Essays on Cash Flow Statement-ending Assignment

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The paper 'Cash Flow Statement-ending ' is a great example of a Finance and Accounting Assignment. As depicted by the financial situation of the couple, they are considered as growing since; their financial report an increasing trend on the value of the worth as observed by the value of their net worth and the liquidity ratio. Their saving ratio is less 0.76, which implies that the couple has more funds at their investment and thus the client, is having a huge fund at their disposal to be invested in funds that generate income.

This a class of portfolio with a highly risky venture with high returns. the couples in this class are the ones who are ready to take on risk in order to increase their returns as observed by a high liquidity ratio of 1.5. The couple is considered as aggressive customers since these investors require substantiality Perform exemplary in the investment and they must understand that they are exposed to investment risk than the market. They might even lose their portfolio up to more than 35% within a month and it takes longer to recoup the losses.

this kind of investor characteristically holds many economies in the entire sector (coefficient, 2003). Aggressive investors are naturally young as well as tend to contribute comparatively large amounts into the portfolio occasionally overtime by the contribution from earned-investment income. They are in need of accumulating large amounts of wealth in the future in order to fiancé their living cost as well as remain with plenty of time to work and recover losses. 4.1 The couple’ s current asset allocation (across all their investments including super)     Current Asset Allocation     Name of investment Cash Fixed Interest Property Australian shares Total Fixed home     $480,000   480000 Boat     20,000   20000 Cars     35000   35000 Commonwealth Bank shares       25000 25000 Term deposit with Bundoora 165000       165000 Home mortgage   14500     14500 Personal car loan   1360     1360 credit card   990     990 Total of the asset class in $ terms 165000 16850 $535,000 25000 741850 Total of the asset class in % terms 22.24 2.27 72.12 3.37 100.00                         5.1 Analyzing the risk and situation     Analyzing financial situation   Balance sheet   concerned with a person’ s net worth   Net worth ratio   {total net worth/total assets} 824000-35500)/1370900=0.56 Liquidity ratio =liquid assets/current debt 824000/546900=1.5 Cash flow statement   concerned with generating a cash surplus   Savings ratio cash surplus= (savings)/Net income after tax 936105.35/1227905.35=0.76 Debt service ratio ={monthly loan repayments/Monthly net income after tax} 35500/102408.78=0.35     Analyzing financial situation Net worth 0.56 Liquidity ratio 1.5 Saving ratio 0.76 Debt ratio 0.35     The graph of the financial situation 5.2four possible financial strategies that the couple may be able to use to improve their short-term and long-term financial situation. The time value for money This considering the future value of an investment at the present year zero in order to ascertain the viability in terms of positive returns and making an informed investment decision of whether to invest in the project or not.

The advantage of discounting an investment returns is that it will provide a clear understanding of the business performance and its profitability at time zero which gives a clear understanding of the venture risk and factors to consider before investing the venture.

by doing so, the risk of investment is minimized. The model to discount future returns to year one is the use of present value PV= (one+R^-N} where PV is the present value, r is the discounting rate and n is the number of years that investment will exist before the returns are maximized. Financial projection This is done in order to ascertain the number of funds that the client will be required to have at the time of their retirement.

the best tool for forecast the cash at the time of the retirement is the use of superannuation since it determines the amount that a client requires to accumulate today till the day of his retirement in order to meet his long-term financial needs. In order to undertake this approach, the client background understanding including the number of children time to retirement as well as vital data on the income and expenditure is considered relevant prior to making the financial projection of the client and providing a conclusive report based on the financial needs. Asset diversification                       Diversification is holding a portfolio of assets in different sectors in order to minimize investment risk.

An investment will diversity his investment security in different sectors in order to ensure that returns and risk of different security as not consistent hence saving the investor from investment downfall consequential from holding single return investment. The impact that diversification The impact of diversification portfolios is that there is a reduction in the volatility of the returns and at the same time the returns of the portfolio returns. In this regard, it can be observed that holding a portfolio investment return is ideal since there is less security risk as depicted by the value of variance and with maximum retains of investment.

The justification why we choose the portfolio as an ultimate investment strategy is that the expected return of the market is high with low cost of capital as depicted in the table for portfolio return and risk. The expected return of the market after using CAPM formula  

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