Examining Related-Party Transactions And Corporate Fraud

Examining Related-Party Transactions And Corporate Fraud Related parties represent a link where one party can exercise control (direct or indirect) or significant influence over the operating policies of the other party. According to FRS 8 and IAS 24, a related party includes an entitys subsidiaries, associates, joint venture interests, directors and family members of  directors. Related-party transactions are legitimate activities and serve practical purposes such as: They are recognised in corporate and taxation laws. They have their own standards for accounting treatment. Systems of checks and balances have been built around them to make sure they are conducted within these boundaries. The following parties are not considered as related parties in IAS 24: Parties which have normal dealing with an entity. Examples include providers of finance, trade unions, government agencies and public utilities. Parties such as customers, suppliers, distributors and franchisors on which the entity is economically dependent. Two venturers sharing joint control over a joint venture. Two entities having a common directors or other member of key management personnel are not considered as related parties. Related Party Transactions Related party transactions (RPTs) are defined in IAS 24 as any transactions made between the related parties irrespective of whether a price is charged or not. The transactions include transfer of resources, services or obligations. In other words, RPTs are transactions between a company and its management, board members, principal owners, or members of the immediate families of any of these groups. Examples of RPTs under IASB include rendering or receiving of services, purchase or sales of goods, leases, provisions of guarantees or collateral, purchase or sale of property and other assets, among others. Moreover, FASB (1982) states that RPTs include transactions between a company and its affiliates. Affiliates refer to entities which control the company, they are controlled by the company or they are controlled by another entity which also controls the company. Examples of RPTs under FASB include services received or furnished, borrowings and lendings, guarantees among others. Scenarios under related party transactions When an individual purchases a stock, bond, note or mutual fund from a family member or related party entity, he becomes entitled to the related party rules and under these rules, the individuals cost basis will actually depend on whether he ends up selling it at a gain or a loss. For example, the individuals sister owned stock of XYZ Corp which she bought for $20,000.   It had declined in value to $10,000 when he bought it from her.  Ã‚   Therefore, she is  not allowed to claim a  capital loss when she sells it to him because he is a related party. Gain scenario: If later the individual sells the stock to a  third, unrelated party  for $22,000, he will experience a true gain of $12,000 on his own acquisition cost of $10,000. However, he only have to declare  a capital gain of $2,000 for  income tax purposes because  he is allowed to use a carryover basis from his sister, since she was not able to claim the previous  disallowed loss.  Ã‚   Loss scenario: If the individual sells it later to a  third, unrelated party  for $8,000, he will have a true loss of $2,000 on his own acquisition cost of $10,000,  and he can only declare  a capital  loss of $2,000 for  income tax purposes.   However, he is not allowed to use a carryover basis from his sister, even though she was not able to claim the previous  disallowed loss. The tax savings from the previous disallowed capital loss are wasted and no one claimed them. Disclosure The objective of IAS 24 is to ensure that an entitys financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties. The IAS 28 requires the following to be disclosed: Relationship between parents and subsidiaries: The entity should disclose the name of its parent company or of its ultimate controlling party irrespective of whether there have been any transactions occurred between them. In the case where neither the parent company nor the ultimate controlling company produces financial statement for public use, then the next most senior parent that does so must also be disclosed. Management Compensation: The compensation of the key management personnel must be disclosed in total and for each of the following categories: Short-term employment benefits Post-employment benefits Other longer benefits Termination benefits, and Equity Compensation benefits. Related Party Transaction: If transactions have been made between the related party, then for each categories of the related party, the following should be disclosed separately: The amount of the transactions The amount of the outstanding balances including terms and conditions and guarantees Provisions for doubtful debts related to the amount of outstanding balances Expenses recognised during the period in respect of bad or doubtful debts due