Personal Finance Midterm Reviewer PDF

**CHAPTER 1:** **INTRODUCTION TO PERSONAL FINANCE** **\* FINANCE** \- a term that broadly describes the study and system of money, investment, and other financial instruments. \- it involves managing money, investments, credit, debt. securities, and using future income flows to fund current proj...

**CHAPTER 1:** **INTRODUCTION TO PERSONAL FINANCE** **\* FINANCE** \- a term that broadly describes the study and system of money, investment, and other financial instruments. \- it involves managing money, investments, credit, debt. securities, and using future income flows to fund current project. \- it is tied to the time value of money, interest rate, and related topics due to its temporal nature. **\* PERSONAL FINANCE** \- is a term that covers managing your money as well saving and investing. \- it is about meeting your personal financial goals. **ITEMS THAT YOU CAN ENCOUNTER** **Income -** a money that you will receive once you have provided the project. **Expense -** a money that you will give in exchange for a product. **Saving -** the income left over after spending. **Debt -** a money that you owe. **Investment -** a purchase of financial products that are expected to give you an income in nature. **Asset -** a valuable item that you own. **CHAPTER 2:** **THE FINANCIAL STATEMENT** **\*FINANCIAL STATEMENTS** **-** it is a formal record summarizing financial performance and position over a specific period, essential for decision-making, financial analysis, and reporting to stakeholders. **ACCOUNTING STATEMENTS** \- a formal financial reports that summarize the financial activities and condition of the business. \- it provide stakeholders with information on the financial health and performance of the organization. **KEY STATEMENTS** - **\*INCOME STATEMENT -** Reports Revenue, Expenses, and Profit over a specific period. - **\*CASH FLOW STATEMENT -** Summarizes the amount of cash and cash equivalents entering and leaving the company. - **\*BALANCE SHEET -** Displays assets, liabilities, and equity at a specific point of time. \***(Assets = Liabilities + Equity)** **\*ASSETS -** Reports revenue, expenses, and profit over a specific period. **\*LIABILITIES -** any money that a company owes to outside parties, from bills it has to pay to suppliers to interest on bond issued to creditors to rent, utilities and salaries. **\*EQUITY -** a money attributable to the owners of the business or its stakeholders. \- it is also known as net assets since it is equivalent to the total assets of a company minus its liabilities or the debt it owes to non stakeholders. **ASSET MEASUREMENT** **-** a process of determining the fair market or present value of the assets, using book values, absolute valuation models like discounted cash flow analysis, option pricing models or comparable. **\*TYPES OF ASSETS** - **\*TANGIBLE ASSETS -** Cash, Inventory, Accounts Receivable. - **\*INTANGIBLE ASSETS -** Property, plant, and equipment. - **\*CURRENT & NON-CURRENT ASSETS** **(Current: Less Than 1 yr)** **(Non-current: Within 1 yr)** - **\*CURRENT & NON-CURRENT LIABILITIES** **(Current: Within Than 1 yr)** **(Non-current: More than 1 yr)** **\*NET ASSET VALUE** \- also known as net tangible assets. \- is a book of value of tangible assets of the balance sheet less intangible assets and liabilities. **\*(NAV = TA - ITA - L)** **\*PERSONAL FINANCE STATEMENT** **-** it refers to a document or spreadsheet that outlines an individual's financial position at a given point in time. \- it lists all assets and liabilities of all individual or couple. \- An individual's net worth is determined by subtracting their assets, a positive net worth shows more assets than liabilities. **UNDERSTANDING PERSONAL FINANCIAL STATEMENT** \- it shows the individual net worth.\* **\*(A - L = INW)** **A - Assets** **L - Liabilities** **INW - Individual's Net Worth** **(L \> A = -NW)** **(L \< A = +NW)** **\*COST AND TIME VALUE OF MONEY** \- it means that a sum of money is worth more now than the same sum of money in the future, **\*FV = PV(1+i/n)\^n(t)** **FV = Future Value of Money** **PV = Present Value of Money** **i = Interest Rate** **n = Number of compounding periods per year** **t = Number of Years** **\*OPPORTUNITY COST** **-** it represents the potential benefits that an individual/business misses out on when choosing one alternative over another. **\*PERSONAL OPPORTUNITY COST** \- it refers to the value of what you give up in terms of personal-satisfaction, time, or well-being when you choose one option over another. \- it is more concerned with non-monetary factors like happiness, relationships, time, and personal fulfillment. \***FINANCIAL OPPORTUNITY COST** **- -** it refers to the potential monetary gain or savings you forgo when you choose one financial decision over another. \- it is the centered of monetary gains or losses, such as ROI, savings, or potential income. **RATIO ANALYSIS** -- is a method of examining a company's balance sheet and income statement to learn about its liquidity, operational efficiency, and profitability. It doesn't involve one single metric, examples of ratio analysis include current ratio, gross profit margin ratio, and inventory turnover ratio. **\*5 MAJOR CATEGORIES OF FINANCIAL RATIOS** 1. **\*LIQUIDITY RATIO** **-** it is the ability to pay short-term liabilities. 