Personal Financial Plan and Financial Performance Assignment

Assignment Task

Task description

You are to develop a personal financial plan (which may comprise creating a risk profile, cash budget, an assessment of borrowing capacity or plans for future wealth creation) and analyse the financial health of two listed firms using published financial statements.

This is an authentic assessment because preparing a budget and building a sound credit history are essential life skills. Financial statement analysis is a technique used by stakeholders to assess the past and current performance of a company before making investment decisions.

The use of generative Al tools, e.g. Chat CPT, is not permitted in any aspect of these assessment tasks. The use of such tools when not authorised may be treated as a breach of MOPP Academic Integrity S6 (13) and appropriate penalties imposed.

Part A - Develop a personal plan 

This task requires you to carefully consider the effect of your financial circumstances and goals (as reflected in your budget - income and expenditures) on your ability to borrow and service a personal debt. Building a sound credit history requires knowledge, effort and discipline. In this assignment you will learn how to take the right actions for building a sound credit history by considering your financial circumstances and goals, exercising control over your spending and matching your borrowing amount (and repayment rate) to your financial circumstances.

Budget Scenario

Unfortunately, your car was written off in a car accident in January and was not comprehensively insured. To make matters worse, you have no savings to draw on so you will need to finance your new car purchase entirely through borrowings from financial institutions. After some research, you have decided that the choice of a car has come down to two possible cars (click HERE to see details)

To evaluate your capacity to borrow and establish/maintain a sound credit history, you are to perform the following tasks:

Question 1

Plan and prepare a personal budget - Using the Excel template provided, prepare a financially responsible budget (this usually means that your budget is expected to be in surplus and the likelihood of a budget deficit is not above 20%). Prepare the budget considering acceptable risks and provide your best estimate and expected range (high and low) of your weekly income and expenditures for the next 24 months. Please note: You should include the full costs of the proposed car in your budget i.e. registration, insurance, fuel & maintenance etc. in your budget.

Question 2

Using the Excel template provided, decide on the optimal payment period, the number of repayments (keeping in mind the need to take out the loan as well as the need to establish/maintain a sound credit history). In making your decision there are several parameters you need to consider: the desired loan amount ($4,000 or $5,000) and repayment period, the interest charge on the loan, the impact of your loan repayment on your budget (probability of loan default and net budget deficit). Your justification should detail the iterative process (trial and error) on how you decided on the optimal repayment period. Your answer should include consideration of some of the parameters listed above, including how this has helped you establish a sound credit history for the future. You should fully justify your decision.

Qustion 3

Unexpected changes - Recent announcements by the Reserve Bank of Australia (RBA) has forecast that growth in the Australian economy will slow further this year due to interest rates being high, continued concern about the cost-of-living, and household wealth declines. As a result of the slowing economy, by the end of the year, your employment hours will have decreased significantly. This has reduced your income for the foreseeable future, to the point that your budget is now expected to be in deficit.
In the space provided on the excel spreadsheet, detail your specific plan of action to avoid defaulting on your loan and damaging your credit rating. What plan of action is necessary (if any) to ensure you will be able to keep servicing your loan and build a good credit history (i.e. avoid default)?

Part B - Choosing an investment wisely 

Scenario: You have just won a major lotto prize and have $3 million dollars to invest. You have decided to invest your winnings to provide an additional income stream. You have narrowed your choices down to two companies - KMD Brands Ltd and Premier Investments Ltd.
Using the selected financial information in the Excel file provided, and based on the company's profitability and solvency alone, decide and justify which of the two companies you would prefer to invest in.

Question 1

For each of the two companies, you are required to calculate two profitability ratios and two solvency ratios for the years stated.
In the appropriate section in the template provided, clearly state and justify the reasons you selected these ratios given the purpose of your investment, i.e., for an additional income stream.

Question 2

Using Excel charts, plot the ratio information for each category of ratio (profitability and solvency) on a separate graph for each company. You will have 4 graphs in total. Two charts for each company (one for profitability and one for solvency).

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