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Chapter 8

Credit Cards

• Nearly half of all Canadian credit card holders (46 per cent) are carrying credit card debt,

• 2015 Credit Card Report also showed that one in three don’t pay off their credit card bill every

month

• Credit cards are a popular payment tool for Canadians; however, unchecked spending habits can

result in getting stuck in continuous monthly debt cycles that can hamper near and long-term

financial goal

How to Avoid Paying Credit Card Interest

Pay your balance on time and in full every month, and you’ll never have to pay or calculate credit card

interest again!

1. Set a reminder to pay your bill early

2. Only charge what you can afford to pay off each month

3. Take advantage of a 0% APR balance transfer offer

4. Use your card only in emergencies

Mortgages

• Among Canadian homeowners, 57% made a mortgage payment and the remaining 43% were

mortgage-free. The mean age of persons with a mortgage was 45 compared with 62 for those

without a mortgage. Hence, on average, mortgagees are much younger than mortgage-free

homeowners

• More than seventy percent of Canadian household debt is the mortgage on the family home.

• At the end of 2015, the total Canadian mortgage debt stood at $1,262 billion

• The average size mortgage in all of Canada is approximately $193,778

Budgeting

Forecasting your Companies Financial Future

– Essential Functions of Budgeting

– Types of Budgets

– Create an Operating Budget

– Create a Cash Budget

– Applying Sensitivity Analysis to Budgets

– Developing HR Department Budgets

What is Budgeting?

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• Planning-resources-destination

– Cover a short-time span

– Take a long-term perspective

– Focus on required resources for specific projects

– Account for income and expenditures

• Budgeting: Translation of strategic plans into measurable quantities that express the expected

resources required and anticipated returns over a period of time.

• 5 P’s of Success - Proper Planning Prevents Poor Performance

Budget Functions

1. Planning

2. Coordinating and communicating

3. Monitoring progress & evaluate performance

1. Planning

• Ensures that the organization will have the resources available to achieve its goals

– Choosing goals – increase revenues by 10% during next year

– Reviewing options and predicating results – raising fees, expanding marketing program,

reducing business-development costs

– Deciding on option

2. Coordinating and communicating

• Units budgets/divisional budgets into a master budget to achieve company’s objectives

• Master budget – budgets from all functional areas (HR, R&D, design, production, marketing,

distribution, customer service)

• Communication is essential on all levels

3. Monitoring/evaluation progress

• Progress vs. Actual results and corrective actions

• Evaluating

Types of budgets

a) Short-term vs. Long-term – purpose of the budget, type of business

b) Fixed vs. Rolling (time frame is stable)

+/- are: rethink every month, more accurate/time-consuming

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a) Incremental vs. Zero-based budgeting

+History/experience/future expectation

- Use past periods for future predictions, use-it-or-lose-it point of view

+ (zero-based) in-depth analysis

- time-consuming

d) Kaizen – cost reduction is built into the budget onto an incremental basis

– Difficult to maintain but cost effective

Jan-Feb $ 100.00

Feb-Mar $ 99.50

Mar-Apr $ 99.00

The Master Budget

• Heart and soul of strategizing - Operating and Financial budgets

• Operating – all budgets from functional areas (HR, R&D, design, production, marketing,

distribution, customer service)

• Financial budget – capital, cash budget, budgeted balance sheet, budgeted cash flow

Steps on preparing Master Budgets

• Developing assumptions – company wide

– What are the sales and marketing’s expectations for unit sales and revenues?

– Are suppliers prices anticipated to rise or fall?

– What will be the cost of the company’s health care?

– Salaries?

– What will competitors do to gain market share?

Preparing the operating budget

• Revenues – (Cost of goods sold +sales+general+administrative costs) = operating income

• Calculate expected revenues

• Calculated the expected costs of goods sold

• Calculate the other expected costs

• Operating income

• Develop alternative scenarios

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Chapter 8 Credit Cards • • • Nearly half of all Canadian credit card holders (46 per cent) are carrying credit card debt, 2015 Credit Card Report also showed that one in three don’t pay off their credit card bill every month Credit cards are a popular payment tool for Canadians; however, unchecked spending habits can result in getting stuck in continuous monthly debt cycles that can hamper near and long-term financial goal How to Avoid Paying Credit Card Interest Pay your balance on time and in full every month, and you’ll never have to pay or calculate credit card interest again! 1. Set a reminder to pay your bill early 2. Only charge what you can afford to pay off each month 3. Take advantage of a 0% APR balance transfer offer 4. Use your card only in emergencies Mortgages • Among Canadian homeowners, 57% made a mortgage payment and the remaining 43% were mortgage-free. The mean age of persons with a mortgage was 45 compared with 62 for those without a mortgage. Hence, on average, mortgagees are much younger than mortgage-free homeowners • More than seventy percent of Canadian household debt is the mortgage on the family home. • At the end of 2015, the total Canadian mortgage debt stood at $1,262 billion • The average size mortgage in all of Canada is approximately $193,778 Budgeting Forecasting your Companies Financial Future – Essential Functions of Budgeting – Types of Budgets – Create an Operating Budget – Create a Cash Budget ...
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