Cash Flow Statement-ending - Assignment Example

Cash flow statement-ending 2017 Jerry Jenny Total 2016 2017 Salary Income 105000 50000 155000 159650 164440 Investment 0 0 Commonwealth Bank shares 625 shares 0 25000 25000 26250 27563 Saving account with Bundoora credit union 26900 26900 28245 29657 Term deposit with Bundoora credit union – 3 month rolling balance 165000 165000 173250 181913 less; Deductable expense 296900 75000 371900 387395 403573 Work related expenses -1500 -1000 -2500 -2575 -2652 Insurance 592300 -3000 -3090 3183 Entertainment -4300 -4429 -4562 Utilities -8000 -8240 -8487 Motor vehicle expenses -8500 -8755 -9018 Sundries -2000 -2060 -2122 Cash income before tax 1184600 149000 1333600 358246 379915 less;tax (Working) -72917.25 -32777.4 -105694.65 -108865 -112132 after tax income 1111682.75 116222.6 1227905.35 249381 267783 Less;houshold expense -25800 -26574 -27371 One off capital item Personal car -16000 -16000 -16480 -16974 Family home -250000 -267500 -294812 Surplus deficit 1095682.75 116222.6 936105.35 188208 196409 2. Balance sheet for the year ending 2017 3. 1 Accumulated superannuation Working on tax computation Tax calculation Jerry Jenny Taxable Income Tax on Taxable Income Marginal Tax Employment income Tax payable Tax payable Rate salary 105000 50000 $0 - $18 Nil 0 Tax .0*105000= 0 0 $18,201 - $37,000 $0 + 19% over $18,200 19% .19*105000= 19950 0.19*50,000 9500 $37,001 - $80,000 $3,572 + 32.5% over $37,000 32.50% 32.5%*105000 34125 32.5%*40500 13162.5 $80,001 - $180,000 $17,547 + 37% over $80,000 37% 0.37*50925 18842.25 27337.5*0.37 10114.9 $180,000 + $54,547 + 47%* over $180,000 47% Net tax payable 72917.25 32777.4 Superannuation Year Age Salary increase Salary Contribution 90.150 Opening super balance ADD; Employer contribution Contribution rate Less;15% contribution tax Add; net earning Closing super balance 2015 45 1.03 155,000 1.15 330000.00 14275.00 0.15 2141.25 936105.00 346416.40 2016 46 1.03 159650 1.15 379500.00 16123.88 0.15 2418.58 936105.00 398042.61 2017 47 1.03 164439.5 1.15 436425.00 17655.64 0.15 2648.35 936105.00 456729.14 2018 48 1.03 169372.7 1.15 501888.75 19332.93 0.15 2899.94 936105.00 524121.77 2019 49 1.03 174453.9 1.15 577172.06 21169.56 0.15 3175.43 936105.00 601517.20 2020 50 1.03 179687.5 1.15 663747.87 23180.67 0.15 3477.10 936105.00 690405.79 2021 51 1.03 185078.1 1.15 763310.05 25382.83 0.15 3807.42 936105.00 792500.46 2022 52 1.03 190630.4 1.15 877806.56 27794.20 0.15 4169.13 936105.00 909770.04 2023 53 1.03 196349.4 1.15 1009477.54 30434.58 0.15 4565.19 936105.00 1044477.46 2024 54 1.03 202239.8 1.15 1160899.18 33325.87 0.15 4998.88 936105.00 1199224.07 2025 55 1.03 208307 1.15 1335034.05 36586.78 0.15 5488.02 936105.00 1377109.00 2026 56 1.03 214556.2 1.15 1535289.16 40062.45 0.15 6009.37 936105.00 1581361.13 2027 57 1.03 220992.9 1.15 1765582.53 43868.34 0.15 6580.25 936105.00 1816031.28 2028 58 1.03 227622.7 1.15 2030419.92 48035.80 0.15 7205.37 936105.00 2085661.24 2029 59 1.03 234451.4 1.15 2334982.90 52599.13 0.15 7889.87 936105.00 2395472.05 2030 60 1.03 241484.9 1.15 2685230.34 57596.03 0.15 8639.40 936105.00 2751465.92 Jerry Jenny Opening balance 195000 135000 Rate of employer contribution 9.50% 9.50% Annual rate of return 0.15 0.15 Contribution tax 5.2 4.9 Current salary 105000 50000 Salary increase 3% 3% Years to retirement 15% 15% Sum Accumulated 4.1 The risk profile of the couple As depicted by the financial situation of the couple, they are considered as growing since; their financial report a increasing trend on the value of the worth as observed by the value of their net worth and the liquidity ratio. Their saving ratio is less 0.76, which implies that the couple has more funds at their investment and thus the client, are having huge fund at their disposal to be invested in funds that generate income. This a class of portfolio with highly risky venture with high returns. the couples in this class are the one whom are ready to take on risk in order to increase their returns as observed by highly liquidity ratio of 1.5.The couple are considered as aggressive customers since, these investors require to substantiality Perform exemplary in the investment and they must understand that they are exposed to investment risk than the market. They might even loss their portfolio up to more that 35% within a month and it take long to recoup the losses. this kind of investors characteristically hold many economy in entire sector (coefficientl, 2003).Aggressive investors are naturally young as well as tend to contribute comparatively large amount into the portfolio occasionally overtime by the contribution from earned-investment income. They are in need of accumulating large amount of wealth in the future in order to fiancé their living cost as well as remain with plenty of time to work and recover losses. 