L4 MATHEMATICAL LITERACY - PowerPoint Presentation

1. L4 MATHEMATICAL LITERACYTOPIC 3 – FINANCELESSON 1SUBJECT OUTCOME 3.1 Manage finances with confidence in workplace and other areas of responsibility including NATIONAL / GLOBAL ISSUES.3.1.1 Recognise financial concepts related to BUSINESS ENVIRONMENTS.3.1.2 Recognise financing concepts and methods related to BUSINESS ENVIRONMENTS3.1.3 Identify documents relating to more complex financial environments including NATIONAL AND GLOBAL SITUATIONS3.1.4 Identify and list typical receipts, funding and income in a LOCAL NATIONAL OR GLOBAL BUSINESS.3.1.5 Identify and list typical payments and expenses in a LOCAL, NATIONAL OR GLOBAL BUSINESS2020/07/071compiled by B Adams

2. FINANCIAL CONCEPTSDESCRIPTIONIncomeAmount of money a business (or person) received for a financial yearNet income/salaryAmount of money employee received AFTER deductions. WagesPaid to worker on a weekly or daily basis. Can differ every day or week – (link to hours worked)CommissionPaid so sales people on items sold (Incentive driven). Commission differs from month to month.Taxable incomeAmount use to calculate income tax of a employee for a specific period. Tax rate and tax bracketsIndividual and Business pay tax on taxable income earned for a specific year. Income is linked to specific tax bracket and tax rates apply. In South Africa tax rates increase when income increase. Minimum income is not taxedPAYEPay-As-You-Earn tax is deducted from employees’ salaries by employer and paid to SARS. It is law to deduct PAYE.Unemployment Insurance Fund (UIF)Short-term relief to workers when they become UNEMPLOYED or are unable to work (maternity, adoption leave or illness). Employer and Employee each contribute 1% each = 2%Gross salary Total cost of employing a person, this is BEFORE deductionsDeductionsAmounts taken from the Gross Salary. TYPICAL DEDUCTIONSIncome tax – amount that every person or business has to pay to SARS in a tax year (12 months) which income is earned. In South Africa the Tax year is from 1 March to 28 FebruaryPension fund – plan, fund or scheme that provides retirement income to employees once they stop working or reach retirement.Retirement annuity – Savings plan towards retirement. Some employees do not provide Pension funds, employee save for retirement themselves. 2020/07/072compiled by B Adams3.1.1 Recognise financial concepts related to BUSINESS ENVIRONMENTS

3. 3.1.2 Recognise financing concepts and methods related to BUSINESS ENVIRONMENTSFINANCIAL CONCEPTSDESCRIPTIONLoanBorrowing money from another in exchange to repay the original amount with interest.Repayment periodThe period in which a loan has to be paid backRepayment amountThe amount of a loan with interest that has to be paid back.Interest rateThe rate at which interest is charged to the borrower for using the money. It is set a specific percentage of the original loan amount. InterestMoney that the lender earn when lending money to the borrower. BondLoan granted to buy property (also called mortgage bond). Property become security for the loan.OverdraftArrangement with the bank to extend credit up to a maximum amount. Credit cardCard used by person/business to pay for transactions, whether there is money in the account or not. Interest rate is very high. There is a credit limit on the card. Hire purchase/leaseSystem where buyer pays for an item in regular installments while having the item already. Ownership is passed to the buyer with the final payment. Residual valueValue of a FIXED asset at the end of its lease, or at end of its use.Real cost or total costThe cost of producing a product or service – E.g. resources, time, overhead costs(electricity and rent)Buying land/property and buildingsBusiness buy property as an investment. House or commercial property can be rented out for income. Value of property increase overtime if maintained.Stock marketPlace where shares in companies listed in the stock market trade. Individuals and organisations can buy and sell shares (stocks and bonds).FINANCE FOR VEHICLES (SUCH AS A CAR OR DELIVERY VAN)Hire purchaseAgreement between vehicle dealer and buyer. Buyer required to pay deposit and monthly repayments are set on outstanding amount with interest. Vehicle is not fully owned until final amount is paid. LoanLoan from a financial institution such as a bank, buyer has immediate ownership of vehicle. Loan is repaid over agreed period with agreed interest. Average repayment period is 68 monthsBalloon paymentEnables buyer to settle inflated lump sum at the end of repayment period. It will keep monthly lower but the when it’s time to settle the balloon payment , it needs to be paid as a single payment. FINANCE FOR HOMES, LAND OR OTHER PROPERTY (SUCH AS BUSINESS PREMISES)BondMortgage bond from a financial institution is a loan that allows a person or business to fund property investments. Loan period is normally 25 years, interest rate is lower than normal loan. FINANCE FOR RETIREMENTPension fundPlan, fund or scheme for retirement income. Some employers partially subsidises their employees monthly contributions. Retirement annuitySavings plan for retirement. It pays a lump sum plus monthly income during retirement. FINANCE FOR MEDICAL EXPENSESMedical aid fundHelps with unexpected medical expenses. Some employer subsidises monthly contributions. This could be seen as Insurance. FINANCE OBTAINED FROM TRADING ON THE STOCK MARKETTradingPlatform for trading of shares of listed companies. Stock market is a good long-term investment. 2020/07/07compiled by B Adams3

