INTRODUCTION TO K Lubza Nihar

FINANCE
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SESSION OUTCOME- INTRODUCE
1. 1. SCOPE OF FINANCE
2. 2. TERMS
3. 3. NUMERICAL APPLICATION TO UNDERSTAND WEALTH

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FEAR OF SURVIVAL
&
WELFARE OF
FAMILY

What does
the picture
SPEAK/
CONVEY TO
YOU?

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PICTURE COMMUNICATES
1. 1. Fear of Danger
2. 2. Leader is Protecting his Family to Survive
3. 3. Taking up decision to attack using a weapon to stay safe

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 1. Hunting
2. Approaching
the deer to
kill
3. Group
4. RISK AND
RETURN
WHAT DOES THIS
PICTURE SAY?
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WHY HUNT?
1. 1. EVERY DAY FOOD - operations
2. 2. TO STOCK FOOD TO FEED THEMSELVES DURING WINTER OR
SUMMER WHEN THEY CANNOT HUNT - Liquidity
3. 3. TO SHARE WITH COMMUNITY INCASE OF NEED - - Dividend/INterest

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Resourceful Activities

• Hunting
• Growing
• Storing
(Preserving)

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 Every one can’t
have everything
• Exchanging resources
could satisfy mutual wants;
and it made sense

• Birth of
Enterprising Spirit
Exchanging Resources
for Mutual Benefit
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What is Wealth?

Any existing ownership

of a
Resource
which generates
One time
or
Sustained benefits
or
A claim for future
ownership

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TERMS - RELATING TO
BUSINESSES

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TERMS- RELATING TO
BUSINESSES

WHY INVEST IN FA AND CA?

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TERMS – STAKEHOLDERS –
NEEDS- GUESS?

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TERMS – STAKEHOLDERS –
ORGANIZATION - GUESS?

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TERMS – STAKEHOLDERS –
CONFLICT

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 CASELET
Lucas inherited $1 million, and decided to invest. His father, before passing
away and while handing him over the wealth said "Son! Learn to grow this
wealth, else whatever i am giving now wouldn't suffice for your future needs".
His mother adds “My dear Son! Even though you can’t grow this wealth at least
protect it from losing its value”. As a married man with children his wife alerts
that the children are growing and the regular income is not sufficient to meet
their genuine growing needs of education. Friends, Relatives, and Financial
Advisors thoroughly confused him with conflicting alternatives with little clarity
on the differences. (CAN YOU HELP LUCAS GENERATE WEALTH). If he
invests in FD at 8% pa.)

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 Wealth in FD and Equity
Bank Fixed Deposit
Today Amount
You have CASH as Wealth $ 1 Mn
You invest in Bank FD @ 8% p.a. $ 1 Mn
At Maturity After 1 Year Amount
You Receive CASH & Your Wealth $ 1.08 Mn
Your Wealth grew By (1.08 – 1) / 1 Mn 8% p.a.

Equity Share
Today Amount
You have CASH as Wealth $ 1 Mn
Bought 10,000 equity shares @ $ 100 $ 1 Mn
After 1 Year Amount
You Receive Dividend in CASH $ 0.08 Mn
Sold shares @ $110 received CASH $ 1.1 Mn
Your Wealth after 1 Year (1.1 + 0.08) $ 1.18 Mn
Your Wealth grew By (1.1+0.8-1) / 1 Mn 18% p.a.
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 So what if Lucas wanted
to start business
Does he need to understand profit or wealth?

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What about Business? – Focus on Profits or
Wealth?
Bank Fixed Deposit
Today Amount
Chocolate Vending Business
Today Amount
You have CASH as Wealth $ 1 Mn
You have CASH as Wealth $ 1 Mn
You invest in Bank FD @ 8% p.a. $ 1 Mn
You Buy Stock of Chocolates (Life 1 Year) $ 0.9 Mn
At Maturity After 1 Year Amount
You spent for Business Startup Expenses $ 0.02 Mn
You Receive CASH & Your Wealth $ 1.08 Mn
After 1 Year Amount
Your Wealth grew By (1.08 – 1) / 1 Mn 8% p.a.
You Sold Chocolates worth $ 0.8 Mn in $ 1.1 Mn
Equity Share Cash
Today Amount You spent for various expenses $ 0.05 Mn
You have CASH as Wealth $ 1 Mn You make a Profit (1.1 – 0.8 – 0.05 – $ 0.23 Mn
Bought 10,000 equity shares @ $ 100 $ 1 Mn 0.02)
After 1 Year Amount Your Profit on Investments (0.23 Mn / 1 23% p.a.
Mn)
You Receive Dividend in CASH $ 0.08 Mn
Balance of CASH (1 - 0.9 - 0.02 + 1.1 - $ 1.13 MN
Sold shares @ $110 received CASH $ 1.1 Mn 0.05)
Your Wealth after 1 Year (1.1 + 0.08) $ 1.18 Mn Stock of Chocolates ( 0.9 – 0.8) $ 0.1 Mn
Your9/28/2021
Wealth grew By (1.1+0.8-1) / 1 18% p.a. Your
K Lubza Nihar Wealth after 1 Year (1.13 + 0) $ 1.13
18 Mn
Mn
 RECAP and THANK YOU

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