from related parties. Types of RPT that lead to corporate frauds Many high profile companies have made an abuse use of related party transactions to succeed in involving in fraudulent activities. These include companies such as Enron, Adelphia, Tyco and others. Sales to ( or purchases from) related parties of goods and services According to Pesaru (2002), a related-party sales transaction represents the link between the company and the customer. In this particular transaction, it is usually difficult to identify the related parties. Thus, companies use this technique for boosting revenue. As such, the undisclosed related-party transactions may be used to fraudulently inflate earnings. Companies use accounting trick to mislead the users of financial statements. Presenting a series of sales, which are executed with an undisclosed related-party and which are insignificant is an example of accounting trick used by companies. Moreover, sales made to related party transactions can also lead to corporate frauds if the sales transactions are categorized under fictitious sales. Fictitious sales include round-trip sales. SEC 2003 defines round trip sales as simultaneous pre-arranged sales transactions often of the same product in order to create a false impression of justifying those fictitious sales transactions of falling under the normal ordinary course of the business. This type of transactions inflates sales figures and thus leads to overstatement of revenues. On the other hand, the purchase of goods or services from related parties is another type of RPT. This type of RPT may lead to fraud when the purchases are not disclosed or when they are considered as unauthorised transactions. Companies create fictitious purchases of services from related party to conceal a misappropriation. For instance, in the Tyco case, it was found that the company failed to disclose a finders fee paid to an outside director in connection with an acquisition. Besides, one of the principal owners of PNF Industries, Inc. created fictitious records to conceal a misappropriation by claiming that he was owed consultation fees. Since the payments were considered as unauthorised, he falsified a minutes of a directors meeting to authorize the fees. Non-reported purchases from a related party understate expenses and the effect of the understated figure of expenses is reflected in an overstated sales figure. On the contrary, non-reported revenues and fictitious purchases lead to understatement of income. This whole scenario is summarised in the following diagram. First scenario: Effect: FICTITIOUS SALES OVERSTATEMENT OF REVENUES SMOOTHING INCOME NON-REPORTED PURCHASES Second scenario: NON-REPORTED REVENUE FICTITIOUS PURCHASES UNDERSTATEMENT OF INCOME Genuine sales can be made to the related party in such a way that this transaction transfer wealth to the related party. This can be done if genuine sales are made below its market price to the related party. Another way of transferring wealth to the related party would be unnecessary purchases of goods and services or even purchases above its market price by the company. The other side of the coin will be transferring wealth from the related parties to the company. This is possible when actual sales are transacted to related party at above market prices or when purchases are made below market prices from the related party. The situation of genuine sales being transacted in a manipulating way can have two impacts: Firstly, if the company is already facing a crisis in terms of low profits for instance, then the latter can opt for transferring wealth from the related party to itself. And, if the company is transferring its wealth to the related party, this will lead to misappropriation of companys assets. Both of these impacts will lead to fraudulent financial reporting. To better understand the picture, a diagram is illustrated below: Scenario of sales: GENUINE SALES Made to related parties under market prices Made to the company over market prices LEADS TO TRANSFER OF WEALTH To the company To related parties Scenario of Purchases: PURHASES MADE TO Related parties over market prices The company from related parties under market prices LEADS TO TRANSFER OF WEALTH To the company An example of a company which uses this to involve in fraudulent activity is Livent Inc., Humatech Inc. and Enron. Livent Inc has mischaracterised certain receipts as revenue. In fact, the receipts were actually borrowings since there were side agreements obligating the company to repay the funds. The counterparty companies were related parties since the top executive of Livent Inc were a member of their boards. In the case of Humatech Inc, the CEO and the CFO secretly controlled the improper recognition of revenue which was actually sale to a foreign distributor. Indeed, the foreign distributor was a related party but however no disclosure has been made of the transactions. Furthermore, Enron has made a payment to one of its employees of around $ 10 million and the CFO took it as a SPE. The employee then