Professional Documents
Culture Documents
Defining
Definingand
andprioritizing Deciding
prioritizing Accessing
Accessingcurrent
current Decidingwhere
whereyou
youwant
want
short finances
finances&&commitments to be in the future
short&&long
longterm
termgoals
goals commitments to be in the future
Identifying
Identifyingrealistic
realistic
Putting
Puttingthe
theplan
planinto
into
Monitoring
MonitoringPerformance
Performance strategies
strategiesto
toachieve
achievethethe
action
action goals
goals
Risk Management –
Insurances & Asset Protection
Prepare & present a Assist the Client or manage Review changes in personal
personalized financial plan the process as defined in the circumstances
Engagement Agreement
Establish a review cycle Review and evaluate impact of
changing tax laws
• Estate planning
• Investment and property management
• Start as early as possible and start with what you have got
• Look at the big picture – It is more than just retirement planning or tax
planning
Client Planner
• Quantitative Data-
• May be described as statements of fact.
• A client's name, date of birth and salary are some
examples.
• Qualitative Data-
• These may be defined as ‘relevant information that is not
factual in nature’.
• More difficult to obtain and define.
• Relates more to personal and social attitudes of the client.
• Examples : attitude to risk, future employment prospects
• The financial planner should find out which insurance policies the
client has in force
• Listening Skills
- Specific
- Measurable
- Action Oriented
- Realistic
- Time Bound
• Clients who have the willingness to take risks, but don’t have
the financial ability.
• Clients who have the financial ability but don’t have the
willingness to take risks.
• All other clients
Check
Checkthat
thatyou
youhave
have
all the information
all the information
Secure
Securethe
theclient’s
client’s
current
current financialposition
financial position
Establish
Establishthe
theclient’s
client’sgoal
goal
and financial concern
and financial concern
Recommendations
Recommendationsto to
meet
meetclient's
client'sdesired
desired
future
futurefinancial
financialposition
position
Monitoring the plan- The Financial Planner and the Client should:
• Conduct periodic reviews when:
• Changes in personal circumstances
• Changing tax laws
• Changing life circumstances
• Make periodic adjustments or recommendations as necessary
• The financial planner should establish a client file and a system for
periodic review and revision.
• For example, Clients who carry too little insurance or hold highly
risky assets are risk tolerant.
• Portfolio goals and constraints (including time horizons) and the need for
current income, capital preservation and growth are part of the risk
capacity evaluation.
• The planner can find out if their client’s financial situation allows
them to take greater risks.
• Cash budgeting
• Simple Mortgage.
• Mortgage by conditional sale.
• Usufructuary mortgage.
• English mortgage.
• Mortgage by deposit of title deeds.
• Anomalous mortgage
Property
Propertystands
stands
absolutely
absolutely
Possession
Possessionstands
stands transferred
transferredto tothe
the
transferred
transferred mortgagee
mortgageewithwithaa
Involves
Involves to
to themortgagee
the mortgagee covenant
covenantto torepay
repay
AAmortgage
mortgagewithout
without an
an ostensiblesale
ostensible sale and
and rentsand
rents andprofits
profits the mortgage
the mortgage
the
the transferof
transfer of to start with
to start with from the property
from the property money
moneyon onaacertain
certain
any property.
any property. which
whichbecomes
becomes can
canbe beenjoyed
enjoyedbyby date by the
date by the
absolute
absoluteonondefault
default the
themortgagee
mortgageetill
till mortgagor,
mortgagor,
payment of the
payment of the when
whenthethe
mortgage
mortgagemoney
money property
property willbe
will be
re-transferred
re-transferred tothe
to the
mortgagor.
mortgagor.
The
Thesecurity
securityfor
forthe AAsimple
the simplemortgage
mortgage
money
moneyisisintended giving
intended giving an addedright
an added righttoto
to
tobebecreated
createdbyby take possession in
take possession in
deposit of the case
deposit of the caseofofdefaults
defaultsof
of
title
titledeeds
deedsororpapers payment
papers paymentbecomes
becomesan an
of
of the property..
the property anomalous
anomalousmortgage.
mortgage.
