Discounted Cash Flow Modelling to Achieve Personal Financial Goals

A discounted cash flow or DCF model is a style of calculation linking streams of future money flows to lump sum amounts. Discounted cash flow models have a range of business-related applications, and are used extensively by economists, accountants, actuaries, engineers, business valuators, finance professionals, and others.

For example, a company may wish to finance a project if (and only if) the Internal Rate of Return exceeds 10% per year. The anticipated development costs for the project may be large for the initial year. On the other hand, significant revenues are anticipated for Year 2 onward. The company directors rely on a DCF model to help determine whether or not the project's Internal Rate of Return exceed their 10% threshold.

Discounted cash flow models also have important applications in everyday life that are often overlooked. For example, consider auto dealers who advertise low finance rates to prospective clients. From a car buyer's perspective, low finance rates are understood to be good, since they mean lower monthly payments. By using a DCF model, a buyer can determine the monetary value on the low finance rate offer.

Everyday use of a Discounted Cash Flow model would include (but would not be restricted to) the following:

  • Mortgage Refinancing: For homeowners with a fixed-rate mortgage, refinancing often debts paying a penalty. A DCF model can be used to calculate whether the interest savings exceeded the penalty cost
  • First-Time Home Ownership: First time home ownership involves many new costs, and can be intimidating to many of us. A DCF model can help by comparing long term home ownership costs against rental costs
  • Lease or Own Vehicle: A DCF model can help car shoppers in their decision whether to buy or lease a vehicle

Examples of these and other everyday applications can be viewed at the author's website.

Through the above (and other) practical applications, Discounted Cash Flow models can assist all of us in achieving our personal financial goals.

The Art Of Flattery – Using Flattery To Become More Attractive

Many people completely hate the word "flattery" and to even say there is an art to this makes them shudder with total disgust.

In a culture where everything is either right or wrong with very little room for the "grays" in between, I can understand why the word "flattery" rubs people the wrong way. I can also understand why many are sickened to the stomach because flattery is often associated with compromising one's values ​​and integrity.

But is flattery always a bad thing? And does flattery always have to be insincere? Does flattery make you more attractive and should you use the art of flattery on the men / women you find attractive?

Personally I find that mild flattery does often move things along more pleasantly than outright candidness. While excessive insincere praises intended to put the other person into the position of owed something to the flatterer is cheap and cheesy (and often reveals emotionally "needy" personality out for approval), a little flattery does help to quickly warm up first meetings or bridge relationship gaps.

For example starting off your conversation with a statement like "You look gorgeous" is certainly better than starting with "You forgot to put on your make-up today". By offering positive reinforcement, you are not only making the person feel good about herself but you are taking the small extra effort to actually show the person that you care about how she feels. She may come back with "I do not have my make-up on" to which you can respond with "You still look good". But when you say "I could not even tell you did not have make-up on" or "You look like you have make-up on", you've crossed over to the excess insincere praise.

In terms of bridging relationship gaps, a little flattery goes a long, long way. Say you are the "hottest" woman in your workplace or even at a party, taking the time to shake hands with the office boy or cleaner, or saying "hi" to the "geeky-looking" guy standing all by himself not only makes their day (they will be talking about it for days) but moves them away from feeling like a "nobody" in the eyes of society to "somebody" to those present (and to himself). Just by a simple gesture you show the person that you care about how they feel. Did I mention you'll be ever so "hotter!"

Having said that, I do not advocate using flattery to manipulate another's self-doubt or use their feelings of inferiority against them. Using flattery for personal gain has its own "come back to bite your ass" consequences. You can not get round using flattery to always get what you want without starting to feel empty, phony, lonely and depressed. You can never genuinely and deeply connect with others if you are manipulating their feelings.

Also keep in mind that flattery works for about 95 percent of people. Recognizing situations where flattery is appropriate is the secret of the art of flattery!

Culinary Concepts – How To Create Them And How To Serve Them

Famous chefs can spend 15 hours or more a day trying to create culinary concepts. When they get it right their restaurants gain acclaim, the diners delight and may even pay hundreds for just one course.

For the rest of us mere mortals dining is a pleasure also, as is cooking for those of us who enjoy it when we have the time. Many people prefer to work strictly according to recipes created by others whereas others love the idea of ​​creating something unique in terms of culinary concepts.

How is it possible to come up with this type of culinary success in your own home? One of the largest secrets is to understand the energy of food and on top of this it is necessary to have a good palate so that it is easier to know almost subconsciously what ingredients will work together.

Of course it also makes sense to model restructured chefs who have trained and been working for years. Currently the world's top restaurant is located in Denmark and the owner chef of this restaurant only works with local ingredients. He and his team wander around in the local nature finding ingredients later to be served in delicious dishes. This is one important tip, to connect with local produce and work with seasonal ingredients.

On top of this it is a wonderful experience to listen to your inner voice about food and ingredients. On a subconscious level we often know what would be good for ourselves and our families. When we practice tuning into this we will find the best ingredients for the creation we wish to make at that time. When we cook intuitively we can produce great dishes.

This is a practice that can take time to learn but it can bring some excellent results. The reason it works is that only 12 per cent of our mind is conscious whereas the remaining 88% is subconscious. In our subconscious we hold our more primitive instincts, of which survival is central. To survive we need to eat food and to be healthier we need to eat food that varied and offers us a complex range of nutrition. So ask your subconscious before you start trying to create a culinary success.

Yet do not forget that even when the creation is delicious if it is not presented nicely then some of its qualities are automatically lost to the senses. We initially eat with our eyes, so create a work of art on the plates. This comes more naturally to some than others but again with practice the presentation will improve.

