DECA - FTDM Notes (copy)

• Savings Account: Easy-to-use and offer instant access to your funds but with lower interest rates

  • low risk, low interest rate, easy access to the cash 

• Checking Account: you can deposit money with your bank that you can later withdraw or use checks or a debit card to pay others

• Certificate of Deposit (CD): Earn a higher interest rate by putting you money away for a fixed term—great for funds you won’t need immediately

  • low risk, low interest rate, but typically higher than savings, relatively easy access to the cash depending on type of CD 

• Mutual Funds: Mutual fund managers pool money from many investors and invest the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio.

  • mix of stocks and bonds, can choose funds by risk tolerance 

• Bonds: corporate and government issued, can be sold at a gain or loss, interest is typically at a higher rate than other debt instruments, relatively low risk 

• Stocks: can be sold at a gain or loss, earnings may be received from dividends, high risk, volatile and adjusts with the economy and political environment 

• Money Market Accounts: Combine the benefits of a savings account and a checking account—offer higher interest rates like a  savings account and allow some transactions (to a limit), sometimes including checks and debit cards

  • Often require higher minimum balances

• High-Yield Accounts: Offer higher interest rates to grow your savings faster, but might require higher minimum balance

  • Good for emergency funds

Online Banking:

• Direct Deposit: Have your paycheck automatically deposited into your checking account. 

• Auto-transfers: Automatic transfer to your savings account each payday to save.

• Auto-pay: automate bill payments to ensure you never miss a due date and avoid late fees

• Gross Income (gross pay): total amount earned during pay period

• Federal taxes: tax collectors withhold a portion for federal taxes

• State taxes: Might be state taxes depending on workplace

• Social Security: paying into a communal pot for retirement benefits

Insurance Policies:

• Premiums: the price you pay to keep your insurance active, typically monthly or annually

• Deductibles: the amount you’re responsible for paying out of pocket before insurance kicks in on its claim

• Coverage limits: the maximum amount an insurance policy will pay for covered losses

Credit:

• Credit: Credit is a contractual agreement in which a borrower receives something of value immediately and agrees to pay for it later, usually with interest.

• Credit Score: a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time

Financial Concepts

• Assets: Things you own that have value, like cash, property, or investments.

• Liabilities: Things you owe, like loans or credit card debt.

• Net Worth: The difference between your assets and liabilities.

• Interest Rate: The percentage charged for borrowing money or earned on savings.

• Compound Interest: Interest earned on both the initial amount and the previously earned interest.

• Return on Investment (ROI): How much profit you make compared to what you invested.

• Risk Tolerance: How much risk you're comfortable taking with investments.

• Diversification: Spreading money across different investments to reduce risk.

• Liquidity: How easily you can turn an asset into cash.

• Cash Flow: Money coming in and out of your accounts.

• Budgeting: Planning how to spend your money.

• Credit Score: A number that shows how reliable you are at paying back loans.

• Debt-to-Income Ratio (DTI): The percentage of your income used to pay debts.

• Inflation: When prices go up over time.

• Deflation: When prices go down over time.

• Principal: The original amount of money borrowed or invested.

• Equity: Ownership in a business or property.

• Fixed Costs: Expenses that don’t change, like rent.

• Variable Costs: Expenses that change, like utilities.

• Opportunity Cost: The value of what you give up when choosing something else.

• Break-even Point: When your income equals your expenses or costs.

• Capital Gains: Profit from selling an asset like stocks or property.

Banking and Investments

• Certificate of Deposit (CD): A savings account that locks your money for a set time and pays higher interest.

• Money Market Account: A savings account with higher interest but limits on withdrawals.

• Savings Account: A basic bank account to save money and earn interest.

• Checking Account: A bank account for daily spending.

• Mutual Funds: A pool of money from many investors used to buy a variety of investments.

• Bonds: A loan you give to a company or government that pays interest over time.

• Stocks: Shares of ownership in a company.

• Exchange-Traded Funds (ETFs): Investment funds traded like stocks that hold multiple assets.

• Retirement Accounts: Special accounts to save for retirement, like 401(k) or IRA.

• 401(k): A retirement account offered by employers where you save pre-tax money.

• Roth IRA: A retirement account where contributions are taxed upfront, but withdrawals in retirement are tax-free.

• Traditional IRA: A retirement account where contributions are tax-deductible, but withdrawals are taxed.

• Annuities: Financial products that provide regular income, often used for retirement.