via a payment to the CFOs family members, share a portion of its fees to the CFO. Loans to and from the related parties The provision of loan to and from the related parties is another major type of RPT. Lack of transparency involved in recording the following transactions outlined below of a company leads to understatement of its liabilities: Non- recognition of borrowings by the company to the related parties Non-disclosure of obligations incurred for the related parties in terms of guarantee Disclosure of loan transactions to related parties If loans are given to the related parties by the entity are reported accordingly in the financial records of that firm, the issue that arises is in terms of the collateral which is used as a medium to get the finance. In fact, what usually happens is that in case of related party transactions companies tend to overstate the value of these collaterals. Manipulating interest rates Wealth are transferred to related party by either borrowing from a related party at above-market interest rates, or lending to a related party at below-market interest rates. If the related parties borrow from the company at an interest rate which is above the market interest rate, this leads to a transfer of wealth to the company. Similarly, if the company is financed out by the related parties at below-market rates or off-market, this would again leads to a transfer of wealth from the related parties to the company. According to Freidman et al. (2003), this kind of practice is referred to as propping. On the other hand, if the company lends the related parties at an interest rate which is lower or even off the market interest rate, this will lead to a transfer of wealth from the company to the related parties. The scenario of manipulating interest rate can be easily understood through the diagram below: Scenario: transfer of wealth to the company: COMPANY Borrows from the related parties at a lower market interest rate Lends to related parties at a higher market interest rate Leads to transfer of wealth to the company If borrowings from a related party are not recognised, this will result in an understatement of liabilities. Moreover, over-estimating the collectability of loans to a related party leads to an overvaluation of assets. These situations are known as loan related misstatements and this may eventually leads to frauds. Several companies adopted this technique when preparing their financial statements. For example, Adelphia understated its liabilities by $1.6 billion. It failed to report its obligation under the credit facility by claiming that its obligation was merely a guarantee which did not require disclosure. In addition to this, Adelphia has netted $ 1.351 billion related party receivables with against related party payables, which has enable them to hide $ 1.348 billion of related party payables. The netting has also allowed them to hide the amount of transactions between the Adelphia and the company owned by Rigas family which was Adelphias controlling shareholders and management team. Indeed, the SEC has stated that the Rigas family has illegally excluded over $2.3 billion in bank debt by deliberately shifting those liabilities onto the books of Adelphias off balance sheet, unconsolidated affiliates and created sham transactions backed by fictitious documents to give the false appearance that Adelphia had actually repaid debts when, in truth, it had simply shifted them to unconsolidated Rigas-controlled entities. Moreover, PrintontheNet.com did not disclose that it had guaranteed $7.3 million in related parties loans. In the case of Tyco, Mr Kozlowski, who was the former Chief Executive Officer of Tyco International borrowed $ 242 Million from a Tyco program, with the intension to facilitate the executives to pay taxes on restricted-stock grants. However, instead of utilising the funds for that purpose, he spent the finances on yachts, fine art, estate jewelry and luxury apartments. In the same way, Mr Swartz, Tycos former Chief Financial Officer took a lo an of $72 Million from program and made personal investment and business ventures with that money. In the Enron case, Mahonia, a special purpose entity (SPE) which was controlled by a financial institution was employed to make some of the Enrons transactions disguised a borrowing of $ 2.6 billion from the financial institution as forwards contract. Hence, as a result of the disguised loans, cash flowed from the financial institution to Mahonia and then from Mahonia to Enron. Investment in related parties It is crucial to disclose investments in related parties in order to prevent frauds from occurring. Managers tend to manipulate earnings via tunneling actions in order to maintain the companys stock performance. As a result, investment decisions would be expropriated if such decisions are determined based on the financial disclosure. If investment in the equity of a related party is not reported correctly, this will lead to an overstatement of assets and hence will mislead investors about insider