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    Financial Plan Preparation

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    Note: the Company selected for question 1 is TD Capital Trust. (TDD.M)

    1. Regarding the company you selected

    a. describe what business your company operates in.

    b. evaluate your company and its prospects, in light of current economic conditions. You should:
    • identify the business cycle phase you think Canada is in. Justify your answer by citing economic statistics and/or expert opinion.
    • identify the business cycle phase you think this company is in. Does this company, or the industry within which the company operates, have a business cycle that follows the general economy or not? What is your evidence?
    c. describe a political, social, and economic trend that might affect the success of your company in the long term. How will these trends affect your company?

    This section should not exceed three pages—double-spaced, 1-inch margins, and font no smaller than 12 pt. List your sources of information on a separate page. Be certain you provide the name of the company, together with the Web site address (if useful).

    2. A distant relative has heard that you are taking an investment course. They know that you might be a little short of money so they have offered to lend you $100,000. They have told you that you should not use this money to pay off debts or make lifestyle purchases (e.g., house, car, vacation, RRSP contributions). They want to see how you will invest the money. This relative has also told you that there are no strings attached to the money, other than the need to show them a well-developed plan. However your relative is eccentric, and, depending on how you progress towards your goals, they may decide to: a) give you the $100,000; b) let you keep the increase in value; or c) ask you to return the $100,000 if you have mismatched your objectives and investment strategy.

    a. Prepare a brief financial plan for yourself. Include a net worth statement, an annual income statement, analysis of life cycle, and a statement of short- and long-term goals. This plan should be based on your current circumstances, so you may need to track your expenses for at least a month.

    b. Briefly outline your investment objectives. Provide justification for any purchases you will be making in order to establish the portfolio. You should take into account the financial plan you have prepared.

    Your plan and list of objectives should not exceed four pages—double-spaced, 1-inch margins, and font no smaller than 12 pt. List your sources of information on a separate page.

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    Solution Preview

    TD Capital Trust (TSX: TDD.M) is one of the first North American bank and claims to be a leader in service and convenience in Canada and the United States (TD Capital Trust). Given its current business environment, the company aims to survive the recession by carefully managing its capital, funding, liquidity and risk; keep its business model intact by preserving its performance, convenience and service culture; and merging from the recession with momentum by continuing to invest in its core growth engines.
    Based on the available reports, financial and business, I believe that TD Capital Trust is in the Maturity phase of its life cycle. This is based on the relatively flat financials of the company. For example, its revenues and adjusted net income over the last financial quarters are relatively flat (TD Capital Trust).
    According to my analysis of the financial industry, the business cycle phase that I think the company is in is the maturity stage. This is supported by the company's analysis of its long term support such as the trend in unemployment rate in the country (TD Capital Trust). The unemployment level in the country affects the disposal income of the population which in turn affects the country's saving rate. The savings of the country directly impacts the financial industry's capacity to lend money and improve its profitability.
    A new political and social trend that might affect the success of the company in the long term is the growing clamor for greater regulation of the financial industry in faced of the current financial and economic recession. If the government legislates greater regulation, then the financial industry's and that of TD Capital's freedom to use its capital, particularly in the creation of new financial products, will be curtailed. Thus the company's future profitability might be jeopardized as a large portion of its net income comes from new products.

    Solution Summary

    The expert prepares a brief financial plan and includes the net worth of the expert.