Assessment task

Question 1: Case study

You are a financial adviser and the following information is an extract of data you gathered as part of fact finding during an initial client consultation for married couple James and Jane Pretzel:

Personal details, income and savings:

Name

Age

Gross annual salary

James Pretzel

34

$101,500

Jane Pretzel

33

$40,000

The Pretzel?s have a 1 year old daughter.

Additional Information

James and Jane have just returned to Australia after living abroad for the past 8 years. They have used up their savings and started using credit cards to fund their living expenses whilst looking for work upon their return. Luckily, James has just found work as an Education Consultant and Jane has just found part-time work as a florist.

James and Jane would like to know how much money they will receive after paying tax.

Jane and James have limited financial knowledge and are seeking your advice about their current financial state.

The Pretzel?s currently rent an apartment but aim to buy a house in the future. They have consulted you as they are looking to save $80,000 for a deposit for their house, 5 years from now. They want to know if they can achieve this goal.

The Pretzel?s keep a minimum $5,000 in a current account for sudden events. Any surplus savings will be invested into the James? Managed Fund at the end of each financial year.

Assume that James? Managed Fund pays 4% return after tax at the end of the year. Also assume that return from this investment does NOT need to be included in his annual tax returns.

Assume their income will remain constant in dollar terms and that the 2016/17 tax rate will stay constant for the next 5 years.

Assume that all expense amounts have been adjusted for inflation and will stay constant in dollar terms for the next five years. A change which will occur is that the day care fees will be incurred for the next 3 years only. After which, their daughter will attend kindergarten at a cost of $ 1200 per annum. Also, the credit card debt will be paid off in 12 months.

Assume that both James and Jane have 9.5% employer superannuation contributions paid in addition to their salary and they do not salary sacrifice into their superannuation.

2

Annual Budget Sheet

$

Rent (490 per week)?. ????????????..

25,500

Electricity/Water/Gas ?????????????.

1,140

Telephone/Mobile ??????????????..

1,800

Pay television/Internet ?????????????

1,100

Insurance ? home/contents ???????????.

1,200

Day care expenses (2 days a week at $60 each day)?

6,240

Insurance ? cars ..???????????????

3,075

Health Insurance (After income tax deduction)???.

3,235

Credit cards repayment ($500 a month for 12 months).

6,000

Car loans repayment ($8000 a year for 5 year term).?.

8,000

Petrol/maintenance ??????????????.

6,500

Car registration ???????????????...

720

Public transport ???????????????..

2,800

Other expenses

Food ????????????????????

13,500

Clothing/Haircuts/Beauty ???????????..

4,500

Medical/Dental ???????????????...

2,500

Entertainment/Dinners ????????????...

12,000

Prof. Memberships (James)???????.????

1,000

Gifts - Birthdays/Christmas ???????????

5,000

Total ???????????????????..

105,810

Current Assets and Liabilities

Assets (Ownership)

Current

Liability (Ownership)

Current valuation

valuation

Home Contents (Joint)

$20,000

Credit cards (Joint)

$6,000

Includes the annual interest

cost

Cars

$55,000

Cars loan

$30,000

5 year term at 12%

Current accounts (Joint)

$5,000

Managed Fund- Vanguard Cash

$15,000

fund (James 4% return p.a.)

Superannuation

-James

$12,000

-Jane

$10,000

3

Required:

A.Calculate Jane and James? annual after-tax income. Explain one way in which Jane and James could reduce their tax liability and show the effect this strategy would have.

B.Calculate the solvency ratio, liquidity ratio and savings ratio using the Preztel?s financial information. Explain in everyday terms what these ratios mean, highlight any concerns you have and suggest one improvement the Preztel?s could make.

C.Calculate the amount of combined savings the Preztel?s can accumulate 5 years from now for the deposit on a house. Explain a strategy that the Preztel?s could take to increase their savings.

Each question is worth 5 Marks with 2.5 marks being allocated for calculations and 2.5 being calculated for the analysis.

(5 + 5 + 5 = 15 marks)

Financial Formulae

total net worth

Solvency ratio=total assets

liquid assets

Liquidity ratio =total current debts

savings (or cash surplus)

Savings ratio =net income after tax

Future value FV = PV(1 + i)ⁿ

Annuity (Future value) FV = PMT[(1 + i)ⁿ ? 1] i

Question 2: Infographic/poster

You are required to design an infographic/poster that would be used on financial planner?s website or displayed in their office. The purpose of the infographic/poster is to explain to investors the key similarities and differences between investing in ?industry super funds? vs. ?retail super funds?.

The poster should be self-explanatory and contain real information. So you need to conduct additional research and you may want to compare two actual superannuation funds. Make sure to reference your sources in the poster. The aim of the poster is to communicate essential information about superannuation funds to an audience with limited financial knowledge on this topic.

4

(15 Marks)

Here are some useful website references:

Infographic/poster websites:

https://piktochart.com/

https://venngage.com/

Otherwise, you can use Adobe Photoshop or Powerpoint to design the infographic/poster.

Website for industry super funds:

http://www.industrysuper.com/

Websites for retail super funds:

https://www.bt.com.au/personal/superannuation.html

http://www3.colonialfirststate.com.au/

Submission of assignment:

The infographic/poster can be submitted as a picture in a word document or by providing a web

link. It is your responsibility to ensure that the examiner can accurately view the poster/infographic.

Important Note:

While answering requirements involving calculations, you are expected to describe your approach and explain your calculations. If assumptions are made, these assumptions must be clearly stated.

In order to answer requirements of this assignment, you may need to access resources other than the set text.

All sources used in your assignment must be clearly referenced, but there is no set referencing style for this course.

5

Marking criteria

The marking criteria for the total assignment are as follows:

Case Study

Marks

Question 1 A

5

Question 1 B

5

Question 1 C

5

Question1 Sub-total

15

Question 2:

Presentation (i.e. layout)

5

Content

10

Question2 Sub-total

15

Overall mark

30

Question 2: Marking guide

Question

Possible

Criterion

marks

Question 2

5

5 marks

Excellent use of graphics and data. Arrangement of

information is coherent with an appeal to the audience.

Presentation

(i.e. layout)

4 marks

Good use of graphics and data. Arrangement of

information can be followed but may require more effort by

the audience.

3 marks

Graphics and data are presented but limited or ill suited.

The presentation can be understood but is not audience

friendly.

0-2 marks

Presentation lacks graphics and/ or information.

Arrangement of information does not consider the

audience.

Question 2

10

8 - 10 marks

Very clear, thoroughly researched and referenced. Key

similarities and differences identified and an excellent

Content

understanding demonstrated.

6.5 - 8 marks

Clear, researched and referenced. Most similarities and

differences identified and a strong understanding

demonstrated.

4.5 - 6 marks

Adequately information but not as thoroughly researched

and referenced. Not all similarities and differences

identified and only partial understanding shown.

0 - 4 marks

Poor information, with little research and references. Does

not show a clear understanding of similarities and

differences. Not to undergraduate standard.

6