Professional Documents
Culture Documents
for NFLAT
Which 5 things you would like to buy right away, if you had
the money?
Net Worth
2
Amount
Assets
Gold / Jewellery
1000000
1000000
Laptop
40000
40000
Car
500000
500000
Home Loan
1500000
1500000
10000
10000
Liability
1540000
30000
1510000
1
Not Smart
Smart
Specific
I want to go
somewhere on my
winter vacations.
Measurable
I need to save
some money for
going on a trip.
I need to save
Rs.3000 for going
on a trip.
Achievable
Realistic
Timely
1. Active Income: You are receiving Rs.500 regularly as your monthly pocket
money.
2. Passive Income: You received Rs.500 from your parents on your B'day.
Expenditure: It is the money that you spend on your needs and
Wants.
Eg: Rs.100 you spent for having a pizza.
Expense are of two types:
1. Regular Expense: That you regularly or daily spend like eating daily in
canteen.
2. Lump Sum Expense: That you spend once on your Birthday Party.
Expenses
5
Discretionary Expense: Its your choice that you want to spend money for eating at
canteen. You can also bring your lunch.
Non-Discretionary Expense: Its a expense that you have to spend out of necessity. You
spend Rs.10 daily for taking a bus for attending school.
Surplus: Surplus is the amount that remains when use or need is satisfied.
Eg; If you along with your 4 friends ordered 4 Burgers, Cold Drinks etc. at Mc'Donalds. The
total cost of your order will be Rs.500. Now, instead of ordering everything
separately, you ordered 4 combos which includes Burger, Cold Drinks, Toys etc. For
Rs.400 only. In this case Rs.500 Rs.400 = Rs.100 money you still have with you. This
amount is your SURPLUS, where you utilized your smartness to fulfill your need.
Savings
6
Budget
8
11
Dying too
Early
Financial Loss
Above picture explains the risks involved with Humans and if they die early & live
too long then it will get impact on their Finances. Thus explaining the importance
of Life Insurance.
Need of Insurance
12
A Peace of Mind
13
Traditional Plan
Term plan
(Risk
Management
Scheme)
Unit Linked
Insurance Plan
Pure
Endowment
Note :
Term Plan
Pure Endowment : Benefit paid only in case of survival during the term
Basics
Element
15
Death
Cover
Survival
Benefit
Term Assurance
Pure Endowment
(Provides only
death cover)
(Provides only
survival benefit)
Endowment Plan
(Combo of Term and Pure
Endowment
15
Premium
. Mortality
Expenses
Charges
Investment Element
Debt
Equity
Money
Market
Insurance Terminologies
17
Proposal form
Proposer
Life Insured
Sum Assured
Premium
Insurance Terminologies
18
19
Policy term
Maturity value
Premium paying
term
Surrender value
Fire
(dealing
with fire
related
risks)
Marine
(dealing with
transport
related risk &
ships)
Miscellaneous
(dealing with all
other like
motor, liability,
Medical etc)
You have a car of Rs.3 lac & have taken a car insurance. The premium for this is
Rs.6000/year. After 1 month your car met with an accident and too fix the
damage (make the car new again), it will cost Rs.20000. Now the insurance
company will pay this amount as you have taken a car insurance.
Portability Of Health Insurance: Here one can change his insurance company.
Note: In INDIA the regulatory body for insurance companies is IRDA i.e.
Insurance Regulatory And Development Authority.
Authority
23
Once a boy (Named - Ankush) received Rs.500 from his grandfather for his
Birthday.
Ankush went to his father with this Rs.500.
Father:: Son, put the money in your a piggy bank.
Ankush:: Father, it is almost full and what should I do now?
Father:: Why don't you put the money in my bank?
Ankush:: I have total Rs.1500 (Rs. 1000 in my piggy bank and this Rs.500), but
why should I give it to your Bank? Will they return my money?
Father:: What if I say, they will not only return your money but will also give you
additional Rs. 90 at the end of the year.
Ankush:: I would like to know that why they are giving me this extra Rs.90?