4. 3.1.3 Identify documents relating to more complex financial environments including NATIONAL AND GLOBAL SITUATIONSDOCUMENTSDESCRIPTIONPay slipDocument given to an employee as evidence of amount paidOrdersDocument filled in by customers requesting purchase of good or servicesQuotationEstimated cost is indicated and specified to potential client – services or items (or combination)InvoiceDocument (form) for billing goods and services. Shows amount of transaction – considered a receipt when it displays paid. Travel allowanceAmount for travelling for business purposes. Claim document (expense claim)Official document requesting an amount form business incurred on behalf of business. Cash flow statementActual flow into and out of a business. Recorded and reported on for a specific period of time. Income and Expenditure statementsShows the net profit(or loss) the business makes during a financial period. It is a summary of income and expenses. Balance sheetFinancial statement that reflects the Value of the business on a specific date. (Assets, Liabilities and total owner’s equity)BudgetPlan or projection of how a individual, business or country intends to spend its money. TAX FORMSTax rate tablesInformation by SARS about the rate applicable for paying taxes, linked to total income and possible deductions. IRP5Tax certificate issued by employer to Employee at the end of tax year. Specifies amount of tax deducted from gross income and paid to SARS. Employee income tax returnUsed by Employee to verify tax information for a specific year. Can be completed online. SARS pocket tax guideDevelop by SARS to provide summary of information and how to complete tax return form. LOAN DOCUMENTSAgreement stating loan conditionsContract between borrower and lender. Terms and conditions of the loan – repayment amount, period for repayment. Statement showing changes in a loanWhen one or more conditions of loan are altered. (Interest rate that can change – increase/decrease)Inflation rateRate by which general level of prices and goods and services rises in a country.Inflation data and graphsShows movement and change in South Africa’s inflation rate over a period of 12 months (pg157)2020/07/07compiled by B Adams4

5. 3.1.4 Identify and list typical receipts, funding and income in a LOCAL NATIONAL OR GLOBAL BUSINESSINCOMEDESCRIPTIONSales/services renderedMoney received from selling a product or rendering a service.Interest receivedCould earn interest on money in bank account or savings accountGrantsSmall businesses and entrepreneurs could apply for grants to start up their business. Usually linked to specific requirements. Rent or lease receivedBusiness owning a property or equipment can rent or lease it for income. Sponsorships/fundingUsually for Non-Profit organisations to perform specific tasks by large businesses. DonationsMoney given with no conditions attached. Does not need to be paid back. TaxesOnly for Local and National government, taxes is a source of income. (Income Tax, VAT, import tax, fuel tax, tax on products such as Alcohol and Cigarettes also called “Sin tax’’.)2020/07/07compiled by B Adams5BUSINESS RECEIPTSDESCRIPTIONRegister-type receiptStandard store receipt printed by cash register. Receipt tabletReceipts booklets with receipt forms printed on multi-coloured sheets of paper used to generate several copies f a receipt. There is sometimes a sheet of carbon paper coated with ink attached to the booklet. Letter of confirmationLetter of confirmation specifying the details of a transaction could be used as proof of sale. FUNDING FOR BUSINESS VENTURESDESCRIPTIONHire- purchaseFunding used when buying expensive equipment or vehicles. BondsFinancial institutions e.g. Banks enables a business to fund property investments. Loan period vary from 5 to 25 yearsLoansLoan can be taken to establish or expand a business.

6. 3.1.5 Identify and list typical payments and expenses in a LOCAL, NATIONAL OR GLOBAL BUSINESSBUSINESS PAYMENTS AND EXPENSESDESCRIPTIONSLoan repaymentsPaid back in regular monthly installments or a fixed amount. Repayment period and interest rate determine the installment amount.Operating or running expensesExpenses not directly associated with product or service. Includes payrolls, employee benefits, pension contributions, transportation, rent, repairs, electricity and water, phone costs and taxes. Fees payableBank fees, UIF for employees, property tax, municipal levies for rate, refuse removal, skills levyInsurancePractice or arrangement which a company provides a guarantee of compensation for specified loss, damage, illness or death in return for payment of premium. Business takes out insurance to reduce financial impact of potential risks – accidents(fire, theft and burglaries)2020/07/07compiled by B Adams6