DECA - Financial Analysis

Explain forms of financial exchange (cash, credit, debit, electronic funds transfer, etc.) (FI:058) (PQ)

-Financial exchange is the process of exchanging money or -forms: cash, credit, debit, and electronic funds transfer

-Cash: most common form of financial exchange, involves

physical exchange of paper money or coins for goods or services

-Credit: goods or services are purchased on credit, buyer pays for them at a later date, credit cards are most common form of credit

-Debit: goods or services are purchased with funds directly from the buyer's bank account, debit cards are most common form of debit

-Electronic funds transfer (EFT): funds are transferred electronically from one bank account to another, often used for online purchases or for transferring money between accounts.

Identify types of currency (paper money, coins, banknotes, government bonds, treasury notes, etc.) (FI:059) (PQ)

Currency: form of money that is used as a medium of exchange for goods and services

-types: paper money, coins, banknotes, government bonds, treasury notes.

-Paper money: physical form of currency, printed by a government, used as legal tender.

-Coins: also physical forms, but are made of metal and have a set value

-Banknotes: similar to paper money, but are issued by a bank and are not legal tender

-Government bonds: debt instruments issued by a government to raise money for public projects.

-Treasury notes: debt instruments issued by a government to raise money for specific projects

Describe functions of money (medium of exchange, unit of measure, store of value) (FI:060) (PQ)

-Money: medium of exchange, a unit of measure, and a store of value.

-a medium of exchange: used to facilitate transactions between two parties.

-a unit of measure: used to compare the relative value of goods and services

-a store of value: used to store wealth, can be used to purchase goods and services in the future

Describe sources of income and compensation (FI:061) (CS)

-Sources of income: various ways in which an individual or household can earn money

-most common are wages and salaries, are earned through employment.

-interest earned on investments, rent from property, dividends from stocks, transfer payments such as Social Security, and other forms of government assistance.

-Each can provide an individual or household with a steady stream of income, allowing them to meet their financial needs

Explain the time value of money (FI:062) (CS)

The time value of money: the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

-due to the fact that money can be invested and earn interest over time.

-in finance, used to compare investment options and to determine the value of cash flows at different points in time

Explain the purposes and importance of credit (FI:002) (CS)

Credit:allows individuals and businesses to borrow money to purchase goods and services

-important because allows people to purchase items that they may not be able to afford with cash

-also helps individuals and businesses build a credit history, can be used to secure loans and other financial products in the future.

-also helps to stimulate the economy by allowing people to purchase items that they may not have been able to purchase otherwise

-an important financial tool that can help individuals and businesses achieve their financial goals.

Explain legal responsibilities associated with consumer financial products and services (FI:063) (CS)

-Financial exchanges: involve the transfer of money or other financial assets between two or more parties.

-Legal responsibilities associated with financial exchanges: ensuring that all parties involved in the exchange are legally allowed to do so, that all parties understand the terms of the exchange, and that all parties are in agreement with the exchange.

-also, all parties must adhere to applicable laws and regulations: those related to taxation, anti-money laundering, and consumer protection.

-all parties must ensure that the exchange is conducted in a fair and transparent manner

Explain the need to save and invest (FI:270) (CS)

Saving and investing: can help individuals build wealth and achieve financial security

-Saving money allows individuals to set aside money for future use,

-investing money allows individuals to grow their money over time

-can help individuals reach their financial goals, such as buying a home, paying for college, or retiring comfortably.

-can help protect themselves from unexpected financial emergencies

-setting aside money in a savings account and investing in stocks, bonds, and other financial products, they can build a financial safety

Set financial goals (FI:065) (CS)

-an important step in creating a successful financial plan. -specific objectives that you set for yourself in order to achieve financial security and stability

-Examples: saving for retirement, paying off debt, building an emergency fund, and investing in stocks and bonds.

-can help you stay on track and make sure you are taking the necessary steps to reach your financial goals.

Develop personal budget (FI:066) (CS)

-a plan that outlines how you will manage your income and expenses over a given period of time.

-helps you to track your spending and ensure that you are living within your means.

-helps you to plan for future expenses and save for long-term goals.

-requires you to analyze your current financial situation, set financial goals, and track your spending.

-important to review your budget regularly to ensure that it is still meeting your needs.

Determine personal net worth (FI:562) (CS)

-a measure of an individual's financial health

-calculated by subtracting total liabilities from total assets

-an important metric to consider when assessing an individual's financial situation

-To determine, first calculate total assets (cash, investments, and any other items of value owned)

-Then, calculate total liabilities (debt or other financial obligations)

-the total assets -- total liabilities

Explain the nature of tax liabilities (FI:067) (PQ)

-amount of money that an individual or business owes to the government in taxes

-includes income taxes, payroll taxes, sales taxes, and other taxes

-determined by the amount of income earned, deductions taken, and credits applied

-must pay on time or face penalties and interest charges

-can also be reduced through various tax credits and deductions.