Father : Rs.1500 was your investment and Rs.90 is the return on investment or in
simple term interest amount.
Inflation
25
Inflation: The rate at which the general level of prices for goods and services is
rising, and, subsequently, purchasing power is falling.
For Eg; When Mc'Donald launches its Mc Aloo Burger at Rs.20, now because of
inflation (Due to rise in price of potato, transportation cost etc.) the same
burger now costs Rs.30 (including taxes). So, inflation rate is 30-20/20
30
= 50%.
26
CPI (Consumer Price Index): A measure that examines the weighted average of
prices of a basket of consumer goods and services, such as transportation, food
and medical care. The CPI is calculated by taking price changes for each item in
the predetermined basket of goods and averaging them; the goods are
weighted according to their importance.
The annual percentage change in a CPI is used as a measure of inflation.
WPI: An index that measures and tracks the changes in price of goods in the stages
before the retail level. Some countries use WPI changes as a central measure of
inflation.
Time Value Of Money: The time value of money is the principle that a certain
currency amount of money today has a different buying power (value) than the
same currency amount of money in the future. The value of money at a future
point of time would take account of interest earned or inflation accrued over a
given period of time.
Types of Interest
27
A. Simple Interest:
Formula:
S.I. = P*N*R/100 = Principal (Rs.1500 Amount Deposited) Number Of Year (1Year) Rate (6%) /
100
S.I. (Simple Interest) = Rs.90
B. Compound Interest: Interest On Interest.
Suppose Ankush has deposited his Rs.1500 with bank for 2 years then his interest would be Rs.1685.40
Formula:
C.I. = P (Principal) * (1+r)^n = P (Rs.1500 Amount Deposited) {1+0.06}^n(2)
= Rs.1685.40
C.I. = Compound Interest, P= Principal, R = rate of interest, n = number of periods, r = R/100 (6 / 100
= 0.06)
So, Compound Interest for 2 years = Rs.185.40 (Compound Interest)
Rule Of 72:
28
Now, parents can also open bank a/c in name of their kids
Special Bank Term Deposits: Banks also have their own specialized FD's
offering attractive interest rate which is higher than normal FD's.
Banking
33
Demand Draft: It is a special instrument which does not get dishonoured (bounced). IT is
always issued by a Bank.
ATM: Its a machine through which we can withdraw money from our deposit a/c at any time.
E-Banking Or Internet Banking: Its a process through which one can manage his/her account
online like viewing e-statement,
statement, fund transfer, online shopping, ticket booking etc.
Tele-Banking: Its a process through which one can manage his/her account over the
telephone.
Cheque
34
Circled
Number
Details
Ramesh K.N
31-03
03-1999
1000
11987
Cheque Number
665078
Mode of Payment
A/C Payee
Demand Draft
35
Details
SBM - Somwarpet
FOODS LIMITED
22/06/2006
Date of issue of DD
(Validity period is six months)
65000.00
Amount in words
DD715693
Number of DD
Signatures
Features
Cheque
Demand Draft(DD)
Issuer
Issued by bank
Availability of
Amount
Safety
Highly secure
Credit of
amount to the
payees
account.
Could
take few
days
Dishonoring
of instrument
Guaranteed by Bank
Issue Date
Signature
Signed by
Accountholder/s
Charges for
issue
Nil or negligible
Basics Of Banking
37
Safety: If you lend 100 rupees to someone, will he give it back to you i.e. is your
capital (Rs.100) safe?
Liquidity: Will you get your money back if you need it immediately?
Growth: What is the return you will get on your investment? It could be in the
form of income or appreciation or both.
Bank Gives
You
You can withdraw money at any time through cheque, atm etc.
Note: In INDIA the regulatory body for Banks is RBI i.e. Reserve
Bank Of India.
1
39
Note: In INDIA the regulatory body for stock exchange is SEBI i.e. Securities and
Exchange Board Of India.
40
41
Equity Stocks: An equity investment generally refers to the buying and holding of shares
of stock on a stock market by individuals and firms in anticipation of income from
dividends and capital gains, as the value of the stock rises.
