Interest rates in New Zealand have been hit twice since the start of the year 2017. Kiwi bank has increased rates on it’s two, three, four and five year fixed term rates on January 9, and again on January 13. The rise in interest rates ranged from 25 basis points, up to 35 basis points. The bank has said that this is due to the rising costs and that not all the adjustments are because of the OCR, official cash rate. The OCR was adjusted in the month of November 2016 to an all-time low of 1.75 percent, and with the next decision due on February 9, The burning question is will it bring any further hits. Kiwi bank is not the only bank to be affected. ASB have also made changes to their interest rates in New Zealand, and have said that the changes are to reflect the increasing cost of funding in both the local and international markets.
To the beginner, the stock market can seem daunting. However, considering the dismal returns you get from building societies and banks, investing in the New Zealand stock market provides you with an opportunity to guard yourself against rising inflation and achieving greater returns compared to property, bonds, and cash. Read on to learn more about the stock market and how to start. A stock (sometimes called a share) offers you a part of the company. When you purchase a stock, you literally own part of that company. This offers you two money making sources: • You can receive a dividend, which is a share of the annual profit the company has generated. • The other is through capital gains. When the price of your stocks goes up due to demand and supply, you can sell your portion for a profit, but you have to take into account inflation. You can purchase your stocks via brokers. These brokers are also called advisers. You have the option of working through online dealing websites like those offered by the ANZ and ASB banks. Banks and brokers make their money from a set percentage as you make the purchase. Investing through banks or brokers also offers you access to valuable information that will help you make it through your venture. Upon the advice of the experts, choose 3 cheap stocks to get you started on a good note. Once you are familiar with the New Zealand stock market and how to start, you can move on to buying stocks across 10 or 20 companies. This way, if one of the companies experiences a bad year, you can make a recovery from the others.
Over the last couple of decades, New Zealand has seen a boom in its economic status. Some factors that play a part in the economic growth are the massive expansions of agriculture and tourism as well as IT. This has driven up the industries to a global status. The reason for this is due to a significant decrease in regulation which has allowed freer movement of markets and more production. As The New Zealand dollarsoars, you need to know how to invest your money in the best way possible. The top 5 finance companies that exist in New Zealand today are ASB, ANZ, Bank New Zealand, Kiwibank, WestpacAlways and Bank of New Zealand. Always compare the finance companies that you decide to keep your money in. What you are looking for is to get a good interest rate on your investments and solid advice on your portfolio when diversifying. If you go with one of the top 5 finance companies in New Zealand, you and your hard earned money are certainly in good hands.
1. Liabilities (borrowed money) are not free. Money borrowed today has to be repaid in the future. There is no liability which does not have a cost.
2. Every asset will have a corresponding liability. Businesses should realise it does not possess any asset.
• Let us suppose a fully operational café has 100 assets. It will include both Performing Assets (PAs) and Non-performing Assets (NPAs).
o PAs are assets that directly help a business in bringing profit Eg: Coffee machine, toaster, oven and so on.
o NPAs are assets that indirectly help in bringing profit to the business Eg: Tables, chairs, and so on. Non-performing does not mean it is not essential. It is essential, but it will not directly help in bringing in profit to that business.
• Assume the cost of borrowing to acquire those 100 assets is 10%. So to make the profit this café has to earn more than 10%. This means Performing Assets (PAs) should generate a return of more than 10%.
• Let us see what happens if the ratio of PAs: NPAs varies.
If 100 assets are performing assets then to make the profit the performing assets should earn more than 10% to make the profit. If performing assets are 75% and 25% are non-performing assets, then the performing assets have to generate more than 13.33% to make the profit. If the PAs (Performing Assets) and NPAs (Non-Performing Assets) is 50-50 then PAs (Performing Assets) will have to generate a return of more than 20% to make the profit. If PAs (Performing Assets) are just 25% and 75% are NPAs (Non-Performing Assets) then the PAs (Non-Performing Assets) will have to generate a return of more than 40% to make the profit.
NZ firm wins Start Up award for Cloud farm accounting software which is the latest buzz on the economic scene. Figured Ltd. is the start up that has won the award. The unique farm accounting software developed by the company made life easy for farmers, accountants and bankers. All these three stakeholders could use the same set of real-time data available on the cloud. This software has enabled the farming community by managing finance and facilitated the financial experts by giving them knowledge of specific needs of the farmers. The spokesperson at Figured revealed that they had to build a team of technology experts, people with accounting expertise and people with ‘on the farm’ experience. The software was made with active partnership of innovative companies in the farming sector that includes Xero and leading banks like BNZ and ASB. The software used farm language instead of financial jargon so that people on both ends could understand the data. This was the clinching factor which won the Start Up the company of the year award.
Being an entrepreneur is not easy. It sometimes feels like you’ll never fit in. At first, you are just one person, putting all your energy into a unpaid idea. Then, you are an investor of your own time and money. Finally, you either find other investors or take a small business or start-up loan. Those are nothing compared to when you face the opportunity of commercial loans. A commercial loan is a bank product meant to operate on collateral invested by the business. That means that most banks won’t work with somebody unless they already have a stable business. Another thing about commercial loans is that you sacrifice a fair amount of control over the project finance process because paying back the bank is always the top priority, legally. This can often lead to project failure, specifically if the business is not willing to invest any money past the collateral amount. An ideal commercial loan business will have upwards of 50 percent the project finance available, in cash, and will also show the ability to continually generate cash from their business. If you are an entrepreneur seeking a commercial loan, it is advisable to not go down that road if you find yourself scraping together just enough money to meet the required collateral. This will save you a lot of trouble – be patient.