• Financial Portfolio: A collection of all your investments.

• Index Funds: A type of mutual fund that tracks a stock market index.

• Dividend: A share of a company’s profits paid to stockholders.

Credit and Lending

• Creditworthiness: How likely you are to pay back a loan.

• Collateral: Something of value used to secure a loan.

• APR (Annual Percentage Rate): The yearly cost of a loan, including interest and fees.

• Loan Term: The length of time you have to repay a loan.

• Secured Loan: A loan backed by collateral.

• Unsecured Loan: A loan not backed by collateral.

• Line of Credit: A set amount of money you can borrow as needed.

• Revolving Credit: Credit that renews as you pay it off, like a credit card.

• Installment Loan: A loan repaid in fixed amounts over time.

• Mortgage: A loan to buy a home.

• Credit Utilization Ratio: The percentage of your available credit you’re using.

Insurance

• Premium: The cost of insurance you pay regularly.

• Deductible: The amount you pay before insurance covers the rest.

• Policyholder: The person who owns the insurance policy.

• Beneficiary: The person who gets money from insurance when the policyholder dies.

• Liability Coverage: Insurance that covers damage you cause to others.

• Comprehensive Coverage: Insurance that covers non-collision damage to your vehicle.

• Term Life Insurance: Life insurance for a set number of years.

• Whole Life Insurance: Life insurance that lasts your whole life and builds cash value.

• Health Savings Account (HSA): A savings account for medical expenses with tax benefits.

• Risk Management: Identifying and minimizing risks to protect assets.

Business Finance

• Accounts Payable: Money a business owes to suppliers.

• Accounts Receivable: Money customers owe a business.

• Revenue: Total money earned by a business.

• Profit Margin: The percentage of revenue left after expenses.

• Gross Profit: Revenue minus the cost of goods sold.

• Net Profit: Gross profit minus all other expenses.

• Operating Expenses: Costs of running a business, like rent and salaries.

• Capital Expenditures: Money spent on long-term assets, like equipment.

• Depreciation: The decrease in an asset’s value over time.

• Forecasting: Predicting future income and expenses.

Technology in Financial Services

• Mobile Banking: Using apps to manage your bank accounts.

• Online Banking: Managing your finances through a bank’s website.

• Blockchain: A secure digital ledger for recording transactions.

• Cryptocurrency: Digital currency like Bitcoin.

• Robo-Advisors: Automated systems that manage investments.

• Fintech: Technology used to improve financial services.

• Cybersecurity: Protecting digital data from theft.

• Data Encryption: Securing data so only authorized people can access it.

Economic Indicators

• GDP (Gross Domestic Product): Total value of all goods and services in a country.

• Unemployment Rate: Percentage of people without jobs.

• Consumer Price Index (CPI): Measures changes in prices for everyday goods.

• Stock Market Trends: Patterns in stock prices over time.

• Interest Rate Trends: Changes in borrowing rates over time.

• Market Volatility: How much stock prices change over time.

Miscellaneous

• SWOT Analysis: A tool to evaluate strengths, weaknesses, opportunities, and threats.

• SMART Goals: Specific, Measurable, Achievable, Relevant, Time-bound goals.

• Competitive Advantage: What makes a business stand out.

• Market Segmentation: Dividing customers into smaller groups.

• Branding: Creating a unique image for a product or company.

Forms of Financial Exchange (FI:058) (PQ)

1. Cash: Physical currency such as coins and banknotes used for transactions.

2. Credit: Borrowed funds provided by a lender to make purchases, requiring repayment with interest.

3. Debit: Electronic payments directly deducted from a checking account.

4. Electronic Funds Transfer (EFT): Digital transfer of money between accounts, such as direct deposits or online payments.

5. Checks: Written instructions to a bank to pay a specified amount from a checking account.

6. Mobile Payments: Payments made via apps like Apple Pay, Venmo, or Google Pay.

Types of Currency (FI:059) (PQ)

1. Paper Money: Official government-issued banknotes.

2. Coins: Metal currency issued by governments.

3. Banknotes: Promissory notes issued by central banks.

4. Government Bonds: Debt securities issued to finance government activities.

5. Treasury Notes (T-Notes): Medium-term government securities with fixed interest.

6. Digital Currency: Cryptocurrency like Bitcoin or Ethereum.

Functions of Money (FI:060) (PQ)