Face Value: It is also known as par value of the stock. Face Value of share is generally
Rs.10.
Dividend: A dividend is a payment made by a corporation to its shareholders, usually as a
distribution of profits. When a corporation earns a profit or surplus, it can either re-invest
re
it in the business (called retained earnings), or it can distribute it to shareholders.
EPS (Earning Per Share): It is the rupee value of earnings per outstanding share of a
company's equity stock.
Earnings per share (net income formula) :
EPS = Profits Dividends / No. Of Outstanding Shares
P/E Ratio: The price-to-earnings
earnings ratio or P/E ratio, is an equity valuation multiple. It is
defined as market price per share divided by annual earnings per share.
42
Shareholders: Individuals who buy (in other words invest in) shares of a
company are the owners of the company and are referred to as share
holders. Share holders usually have voting rights and can, thus,
participate in management of the company.
Bond: It is a debt security, under which the issuer owes the holders a debt and,
depending on the terms of the bond, is obliged to pay them interest.
Bonds are issued by public authorities, credit institutions, companies and
supranational institutions in the primary markets.
Debenture:: A debenture is a document that either creates a debt or acknowledges
it, and it is a desbt without collateral.
Nifty is the 50 stock index comprised of some of the largest and most liquid
stocks traded on the NSE.
BSE 100 is the stock index comprised of 100 of the largest and most liquid
stocks traded on the BSE.
Bear Phase: A bear market is a general decline in the stock market over a
period of time. It is a transition from high investor optimism to
widespread investor fear and pessimism.
There are other asset classes for investing apart from bank saving a/c such as: Mutual Funds,
Commodities (Gold), Real Estate, Foreign Exchange (Dollar).
Mutual Fund: It is a pool of funds for doing investments which is professionally managed by
Fund Managers & has a common goal.
NAV
47
NAV : Net asset value(NAV) is the value of a fund's asset less the value of its
liabilities per unit.
Comparisons
48
49
v/s
v/s
Comparisons
49
Pa ra m e t e r
Re t u r n s
In t e re s t
Re c e ip t
8%
On Ma t u rit y
8% - 9%
On
Ma t u rit y
Eq u i t y M F
Sche m e s
12-15%
De p e n d s o n
Pe rfo rm a n c e
Te n u re
1 5 Ye a rs
7 da y s t o
1 0 y rs
No S p e c ifie d
Te rm
Pa rt ia l
Wit h d ra w a l
Lo n g t e rm
Ta x Lia b ilit y
PPF
Ba n k F D
No
No
Ye s
No
Ye s
No
Min im u m
Rs 5 0 0 p . a .
Rs 1 0 0 0 0
Rs 5 0 0 0
In v e s t m e n t
Ma x im u m
Rs 1 , 0 0 , 0 0 0 No Up p e r
No Up p e r
Lim it
Lim it
In v e s t m e n t
N. A
N. A.
Rs 5 0 0
Mo n t h ly
In v e s t m e n t s
De p e n d s
Lo c k In
By De fa u lt
No Lo c k- in
Pe r io d
1 5 y rs
o n Te r m o f Pe rio d
De p o s it
NSC
50
PO MIS
51
EMI (Equated Monthly Installment) is the amount that a borrower should pay every
month.
For eg; You pay back Rs.200 loan taken from your elder1sibling in 4 monthly
installments of Rs.50. In simple term, you will pay back your loan in EMI's of Rs.50.
Credit Card
53
Credit Card
54
Loans
55
House Loan
Consumer Loan
Personal Loan
Auto Loan
Eg: Suppose you purchased a car of Rs.5 Lac. You paid Rs.2 Lac for now i.e.
your down payment. For the remaining portion you took an Auto Loan of
Rs.3 Lac (Loan Amt-3Lac) at 12% per annum (Interest Rate-12%).
Rate
And you
pay Rs.7000 monthly to pay off your loan i.e. EMI.
If the interest rate remains the same i.e. 12%, its called as Fixed Rate.
If the interest rate fluctuates i.e. Sometime 12%, sometime 13%, its called as
Floating Rate.