1.) Gather all your financial details. That will include all of your
bank accounts, credit cards and insurances papers - anything to do with
your personal finances. These details will be needed to start your
budget.
2.) List all sources of income. This includes salary, rental income and regular dividends and
interest.
3.) Categorise your expenses starting with your commitments - list each
item under headings such as:
* Home: mortgage or rent.
* Association and professional fees.
* Insurance: health, motor vehicle, home, contents and life
* Education costs
* Day care and child care
* Loans: car loan, student loan, bank fees and interest
* Land tax or rates.
* Other payments required as a commitment: motor vehicle licensing.
* Investment
4.) List necessities -List each item under headings:
* Food, groceries, gas (petrol), home maintenance, security.
* Utilities: gas, water, electricity, rubbish disposal, phone costs
* School lunches, household supplies, car maintenance, internet
service, dry cleaning, monthly parking.
5.) Other expenses. Personal everyday expenses covering: lunch at work,
snacks, coffee, drinks, newspapers, magazines, batteries, postage.
Family and personal allowances: parties, entertainment, weekend outings,
movies, concerts, other entertainment and events, home improvements and
decorating, magazine and other subscriptions, dining out and fast food.
Also include: clothing, hobbies, personal recreation, books, CD's,
manicures, hair care, alterations, shoe repair, personal and family
gifts, gardening, film processing, video rentals, sports and gym,
donations, computer software and other related items.
6.) Once you have all your expenses listed add the total expenses and
deduct these from your income. You will need to convert everything to
monthly or weekly. This means that bills that are paid once a year must
be divided by 12 to get the monthly figure.
7.) Do you need to tweak your budget? When you deducted the expenses from
your income was there any money left or did you find your expenses were
more than your income? If your situation is the latter you will need to
do some tweaking. The commitments cannot change. As for necessities you
may be able to cut down on food expenses and find cheaper providers of
utilities or try to save costs by being conscious of switching off
lights etc. But it is the other expenses category that has the most
capacity for tweaking as many of them are not needed and can be reduced
or cut out. Review your budget regularly to make sure it is still
working for you.
These gains and losses may be described or classified as either operating or nonoperating, depending on their relation to an entity's major ongoing or central operations.
<h3>What does Conceptual Framework say about profit and loss?</h3>
The Exposure Draft proposed that, because profit or loss is the primary source of information about an entity's financial performance for the period, the framework should include a presumption that all income and all expenses will be included in that statement.
The FASB's conceptual framework classifies gains and losses based on whether they are related to an entity's major ongoing or central operations.
As the required rate of return of the security (9.52%) is more than the expected rate of return (8%), the security or stock is overpriced.
Option b is the correct answer.
Explanation:
A security is underpriced when the required rate of return of the security is less than the expected rate of return and vice versa.
Using the CAPM, we can calculate the required rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.
The formula for required rate of return under CAPM is,
r = rRF + Beta * (rM - rRF)
Where,
rRF is the risk free rate
rM is the market return
r = 0.04 + 0.92 * (0.1 - 0.04)
r = 0.0952 or 9.52%
As the required rate of return of the security (9.52%) is more than the expected rate of return (8%), the security or stock is overpriced.
There are two main types of leases which are operating leases and finance leases. Operating leases work much like an asset being rented so no ownership is passed from the person leasing to the leasee.
When it comes to finance leases however, the person leasing treats the asset as if it is their own. They record depreciation and list it as an asset in their balance sheets. At the end of the lease term, the leasee then has the option to purchase the asset.