• Finance Lease: here the lessee has an option to buy the asset
at the end of the lease tenure. Generally for a longer period.
The ratios we will suggest provide information about the following six
aspects of the client’s financial situation:
• Liquidity
• Debt
• Risk exposure
• Tax burden
• Inflation protection
• Net worth
Gross This
Thisisisthe
thevalue
valueof
ofoutput
outputofofgoods
goodsand
andservices
GrossNational
National produced
services
Product
Product(GNP)
(GNP) produced by Indian companies, regardless ofwhether
by Indian companies, regardless of whether
the production is inside or outside the
the production is inside or outside the IndiaIndia
Gross The
Thevalue
valueof
ofoutput
outputof
ofgoods
goodsand
andservices
servicesproduced
GrossDomestic
Domestic in
produced
Product
Product(GDP)
(GDP) in the country, regardless of whether businessesare
the country, regardless of whether businesses are
owned and operated by Indians or foreigners.
owned and operated by Indians or foreigners.
-
profits on
= +
profits on
Gross
GrossNational
National Gross
GrossDomestic
Domestic Indian owned
foreign owned
Product
Product(GNP)
(GNP) Product
Product(GDP)
(GDP) businesses
businesses
outside India
GDP=
GDP= CC ++ II ++ GG ++ (X-
(X- M)
M)
CC==personal
personalconsumption
consumptionspending
spendingon
ongoods
goodsand
andservices
services
I I==Private
Privatesector
sectorfixed
fixedcapital
capitalexpenditure
expenditure
GG==Government
Governmentexpenditure
expenditure
(X-M)=
(X-M)=Net
Netof
ofexport
exportreceipts
receipts(X)
(X)and
andimport
importpayments
payments(M)
(M)
The relationship highlights actual rupee expenditure for goods and services
produced in the economy for measuring GDP.
This equation includes all key players involved in the economy – consumers /
households, business (private sector) and government.
For living standards to rise in India, GDP must grow at a faster rate than the
population. This way, there is greater quantity of goods and services per person.
Answer:
GDP = 3000 + 500 + 2000 + (1000-1500)
= 5500 – 500
= 5000
Result
Resultof
ofaahigher
highercost
costfactor
factorof
ofproduction
production
Cost
CostPush
PushInflation
Inflation being
beingpassed
passedalong
alongto
tothe
theconsumer
consumer
in
inthe
theform
formof
ofhigher
higherprices.
prices.
Producers
Producersexerting
exertingaastrong
stronginfluence
influenceon
on
Administered
AdministeredPrices
Prices the
theprice
priceof
ofthe
theproduct
productbecause
because
of a lack of competition.
of a lack of competition.
Inability
Inabilityto
tosolve
solvethe
thesimultaneous
simultaneousproblems
problemsof of
Stagflation
Stagflation economic stagnation and inflation
economic stagnation and inflation
through
throughthetheuse
useof
ofmonetary
monetaryand
andfiscal
fiscalpolicies.
policies.
This occurs when high rates of inflation
This occurs when high rates of inflation
and
andhigh
highrates
ratesofofunemployment
unemploymenthappen
happen
simultaneously.
simultaneously.
• CRR is the cash reserve which banks are required to keep with the
RBI ; SLR is the proportion of funds that banks need to keep in
Government Securities
Good Earning Stocks in Stock which One which The least risky
Potential and companies fluctuates declines less form of stock.
very low yield whose earnings widely over than most in a These are the
because the are good, but swings in the general stocks of older,
company is are not business cycle. downturn of well-
reinvesting the growing much This is the the market. established
bulk of its stock of It is usually companies,
earnings in companies income stock which have
expansion. whose sales proved that
and earnings they can earn
vary greatly. profits.
