Presentation Transcript

1. Chapter 15

   Personal and Business Financial Skills
2. Chapter 15 Lessons Lesson 15-1 Taking Stock of High-Tech Financing Lesson 15-2 Loan and Mortgage Skills Lesson 15-3 Maintaining financial health Chapter 15
3. You are a Financial Powerhouse You are an emerging legal entity. You can: Sign a contract to work for a corporation or to take out a loan. Invest money in the stock market. Invest in a retirement account. Invest in yourself by borrowing money for college. Apply for credit cards. You must become your own financial powerhouse. Chapter 15
4. Lesson 15-1 Taking Stock of High-Tech financing In this Lesson You Will: 1. Learn to track stocks online with a ticker symbol. 2. Compare high-tech stocks based on 52-week high and low, market cap, and current price. 3. Follow the Dow, S&P, and NASDAQ stock indexes. Chapter 15
5. Taking financial Control Money coming in is called income. Bills to be paid out are called expenses. When expenses exceed income, debt is created. If debt grows larger than the ability to pay back the money, people and businesses may go bankrupt. Bankruptcy is the inability to pay creditors. A creditor is someone who is owed money. Someone who owes money is called a debtor. Chapter 15
6. Raising Cash for a company As a company grows, it often needs more capitalto grow to its potential. The stock market gives businesses a powerful way to raise additional capital by going public. Going public means that a privately owned business becomes a company in which anyone can invest. If you invest in a public company and buy shares, you become a partial owner. Shares are bought and sold on one of the many stock exchanges (or stock markets) around the world. To go public, a corporation needs to set up an IPO, or initial public offering, through a stock exchange. Chapter 15
7. The GoogleIPO Google’s IPO was legendary. It took place on Wall Street– home of two major stock exchanges: the NYSE (New York Stock Exchange) and the NASDAQ. The number of trades is called the trading volume. The money raised from selling shares was used to finance Google’s explosive growth. Other top technology companies like Microsoft, Apple, eBay, and Yahoo! are public companies as well. To look up the current stock price for a company, you must know its ticker symbol. Chapter 15
8. Taking stock of Stock Indexes The Dow Jones Industrial Average (DJIA), also sometimes called the Dow, was started by Charles Dow and Edward Jones in 1884. The DJIA is an index (or list) of 30 of the top stocks that represent various categories (or sectors) of the economy. A sector is a segment of the economy. By taking in all these sectors, the DJIA tracks the performance of the overall stock market and the overall economy. You can learn a lot by looking at the history of the Dow. A recession is a time period in which the economy stops growing for six months or more. Chapter 15
9. The DOW Since 1970 Chapter 15
10. Tracking the DOW, NASDAQ, and S&P 500 Tickers for stock indexes are preceded by a period: DOW or DJIA = .DJI S&P 500 = .INX NASDAQ = .IXIC Chapter 15
11. Lesson 15-2 Loan and Mortgage Skills In this Lesson You Will: 1. Examine types of debt. 2. Compare loan rates and terms. 3. Calculate loan payments using online apps. 4. Learn how to lower your actual loan costs. 5. Evaluate a mortgage amortization table. 6. Investigate car loan alternatives. Chapter 15
12. Good Debt, Bad Debt Examples of potentially good debt: Business debt (i.e., short-term loans to finance projects) Housing or mortgage debt (may be a good investment compared to paying rent) Car loan debt (if needed to drive to and from work and school) School debt (borrowing money to obtain a degree can lead to higher-paying jobs) Chapter 15
13. Risky Lending and compound interest When a bank or an investor gives a loan to a borrower, that bank or investor is putting his or her money at risk. To cover the risk and to make a profit, lenders charge interest. The interest rate charged over the period of a year is called the APR, or annual percentage rate. The amount you borrow is called principal. Most loans use compound interest – which use an effective APR (principal + interest + fees). Chapter 15
14. How to Lower Your interest payments There are ways to lower the total amount of interest you will pay for a loan: Lower the interest rate. Pay the loan off faster, which means paying more than the minimum payment every month. Borrow less money by making a down payment at the start of the mortgage. Chapter 15
15. Apps for Loan Calculations It is difficult to calculate compound interest – but there are many online apps for that. Most are free to use, but they have advertisements that link to mortgage sites that want to sell you a mortgage. Chapter 15
16. Amortization Tables An amortization table lists how much interest is being paid compared to the principal being paid each month. Chapter 15
17. Local Car Loan Rates The same principals that apply to mortgage loans apply to car loans: Look for the lowest interest rate possible. Negotiate for lower fees (like licensing or shipment fees). Make a down payment of 10%-25% if you can. You will pay less if the term of your loan is shorter. Focus on the true amortized cost created by compound interest, rather than the monthly payment. Chapter 15
18. Go Green: Compare Electric, CNG, and Hybrid savings There are all-electric cars, hybrid cars are battery- and gasoline-driven, and others are fitted with compressed natural gas (CNG). These are more expensive to buy, but save money on the cost of gas or energy to run them. They have a less negative effect on the environment. Some offer special tax breaks that make them less expensive to buy. To find out if a car will save you money over time, you need to find out the MSRP, the average MPG (or equivalent), and the current price of gasoline. Chapter 15
19. Lesson 15-3 Maintaining Financial Health In this Lesson You Will: 1. Review the role of CPAs in managing the financial health of a business. 2. Learn how credit reports can help you view your own credit health. 3. Learn how to obtain a personal credit report. 4. Examine how to find answers to tax questions. 5. Learn where to find answers about student college loans. Chapter 15
20. Maintaining corporate health with a CPA A business must manage how money is budgeted, invested, and spent. To avoid making mistakes, corporations hire accountantswho have skills in finance and accounting. Finance is the science of managing money, or funds. Accurate accounting helps businesses (and individuals) be responsible with their profits and losses. Anticipating the financial future of a company is called forecasting. CPA is short for Certified Public Accountant. Chapter 15
21. Maintaining personal financial health with FICO FICO gives borrowers a measure of their financial health. FICO is the ticker symbol for the Fair Isaac Corporation. FICO created a statistical credit scoring system in 1958. It created a credit card scoring system in 1970. There are other scoring systems (NextGen, VantageScore, and CE Score), but FICO is the best-known credit scoring system. Three big American credit bureaus provide credit histories and credit scores to lenders: Equifax: www.equifax.com Experian: www.experian.com TransUnion: www.transunion.com Chapter 15
22. Making the FICO Public In the past, only lenders could know your credit score. The score was hidden from potential borrowers. You could not argue for better rates because you had a high score. If you were denied a loan, you would often not know why. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 changed that. Now, if you are turned down for a loan or credit card, lenders must give you the score they used to deny you credit. Another law, called the Fair Credit Reporting Act, gives you the legal right to obtain a free credit report each year from AnnualCreditReport.com. Chapter 15
23. Maintain tax Health Every person and every business must pay taxes. Taxes pay for roads, schools, and the military. Taxes help provide breakthrough medical research, airport security, and a host of other things. Businesses need to pay taxes on their profits. Businesses also need to invest in order to grow. Businesses do not have to pay taxes on these costs. If you start a business, you can write off expenses too. The U.S. Government agency that answers tax questions is the Internal Revenue Service, or IRS. Chapter 15
24. Student loans Universities and colleges charge tuition, and there are additional expenses for books and housing to live near campus. How can you pay for school? In the Student Aid and Fiscal Responsibility Act of 2010, Congress expanded low- interest loans and provided generous payment terms through the Federal Department of Education. Chapter 15