activity. Several companies had inflated their assets with RPTs. For example, an investment of $2.5 million in a venture capital fund by Hollinger was not disclosed. Moreover, in the Enron case, using the special purpose entities (SPEs) the managers was able to hide unfavourable performance of their investment decisions. Tonka is another example of a company which involve in fraudulent activities. The CFO of the company secretly owned a company and he misappropriate assets of Tonka by making the corporate funds to be improperly been invested in his company. Hence, it can be seen that many companies has misused related party transaction to involve in fraudulent activities. However, the Sarbanes Oxley Act 2002 has prohibited only one type of related party transaction which was loans to related parties. Indeed, in a study by Henri et al. (2007) which examined 83 SEC enforcement actions involving in related party transaction and fraud, it was found that the most frequent type of related party transaction was loan to related party. RPT: A cause for concern Many accounting frauds such as Enron, Adelphia, Tyco, Refco, Hollinger, Rite Aid have occurred during the past years and have shown concern towards related party transactions. This is because in one way or the other, related party transactions were involved, creating concern among regulators and other market participants about the appropriate monitoring and auditing of these transactions. However it has been pointed out that research has provided a mixed picture of the role of related party transactions in fraudulent financial reporting. For example, research has shown that related party transaction disclosures are quite common (Gordon et al. 2004a; Wall Street Journal 2003). However, since fraudulent financial reporting is relatively uncommon (Lev 2003), and furthermore most frauds2 apparently do not involve related party transactions (Shapiro 1984; Bonner et al. 1988; SEC 2003), it is reasonable to assume that most disclosed related party transactions are not fraudulent. According to Gordon et al. (2004), RPTs play a fundamental role in a firms corporate governance environment. It is said that RPTs are an aspect of corporate governance because these transactions are complex issues between a company and its managers, directors, subsidiaries and major shareholders. RPT is considered as an issue to corporate governance because of the problems of asymmetric information between the firms manager and external capital markets. Additionally, RPTs result in higher agency costs. This is due to the alignment of decision-making and monitoring rights. Moreover, according to Johnstone and Bedard (2004), RPTs are difficult to audit and these transactions represent a potential audit risk. When examining the financial statements of companies, auditors do not have adequate information on related party. Is it fair to blame only bad corporate governance for corporate failures? Bad corporate governance is one of the reasons which account for the corporate failures. Corporate governance issues, like those with related party transactions, crop up because of the existence of asymmetric information between shareholders and the firms managers. Existing research has shown that certain board characteristics and CEO pay-performance sensitivity are useful governance mechanisms which help to improve managerial agency problems. For example, large board size, which is observable and disclosed in proxy statements, has been found to be negatively correlated with firm value and interpreted as indicative of weak corporate governance (Yermack, 1996). However, this does not conclude that corporate failures arise only because of bad corporate governance. There are multitude reasons behind the corporate scandal. For instance, it has been seen that a lack of regulations is one of the reasons. It is believed that the erosion of accounting practices begun in the 1980s as firms tried to balance strict standards with a desire to please clients and increase consulting business. Research has shown that a lack of government regulation was one of the major causes of the huge energy trading firm Enron. This firm reported profits of hundreds of millions of dollars ($979 million in 2000, alone) before collapsing in 2001. Other examples include poor management structures, lack of independence and objectivity by auditors as well as poor business ethics. Ethics can be defined as moral philosophy. It is basically the discipline concerned with what is morally good and bad, right and wrong. The term is also applied to any system or theory of moral values or principles (Ethics, Encyclopedia Britannica Online, 2000). However, when this term is applied in the business context, it is said to be the study and evaluation of decision making by businesses according to moral concepts and judgments (Business Ethics, The Columbia Encyclopedia, 2007). For instance, in the Enron case, the auditors applied reckless standards to do their audit because they were receiving significant consultation fees from the company.