Interpret a pay stub (FI:068) (PQ)

-a document is issued to an employee by their employer to provide a record of their wages and deductions

-typically includes information such as the employee's name, the period of time the wages cover, the gross wages earned, any deductions taken, and the net wages paid

Write checks (FI:560) (PQ)

-write date in top right corner

-write person or organization on pay to order of

-write payment amount in numbers

-write it in words

-why you wrote check in memo area

-sign check in bottom right corner

Maintain financial records (FI:069) (PQ)

-process of keeping accurate and up-to-date records of all financial transactions

-includes tracking income, expenses, assets, liabilities, and other financial information

-should be kept in an organized manner and should be updated regularly to ensure accuracy.

-helps to track their financial performance and make informed decisions

-helps to ensure compliance with applicable laws and regulations.

Balance a bank account (FI:070) (PQ)

-assess the balance

-compare check register to bank statement

-find outstanding transactions (deposits and withdrawals)

-run the numbers

-fix mistakes and problems, talk to bank

Explain the nature of charitable giving (FI:567) (PQ)

n/a

Manage online accounts (FI:830) (CS)

-Keep your operating system and browsers up to date

-create strong passwords

-never reuse passwords

-use caution when sharing

-erase passwords stored on browsers

-delete old accounts

-set up 2 factor authentication

-use VPN on public wifi

Calculate the cost of credit (FI:782) (CS)

-determining the total amount of money that a borrower will pay for a loan, including interest and any other fees associated with the loan

-done by taking the total amount borrowed, multiplying it by the interest rate, and then adding any other fees associated with the loan

-can vary depending on the type of loan, the amount borrowed, and the interest rate.

Demonstrate the wise use of credit (FI:071) (CS)

-using credit responsibly and understanding the implications of taking on debt

-understanding the terms of any loan or credit card agreement, making payments on time, and not taking on more debt than you can afford to pay back.

- understanding the potential consequences of not paying back debt, such as damage to your credit score and the potential for legal action.

-By using credit wisely, you can ensure that you are able to manage your debt and maintain a good credit score.

Validate credit history (FI:072) (CS)

-process of verifying the accuracy of a person's credit report

-checking the accuracy of the information reported by the credit bureaus, such as payment history, credit limits, and account balances

-verifying that the person's identity matches the information on the credit report

-important to ensure that the person's credit score is accurate and that they are not being unfairly penalized for mistakes or inaccuracies on their credit report.

Make responsible financial decisions (FI:783) (CS)

-taking the time to understand your financial situation and making decisions that will help you reach your financial goals.

-budgeting, saving, investing, and managing debt.

-understanding the risks associated with different financial decisions and making sure that you are comfortable with the level of risk you are taking.

-understanding the different types of financial products available and choosing the ones that best fit your needs

-staying informed about changes in the financial markets

-staying up to date with the latest financial news.

Protect against identity theft (FI:073) (CS)

-a serious crime that can have long-lasting financial and emotional consequences.

-protect against identity theft, it is important to take steps to secure your personal information

-shredding documents with sensitive information, using strong passwords for online accounts, and monitoring your credit report regularly

-important to be aware of potential scams and to never give out personal information over the phone or online unless you are certain of the source.

Pay bills (FI:565) (CS)

-To pay bills as a business, an employee should first review and verify the accuracy of each bill, including the amount owed and the due date

-ensure that the bill is approved for payment by the appropriate person or department within the company.

-employee should determine the most appropriate payment method, such as a check, credit card, or online payment.

-also keep track of each payment made and maintain accurate records for accounting and auditing purposes.

-important to ensure that bills are paid on time to avoid any late fees or penalties.

-an employee can manage the business's bills effectively, maintain good relationships with vendors and suppliers, and ensure that the company's finances are in order.

Apply for a consumer loan (FI:625) (SP)

-submitting an application to the lender, which includes information about the borrower's income, credit history, and other financial information.

-lender will then review the application and determine whether or not to approve the loan.

Control debt (FI:568) (CS)

-financial management strategy that involves actively managing debt levels to ensure that they remain manageable and do not become too large or unmanageable

-creating a budget and sticking to it, making regular payments on debts, and avoiding taking on additional debt.

-monitoring debt levels and taking action to reduce them if necessary.

-individuals and businesses can ensure that their finances remain stable and that they are able to meet their financial obligations.

Prepare personal income tax forms (FI:074) (CS)

-gathering all the necessary documents and information needed to accurately complete the form.

-income statements, deductions, credits, and other financial information.

-form can be filled out and submitted to the appropriate tax authority

-important to ensure that all information is accurate and up to date, as any mistakes can lead to penalties or other issues.

Discuss options for financing a college education (FI:831) (CS)

-scholarships

-student loans

-grants (based on financial needs)

-work study

-save

-tuition reimbursement

-FAFSA, HOPE in GA

-529 plan (education savings account)

Discuss the nature of retirement planning (FI:569) (CS)

-process of planning for one's financial future after they have stopped working

-creating a plan to ensure that one has enough money to live comfortably in retirement

- include saving and investing for retirement, creating a budget, and understanding the different types of retirement accounts available.

-understanding the tax implications of retirement income and planning for long-term care.

-start planning for retirement early, as it can be difficult to catch up if one waits too long.

Explain the nature of estate planning (FI:572) (CS)

-planning for the management and disposal of an individual's estate during their lifetime and at and after death.

-the preparation of wills, trusts, powers of attorney, and other documents to ensure that an individual's wishes are carried out and that their estate is distributed according to their wishes.

