accounting, also known as cost accounting, is the process of identifying, measuring, analyzing, interpreting, and communicating information to managers for the pursuit of an organization's goals. The key difference between managerial and financial accounting is managerial accounting information is aimed at helping managers within the organization make decisions, while financial accounting is aimed at providing information to parties outside the organization.
Describe marginal analysis techniques and applications (FI:659) (SP)🎇
Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.
Explain the role of managerial accounting techniques in business management (FI:660) (SP)
Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits.
Basic bond characteristics
Maturity - when the bond principal or face value is paid. Secured/unsecured - whether the bond will be financed through credit or not. Liquidation preference - Senior debt is debt that must be paid first, followed by junior (subordinated) debt. Stockholders get whatever is left over. Coupon - The coupon amount is the amount of interest paid to bondholders, normally annually or semiannually. Yield to maturity - It measures what the return on a bond is if it is held to maturity and all coupons are reinvested at the YTM rate. current yield - Current yield can be used to compare the interest income provided by a bond to the dividend income provided by a stock.
Describe functions of money (medium of exchange, unit of measure, store of value) (FI:060) (PQ)
Money functions as a vehicle to buy goods and services, save for the future, and build wealth. Money can be used as a medium of exchange as well in order to buy and sell goods. Exchange money for goods. They can also be used as unit of measure, which means that money is used to be the common standard for measuring the relative worth of goods and services. It can also be the store of value. Because, money is a liquid asset, its value can be retained over time.
Explain the nature of financial needs (e.g., college, retirement, wills, insurance, etc.) (FI:064) (CS)
One aspect of developing a financial plan is to know the difference between your needs and your wants. Furthermore, you need to prioritize your needs and wants as you set your financial goals. As you do so, keep in mind your attitude toward money and ask yourself if something is more important to spend money on now or to save for the future. Having choices with money comes with a cost and with risk. Opportunity cost is the trade off of giving something up when choosing one thing over another. Financial risks that you should consider include the risks of inflation, rising or falling interest rates, loss of income, and liquidity. Liquidity is the ability to convert assets into cash without loss of value.
Maintain financial records (FI:069) (PQ)
Organizing your financial records helps you plan and measure your financial progress, handle routine money matters, determine the money you have now and will have in the future, and make effective decisions about saving and investing. Documents to manage include bank statements, pay stubs, ownership certificates, tax forms, etc. Records may be maintained in a file cabinet, a safe-deposit box, and/or on a computer. File cabinets are useful for maintaining printed documents and records, and should be organized by type with labeled folders. Items that are difficult to replace, such as car titles and birth certificates, should be kept in a safe-deposit box. These can be rented at a bank. Alternatively, you may choose to purchase an in home fire safe for such documents. Computer programs are an excellent way to create and manage a personal budget, pay bills online, or generate financial documents that can be stored electronically.
external forces affecting a company's value
Political - the extent to which a government may influence the economy Economic - how economic conditions shift supply and demand to directly affect a company Social - changes in the sociocultural market environment that illustrate customer needs and wants Technological - how innovation and development evolve a market or industry Environmental - the ecological and environmental aspects that affect a company's operations and consumer demand Legal - the current legal allowances or requirements within countries or territories in which an organization operates. PESTEL
Discuss the nature of retirement planning (FI:569) (CS)
Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program and managing assets. Future cash flows are estimated to determine if the retirement income goal will be achieved.
Explain the nature of tax liabilities (FI:067) (PQ)
Taxes are payments you make to the government for services they provide. Tax liability is the total amount of taxes owed. Effective planning can reduce your tax liability, thus paying your fair share while taking advantage of tax benefits. The types of taxes include income, Social Security, sales, wealth and property taxes, as well as user fees.
Explain the use of technology in accounting (FI:352) (SP)
Technology is ever-growing in this era so it is only natural that technology plays a very big part in accounting. Accountants use technology to keep records of the financial information of the company so that it all stored in one place. They also use computers to analyze all of those records in order to generate the best advice of companies on how to proceed with the current amount of capital and inventory.
Calculate the cost of credit (FI:782) (CS)
The cost of credit is just how much extra you will pay if you pay at the end of the grace period versus using the early discount offer. There is a formula to calculate your cost of credit. 🎇Discount %/(100-Discount %) x (360/Allowed payment days - Discount days)🎇
Describe the scope of costs in managerial accounting (e.g., direct cost, indirect cost, sunk cost, differential cost, etc.) (FI:658) (SP)
The essential difference between direct costs and indirect costs is that only direct costs can be traced to specific cost objects. A cost object is something for which a cost is compiled, such as a product, service, customer, project, or activity. Examples of direct costs are direct labor, direct materials, commissions, piece rate wages, and manufacturing supplies. Examples of indirect costs are production supervisor salaries, quality control costs, insurance, and depreciation. Differential cost (also known as incremental cost) is the difference in cost of two alternatives. For example, if the cost of alternative A is $10,000 per year and the cost of alternative B is $8,000 per year. The difference of $2,000 would be differential cost. The differential cost can be a fixed cost or variable cost. It is a potential benefit or income that is given up as a result of selecting an alternative over another. For example, You have a job in a company that pays you $25,000 per year. For a better future, you want to get a Master's degree but cannot continue your job while studying. If you decide to give up your job and return to school to earn a Master's degree, you would not receive $25,000. Your opportunity cost would be $25,000. The costs that have already been incurred and cannot be changed by any decision are known as sunk costs. For example, a company purchased a machine several years ago. Due to change in fashion in several years, the products produced by the machine cannot be sold to customers. Therefore the machine is now useless or obsolete. The price originally paid to purchase the machine cannot be recovered by any action and is therefore a sunk cost.