1. Medium of Exchange: Money facilitates transactions, eliminating the need for bartering.

2. Unit of Measure: Provides a standard value to price goods and services.

3. Store of Value: Retains purchasing power over time, allowing saving and deferred consumption.

Sources of Income and Compensation (FI:061) (CS)

1. Wages and Salaries: Compensation for employment.

2. Investments: Dividends, interest, and capital gains from stocks, bonds, or real estate.

3. Business Profits: Income earned by business owners.

4. Government Payments: Social security, unemployment benefits, or subsidies.

5. Rental Income: Earnings from renting property.

6. Royalties: Payments for intellectual property like books or patents.

Time Value of Money (FI:062) (CS)

The time value of money (TVM) suggests that a dollar today is worth more than the same dollar in the future because of its earning potential. This concept is used to:

1. Evaluate investments through present value and future value calculations.

2. Understand the impact of interest rates and inflation.

3. Make decisions about loans, savings, and retirement planning.

Purposes and Importance of Credit (FI:002) (CS)

1. Facilitates Large Purchases: Enables individuals to buy homes, cars, or education.

2. Improves Cash Flow: Offers flexibility for businesses and individuals.

3. Builds Credit History: Essential for securing loans or lower interest rates.

4. Supports Economic Growth: Drives consumer spending and investments.

Legal Responsibilities Associated with Consumer Financial Products and Services (FI:063) (CS)

1. Disclosure Requirements: Financial institutions must disclose interest rates, fees, and terms clearly.

2. Fraud Protection: Laws like the Electronic Fund Transfer Act (EFTA) protect consumers against unauthorized transactions.

3. Fair Lending Practices: Equal Credit Opportunity Act ensures non-discrimination in credit approval.

4. Debt Obligations: Borrowers must repay loans according to agreed terms.

5. Privacy Protection: Laws like the Gramm-Leach-Bliley Act safeguard personal financial information.

Describe four types of financial-services providers (participants can describe any four): 

• Commercial Banks – Banks that take in deposits from people who want to save their money or keep in a safe place. 

• Thrifts - they specialize in savings accounts and real estate financing. 

• Credit Unions – Financial institutions that are formed by and organized group of people with a common bond such as the one that exist between teachers, government or industry employee, or even people living in a certain geographical locations. They are not-for-profit cooperatives that are owned by its members. 

• Insurance Companies – Designed to protect individuals and businesses from risk. They are considered financial providers because they invest the money they collect as premiums from their policy holders. They can also sell investments like annuity. 

• Mutual Funds – Professional managed Investment Company that pools money from investors and invest the money into stocks, bonds, or other securities. Mutual funds allow people with small amounts of money to diversity their investments. 

Discuss considerations in selecting a financial-service provider: There are several considerations that you can take to choose a financial-service provider: 

• Security of funds – Make sure that any bank or credit union is insured by the Federal Insurance Corporation (for banks) or by the National Credit Union Association (for credit unions). 

• Fees – Make sure that the organization charges realistic fees and that the institution does not charge for any basic account transactions (fees like monthly maintenance fees, per check fees, fees for talking to a representative). 

• Ease of deposit – Make sure that the institution offers locations or online options which enable you to deposit freely. 

• ATM Fees – If you use an ATM frequently make sure that the fees are realistic and do not charge you high fees. 

• Interest rates – Interest rates work both ways: the rate to receive on your deposit and the rate the bank charges you when you borrow money. Find an account that pays higher-than-average interest on your deposits and charges lower-than-average interest on debts. 

• Availability of Funds – Look for banks that give an early release of active duty pay deposits. 

• Customer service – Make sure you when you have a problem or question, you can get in touch with someone fairly quick and easy. 

• Branch Availability – Access to an area that you can actually walk in and obtain quick service.

1. Role of Financial Institutions:

• Financial institutions (FIs) play a key role in the economy by facilitating the flow of funds between savers and borrowers, providing services like loans, investment products, insurance, and asset management. They contribute to financial stability, economic growth, and efficient capital allocation. Ex. banks, investment, insurance, companies, credit unions

2. Types of Financial Markets:

• Money Market: Deals with short-term debt instruments, typically with maturities of one year or less (e.g., Treasury bills, repurchase agreements).

• Capital Market: Involves the buying and selling of long-term debt (e.g., bonds) and equity (e.g., stocks). It's essential for businesses to raise long-term capital.

• Insurance Market: Allows individuals and businesses to purchase insurance to mitigate risk (e.g., health, life, and property insurance).