- management of assets, tax planning, and the avoidance of probate.

-important part of financial planning and should be done with the help of a qualified professional.

Describe types of financial-services providers (FI:075) (CS)

-organizations that offer financial services to individuals, businesses, and other organizations

-services can include banking, insurance, investments, and other financial products

-Banks: most common type of financial-services provider, offering services such as checking and savings accounts, loans, mortgages, and credit cards

Insurance: provide coverage for risks such as health, life, property, and casualty

Investment firms: provide advice and services related to stocks, bonds, mutual funds, and other investments

Other: credit unions, brokerages, and financial advisors.

Discuss considerations in selecting a financial-services provider (FI:076) (CS)

-First, consider the provider's reputation and track record

-research the provider's history and customer reviews to ensure that they have a good reputation and have provided satisfactory services in the past

-Second, consider the provider's fees and services.

-Different providers may offer different fees and services, so it is important to compare different providers to find the one that best meets your needs.

-Third consider the provider's customer service

-make sure that the provider is available to answer questions and provide assistance when needed

Finally consider the provider's security measures

-make sure that the provider has adequate security measures in place to protect your financial information

Explain types of investments (FI:077) (CS)

-Investing: act of putting money into a financial asset or security with the expectation of earning a return

-many different types of investments, each with their own unique characteristics and risks.

-stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, commodities, and cash equivalents

-Each has its own set of advantages and disadvantages, and investors should consider their individual goals and risk tolerance when deciding which type of investment is right for them

Describe the concept of insurance (FI:081) (CS)

-form of risk management that provides financial protection against losses caused by unexpected events

-contract between an insurance company and an individual or business, in which the insurer agrees to pay a certain amount of money in the event of a covered loss

-can cover a variety of risks, including property damage, medical expenses, and liability for accidents

-can also provide financial security in the event of death or disability

Determine insurance needs (FI:571) (SP)

-based on income

Describe the need for financial information (FI:579) (CS)

-essential for businesses to make informed decisions about their finances

-provides an overview of the financial health of the company, including income, expenses, assets, liabilities, and cash flow

-can help businesses identify areas of improvement, plan for future growth, and make decisions about investments

-also be used to assess the company's risk profile and make decisions about financing options

-critical tool for businesses to ensure their financial stability and success.

Explain the concept of accounting (FI:085) (CS)

-process of recording, classifying, summarizing, analyzing, and interpreting financial information

-used to measure the performance of a business and to provide financial information to decision makers

-involves the use of financial statements, such as the balance sheet, income statement, and statement of cash flows, to track the financial performance of a business

-involves use of various accounting principles, such as the matching principle, accrual basis of accounting, and the cost principle, to ensure that financial information is reported accurately

-essential part of any business and is used to make informed decisions about the future of the business.

Discuss the role of ethics in accounting (FI:351) (SP)

-Ethics plays an important role in accounting, as it helps to ensure that financial information is accurate and reliable

-Accounting ethics are the principles and standards that guide the behavior of accountants in their professional activities

-based on the core values of integrity, objectivity, professional competence, and confidentiality

-Accountants must adhere to these principles and standards in order to maintain the public's trust in the financial information they provide

-Ethical accounting practices help to ensure that financial statements are accurate and reliable, and that financial transactions are conducted in a fair and honest manner

-help to protect the public from fraud and other unethical activities

Explain the use of technology in accounting (FI:352) (SP)

-revolutionized the way accounting is done

-Accounting software and cloud-based systems have made it easier for businesses to track their finances and manage their accounts

-technology has also enabled businesses to automate many of their accounting processes, such as invoicing, payroll, and tax filing

-automation has allowed businesses to save time and money, while also providing more accurate and timely financial information

-made it easier for businesses to access and analyze their financial data, allowing them to make more informed decisions. -has enabled businesses to share their financial information with other stakeholders, such as investors, creditors, and auditors, in a secure and efficient manner

Explain legal considerations for accounting (FI:353) (SP)

-refer to the laws and regulations that govern the accounting profession

-designed to ensure that accounting practices are conducted in an ethical and responsible manner

-includes the accuracy of financial statements, the disclosure of information, and the protection of confidential information

-the protection of investors, creditors, and other stakeholders

-accountants have to be aware of the legal considerations for accounting in order to ensure that their practices are compliant with the law

Describe the nature of cash flow statements (FI:091) (SP)

-a financial statement that provides information about the cash inflows and outflows of a business over a period of time

-used to assess the liquidity of a business, as well as its ability to generate cash and pay its bills

-divided into three sections: operating activities, investing activities, and financing activities

-Operating activities: cash generated from sales, expenses, and other operating activities

-Investing activities: cash generated from investments, such as the purchase or sale of assets

-Financing activities: cash generated from borrowing, such as loans or debt, as well as cash generated from the sale of equity

-provides a comprehensive view of a business's financial health and is an important tool for financial analysis

Explain the nature of balance sheets (FI:093) (SP)

-financial statement that provides a snapshot of a company's financial position at a given point in time

-summary of a company's assets, liabilities, and equity

-Assets are the resources a company owns, such as cash, inventory, and property

-Liabilities are the debts a company owes, such as accounts payable and loans

-Equity is the difference between assets and liabilities and represents the owners' stake in the company

-used to assess a company's financial health and to identify potential areas of risk

Describe the nature of income statements (FI:094) (SP)

-(also known as a profit and loss statement) is a financial document that summarizes a company's revenues and expenses over a given period of time

-used to measure the performance of a business and to determine its profitability

-includes items such as sales, cost of goods sold, operating expenses, depreciation, interest, taxes, and other income

-does not include any balance sheet items such as assets or liabilities.