Besides these, we have speculative stocks - Stocks of new, small firms whose chances
for success are not great (mining stocks, etc.). An investor should not place money in
these stocks if they cannot afford to lose it during bad times.
Non-
Non-
Cumulative
Cumulative Participating
Participating Convertible
Convertible
Cumulative
Cumulative
Dividends If no dividends If earnings Can be
accumulate from suffice, the exchanged for
are paid in
prior years. preference common stock or
prior years,
When the shareholder will other securities
company The corporation also share in the same
declares is not liable for equally, the company or
dividends, those such failure to dividend paid to other
in arrears pay dividends common share companies, at
receive back holders the option of the
dividends stockholder
Compound Interest
Interest paid (earned) on any previous interest earned, as
well as on the principal borrowed (lent).
General Formula:
FVn = PV0(1 + [i/m])mn
n: Number of Years m:
Compounding Periods per Yeari: Annual
Interest Rate FVn,m: FV at the
end of Year n
PV0: PV of the Cash Flow today
(1 + [ i / m ] )m - 1
• The numerator of this ratio is the average annual post tax profit
over the life of the investment and the denominator is the average
book value of fixed assets committed to the project.
• FV
FV(rate,nper,pmt,pv,type)
• Rate is the interest rate per period.
• Nper is the total number of payment periods in an annuity.
• Pmt is the payment made each period; it cannot change over the
life of the annuity. Pmt must be entered as a negative number.
• Pv is the present value, or the lump-sum amount that a series of
future payments is worth right now. If pv is omitted, it is assumed
to be 0 (zero). PV must be entered as a negative number.
• Type is the number 0 or 1 and indicates when payments are due. If
type is omitted, it is assumed to be 0 which represents at the end
of the period. If payments are due at the beginning of the period,
type should be 1.
Example: =NPV(F9,C10:C14),+C9
F9 contains the required rate of return
C10:C14 contains the postive cash flow generated by the project
each period
+C9 contains the cash investment required by the project.
The cash investment must be entered as a negative amount.
• RATE
RATE(nper,pmt,pv,fv,type,guess)
Nper is the total number of payment periods in an annuity.
Pmt is the payment made each period and cannot change over the
life of the annuity.
Pmt must be entered as a negative amount.
Pv is the present value that the future payment is worth now. Pv
must be entered as a negative amount.
• IRR
• IRR(values,guess)
• Values is an array or a reference to cells that contain
numbers for which you want to calculate the internal
rate of return.
• · Values must contain at least one positive value and
one negative value to calculate the internal rate of
return.
· IRR uses the order of values to interpret the order of
cash flows. Be sure to enter your payment and income
values in the sequence you want.
· If an array or reference argument contains text,
logical values, or empty cells, those values are ignored.
• Guess is a number that you guess is close to the result
of IRR.
Ans:53,220.57
• Sole Proprietorship
• Partnership
• Limited Liability Companies
• Trusts
• Foundations
• Professional Association
• Cooperative Societies
Promise According
Accordingto
toSection
Section2(b)
2(b)
"When
"Whenthe
theperson
personto
towhom
whomthe
theproposal
proposalisismade
made
signifies
signifieshis
hisassent
assentthereto,
thereto,the
theproposal
proposalisissaid
saidto
tobe
beaccepted.
accepted.
Proposal
Proposalwhen
whenaccepted,
accepted,becomes
becomesaapromise"
promise"
Illegal Bilateral
• A statute, enacted to
• confer additional consumer rights and
• to preserve and guard the existing one under the law.
• One of the aims of the Act is to make the justice quick and
smooth for the consumers.
• By revocation,
• Renunciation by agents.
• Completion of business.
• Principal's or agent's death.
• Principal or agent becoming person of unsound mind.
• Insolvency of principal.
• Expiry of time.
• Such cases under the Indian Contract Act, 1872 are generally dealt
with as part of the doctrine of "undue influence".