• Commodities Markets: Where raw materials or primary products (like oil, gold, agricultural goods) are traded, often as futures contracts.

3. Convergence/Consolidation in the Finance Industry:

• This refers to the merging of different types of financial services (e.g., banking, insurance, investment) into integrated firms, often due to deregulation, technological advances, and market competition. It leads to bigger firms that can offer a variety of services under one umbrella.

4. Economic Conditions and Financial Markets:

• Economic conditions (like interest rates, inflation, and unemployment) greatly impact financial markets. For example, high inflation may lead to higher interest rates, which can reduce the demand for borrowing and affect stock and bond prices.

5. Nature and Scope of Financial Globalization:

• Financial globalization refers to the increasing integration of financial markets across borders. It allows for greater capital flow, investment opportunities, and economic growth but also increases exposure to global risks (e.g., financial crises, currency fluctuations).

6. Utilizing Sources of Securities Information:

• Sources of Securities Information: Investors often use stock exchanges, financial reports, analysts, and media to obtain data. Financial news, financial statements (balance sheets, income statements), and financial metrics (e.g., P/E ratios) are crucial for informed investment decisions.

• Securities Tables: Used to interpret stock prices, trading volumes, dividends, etc., allowing investors to assess the performance of different securities.

7. Managing Financial Resources for Solvency:

• This focuses on understanding how to calculate and manage the time value of money, plan for future financial needs, and ensure that a business can meet its obligations (debts, operating costs) without becoming insolvent.

8. Managerial Accounting for Financial Decision-Making:

• Involves understanding costs (direct, indirect, sunk, etc.), performing marginal analysis (for cost-benefit decision-making), variance analysis (for budget deviations), and cost allocation methods to make informed financial decisions.

9. Types of Business Transactions and Documentation:

• Business transactions (e.g., purchases, sales) and the corresponding documentation (e.g., invoices, purchase orders) are tracked in accounting systems. This ensures accurate financial reporting and compliance with regulations.

10. Cash Flow and Internal Controls:

• Cash Controls: These procedures ensure accurate tracking of cash flows within a business, preventing fraud and errors. Tools like signature cards, deposit slips, and reconciliations are key components.

• Internal Controls: Systems that ensure financial transactions are accurately recorded and prevent mismanagement or fraud. This includes segregation of duties, access controls, and regular audits.

Performance Element: Utilize sources of securities information to make informed financial decisions.

1. Describe sources of securities information (FI:274) (CS):
Securities information can come from various sources such as financial reports, stock exchanges, news outlets, investment research, and analysts’ recommendations. These sources help investors and financial professionals make informed decisions by providing data on stock performance, trends, and potential risks. Investors rely on such data to assess the viability of securities as investment opportunities.

2. Interpret securities table (FI:275) (SP):
A securities table presents data such as stock prices, trading volume, high/low price ranges, and dividend yields. Interpreting these tables involves analyzing the provided data to understand the performance of securities over time. Investors use these tables to track trends, make comparisons, and make decisions about buying or selling stocks.

3. Explain the nature of statements of changes in equity (FI:630) (SP):
The statement of changes in equity outlines the movements in equity over a specific period, detailing things like retained earnings, capital contributions, dividends, and stock issuance. It is a key financial statement for understanding a company’s equity structure and how it changes over time. The statement helps investors evaluate the company's growth and distribution of profits.

Performance Element: Manage financial resources to ensure solvency.

4. Calculate the time value of money (FI:238) (SP):
The time value of money is the concept that a sum of money today is worth more than the same sum in the future due to its potential earning capacity. It is used to calculate the present or future value of money by factoring in interest rates and time. This concept is crucial for making investment decisions and understanding how money can grow or decrease in value over time.

Performance Element: Understand the fundamentals of managerial accounting to aid in financial decision-making.

5. Describe types of costs used in managerial accounting (FI:658) (SP):
Managerial accounting identifies different cost types such as direct costs (costs directly tied to production like materials), indirect costs (overhead costs), sunk costs (irrecoverable costs), and differential costs (the difference between alternatives). Understanding these costs is essential for budgeting, pricing, and financial decision-making within a business.

6. Describe marginal analysis techniques and applications (FI:659) (SP):
Marginal analysis is the study of the additional benefits versus the additional costs of a decision. It helps businesses determine the impact of small changes in operations or strategy, guiding decisions like pricing and production levels. This analysis is particularly useful in making cost-effective and profit-maximizing decisions.