Explain the role of finance in business (FI:354) (CS)

-provide the necessary capital to fund operations, investments, and other activities

-responsible for managing the company's financial resources, such as cash, investments, and debt

-creating financial plans and strategies to ensure the company's financial health and success

-providing financial information to management, investors, and other stakeholders

-used to make decisions about the company's future and to ensure that the company is meeting its financial goals

Discuss the role of ethics in finance (FI:355) (SP)

-ensure that financial decisions are made in a responsible and ethical manner

-ensuring that financial decisions are made in accordance with the law, as well as in accordance with the ethical standards of the industry

-making sure that financial decisions are made in the best interests of the company, its stakeholders, and its customers

-making sure that financial decisions are made with the utmost integrity and transparency

-making sure that financial decisions are made in a way that is socially responsible and that takes into account the impact of those decisions on the environment and society

Explain legal considerations for finance (FI:356) (SP)

-refer to the laws and regulations that govern financial activities

-laws related to banking, securities, taxation, and other financial services

-Financial institutions must comply with these laws and regulations in order to protect the interests of their customers and ensure the safety and soundness of the financial system

-the rights and responsibilities of financial institutions and their customers, as well as the rights and responsibilities of creditors and debtors

-enforcement of contracts, the protection of intellectual property, and the prevention of fraud and money laundering

Describe the nature of budgets (FI:106) (SP)

-financial plan that outlines how an organization or individual will allocate their resources over a specific period of time

-used to track income and expenses, and to ensure that resources are used efficiently and effectively

-created annually, but can also be created for shorter periods of time such as a month or quarter

-tools for managing finances and ensuring that resources are used in the most effective way possible

Discuss the nature of depreciation (FI:345) (SP)

-accounting concept used to spread the cost of an asset over its useful life

-a non-cash expense that is used to reduce the value of an asset over time

-used to account for the wear and tear of an asset, as well as its obsolescence

-helps to accurately reflect the true cost of an asset.

Describe the nature of cash flows (FI:359) (SP)

-movement of money into and out of a business

-divided into three categories: operating activities, investing activities, and financing activities

-Operating activities: cash generated from the day-to-day operations of the business, such as sales, expenses, and taxes

-Investing activities: cash generated from the purchase and sale of long-term assets, such as property, plant, and equipment

-Financing activities: cash generated from the issuance and repayment of debt and equity

-provide an indication of the financial health of the business

Discuss the nature of corporate bonds (FI:523) (SP)

-debt securities issued by corporations to raise capital

-form of loans that investors make to the corporation, and in return, the corporation pays the investor a fixed rate of interest over a set period of time

-rated by credit rating agencies, which assess the creditworthiness of the issuer

-higher the rating, the lower the risk of default and the higher the interest rate the issuer must pay

-traded on the secondary market, allowing investors to buy and sell them

Discuss the cost of corporate bonds (FI:524) (SP)

-determined by the issuer's creditworthiness, the bond's coupon rate, and the current market interest rate.

-the coupon rate is the interest rate paid to the bondholder, and the market interest rate is the rate of return that investors expect from similar investments

-the higher the issuer's creditworthiness, the lower the cost of the bond

-The higher the coupon rate, the higher the cost of the bond

-The higher the market interest rate, the higher the cost of the bond.

Discuss the issuance of stock from a corporation (FI:526) (SP)

-process of a company offering shares of its stock to the public for sale

-also known as an initial public offering (IPO)

-selling a portion of the company to the public

-proceeds from the sale of the stock are used to fund the company's operations and growth

-complex process that involves a number of steps: filing with the Securities and Exchange Commission (SEC), setting the offering price, and marketing the offering

-way for a company to raise capital and increase its visibility in the market

Discuss the cost of common stock (FI:528) (SP)

-type of security that represents ownership in a company

-most common form of equity financing

-purchased by investors in order to gain a stake in the company

-determined by the market, and it is based on the company's performance, the current economic climate, and the demand for the stock

-can fluctuate significantly, and investors should be aware of the risks associated with investing in common stock

Discuss the nature of stock options (FI:729) (SP)

-used as a form of compensation for employees, lets them benefit from the appreciation of the company's stock without having to purchase it outright

-used as a form of hedging against a decline in the stock price.

