Business math and statistical measures

Business Math And Statistical Measures

As a business owner, financial decisions require careful planning and prioritizing, especially when large, capital-intensive purchases are involved. As you establish a process to achieve your company goals, you will need to demonstrate your math skills, consider different investment options, and describe how different investment vehicles can be used effectively to accomplish business goals.

You, as a small business owner, are interested in buying a lot for $38,000. You have a CD (certificate of deposit) worth $40,000 now, which earns 4% compounded annually and will mature in 3 years. You are thinking about cashing in the CD to purchase the lot, but cashing in the CD now means you will have to pay a withdrawal penalty of $500. You project the value of the lot will be $45,000 in 3 years and you intend to use it for immediate equipment storage purposes for your business.

For your main post, you will write an essay discussing what you, as a business owner, decide to do - buy or pass on purchasing the lot. In your essay you should address the following:

Calculate how much your CD will be worth upon maturity.
Explain the differences (pros and cons) between these two investment options.
Prioritize and select the best option for your business and explain why that option is preferable.
Discuss the potential impact this choice will have on the future of your business.
Include at least one APA formatted reference supporting your decision.
Your essay should include an introduction, conclusion, at least 3 body paragraphs, and a highly developed purpose and viewpoint. It should also be written in Standard American English and demonstrate exceptional content, organization, style, grammar, and mechanics. There should be no evidence of plagiarism. If you are unsure about what constitutes plagiarism, please review the university’s plagiarism policy.

Paragraph 1: Make this an introduction where you talk about planning and prioritizing large capital-intensive purchases in general.

Paragraph 2: Calculate how much your CD will be worth upon maturity. Put some words around this!

Paragraph 3: Explain the differences (pros and cons) between buying or passing on purchasing the lot.

Paragraph 4: Prioritize and select the best option for your business and explain why that option is preferable. Include the potential impact this choice will have on the future of your business.

Paragraph 5: This will be your conclusion! Write a few sentences wrapping up what you've learned about planning and prioritizing a large capital expense.

Running Head: Personal Finance 2

A Personal Finance Wake Up Call

Teresa Kelly

Purdue University Global

May 21, 2018

In May 2018, a report by the United Way indicated roughly 50% of American households cannot afford housing and food, Part of the issue is climbing prices and stagnant wages, but lack of financial literacy also plays a part. People don’t always understand the role of interest in personal finance. Interest rates increase debt for things like mortgages and credit, but they can also increase the value of saved or invested money. The information in Unit 9 improved my understanding of personal finance, how to view interest, and the proper to handle financial matters.

Unit 9 changed how I manage money. In the past, intuition and necessity drove the plan or lack of therefore. Spending priorities, wants not needs, and modeling from parents and friends- not reading or analyzing expert advice- created habits. The strategy focused on paying bills on time, short term savings for emergencies or small down payments on big ticket items to finance less, and achieving immediate financial goals such as having money left in checking at the end of the month. School has changed that approach through necessity. Schools costs require money, Content – MM 212 in particular – has also forced a reflection on poor financial habits.

Unit 9 showed that interest plays a key role in personal finance in two ways. First and most importantly, interest determines how much something really costs. Time, rate, and compounding raise debt exponentially. For example, according to Bankrate.com (2018) the amount paid on a 30 year mortgage for a $170,000 house can exceed $350,000 depending on interest and other factors. At the same time, the simple interest paid in savings and money markets only add about 1-2% per year. According to the National Foundation of Debt Management (2017), a savings account holding $3000.00 on January 1, 2018, will only be worth about $3060.00 on December 31 while a $3000.00 credit card balance will accrue nearly $450 in interest over the same period. Understanding this can allow comparisons between promotions such as lower interest rates versus longer terms or smaller payments versus cash back at signing. While 72 months at 1.8% interest might produce lower monthly payments, 48 months at 0% interest results in less money paid overall and in the car being paid off sooner. The cash back up front might seem nice, but the additional interest on the increased balance will wipe out that gain in the long run. Even saving the money and gaining a small percentage of simple interest does not negate the impact of compound interest. Paying down debt faster creates a larger net gain.

Unit 9 demonstrated that financial goals have to be more structured and focused on spending less over time by picking the most financial beneficial options. Rather than simply paying bills on time, debt reduction must be the priority. Minimum payments don’t allow for that and cost money each month. In addition, financing large purchases also adds to debt. Smarter shopping and eliminating rather than reducing use of credit provide better options. Finally, the idea of “money left” is not really a goal. It is not specific or measurable. Rather, planning then doing what it takes save 10% of each month is a measurable, realistic strategy. Mistakes from the past have provided powerful lessons and allowed me to appreciate what the course has taught.

Past experiences with personal finance, interest, and managing financial matters caused periodic stress, but mostly seemed to work. Unit 9 showed a much better approach and revealed the weaknesses of winging it without a long-term plan or focus. By applying strategies over intuition, understanding interest, and creating structured financial goals, managing money and reducing debt feels less insurmountable.

References

Bankrate.com. (2018). Mortgage calculator. Retrieved from https://www.bankrate.com/calculators/index-of-mortgage-calculators.aspx

Luhby, T. (2018). Almost half of US families can’t afford basics like rent and food. CNN Money. Retrieved from http://money.cnn.com/2018/05/17/news/economy/us-middle-class-basics-study/index.html

National Foundation for Debt Management. (2017). Debt calculator. Retrieved from https://www.nfdm.org/credit-debt/consumer-tools/debt-calculator/?gclid=EAIaIQobChMIk86bor-X2wIVwUOGCh1WDQFJEAAYAyAAEgIri_D_BwE