7. Explain the nature of managerial accounting (FI:660) (SP):
Managerial accounting focuses on providing internal financial information to help managers make informed decisions. It includes planning, controlling, and evaluating business activities, and the use of financial data to improve efficiency, profitability, and cost management within an organization.

8. Discuss the use of variance analysis in managerial accounting (FI:661) (SP):
Variance analysis involves comparing actual financial performance to budgeted or planned performance to identify differences (variances). This analysis helps managers understand why variances occur and how to address them, ensuring better control over operations and financial goals.

9. Discuss the nature of cost accounting budgets (FI:662) (SP):
Cost accounting budgets are tools used to forecast and control costs associated with production. They focus on estimating fixed and variable costs, tracking actual costs, and analyzing discrepancies between planned and actual spending to maintain profitability. These budgets help businesses plan for future operations and minimize unnecessary expenditures.

10. Discuss the nature of cost allocation (FI:663) (SP):
Cost allocation involves distributing indirect costs (like overhead) to various departments, products, or services. This method ensures that every part of the business carries its fair share of the costs, helping businesses understand profitability and make informed pricing and budgeting decisions.

Performance Element: Maintain cash controls to track cash flow.

11. Explain cash control procedures (FI:113) (CS):
Cash control procedures involve systems and methods used to protect and manage an organization’s cash. These may include checks and balances, such as using signature cards, maintaining cash clearing accounts, and implementing internal controls to prevent fraud and ensure accuracy in cash management.

12. Reconcile cash (FI:396) (CS):
Cash reconciliation is the process of comparing a company’s internal financial records with bank statements to ensure that the cash balance is accurate. This process helps identify errors or discrepancies in cash transactions and ensures that the company’s financial reporting is correct.

13. Account for petty cash (FI:676) (CS):
Petty cash accounting involves managing small amounts of cash used for incidental business expenses. Businesses track these transactions to ensure they are properly documented and that the cash fund is replenished as necessary to cover minor operational costs.

14. Account for cash receipts (FI:677) (CS):
Cash receipts are recorded when a company receives money from customers or other sources. Properly accounting for these receipts ensures that financial records reflect accurate cash inflow and that the business can track its revenue and manage its cash flow effectively.

15. Account for cash payments (FI:678) (CS):
Cash payments refer to the disbursement of cash for expenses such as payroll, vendor payments, or other operating costs. Proper accounting ensures that all payments are accurately recorded, which is vital for tracking expenditures and managing cash flow.

Performance Element: Perform accounts payable functions to record, control, and disburse payments to vendors.

16. Explain the nature of accounts payable (FI:409) (CS):
Accounts payable refers to the money a business owes to its vendors or suppliers for goods and services received. Proper management of accounts payable ensures that payments are made on time and in the correct amounts, preventing overdue fees and maintaining good supplier relationships.

17. Account for purchases (FI:679) (CS):
Accounting for purchases involves recording transactions where goods or services are acquired from suppliers. This includes documenting invoices, purchase orders, and receipts, which ensures that accounts payable and inventory records remain accurate.

18. Process accounts payable (FI:680) (SP):
Processing accounts payable involves maintaining vendor records, verifying invoices, and issuing payments. This ensures that a company stays in good standing with suppliers and avoids late fees, while also helping to manage cash flow efficiently.

Performance Element: Perform accounts receivable functions to record, control, and collect payments due from the sale of goods and services.

19. Explain the nature of accounts receivable (FI:424) (CS):
Accounts receivable represents money owed to a business for goods or services sold on credit. Managing accounts receivable involves tracking outstanding invoices, following up on overdue payments, and ensuring timely collection to maintain cash flow.

20. Account for sales (FI:682) (CS):
Accounting for sales involves recording the revenue earned from selling goods or services. This process includes creating invoices, recording sales receipts, and ensuring that accounts receivable reflects accurate amounts due from customers.

21. Process accounts receivable (FI:683) (SP):
Processing accounts receivable involves updating the general ledger with payments received, applying payments to customer accounts, and managing uncollectible accounts. It ensures that the business can track outstanding debts and manage cash flow effectively.

Performance Element: Maintain inventory records to track the location, quantity, and value of goods and services.

22. Record inventory transactions (FI:432) (CS):
Inventory transactions are recorded whenever goods are purchased, sold, or returned. Accurate inventory tracking helps businesses manage stock levels, avoid shortages, and ensure proper cost accounting for goods sold.