Discuss the nature of Initial Public Offerings (FI:730) (SP)

-company can offer its shares to the public for the first time

-filing a registration statement with the Securities and Exchange Commission (SEC) and then offering the shares to the public through an underwriter

-raise capital for the company, which can be used for expansion, acquisitions, or other investments

-allows the company to become publicly traded, which can increase its visibility and attract more investors

Describe components of a payment system (FI:733) (SP)

-set of components that enable the transfer of money between two parties

include: the payment instrument, the payment network, the payment processor, and the payment service provider

-payment instrument: the form of money used for the transaction, such as cash, check, credit card, or debit card

-payment network: the infrastructure that facilitates the transfer of money between the two parties, such as a bank or a payment gateway

-payment processor: the entity that processes the payment, such as a bank or a payment processor

-payment service provider: the entity that provides the services associated with the payment, such as a merchant account provider or a payment gateway

Describe components of a collection system (FI:734) (SP)

-system used to collect payments from customers

-components:payment gateway, a payment processor, a payment processor interface, and a payment processor database

-payment gateway: the interface between the customer and the payment processor, allowing customers to securely enter their payment information

-payment processor: the system that processes the payment information and sends it to the payment processor interface

-payment processor interface: the system that communicates with the payment processor database, which stores the customer's payment information

-payment processor database: stores the customer's payment information and is used to track payments and generate reports

Manage bank accounts (e.g., scope of services, fee structures, system integration) (FI:735) (SP)

-involves a range of services, such as setting up and maintaining accounts, processing payments, and providing customer service

-scope of services and fee structures vary from bank to bank, and may include monthly fees, transaction fees, and other fees

-System integration: allows customers to access their accounts from multiple devices and platforms

Describe the nature of short-term financial management (FI:513) (SP)

-process of managing a company's financial resources in order to meet its short-term goals

-managing cash flow, budgeting, forecasting, and analyzing financial data

-making decisions about how to allocate resources to maximize short-term profits and minimize risk

-essential remain competitive and successful in the long run

Describe cash management procedures (FI:739) (SP)

-processes and policies that an organization has in place to ensure that cash is managed efficiently and effectively

-processes for collecting and disbursing cash, tracking cash flows, and reconciling accounts

-includes procedures for monitoring cash balances, investing excess cash, and managing cash flow risks

-ensure that they have adequate liquidity and to minimize the risk of fraud or theft

Explain the use of cash budgets (FI:505) (SP)

-financial planning tool used to estimate and manage a company's cash flow

-outlines expected cash inflows and outflows over a specific period of time

-ensure that a company has enough cash to meet its obligations and to plan for any potential cash shortages

-help a company identify areas where it can reduce costs and increase profits

-used to plan for future investments and to identify potential sources of financing

Analyze the impact of accounts payable schedules on working capital (FI:633) (SP)

-direct impact on working capital

-difference between a company's current assets and current liabilities

-Accounts payable schedules: terms of payment that a company agrees to with its suppliers

-If a company has a longer accounts payable schedule, it will have more working capital available to use for other purposes -if a company has a shorter accounts payable schedule, it will have less working capital available

Analyze the impact of accounts receivable collection on working capital cycle (FI:637) (SP)

Accounts receivable: the amount of money owed to a business by its customers for goods or services that have been provided

-When customers pay their accounts receivable, the business is able to use the money to pay its own bills, such as inventory and payroll

-helps to keep the working capital cycle in balance, as the business is able to pay its own bills without having to borrow money or take out a loan

-when customers pay their accounts receivable, the business can reinvest the money back into the business, which can help to increase profits and growth

Discuss the impact of employee benefits on business financials (FI:639) (SP)

-Benefits such as health insurance, retirement plans, and paid time off can increase a business's expenses, but they can also help to attract and retain talented employees

-lead to increased productivity and efficiency, which can ultimately lead to higher profits

-competitive benefits can help to improve employee morale and loyalty, which can lead to increased customer satisfaction and loyalty

Discuss the impact of obsolescence on business expense (FI:641) (SP)

Obsolescence: process of a product or technology becoming outdated and no longer useful

-companies must continually invest in new products and technologies to remain competitive

=must also factor in the cost of disposing of obsolete products, as well as the cost of training employees on new products and technologies

-can lead to decreased customer satisfaction, as customers may be dissatisfied with outdated products and services

Prepare cash flow budgets/forecasts (FI:507) (SP)

-process of creating a financial plan for a company or organization that estimates the expected cash inflows and outflows over a specific period of time

-helps to identify potential cash flow problems and allows for proactive management of cash resources

-should include all sources of cash, such as operating activities, investments, financing activities, and other sources

-include expected cash receipts and payments for each period, as well as any expected changes in cash balances

-should be reviewed and updated regularly to ensure accuracy and to identify any potential cash flow issues

Analyze cash budget/forecast variances (FI:508) (SP)

-process used to compare actual cash flow to the budgeted or forecasted cash flow.