The most used terms in finance and accounting are debit and credit. We will try to understand these terms in simple terms.
Debit or Credit by itself does not have any meaning. It has meaning in case of double entry system of bookkeeping. Every transaction in business affects two heads and these are debit and credit.This is what gives the name to the accounting system where each transaction will have double entry
Debit and credit denote the two effects each business transaction has on the accounts.
There are only four kinds of transactions – Transactions which make Assets, which make liability, Generate income and expenses.
Among these two goes to be debit and two credit. Pretty obvious right.
It is very simple law when money goes out of business it is debit and when it comes into business it is credit. The perspective is from business, hence Assets is debit and expenses are debited while Liabilities and Income are Credited. Let us make it more clear. Assets which means Land , Building or machinery is present on site. However for purchasing these Assets money goes out. So Assets are always on debit side. Same is the case for liabilities. Loans are liabilities but brings money in business and hence credited. Income and Expenses are credited and debited respectively and easy to understand as per law of debit and credit.
A Balance Sheet is a financial statement that is a summary of Assets and Liabilities of a business. It is a statutory statement which is used by lenders, creditors and investors to determine the liquidity of the business. It is a statement which is prepared at the end of the accounting period. Quarterly, bi-annual and annual balance sheet can be prepared depending on the accounting period accounted for. However the statutory Balance Sheet comes once a year. It is also known as a statement of financial position.
It consists of Assets on left hand side and Liabilities and owner’s equity on the right hand side.
Typical items on the Balance Sheet are:
Assets: This includes Cash in hand, cash in bank,marketable securities, accounts receivable, inventory, and fixed assets like Land, Building, Machinery. The depreciation of Fixed Assets is also accounted for.
Liabilities: Loans which are classified as short-term debt and long-term debt, accounts payable, taxes payable and accrued liabilities make the liabilities side of the Balance Sheet.
Shareholders’ Equity: Also known as Owner’s Equity it includes Stock, retained earnings, and treasury stock.
The elements vary as per the business and the type of organization. The name Balance Sheet signifies that the Asset side and Liabilities side should always be equal or “balanced”. Balance Sheet which is not balanced is not issued a s a statutory statement.
Profit and loss statements are prepared as per need. If the company has gone public and is offering shares in the stock market, then it is compulsory for them to produce their Profit & Loss Statement every financial quarter. So the heading would be Profit & Loss Statement for the quarter ending…..
If the company wants to take a look at the profitability every month it can also prepare for every month or every week depending on the number of financial transactions and how much financial transaction is happening in that particular business. If you want some instant cash you can try justcash.
So this is how a Profit & loss Statement would look. I would like to mention a very important fact. For some funny reason the accountants they love to confuse people. Some will list the items on the Profit & loss Statement as you are seeing. Expenses would be on left-hand side and Income would be on right-hand side. This is called T format.
Some of the accountants will have Income on left-hand side and Expenses on the right-hand side. Some of the accountants will have Income on the top and Expenses at the bottom. Some of them will have Expenses at the top and Income at the bottom. Whatever the format might be all you have to remember is that there are only two headings under Profit & Loss Statement. Those are Expenses and Income.
Profit & loss Statement and Balance Sheet – Different Names
When it comes to finance and accounting for some reason people like to confuse and call the same thing using different names. So I would like to share some names give for Profit & loss Statement and balance Sheet.
Profit & loss Statement is also known as: It is a statement of expenses and Earnings.
- P & L Statement
- Income statement
- Statement of earnings
- Statement of operations
- Operating Statement
- Revenue and Expense statement
Balance Sheet is also known as Statement of Financial position.
But for me Profit & loss statement is like a thermometer. It will tell the temperature of your business. Balance Sheet on the other hand will tell the reason why your business has got that temperature.
But Balance Sheet and Profit & loss statement has got a limitation. They will tell us where the money came from and where it went, but will not tell us when it came and when it went. For that we prepare something called the Cash-Flow Statement.
Money comes in and goes out of the business at different times. A cash flow statement shows us how much cash is moving in and out of business over a certain period of time. A certain period of time may be a day, a week, a month or even three months. So cash flow statement reflects liquidity within the business.
It makes decisions of owners much easy when they come to know how much money or cash they have got in business. So they can go ahead and purchase raw materials if required or pay some of their debtors or buy something more.
Having enough cash to pay you suppliers, to buy raw material and to make sure you have sufficient money for your operating expenses is a very important part of business planning.
A cash flow statement will quickly tell us whether the business will have any issue in this area.
The purpose of Cash-Flow Statement is to tell us:
- How much money we have at the beginning of the month?
- How much money came into business in that particular month?
- How much money went out in that particular month?
- How much money is left at the end of that month?
Usually Cash-Flow Statement is prepared for a month; again it depends from business to business. You might even prepare it for a week, a day or for three months. A simple cash flow statement looks something like this.