Mathematical Literacy Level 4 Module 6

Mathematical Literacy NQF 4 Downloaded from hlayiso.com Maths Lit NQF Level 4

Managing finance: How does a business work? Module 6 Downloaded from hlayiso.com Maths Lit NQF Level 4

Overview 6.1 Financial concepts relating to employees 6.2 Concepts and methods for business finance 6.3 Income and funds received 6.4 Expenditure 6.5 Interest received on savings and investments Downloaded from hlayiso.com Maths Lit NQF Level 4

Financial concepts relating to employees Unit 6.1 New concepts and words Gross earnings income before any deductions Nett earnings your take-home pay Deductions the money deducted from your gross earnings Tax bracket the grouping of tax rates Rebates money refunded against tax owed the amount of money on which the tax payable is Taxable income calculated SARS tax pocket a small booklet that summarises all information guide pertaining to income tax. Downloaded from hlayiso.com Maths Lit NQF Level 4

Financial concepts relating to employees Unit 6.1 New concepts and words The tax certificate issued by employers to their IRP5 employees detailing all income and deductions for the entire tax year. If you earn above a certain income you need to submit Employee tax an income tax return (IT12 form). This can be done forms online. Downloaded from hlayiso.com Maths Lit NQF Level 4

Financial concepts relating to employees Unit 6.1 Payslip It is a legal document issued by an employer to an employee that displays the details of the monthly income and deductions. It includes: • Income earned from all sources (Basic income, commission, bonuses, etc) • Deductions • Nett income received. Tax rates ” These are the rates that are determined by the Minister of Finance annually of how much tax must be deducted from income earned. Downloaded from hlayiso.com Maths Lit NQF Level 4 ”

Tax rates and tax tables Unit 6.1 INCOME TAX: INDIVIDUALS AND TRUSTS Tax rates for the period from 1 March 2017 to 28 February 2018 Individuals and special trusts Taxable income (R) Rate of tax (R) 0 – 189 880 18% of taxable income 189 881 – 296 540 34 178 + 26% of taxable income above 189 880 296 541 – 410 460 61 910 + 31% of taxable income above 296 540 410 461 – 555 600 97 225 + 36% of taxable income above 410 460 555 601 – 708 310 149 475 + 39% of taxable income above 555 600 708 311 – 1 500 000 209 032 + 41% of taxable income above 708 310 1 500 001 and above 533 625 + 45% of taxable income above 1 500 000 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.1 page 129 Unit 6.1 Refer to the tax table to answer the questions about these documents: Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.1 page 129 Unit 6.1 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.1 page 129 Unit 6.1 1. a) Mr Sindawe’s annual salary includes his basic earnings and his commission. Assume that he earns the same commission every month on average. Calculate Mr Sindawe’s annual salary. b) What tax bracket would he fall into? 2. a) Explain why his UIF contribution is R148,72 which is less than 1% of his salary. b) If you were Mr Sindawe’s employer, how much UIF would you pay to SARS on his behalf? Give a reason for your answer. 3. Explain how the business used Mr Sindawe’s travel claim document when preparing his salary. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.1 page 129 Unit 6.2 1. a) Monthly salary = 17 500 + 9 875 = R27 375 Annual salary: (27 375 × 12) = R328 500 b) He would fall into the tax bracket 296 541 – 410 460 2. a) He earns more than R14 872 per month, so he pays the maximum contribution amount. b) R148,72 × 2 = R297,44. The employer contributes an equal amount to the fund as the employee. 3. The travel claim document is given to the person preparing the salary. The travel claim amount is included in Mr Sindawe’s monthly salary. Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 6.1 Unit 6.1 Complete Exercise 6.1 on page 130 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Concepts and methods for business Unit 6.2 finance Having access to finance is vital for any business and the method of financing is usually determined by the purpose of the finance. • Short-term credit – loans, overdrafts and credit cards • Vehicle Finance • Property finance • Trading on the stock market • Sponsorships • Rental income Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.2 page 131 Unit 6.2 Speedy Plumbing Fix won a tender to install new toilets in a public hospital. • Before they could start the job, they needed to buy equipment that costs R150 000. • They made a loan from the bank. The loan agreement stated that the loan period was one year, with interest charged at 10,5% per year. • Use the amortisation table to answer the questions that follow. Downloaded from hlayiso.com Maths Lit NQF Level 4

Amortisation table Unit 6.2 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.2 page 131 Unit 6.2 1. What was the monthly payment? 2. Calculate the percentage of the monthly payment that was interest, for: a) May 2018 b) January 2019 1. Explain why the interest portion was less in January 2019 than in May 2018. 2. How much interest was paid in total over the loan period? 3. The profit that Speedy Plumbing Fix made on the tender was R240 000. Was it a good financial decision to make the loan? Give a reason for your answer. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.2 page 131 Unit 6.2 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.3 page 132 Unit 6.2 Downloaded from hlayiso.com Maths Lit NQF Level 4

