MCS 2100 Lecture Notes - Lecture 1: List Of Fables Characters, Cash Flow, Cash Flow Statement

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Unit 01
Personal Financial Planning
- Personal Financial Planning- process that involves setting your financial goals and deciding how
you’re going to reach those goals
- 6-step planning process
oHelps to review, revise, and align goals with changing circumstances
- Goals need to be realistic, specific/measurable, time frane, and action plan
- Influence prevailing economic factors (market forces, financial insitutions, global conditions)
need to be considered
- Once goals set, alternative course of action to achieve goals need to be identified and evaluated
oNeed to understand opportunity costs (what a person gives up by making a choice)
oHow to mitigate various risks associated with each choice
oIntelligent use of financial resources
- Important to identify strategies (spending, saving, investing, borrowing) that are consistent in
achieving the stated goals
Time Value of Money
- Common measure of financial opportunity is called time value of money (interest)
oCost of money that is borrowed or lent
oBased on fact that a dollar received today is worth more than a dollar received one year
from today because of inflation
oLender is compensated by interest earnerd
- 2 major components: Future Value and Present Value
- Future value (compounding)- yield amount to which a current sum will increase based on a
certain interest rate and period of time
- Present value (discounting)- yield current value of future sum based on certain interest rate and
period of time
- Money can be accumulated by depositing a lump sum or series of deposits
- Loans can be repaid with lump sum or with series of payments
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