-helps to identify any discrepancies between the two and can be used to identify areas of improvement or areas of risk

-used to identify any potential cash flow issues that may arise in the future and can help to inform decisions about cash management

-used to identify potential opportunities to increase cash flow

Evaluate leases (FI:740) (SP)

-process of assessing the financial implications of a lease agreement

-analyzing the terms of the lease, such as the length of the lease, the amount of rent, and any other fees associated with the lease

-assessing the potential risks associated with the lease, such as the potential for default or early termination

-assessing the potential benefits of the lease, such as the potential for cost savings or increased revenue

-ensure that the lease is in the best interests of the lessee and the lessor

Develop policies to manage trade credit (FI:741) (SP)

-Trade credit policies are designed to manage the risks associated with extending credit to customers

-include guidelines for evaluating creditworthiness, setting credit limits, and establishing payment terms

-include procedures for monitoring customer accounts, collecting overdue payments, and managing disputes

-outline the process for granting trade credit and the criteria for approving or denying credit requests

-include system for tracking and reporting trade credit activity

Explain the role of capital markets in business finance (FI:360) (SP)

-provide a way for businesses to raise capital by issuing securities such as stocks and bonds

-capital can then be used to finance operations, expand the business, or pay off debt

-provide a way for businesses to access liquidity by allowing them to sell their securities to investors

-liquidity can be used to pay off short-term debts or to fund new projects

-provide a way for businesses to manage their risk by allowing them to hedge against market volatility

-businesses can protect themselves from losses due to market fluctuations

Calculate stock-related values (e.g., the value of a constant growth stock, the expected value of future dividends, the expected rate of return, etc.) (FI:367) (SP)

-value of a constant growth stock can be calculated using the Gordon Growth Model, which takes into account the current stock price, the expected dividend growth rate, and the required rate of return

-expected value of future dividends can be calculated by multiplying the current dividend per share by the expected growth rate

-expected rate of return can be calculated by taking the expected dividend yield plus the expected capital gains yield

-Other stock-related values to calculate include the price-earnings ratio, earnings per share, and book value per share

-Accurate calculations important for making informed investment decisions and managing investment portfolios

Calculate bond-related values (e.g., the price of a bond given its yield to maturity, the coupon interest payment for a bond, the effects of interest rates on the price of a bond, etc.) (FI:236) (SP)

-understanding the relationship between the price of a bond and its yield to maturity, as well as the effects of interest rates on the price of a bond

-price of a bond: determined by the coupon interest payment, the yield to maturity, and the face value of the bond

-coupon interest payment: amount of interest paid to the bondholder each year

-yield to maturity: rate of return that an investor can expect to receive if they hold the bond until it matures

-face value of the bond: amount that the bondholder will receive when the bond matures

-interest rates can have an effect on the price of a bond

-when interest rates rise, the price of a bond will typically fall, vice versa

Explain the nature of capital investment (FI:078) (SP)

-process of investing money into a business or project in order to generate a return

-long-term investment that is used to purchase assets such as buildings, equipment, and other resources that will help the business grow and generate profits

-made with the expectation of a return on the investment over time, and can be used to finance expansion, research and development, and other activities that will help the business become more successful

Explain methods used to analyze capital investments (e.g., payback period, discounted break-even, net present value, accounting rate of return, internal rate of return, etc.) (FI:745) (SP)

-Payback period: method that looks at the amount of time it takes to recover the initial investment

-Discounted break-even: looks at the point at which the net present value of the investment is equal to zero

-Net present value: looks at the present value of the future cash flows of the investment

-Accounting rate of return: looks at the return on investment based on the initial investment

-Internal rate of return looks at the rate of return that is expected from the investment

-can be used to analyze capital investments and help determine if the investment is a good decision

Explain the impact of the cost of capital on capital investments (FI:746) (SP)

-cost of capital: rate of return that a company must pay to its investors for the use of their capital

-key factor in determining the profitability of capital investments

-When the cost of capital is high, it increases the cost of borrowing money and reduces the amount of capital available for investments

-lead to fewer investments being made, as the cost of capital is a major factor in the decision-making process

-when the cost of capital is low, it can lead to more investments being made, as the cost of borrowing money is lower and more capital is available

-cost of capital has a significant impact on capital investments, as it affects the amount of capital available and the cost of borrowing money

Calculate the cost of capital and its components (e.g., debt, equity) (FI:747) (SP)

-cost of capital: rate of return that a company must pay to its investors in order to finance its operations

-calculated by taking into account the cost of debt and the cost of equity

-is the interest rate that a company must pay to its lenders, while the cost of equity is the rate of return that shareholders expect to receive from their investments

-must be taken into account when calculating the cost of capital

Calculate cash flows associated with an investment (e.g., initial investment, operating cash inflows, operating cash outflows, terminal flows) (FI:492) (SP)

-is the total amount of money that is generated or spent over a period of time

-includes the initial investment, operating cash inflows, operating cash outflows, and terminal flows

-initial investment: amount of money that is used to purchase the asset or to start the project

-Operating cash inflows: revenues generated from the asset or project

-Operating cash outflows: expenses associated with running the asset or project

-Terminal flows: cash flows that occur at the end of the project or when the asset is sold

Use the time value of money to make business decisions (e.g., projects, investments, etc.) (FI:646) (SP)

-idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity

-Businesses can use the time value of money to make decisions about projects, investments, and other financial decisions

-can use the time value of money to compare the cost of a project today versus the potential return on investment in the future

-helps businesses to determine which projects are worth investing in and which ones are not

-can use the time value of money to compare the cost of different investments and determine which one will provide the highest return

-can make more informed decisions and maximize their profits

Calculate capital investment return (e.g., payback, net present value, internal rate of return) (FI:748) (SP)

-measure of the profitability of an investment

-calculated by taking the total return from the investment and dividing it by the amount of capital invested

-Payback: amount of time it takes to recoup the initial investment

-Net present value: present value of future cash flows minus the initial investment