Property Finance Unit 6.2 Buying property is a huge financial commitment. • Property is a good investment - value of property increases over time. • Property can be rented out and be a source of income. As with all investments, buying a property also involves costs. The following costs are usually involved: • A deposit is usually always required and can be as high as 25% of the selling price of the property. • 2% – 3% of the loan amount for administrative costs • A reserve of six monthly bond repayments is also required as security in the event of cash flow problems Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.5 page 133 Unit 6.2 Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 6.2 Unit 6.2 Complete Exercise 6.2 on page 135 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Income and funds received Unit 6.3 • Income is money that is received usually for goods sold or services rendered. • However, some organisations also receive money from Donations, Grants and Sponsorships, e.g. Non-profit organisations • Sponsorships are contributions that are usually for a fixed period and are usually a source of marketing for the company. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.6 page 139 Unit 6.3 A national non-profit organisation that works to rehabilitate drug users depends on donations to fund its work. A beverage company donated R2,8 million to the NPO towards the building of a clinic in Mokopane. a) The budget for the new clinic is R8 750 000. What percentage of the budget is still outstanding? b) A motor dealer donates a car to the organisation. They decide to raffle the car to raise more funds . Raffle tickets cost R50 each. How many raffle tickets should they sell if they hope to raise R1,5 million from the raffle? Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.6 page 139 Unit 6.3 c) A cellular phone company decides to sponsor the recreation room in the clinic. i. What benefits will the cell phone company gain from the sponsorship? Explain. ii. What benefits will the NPO gain? iii. A tobacco company offers to sponsor the out- patients facility at the clinic. Give a reason why the NPO might decide not to accept the sponsorship. d) The Department of Health agrees to issue a grant for the outstanding funds. If the cost of the recreation room was R1,2 million, how much would the grant be worth? Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.6 page 139 Unit 6.3 Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.6 page 139 Unit 6.3 c) ii. The sponsor would cover all costs. iii. The company fights drug addiction and tobacco is an addictive drug. There is a conflict of interest. d) R8,75 million – (R2,8 + R1,5 + R1,2) million = R3,25 million Downloaded from hlayiso.com Maths Lit NQF Level 4

Income from property rental Unit 6.3 • Investing in property can be a profitable source of income. • The rental on commercial property is calculated by the size and area of the floor space. • Small shops pay proportionately less rent than bigger supermarkets. Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 6.3 Unit 6.3 Complete Exercise 6.3 on page 139 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Expenditure Unit 6.4 Expenditure refers to all funds that are paid out by the business. Sound financial management requires good record keeping and this ensures that expenditure remains controlled. We distinguish between two types of expenditure: • Fixed expenditure which remains the same every month • Variable expenditure which varies every month Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.7 page 141 Unit 6.4 A supermarket chain has the following expenses from all its stores, as well as its head office, for one month: Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.7 page 141 Unit 6.4 1. Explain why the cost of commission is a variable expense. 2. List two other variable expenses and three fixed expenses. 3. Income from sales for the month is R2 981 655 845. If the stock that was sold in the month cost R1 988 871 334,85, has the company made a profit for the month? Support your answer with relevant calculations. 4. Explain why vehicle insurance is a fixed expense, but stock insurance is a variable expense. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.7 page 141 Unit 6.4 1. The commission amount depends on the sales amount. This amount varies from month to month. 2. Fixed expenses: salaries, rent, vehicle insurance Variable expenses: telecommunications, municipal bills, taxes and levies, insurance on stock and buildings, and bank fees (any two) Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.7 page 141 Unit 6.4 3. Profit = income – expenses = R2 981 655 845,00 – (R20 904 198,46 + R1 988 871 334,85) = R971 880 311,69 The company made a profit of nearly 1 billion rand for the month. 4. For vehicles, the cost of insurance is fixed for the year. The value of stock in a company changes from month to month as some stock is sold and new stock is bought. The cost of insurance depends on the value of the stock. Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 6.4 Unit 6.4 Complete Exercise 6.4 on page 142 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

Interest received on savings and investments Unit 6.5 • Interest is the reward for making an investment. Choosing the best type of savings and investment plan is very important. • We have short term, medium term and long term financial goals and each term requires a different investment or savings vehicle. • The younger you start saving, the larger your retirement capital. Downloaded from hlayiso.com Maths Lit NQF Level 4

Example 6.8 page 142 Unit 6.5 Downloaded from hlayiso.com Maths Lit NQF Level 4

Exercise 6.5 Unit 6.5 Complete Exercise 6.5 on page 144 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

VIDEO: Application in the Workplace Downloaded from hlayiso.com Maths Lit NQF Level 4

Module assessment Module 6 Complete Module assessment on page 146 of your Student’s Book Downloaded from hlayiso.com Maths Lit NQF Level 4

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