Finally ensure that the table is also as beautiful as possible. This does not have to cost a lot of money. In the same way as creating from quality local ingredients the table setting for your culinary concepts can be simple, but stylish, with a feeling of balance.

Financial Reporting & Auditing in Singapore

The Accounting Profession of Singapore

The Institute of Certified Public Accountants of Singapore (ICPAS) is the national body representing the accounting profession in Singapore. It maintains a register of qualified accountants comprising mainly local graduates. Membership is open to members of the Institutes of Chartered Accountants of England and Wales, Australia, Scotland, Ireland and a number of other accounting bodies. Generally, prior to being admitted as a full member, they must attend a week-long pre-admission course. Members are designated as certified public accountants (CPA).

The Public Accountants Board, whose council members are appointed by the Ministry of Finance, licenses and registers accountants who wish to practise. It also handles practice monitoring, disciplinary matters and regulations on professional conduct.

Accounting Records in Singapore

All companies incorporated under the Companies Act are required to maintain books of accounts that sufficiently explain the transactions and financial position of the company.

The books may be kept either at the company’s registered office or at another place the directors think fit. If the books are maintained outside Singapore, sufficient records must be maintained in Singapore to facilitate the preparation and/or audit of financial statements that reflect accurately the company’s financial position.

Sources of Accounting Principles

Financial Periods Commencing before 1 January 2003 The principal source of accounting principles in Singapore, namely Statements of Accounting Standards (SAS) and Interpretation of Statements of Accounting Standards (INT), are issued by ICPAS. These standards are essentially International Accounting Standards (IAS) modified for certain transitional provisions. They provide guidelines on the accounting measurements and disclosure requirements. Businesses may depart from such standards if the standards conflict with disclosure exemptions granted by law. Otherwise, ICPAS may take disciplinary action against any of its members who are in violation of the standards.

Rules on accounting measurements are generally established by SAS and INT. Disclosure requirements are governed by SAS, INT and the Companies Act.

ICPAS is a member of the International Accounting Standards Committee (IASC). Compliance with IASC standards are not mandatory, but the institute supports the IASC objectives of formulating and publishing standards for observance during presentation of audited financial statements and promoting worldwide acceptance of such standards.

Financial Periods Commencing on or after 1 January 2003 With the implementation of section 37 of the Companies (Amendment) Act 2002, SAS issued by ICPAS will not be used with effect from annual financial periods commencing on or after 1 January 2003. Instead, Singapore Financial Reporting Standards (FRS), issued by the new accounting standards-setting body, the Council on Corporate Disclosure and Governance (CCDG), are now effective. FRS are essentially adopted from International Financial Reporting Standards (IFRS). The previous SAS were adopted from the same set of IFRS (formerly referred to as IAS) but with modification to certain transitional provisions. Consequently, there are differences between FRS and SAS.

Interpretations of Standards are authoritative guidance on the application of the relevant standards. CCDG adopted all international interpretations as Interpretations of FRS (INT FRS) with effect from financial periods beginning on or after 1 January 2003.

Compliance with FRS is a statutory requirement whereby any non-compliance amounts to a breach of the Companies Act by the directors.

Financial Reporting in Singapore

The Companies Act requires that an audited set of financial statements, made up to not more than six months before every Annual General Meeting, is to be presented to the shareholders at the meeting. Generally if a company incorporated in Singapore has one or more subsidiaries, it must prepare consolidated financial statements unless it meets certain criteria as provided for in FRS 27 Consolidated and Separate Financial Statements. Currently, financial statements under the Companies Act consist of the balance sheet, income statement together with explanatory notes. With the Companies (Accounting Standards) Regulations 2002 coming into operation for financial periods on or after 1 January 2003, a complete set of financial statements will comprise the balance sheet, income statement, statement of changes in equity, cash flow statement and explanatory notes.

The financial statements must be accompanied by the directors’ and auditors’ reports and by a statement from the directors declaring that the financial statements show a true and fair view and that it is reasonable to believe that the company can reasonably pay its debts as they become due.

Companies which meet specific provisions in the Companies Act may be exempt from having their accounts audited but nevertheless must prepare financial statements that comply with the Companies Act.

Annual Requirements for Companies in Singapore

The Companies Act requires every company, except for those exempted in accordance with the provisions in the Act, to appoint one or more auditors qualified for appointment under the Accountants Act to report on the company’s financial statements. The auditors are to ascertain whether proper books of accounts have been kept and whether the financial statements agree with the company’s records. They will then report on the trueness and fairness of the financial statements to the shareholders at the Annual General Meeting.

Audit Exemption Starting with the financial year beginning on or after 15 May 2003, the following companies are no longer required to have their accounts audited. However, they are still required to prepare accounts (and consolidated accounts where applicable) that comply with FRS.

o Small exempt private companies An exempt private company with revenue in a financial year below S$5m is exempted from appointing auditors and from audit requirements. Revenue is defined according to the statutory accounting standards, i.e. the FRS.

o Dormant companies A dormant company is exempted from appointing auditors and from the audit requirements if it has been dormant either (a) from the time of its formation or (b) since the end of the previous financial year. A company is considered dormant during a period in which no accounting transaction occurs, and the company ceases to be dormant on the occurrence of such a transaction. For this purpose, transactions arising from the following are disregarded:

  • Taking of shares in the company by a subscriber to the memorandum
  • Appointment of company secretary
  • Appointment of auditor
  • Maintenance of a registered office
  • Keeping of registers and books
  • Fees, fines or default penalties paid to the Registrar of Companies