23. Process inventory adjustments (FI:435) (CS):
Inventory adjustments are made to account for changes in stock due to shrinkage, obsolescence, or returns. This ensures that the business’s financial records and inventory levels remain accurate and reflect the true value of stock on hand.

24. Explain methods used to value inventory (FI:586) (CS):
Inventory can be valued using different methods, such as FIFO (First In, First Out), LIFO (Last In, First Out), or average cost. These methods impact the cost of goods sold and inventory valuation, affecting profit and tax calculations.

25. Determine the cost/value of inventory (FI:436) (SP):
Determining the cost or value of inventory is necessary for calculating the cost of goods sold and accurate financial reporting. This involves applying appropriate inventory valuation methods and adjusting for any changes in stock levels or inventory value.

Performance Element: Complete payroll procedures to calculate, record, and distribute payroll.

26. Explain the nature of payroll expenses (FI:638) (CS):
Payroll expenses include salaries, wages, and benefits paid to employees, as well as the related taxes (like Social Security and Medicare). Properly managing payroll ensures that employees are compensated correctly and that the business complies with tax and legal requirements.

27. Maintain employee earnings records (FI:134) (CS):
Employee earnings records are maintained to track wages, hours worked, deductions, and other payroll details. These records are essential for accurate payroll processing and for meeting legal and tax requirements.

28. Calculate employee earnings (FI:438) (SP):
Calculating employee earnings involves determining the total wages or salary based on hourly rates or salaries, overtime, bonuses, and deductions. Accurate calculations are crucial to ensure proper compensation and tax compliance.

29. Calculate employee deductions (FI:439) (SP):
Employee deductions include taxes (e.g., federal income tax, Social Security), retirement contributions, and other benefits. Correctly calculating these deductions ensures legal compliance and accurate employee paychecks.

30. Calculate payroll taxes (FI:442) (SP):
Payroll taxes include taxes withheld from employee wages (income tax, Social Security, Medicare) and employer contributions. Accurately calculating and remitting these taxes ensures compliance with federal, state, and local regulations.

Performance Element: Record and report financial transactions in accordance with accounting principles.

31. Record financial transactions (FI:240) (SP):
Recording financial transactions involves documenting all business activities that affect the company’s financial position, such as sales, purchases, and expenses. These transactions are recorded in journals and ledgers using double-entry bookkeeping. Properly recording these transactions ensures accurate financial statements.

32. Explain the nature of debits and credits (FI:242) (SP):
Debits and credits are fundamental components of accounting. Debits increase asset accounts and decrease liability and equity accounts, while credits do the opposite. They must always balance in every financial transaction to maintain the integrity of the financial system.

33. Record journal entries (FI:243) (SP):
Journal entries are used to record individual transactions in the accounting system. Each entry includes a date, a description of the transaction, and the amounts debited or credited to accounts. Proper journal entries ensure the accuracy of financial records and facilitate the preparation of financial statements.

34. Post journal entries to the general ledger (FI:244) (SP):
After journal entries are recorded, they are transferred to the general ledger, where all transactions are grouped by account type (assets, liabilities, equity, revenues, expenses). Posting to the general ledger is essential for summarizing financial transactions and preparing financial reports.

Performance Element: Prepare financial statements and reports.

35. Prepare an income statement (FI:617) (SP):
The income statement shows the company’s revenues, expenses, and profits over a period. It is used to assess a company's financial performance and profitability. The income statement helps managers, investors, and analysts understand how much profit a company is generating.

36. Prepare a balance sheet (FI:618) (SP):
A balance sheet provides a snapshot of a company's financial position at a specific point in time. It lists assets, liabilities, and equity, showing what the company owns, owes, and its net worth. The balance sheet helps investors and stakeholders understand the financial stability of the company.

37. Prepare a statement of cash flows (FI:619) (SP):
The statement of cash flows reports the inflow and outflow of cash during a specific period, categorized into operating, investing, and financing activities. This statement is crucial for understanding a company’s liquidity and its ability to generate cash.

38. Prepare a statement of changes in equity (FI:620) (SP):
This statement outlines the changes in a company's equity during a given period, including profits, dividends, and any other transactions affecting ownership equity. It helps stakeholders understand how profits are distributed and how equity has changed.

Performance Element: Ensure compliance with tax laws and regulations.