-Internal rate of return: rate of return that makes the net present value of all cash flows from a project equal to zero

Identify project benefits and costs (FI:750) (SP)

-refer to the advantages and disadvantages associated with a particular project

Benefits: increased revenue, improved customer satisfaction, or increased efficiency

-Costs: increased expenses, decreased customer satisfaction, or decreased efficiency

-helps to determine the overall value of a project and whether it is worth pursuing

Monitor project portfolio (FI:753) (SP)

-involves tracking the progress of all projects within the portfolio

-monitoring the budget, timeline, and resources allocated to each project

-assessing the performance of each project and identifying any potential risks or issues that may arise

-ensure that all projects are completed on time and within budget, while also ensuring that the portfolio is meeting its overall objectives

Manage loans (FI:756) (SP)

-overseeing the process of loan origination, servicing, and repayment

-ensuring that loan applications are processed in a timely manner, that loan payments are collected on time, and that any necessary adjustments are made to the loan terms

-monitoring the creditworthiness of borrowers and ensuring that all loan documents are in compliance with applicable laws and regulations

-managing loans involves keeping track of the loan portfolio and ensuring that all loans are performing as expected

Manage investment portfolio (FI:757) (SP)

-creating a diversified portfolio of investments that are tailored to meet the individual investor's goals and risk tolerance

-researching and selecting investments, monitoring the performance of the portfolio, and making adjustments as needed

-regularly should be rebalanced to ensure that the desired asset allocation is maintained

-investor should be aware of any tax implications associated with their investments

Manage pension investment portfolio (FI:758) (SP)

-making decisions about how to invest the funds in the portfolio in order to maximize returns while minimizing risk

-researching and selecting investments, monitoring the performance of the investments, and rebalancing the portfolio as needed

-understanding the different types of investments available, such as stocks, bonds, mutual funds, and ETFs, and how they can be used to create a diversified portfolio

-stay up to date on changes in the market and economic conditions in order to make informed decisions about the investments in the portfolio

Explain forms of dividends (FI:346) (SP)

-refer to the different ways in which a company can pay out dividends to its shareholders

-cash dividends, stock dividends, and property dividends

-Cash dividend: most common form, involve the company paying out a portion of its profits to shareholders in the form of cash

-Stock dividends: the company issuing additional shares of stock to shareholders in lieu of cash

-Property dividends: company issuing physical assets such as real estate or equipment to shareholders in lieu of cash

Explain the nature of dividend reinvestment plans (DRIPs) (FI:530) (SP)

-type of investment plan offered by companies that allows investors to reinvest their dividends into additional shares of the company's stock

-allows investors to increase their ownership in the company without having to pay any additional fees or commissions

-great way for investors to build their portfolio over time without having to pay any additional fees or commissions

-allow investors to benefit from the compounding effect of reinvesting their dividends, which can lead to greater returns over time

Discuss the financial planning process (FI:502) (SP)

-systematic approach to managing one's finances

-setting financial goals, analyzing current financial status, developing a plan to achieve those goals, and monitoring progress

-assessing current financial resources, setting financial goals, creating a budget, developing a plan to achieve those goals, and monitoring progress

-evaluating risk tolerance, creating an investment portfolio, and managing taxes

-ongoing process that should be revisited periodically to ensure that goals are still achievable and that the plan is still on track

Discuss the nature of short-term (operating) financial plans (FI:503) (SP)

-also known as an operating financial plan

-outlines the financial goals and objectives of a business over a short period of time, usually one year

-used to manage cash flow, plan for capital investments, and set financial targets

-includes a budget, cash flow projections, and a plan for how to allocate resources

-important for businesses to have a short-term financial plan in place in order to ensure that they are able to meet their financial goals and objectives in the short-term

Differentiate among management accounting responsibility centers (i.e., cost, profit, investment, revenue) (FI:717) (SP)

-tool used by businesses to analyze the relationship between costs, sales volume, and profits

-used to determine how changes in costs and sales volume affect a company's profits

-CVP analysis can help businesses identify the most profitable sales volume and cost structure, as well as the break-even point

-used to evaluate the impact of pricing decisions, cost control strategies, and other business decisions on profits

-important tool for businesses to understand their costs and profits, and to make informed decisions about their operations

Discuss cost accounting systems (e.g., job costing, process costing, standard costing, activity-based costing [ABC]) (FI:719) (SP)

-used to track and analyze the costs associated with a business

-Job costing: track the costs associated with a specific job or project

-used to track the costs of materials, labor, and overhead associated with a specific job

-Process costing: track the costs associated with a specific process

-used to track the costs of materials, labor, and overhead associated with a specific process

-Standard costing: track the costs associated with a specific product or service

-used to track the costs of materials, labor, and overhead associated with a specific product or service

-Activity-based costing (ABC): track the costs associated with specific activities

-used to track the costs of materials, labor, and overhead associated with specific activities

-used to identify and analyze the costs associated with activities that are not directly related to the production of a product or service

-Overall, used to track and analyze the costs associated with a business

Distinguish between variable costing and absorption costing (FI:720) (SP)

-two different methods of accounting for the costs of producing a product

-Variable costing: only includes the variable costs of production, such as direct materials, direct labor, and variable overhead