4.1 The couple’s current asset allocation (across all their investments including super) Current Asset Allocation Name of investment Cash Fixed Interest Property Australian shares Total Fixed home $480,000 480000 Boat 20,000 20000 Cars 35000 35000 Commonwealth Bank shares 25000 25000 Term deposit with Bundoora 165000 165000 Home mortgage 14500 14500 Personal car loan 1360 1360 credit card 990 990 Total of asset class in $ terms 165000 16850 $535,000 25000 741850 Total of asset class in % terms 22.24 2.27 72.12 3.37 100.00 5.1 Analyzing the risk and situation Analyzing financial situation Balance sheet concerned with a person’s net worth Net worth ratio {total net worth/total assets} 824000-35500)/1370900=0.56 Liquidity ratio =liquid assets/current debt 824000/546900=1.5 Cash flow statement concerned with generating a cash surplus Savings ratio cash surplus= (savings)/Net income after tax 936105.35/1227905.35=0.76 Debt service ratio ={monthly loan repayments/Monthly net income after tax} 35500/102408.78=0.35 Analyzing financial situation Net worth 0.56 Liquidity ratio 1.5 Saving ratio 0.76 Debt ratio 0.35 The graph of financial situation 5.2four possible financial strategies that the couple may be able to use to improve their short-term and long-term financial situation. Time value for money This considering the future value of an investment at the present year zero in order to ascertain the viability in terms of positive returns and making an informed investment decision of whether to invest on the project or not. The advantage of discounting an investment returns is that, it will provide a clear understanding of the business performance and its profitability at time zero which gives a clear understand of the venture risk and factors to consider before investing the venture.nby doing so, the risk of investment is minimized. The model to discount future returns to year one is the use of present value PV= (one+R^-N} where PV is the present value, r is the discounting rate and n is the number of years that investment will exist before the returns is maximized. Financial projection This done in order to ascertain the amount of funds that the client will be required to have at the time of their retirement. the best tool for forecast the cash at the time of the retirement is the use of superannuation since it determine the amount that a client require to accumulate today till day of his retirement in order to meet his long-term financial needs. In order to undertake thus approach, the client background understanding including the number of children time to retirement as well as vital data on the income and expenditure is considered relevant prior to making the financial projection of the client and providing a conclusive report based on the financial needs. Asset diversification Diversification is holding a portfolio of asset in different sectors in order to minimize investment risk. An investment will diversity his investment security in different sectors in order to ensure that returns and risk of different security as not consistent hence saving the investor from investment downfall consequential from holding single return investment. The impact that diversification The impact of diversification portfolios is that there is a reduction in volatility of the returns and at the same time the returns of the portfolio returns. In this regards, it can be observed that the holding a portfolio investment returns is ideal since, there is less security risk as depicted by the value of variance and with maximum retains of investment .The justification why we choose the portfolio as an ultimate investment strategy is that as the expected return of market is high with low cost of capital as depicted in the table for portfolio return and risk. The expected return of market after using CAPM formula Read More