The Higher Rate Of Return

292 views
248 views

Published on

Financing is not investing!

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
292
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

The Higher Rate Of Return

  1. 1. The Higher Rate Of Return<br />FINANCING NOT INVESTING<br />
  2. 2. PREMISE:<br />It isalwaysbetter to finance purchasesfromyourown « bank » than out of pocket<br />
  3. 3. Mr. Jones<br />Invests $100,000.00 for one year<br />APR = 20%<br />Gross yield on investment: $20,000.00<br />Less taxes (30%): $6,000.00<br />Net Yield: $14,000.00<br />
  4. 4. Mr. Smith<br />Creates IBC system<br />Builds $100,000.00 Cash Value<br />Borrows $100,000.00 for investment<br />Charges himself 8% for loan<br />Gross Yieldat 20% APR: $20,000.00<br />Minus loan % paid to IBC system: $8,000.00<br />Taxable gain: $12,000.00<br />Less taxes (30%): $3,600.00<br />Net Yield: $8,400.00<br />
  5. 5. And The Winner is…<br />Mr. Jones by $5,600.00<br />
  6. 6. Stop The Music!!<br />
  7. 7. WeForgotSomeThings<br />Mr. Smith owns the IBC system<br />The $8,000.00 loan % wentintothis system<br />He earnsthis money on a non-taxed basis<br />It is an investmentexpense<br />Whatdoesthis change?<br />
  8. 8. The Real Deal For Mr. Smith<br />Net yieldfrom the investment: $8,400.00<br />Net yieldfrom IBC system: $8000.00<br />Total yield: $16,400<br />Mr. Smith earns $2,400.00 more than Mr. J<br />
  9. 9. Moral Of This Story<br />Don’t ignore bankingprocesswith ROR<br />An IBC system requires time to build<br />Capitalizationhappens once<br />An IBC policyislike a business<br />A new business requires time beforemaking a profit<br />

×