Protect against identity theft (FI:073) (CS)
The first step to protecting your identity is to be cautious with sensitive information and documents, including your social security number, checking and other bank account numbers, and the like. Shred any documents that contain sensitive information before throwing them out. When paying with a credit or debit card, be sure the card is always returned to you after the purchase. You may wish to keep a record of your card numbers in a place separate from your cards. Also, always look over your bank and credit card statements carefully when you receive them for mistakes and unknown charges or withdrawals.
Explain the nature of statements of changes in equity (FI:630) (SP)
The statement is split into: - changes that affect the company's share capital - changes that affect the retained earnings of the company The statement shows how certain changes in the company affected the above things.
Interpret securities table (FI:275) (SP)
There are a number of tables that you have to interpret in order to get all of the information needed to make your decisions. Vol is not volatility, it is volume traded.
Explain legal considerations for accounting (FI:353) (SP)
There are many acts that govern how accounting: Budgetary Integrity: Federal financial reporting should assist the government in being accountable in its tax expenditures. Federal financial reporting should thus provide information that helps stakeholders determine. Operating Performance: Federal financial reporting should provide information for evaluating the services, efforts, costs, and accomplishments of the government. Federal financial reporting should provide information that helps stakeholders determine. Stewardship: Federal financial reporting should help in the assessment of the government's operations and investments for the given period and how, as a result, the government's and the nation's financial condition has changed and may change in the future. Federal financial reporting should provide information that helps to determine whether
Prepare bank account documents (e.g., checks, deposit/withdrawal slips, endorsements, etc.) (FI:560) (PQ)
There are many different types of bank account documents. A checkbook register is a booklet that you can use to fill out checks for someone else that they can later cash in. You can use deposit and withdrawal slips to deposit and withdraw money from your bank account. Endorsement is just the signing of a document that allows a legal transfer between parties.
Explain types of investments (FI:077) (CS)
There are many different types of investments. They include bank products which include your money in checking and savings account. There are also bonds which is a loan an investor makes to an organization in exchange for interest payments over a specified term. There are also stocks in which you buy shares of a company's stock, and you own a piece of that company. Stocks come in a wide variety, and they often are described based the company's size, type, performance during market cycles and potential for short- and long-term growth. There are also funds—such as mutual funds, closed-end funds and exchange-traded funds—pool money from many investors and invest it according to a specific investment strategy. Funds can offer diversification, professional management and a wide variety of investment strategies and styles. There is also insurance. Life insurance products come in various forms, including term life, whole life and universal life policies. There also are variations on these—variable life insurance and variable universal life—which are considered securities.
Describe sources of income (wages/salaries, interest, rent, dividends, transfer payments, etc.) (FI:061) (PQ)
There are many sources of income. The primary source of income for most people is wages/salary which comes from their employers. There are many other ways including interest from your bank account, rent from your properties, transfer payments from other people. You can also get income from dividends in your stocks.
Describe sources of securities information (FI:274) (CS)
There are so many resources online to get securities information, however, it is wise to use websites that are known to be reputable. One very reputable source is Yahoo Finance which has a lot of information on certain securities.
🎇Prepare personal income tax forms (i.e., 1040 EZ form) (FI:074) (CS)🎇
There are three basic income tax return forms, although hundreds of forms exist. Choose Form 1040EZ if your taxable income is less than $100,000, you have no dependents, and your income consists only of wages, salaries, and tips (among other factors). Choose Form 1040A if you have less than $100,000 in taxable income and you claim deductions, have dependents, and have capital gains distributions (among other factors). Form 1040 is an expanded version of Form 1040A, useful if you have taxable income greater than $100,000 and plan to itemize deductions, or have more complicated financial situations. To complete a tax return form, have your W-2 Form from your employer(s) on hand along with any interest and/or dividend forms. You can choose to file your tax return by using traditional paper forms and mailing them in, or you can file electronically over the Internet. In addition, you may choose to use tax preparation software to guide you through the process on your own with a computer. You may also choose to hire a tax professional to complete your return. Be sure to keep a copy of your completed form and your supporting documents in a safe place for at least six years.
