Mathematics Of Personal Finance - Chapter 2 PDF

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Lecture Notes - Mathematics Of Personal Finance - Chapter 2...

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Chapter 2 Capital Spending Net capital spending is the cash spent on fixed property less cash received from the sale of fixed belongings It may be negative if the company sold extra belongings than it purchased Operating cash go with the flow is described as income before interest and depreciation minus taxes Total coins flow of the organization consists of capital spending and additions to internet running capital Changes in Net Working Capital Net operating capital is ENWC‐ BNWC Free cash waft is coins glide from belongings Cash Flow To Creditors Cash Flow to Creditors = Interest Paid ‐ Net new borrowing Cash Flow to Shareholders Cash float to shareholders = Dividends ‐ New Equity Raised TABLE 2.4 Cash float summary The coins glide identity Cash waft from assets = Cash go with the flow to creditors (or bondholders) + Cash float to shareholders (or owners) Cash glide from assets Cash drift from belongings = Operating coins drift ‐ Net capital spending ‐ Changes in net operating capital (NWC) in which: a. Operating coins go with the flow = Earnings before interest and taxes (EBIT) + Depreciation ‐ Taxes b. Net capital spending = Ending net fixed belongings ‐ Beginning internet fixed belongings + Depreciation c. Changes in NWC = Ending NWC ‐ Beginning NWC Cash drift to creditors (bondholders) Cash go with the flow to creditors = Interest paid ‐ Net new borrowing Cash drift to shareholders (owners) Cash flow to shareholders = Dividends paid ‐ Net new fairness raised Average vs. Marginal Tax Rates

Average tax price is your tax bill divided by means of your taxable income Marginal tax price is the extra tax you will pay if you earned one greater dollar Taxes on Investment Income Dividend tax credits best observe to Canadian companies Capital gains are only taxes at 50% of the marginal tax charge Taxes on found out capital gains are simplest once they are sold Corporate Taxes Under the carry again feature , a firm documents a revised tax return and gets a refund of up to a few prior years taxes Under the convey forward provision, it applies to operating losses, that's as much as 7 years Capital Cost Allowance Capital Cost Allowance‐ Is the depreciation for tax functions in Canada Deducted when figuring out income Begin by means of assigning every capital to a specific magnificence Intangible belongings comply with a straight‐line depreciation, in which as the other follow a declining balance technique Calculated via Undepreciated Capital Cost * CCA Rate Can only depreciate 1/2 of the belongings installed fee inside the first year When an asset is sold, it's miles found out through the realized value (sell price) or the cost price, whichever is lower Net Acquistions = (overall installed cost of all acquisitions) ‐ (adjusted costs of disposal for all property) If fine we apply the half 12 months rule If terrible there's no want to adjust TABLE 2.13 CCA for manufacturing device Year Beginning UCC 2010 $450,000 2011 765,000 2012 535,500 CCA $135,000 229,500 160,650 Ending UCC $315,000 535,500 374,850...