39. Explain the nature of tax obligations (FI:302) (SP):
Tax obligations include the legal requirement for businesses and individuals to pay taxes on income, sales, or other activities. These obligations must be met to avoid penalties and ensure compliance with federal, state, and local tax laws. Understanding these obligations is crucial for proper financial management.

40. Calculate and report taxes (FI:303) (SP):
Calculating taxes involves determining the amount owed based on applicable tax rates, deductions, and credits. Once calculated, taxes are reported to the appropriate authorities (e.g., IRS). Proper tax reporting is necessary to avoid fines and ensure a company remains in good standing with tax authorities.

41. Understand sales tax (FI:396) (SP):
Sales tax is a consumption tax imposed on the sale of goods and services. Businesses are responsible for collecting, reporting, and remitting sales tax to the government. Understanding the sales tax requirements in various jurisdictions is vital to ensuring compliance.

Performance Element: Evaluate financial performance to inform decision-making.

42. Perform financial ratio analysis (FI:350) (SP):
Financial ratio analysis involves using key ratios like liquidity, profitability, and solvency ratios to assess a company’s financial health. These ratios help investors and managers evaluate performance, identify trends, and make informed decisions about business operations.

43. Perform breakeven analysis (FI:351) (SP):
Breakeven analysis helps businesses determine the point at which total revenue equals total costs, meaning no profit or loss. It is useful for pricing strategies, cost control, and assessing the viability of new projects or products.

44. Perform trend analysis (FI:352) (SP):
Trend analysis involves examining financial data over time to identify patterns or changes in performance. This analysis helps in forecasting future performance, setting benchmarks, and making strategic business decisions.

45. Perform benchmarking (FI:353) (SP):
Benchmarking compares a company’s performance with industry standards or the performance of leading competitors. It helps identify strengths, weaknesses, and areas for improvement, providing insights for better decision-making.

Performance Element: Understand business operations and the impact of external factors on financial performance.

46. Explain the nature of business cycles (FI:618) (CS):
Business cycles refer to the natural rise and fall of economic activity over time, including periods of expansion and contraction. Understanding business cycles helps businesses anticipate changes in demand, manage financial risks, and plan for future growth or downturns.

47. Identify economic factors affecting financial performance (FI:619) (CS):
Economic factors such as inflation, interest rates, unemployment, and exchange rates can significantly impact a company’s financial performance. Recognizing these factors allows businesses to adapt to changes in the economic environment and make informed decisions.

Performance Element: Ensure proper internal controls and risk management.

48. Implement internal controls (FI:440) (SP):
Internal controls are policies and procedures designed to safeguard a company’s assets, ensure the accuracy of financial records, and prevent fraud. Proper implementation of internal controls helps businesses operate efficiently and maintain financial integrity.

49. Assess risks and exposures (FI:441) (SP):
Risk assessment involves identifying potential risks (financial, operational, or strategic) that could affect a company’s performance. Understanding these risks allows businesses to develop strategies to mitigate or manage potential threats to their financial stability.

50. Monitor compliance with regulations (FI:442) (SP):
Monitoring compliance ensures that a business adheres to all relevant legal, financial, and industry-specific regulations. This reduces the risk of legal issues, fines, and damage to the company’s reputation, helping it operate within the boundaries of the law.

Performance Element: Understand and apply financial planning and budgeting.

51. Prepare budgets (FI:622) (SP):
Budgets are financial plans that estimate future income and expenses over a certain period. Creating a budget helps businesses allocate resources efficiently, plan for future growth, and manage financial risks.

52. Monitor budget performance (FI:623) (SP):
Monitoring budget performance involves comparing actual financial results to budgeted figures. This helps identify any discrepancies and take corrective action to stay on track with financial goals.

53. Forecast financial performance (FI:624) (SP):
Financial forecasting involves predicting future financial outcomes based on historical data and trends. Accurate forecasts help businesses plan for future investments, manage cash flow, and allocate resources efficiently.

Performance Element: Understand and apply financial accounting systems and software.

54. Use accounting software (FI:500) (SP):
Accounting software streamlines financial management by automating processes such as invoicing, payroll, and financial reporting. Using this software improves efficiency, reduces errors, and ensures compliance with accounting standards.

55. Implement accounting systems (FI:501) (SP):
An accounting system is a structured way of managing financial transactions. Implementing an effective system ensures that financial data is accurate, accessible, and compliant with regulations, providing a clear view of a company’s financial status.