🎇(Practice with them) Describe the nature of cash flow statements (FI:091) (SP)🎇
They track when you anticipate for cash to come into the company and when you expect to pay money. This will determine whether or not you will have enough money to pay for certain things needed by the business. It shows how much cash you started with, what is your projected cash expenditure, and how you plan to get cash into the company.
Discuss the nature of convergence/consolidation in the finance industry (FI:573) (SP)
To consolidate is to combine assets, liabilities, and other financial items of two or more entities into one. In the context of financial accounting, the term consolidate often refers to the consolidation of financial statements, where all subsidiaries report under the umbrella of a parent company. Consolidation also refers to the union of smaller companies into larger companies. Consolidation in banking is distinct from "convergence." Consolidation refers to mergers and acquisitions of banks by banks. Convergence refers to the mixing of banking and other types of financial services like securities and insurance, through acquisitions or other mean
Determine personal net worth (FI:562) (CS)
To know your personal net worth you have to add what you own and subtract what you owe. List your assets, estimate the value if you don't have the exact number,and add them all up. Your assets can include things like your car (the part that you paid off already), home (the part that you paid off already), money in bank, investments, property and cash value of insurance policies. After that you list your liabilities and add up the outstanding balances. Your liabilities can include things like your car loan, your mortgage, student loans, credit card balance. SUbtract your liabilities from your assets yo determine your net worth.
Make responsible financial decisions (FI:783) (CS)
To make responsible financial decisions you need to first know the extent of your income from all the channels of income that you have. By doing this, you can make a judgement on whether to buy or invest on something because of your current financial situation. You also cannot be making financial decisions when you are upset or in any other compromising situation since this will probably skew your decision. You also need to distinguish between a need and a want so that you are not spending too much money on the things that you want to think that they are the things you need.
Variable costing and absorption costing
Variable costing - A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs. The fixed overhead is expensed as incurred per period. Absorption costing - A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead and fixed overhead - in unit product costs. This way, if the inventory is increased, it defers some FOH.
Discuss considerations in selecting a financial-services provider (FI:076) (CS)
When selecting a financial service provider, consider the following, depending on your needs. Consider one where...you can get the highest rate of return on a savings account. You can obtain a checking account with low or no fees. You will be able to borrow money when you need it and at a favorable interest rate. You can get free financial advice. The institution is insured through the FDIC. It has convenient locations. It offers a broad range of financial services. It has online banking or other special services you may desire.
🎇Validate credit history (FI:072) (CS)🎇
You can validate your credit history by obtaining a copy of your credit report from each of the three reporting agencies. You can obtain a copy free of charge one time per year from each agency. Once you receive a credit report, look it over carefully for errors or out-of-date information, and be sure to contact the agency promptly to make corrections.
Control debt (FI:568) (CS)
You first need to know how much debt you even owe and to who. By doing this, you will have an idea of how much you need to save in order to pay off all these debts. After doing that, you need to pay your bills on time instead of procrastinating on them since there is usually a late fee that you have to pay each time you pay later than your intended time. You also need to prioritize which debts to pay off first.You can also use an emergency fund to fall back on in case you don't have money left. You can also get help from a credit counseling company so that you know how to save enough to pay off your debt.
Explain the need to save and invest (FI:270) (CS)
You need to save and invest in stocks, real estate, etc so that you can later buy things that require a lot of money like cars or homes. You also need to save to be prepared for a recession or when you lose your job. Also saving and investing will allow for a stressless retirement.
Interpret a pay stub (FI:068) (PQ)
Your pay stub includes many important things, starting with your name and social security number. It lists the current pay period. Your current and year-to-date earnings, taxes, and deductions are listed. Current earnings may be described with your hourly rate, the number of hours worked, and your gross earnings (calculated by multiplying your hourly rate by the number of hours worked). Taxes that may be withheld from your gross pay include Federal, State, Local, FICA (Social Security), and Medicare. Other deductions might include union dues and money withheld for fringe benefits, such as health insurance. Net pay is your gross earnings less taxes and deductions.
Discuss the use of variance analysis in managerial accounting (FI:661) (SP)
a variance is the difference between a budgeted, planned, or standard cost and the actual amount incurred/sold. Variances can be computed for both costs and revenues.The concept of variance is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or company.
pro forma statements
are financial reports issued by an entity, using assumptions or hypothetical conditions about events that may have occurred in the past or which may occur in the future.
Cost-Benefit Analysis
economic model that compares the marginal costs and marginal benefits of a decision
Calculate the time value of money (FI:238) (SP)
future value = FV = PV (1 + r)^n, present value = PV = FV / (1 +r)^n
stock options
gives an investor the right but not the obligation to buy or sell a stock at an agreed upon price and date. - Put - a bet that a stock will fall - call - a bet that a stock will rise The way this can happen is when someone says it will go down but someone else says it will go down, so one of them writes a put or a call.
Describe the role of financial institutions (FI:336) (CS)
https://www.investopedia.com/ask/answers/061615/what-are-major-categories-financial-institutions-and-what-are-their-primary-roles.asp
cost of common stock
the return required on the stock by investors in the marketplace
