Financial Calculations: Report on Key Topics and Portfolio Assessment

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Report on financial performance calculations
Name of the student
Institutional affiliation
Instructor’s name
Course
City and state
Date

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Part 1: Report on key the topics
A). Goods and Services Tax
The goods and services tax refers to a value-added tax that is imposed or charged on
domestic consumer goods and services (Kagan, 2019). The final consumer of the product or
service is the final bearer of such a tax imposed on the goods. The wholesaler or retailer simply
acts as the middle man or agent between the tax authorities and the consumer. The seller gets this
type of tax from the consumer and then returns it to the authorities. GST can be calculated in
about three methods. These include the normal, quick and the simplified methods (Perry,2017).
This goods and services tax is an indirect tax that is added to the product price. Therefore, a
consumer buying a commodity from a seller pays the actual price plus the GST amount. For
instance in Australia consumer goods and services attract a 10% GST. This means that every
commodity attracts a 10% charge that is paid by the consumer.
b). simple interest
Simple interest refers to an additional fee or charges that an individual or debtor pays to
the creditor on a given principal loan amount. This type of amount or fee is paid on a
predetermined arrangement depending on the type of agreement. It can be paid on an annual,
semi-annual, quarterly or monthly basis. This simple is obtained by multiplying the coupon rate
on the loan by the total time of maturity. Therefore simple interest = P*r*n where: p is the;
principal loan amount, r is the coupon rate charged on the loan and n is the period (Pritchard,
2019). Simple interest rate can be calculated using the rate function in MS excel software. The
function is stated as follows: RATE = (nper, pmt, pv, [type],). This requires on to input data

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relating to loan period, monthly payment required, the present value. Future value in this
technique is an optional data input and it is mostly regarded as (0).
c) Compound interest
Unlike the simple interest, compound interest is a type of interest is charged on the
principal amount of a loan and it is inclusive of all other periodic interests. The compound
interest is, therefore, a sum of all simple interests charged on the loan. Additionally, this type of
interest can as well be called the "interest on interest". The growth rate of compound interest is
dependent upon the number of compounds that a loan attracts. The more the compounding
periods, the higher the compound interest that is paid. This interest is calculated by the formula
given as total future principal and future interest payment minus the present principal value. In
other words, compound interest = future value –present value= [p (1+r) ^n] – p,where p is the
principal value, r = interest rate, n = number of compounding periods(Kagan, 2019).
Alternatively, compound interest can be calculated as follows:
A = P (1+ r
n ¿ ¿ntwhere: A = future loan amount, and t = time taken
d). basic loan calculations
A basic loan is that type of loan that attracts a relatively low-interest rate. This loan is
usually cheaper especially for people intending to purchase homes. This loan comes with limited
features and it is estimated to be at around 0.7% less than the standard variable loans in Australia

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(Sweeney, 2018). The major feature with basic loans is that the lenders have the liberty to either
lower or increase the interest rates. However, this is not done on a weekly or daily routine. The
causes for changes may, however, be due to the need to attract borrowers or because the costs are
reduced. The basic loans are calculated by the following formula stated as: M = P [r ¿ ¿].
Where: m = monthly payment, p = principal amount, r = interest rate, and n = total
repayments for the loan. However, it is important to note that the interest rate reflected by the
banks is an annual rate and this should, therefore, be further divided by 12 (Whitten, 2019). The
basic calculations are made using an amortization form of calculation. Therefore, a loan
amortizations schedule is drafted to reflect the monthly payments and interest payments till
maturity. This schedule is used as way of writing down the loan up to (0) at maturity.
e). Straight-line depreciation
Straight-line depreciation is a method of ascertaining the deprecation of depreciable value
of fixed assets over their useful life. Under this system, the assets' carrying amount or purchase
price is used as the base upon which the carrying amount is determined. This method is one of
the easiest methods and thereby, making it one of the most used methods of calculating the net
book value or carrying amount of an asset. When using this method of depreciation, the
historical value of an asset is periodically written down at an estimated rate until when it is fully
depreciated. Therefore, the formula for depreciating fixed assets is given by:
Depreciation expense = purchasingcost −scrapvalue
usefullife .