2. **\*EFFICIENCY RATIO** \- it is the ability to effectively employ resources into business operations. 3. **\*PROFITABILITY RATIO** **-** it is the ability to generate profits from the available asset base. 4. **\*MARKET VALUE RATIO** **-** it is the ability to evaluate the share price of a company. 5. **\*LEVERAGE RATIO** **-** it is the ability to evaluate a company's debt levels. **CHAPTER 4:\ INDIVIDUAL INCOME TAX** **(TAX TABLE)** **\*POSSIBLE QUESTIONS** 1. What is the Tax Rate or Tax Percentage? 2. What are the income ranging from 0 to 250,000? **\*PERSONAL INCOME TAX RATES IN THE PHILIPPINES** --------------------- ---------- ---------- **Income** **2023** **2024** **0-250-000** **0%** **0%** **250,001-400,000** **15%** **15%** **400,001-800,000** **20%** **20%** **800,001-2M** **25%** **25%** **2,000,001-8M** **30%** **30%** **Above 8M** **35%** **35%** --------------------- ---------- ---------- **\*TAX -** it is a mandatory contributions levied on individuals or corporations by a government entity. **\*INCOME TAX -** is a tax imposed on individuals or entities in respect of the income or profits earned by them. **\*BANK -** is a financial institution licensed to receive deposits and make loans. **\*BANGKO SENTRAL NG PILIPINAS** **-** it was established on January 3, 1949, and then re-established on July 3, 1993 pursuant to provision of Republic Act 11211 or the New Central Bank Act of 2019. \- its primary objective is to maintain price stability conducive to a balanced and sustainable growth of the economy and employment. It should also promote and maintain monetary stability and the convertibility of the peso. **\*CLASSIFICATION OF BANKS** **\ UNIVERSAL -** it offer credit, loans, deposits, asset management, investment advisory, payment processing, securities transactions, underwriting, and financial analysis. **COMMERCIAL - it** refers to a financial institution that accepts. deposits and offers different banking and financial products. These financial institutions make money from a variety of fees and by earning interest income from loans. **THRIFT** - A classification of bank that specializes in offering savings accounts and originating home mortgages for consumers, **RURAL** - financial institution/cooperative/community. bank or deposit taking financial institution that provides customised financial services. to rural communities. **COOPERATIVE** - bank is one which is organized, owned and controlled by Cooperative cooperative organizations, for the purpose of providing financial and credit services to cooperatives and their members. Its members are either regular or associate. **ISLAMIC BANKING** - and finance serves everyone - granting Muslims much- needed access to financial services and providing non-Muslims with CARD Bank) alternative banking and finance options. **\*BASIC BANK SERVICES** **CHECKING ACCOUNT** - these are deposits used by consumers and businesses to pay their bills and make cash withdrawals. They pay little or no interest and typically come with monthly fees, usage fees, or both. **SAVINGS ACCOUNT** - accounts pay interest to the depositor. Depending on how long account holders hope to keep their money in the bank, they can open a regular savings account that pays a little interest or a time deposit (TD) that pays a little more interest. **LOAN SERVICES** - Banks make loans to consumers and businesses. The cash that is deposited by their customers is lent out to other customers at a higher rate of interest than the depositor is paid. **FOREIGN EXCHANGE (ForEx)** - Several banks also provide forex services. You can get competitive foreign exchange rates on converting \$ to foreign currencies, especially if you need forex while travelling abroad. **INVESTMENT PRODUCT -** Bank offers investment product to investors based on an underlying security or group of securities that is purchased with the expectation of earning a favorable return. **REMITTANCE** - Banks provide the customers to transfer their funds from one account to another using cheque, drafts, etc. This bank service are most commonly used by OFWs. Basic Bank Services · **ONLINE BANKING** - Banks offer mobile and internet banking services that allow you to access your bank account 24x7. You can use the facility to transfer funds, pay bills, check account balances and statements, etc. **CONSULTANCY** - Modern banks expand their businesses and also provides consultancy services to its customers. For this, they hire legal, financial, and market leaders and experts who can provide advice to customers regarding industry, income, trade, investment, etc. In this way, people will be enticed and potentially be a depositor, lender or investor. **\~\~\~\~\~\~\~\~\~\~\~\~\~\~\~END\~\~\~\~\~\~\~\~\~\~\~\~\~\~\~**