-costs are charged directly to the cost of goods sold. Absorption costing: includes both the variable costs of production and the fixed costs of production, such as fixed overhead

-costs are allocated to the cost of goods sold and to the inventory

Describe common management accounting performance measures (e.g., balanced scorecard, return on investment [ROI], customer profitability analysis, etc.) (FI:721) (SP)

-tools used by businesses to measure and evaluate their performance

-The Balanced Scorecard: performance measurement system that looks at four key areas of a business: financial, customer, internal process, and learning and growth

-helps businesses to measure their performance in each of these areas and identify areas of improvement

-Return on Investment (ROI): measure of the profitability of an investment

-calculated by dividing the net profit of an investment by the cost of the investment

-Customer Profitability Analysis: used to measure the profitability of individual customers

-helps businesses to identify which customers are most profitable and which ones are not

-all help businesses to identify areas of improvement and make better decisions.

Discuss the role of standard costing in the preparation and analysis of budgets (FI:722) (SP)

-method of budgeting that uses predetermined costs for materials, labor, and overhead to estimate the cost of producing a product or providing a service

-used in the preparation and analysis of budgets to help organizations plan and control their costs

-helps identify areas of cost overruns and underruns, and it can be used to compare actual costs to budgeted costs

-helps identify areas where cost savings can be achieved. By using standard costing, organizations can better manage their resources and ensure that their budgets are realistic and achievable

Describe the nature of flexible budgets (FI:723) (SP)

-budget that can be adjusted to reflect changes in the level of activity

-useful for businesses that experience fluctuating levels of activity, as it allows them to adjust their budget to reflect the current level of activity

-based on a range of activity levels, and the budget is adjusted to reflect the actual level of activity

-allows businesses to better manage their resources and ensure that they are using their resources efficiently

Explain the role of transfer pricing in managerial accounting (FI:724) (SP)

-tool used in managerial accounting to allocate costs between different business units or divisions

-used to determine the cost of goods and services that are exchanged between different divisions of a company

-helps to ensure that each division is charged a fair price for the goods and services it receives from other divisions

-ensure that each division is operating efficiently and that the company is maximizing its profits

-helps to ensure that the company is in compliance with applicable tax laws

Explain the impact of business operational practices (e.g., total quality management [TQM], lean production, just-in-time [JIT], etc.) on managerial accounting (FI:725) (SP)

-TQM: improving the quality of products and services by reducing waste and increasing customer satisfaction

-direct impact on managerial accounting as it requires the use of data and metrics to measure the effectiveness of the TQM initiatives

-Lean Production: production system that emphasizes the elimination of waste and the efficient use of resources

-impact on managerial accounting as it requires the use of cost-benefit analysis to determine the most efficient production methods

-Just-in-Time (JIT): production system that emphasizes the timely delivery of goods and services

-impact on managerial accounting as it requires the use of inventory management techniques to ensure that the right amount of inventory is available at the right time

-all require the use of data and metrics to measure the effectiveness of the initiatives

Perform budgetary cost analysis (e.g., direct cost, indirect cost, sunk cost, differential cost, etc.) (FI:768) (SP)

-Budgetary cost analysis: method used in corporate finance to determine the cost and benefits of various decisions

-Direct costs: expenses that can be directly attributed to a specific product, service, or project, such as materials, labor, and equipment

-indirect costs: expenses that cannot be directly traced to a particular product or service, such as rent, utilities, and administrative costs

-Sunk costs: costs that have already been incurred and cannot be recovered, such as research and development expenses

-Differential costs: difference in costs between two or more options, such as the cost of producing one product versus another

-by analyzing, companies can make informed decisions about their budget, investments, and overall financial strategy

Perform responsibility center budgeting (i.e., cost, profit, investment, revenue) (FI:769) (SP)

-type of budgeting that assigns responsibility for budgeting to individual departments or units within an organization

-focuses on four main areas: cost, profit, investment, and revenue

-Cost budgeting: looks at the costs associated with running a department or unit, such as labor, materials, and overhead

-Profit budgeting: looks at the expected profits from the department or unit

-Investment budgeting: looks at the investments made in the department or unit, such as capital investments or research and development

-revenue budgeting: looks at the expected revenue from the department or unit

-useful tool for organizations to ensure that each department or unit is operating efficiently and effectively

Discuss the analysis of a company's financial situation using its financial statements (FI:546) (SP)

-Financial statements provide a comprehensive overview of a company's financial position, including its assets, liabilities, and equity

-analyzing, investors and other stakeholders can gain insight into the company's financial health and make informed decisions about their investments

-used to identify potential areas of improvement, such as increasing efficiency or reducing costs

-used to compare a company's performance to that of its competitors, helping to identify areas of competitive advantage

-essential part of the financial management process, providing valuable insights into the company's financial health

Discuss external forces affecting a company's value (FI:547) (SP)

-Economic conditions, such as inflation: increasing the cost of goods and services, reducing consumer spending, and reducing the availability of capital

-Competition: creating pricing pressure and reducing market share

-Government regulations: increasing costs, limiting access to certain markets, and creating compliance requirements

-Technological advancements: creating new opportunities for growth, increasing efficiency, and creating new products and services