Different World Markets Essay

It is commonly accepted that marketing strategies play very important roles in most international organizations. Some believe that a company which plans to expand its business and want to be a successful international firm should have very effective marketing strategies. As a number of writers (John, Letto-Gillies, Cox and Grimwade 1997, Ketelhohn 1993, Johnson and Scholes 2002) have pointed out, international marketing strategy is concerned with making important policy decisions affecting the long-time direction of the company. This paper first proposes the importance of international company’s marketing strategy, and then considers how to make a competitive marketing strategy and carry out it in a right way. After that, it will look at how to understand ‘change’ in business environment and what organizations should pay attention to in a changeable market. In the final part, it will focus on a specific international company’s global marketing strategy. Importance of international marketing strategy. Over the years, many definitions of ‘marketing strategy’ have been made and developed, a typical definition was made by Quinn (cited in John, Letto-Gillies, Cox and Grimwade, 1997) who describes marketing strategy as: †¦ the pattern or plan that integrates an organisation’s major goals, policies and action sequences into a cohesive whole. A well-formulated marketing strategy helps to marshal and allocate an organisation’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents. (Quinn 1980:pp3) According to John, Letto-Gillies, Cox and Grimwade (1997), although there were many definitions about marketing strategy, most of them emphasize the same direction in which the organization is developing, where the organization is going, where the organization is or where it should be. In fact, problems mentioned by them are the biggest headache and trouble maker for most international enterprises, thus marketing strategies enable  companies to find out how and where to develop. As Hill (2005) sees the marketing strategy in international business, nowadays, process of the global economy and liberalization of investment environment result in many global markets becoming extremely competitive, in order to get more profit in such an international environment, a company should have a very clear marketing strategy which cares a lot about its position. In all models of marketing strategies, international marketing strategy is a very large part and it affects other part of strategies to a international company in a certain degree. As Manu (1992) has pointed out, more and more organizations take the whole world as their market with the quickening process of globalization in the past decades, the role and effective marketing strategies in different geographic market-places become a greater need for them to analyse caused by the growth in the globalization of business and markets. All these indicate that marketing strategies do have important influence on international enterprise’s performance; therefore an effective marketing strategy cannot be ignored when companies plan to expand their business. How to make a competitive marketing strategy. From the very start, how to make a competitive marketing strategy is always the problem which international companies have to face. As Ketelhohn (1993) has pointed out, a strategic analysis is the most important of all; it starts by setting the generic strategies which are hypotheses in the industry and finding out the main success factors which are related to each strategy. Then consulting teams in the company should check their understanding of those marketing strategies by comparing them with documented facts. Once they are satisfied with those marketing strategies which they think fit their enterprises’ capabilities, they are able to choose consultants and build strengths in key success factors in which the firm is weak by recommending investment projects. All these details should be considered into companies’ marketing strategies, after planning and making marketing strategies, the next important step is taking those marketing strategies into action and managing them in a right way, good strategic management is not only related to one department, but the  responsibility of the whole company, as Johnson and Scholes (2002) see it, ‘marketing strategy is about how organizations perform overall. Since very few individuals sit at the very top of organizations, their experience of, and contribution to, strategic success is from â€Å"below†. They will operate in parts of an organization where their day-to-day work is dominated by issues about that function’. According to them, enabling the success of marketing strategy in action should from the very top managers to individuals lower down as resources and competences which are crucial in this process are controlled by them. ‘Change’ in business environment. Change is accepted widely in our modern life, it also exists in the business environment all the time, according to the research of Drummond, Ensor and Ashford (2003), ‘the phrase â€Å"change is the only certainty† has become something of a business mantra. All organizations are subject to increasing levels of change.’ Actually, every change exists in the market has the original factor which concerned with the environment where international organizations carry out their marketing strategies, Carter (2002) identifies those factors as political factors, economic factors, technological factors, social or cultural factors, legal factors and competitive factors. It is very important for international companies to full understand these various factors and identify the most important kinds of factors which may influence the company and its consumers’ relationship when they carrying out foreign marketing strategies. Peugeot Company was established in France in 1890 and now it has become one of the ten biggest car manufactures in the world. In order to explore the market, Peugeot invested in Guangzhou, China, in 1985, it failed and left China in 1997. The main reason is lack of competitiveness of its products. On the other hand, Dongfeng Peugeot was created in China. From the external environment, four pieces of information are very clear: firstly, China entered into WTO and then cut its tariffs on auto imports. Secondly, China’s car market is booming. Thirdly, personal incomes are increasing. Finally, more competitors are entering into China’s market. By analysing and  summarising Peugeot’s marketing strategies, there are four main marketing strategies related to its operations: firstly, Peugeot tries to improve the quality and design and find out the acceptance of Chinese marketplace. Secondly, it cuts prices to boost sales. Thirdly, it offers an effective on-line sale channel. Finally, it tries to improve customer service all the time. In conclusion, there is no doubt that marketing strategy plays a crucial role in international enterprises. Making an effective global marketing strategy is a good beginning, carrying out the marketing strategy in a proper way is very essential in the globalization process, understanding the market’s change and identifying problems which is related to a company are also very important in carrying out the marketing strategy. All these steps are linked with one another; they are key points relating to the marketing strategy which is really necessary in international organization. References: Cater, S (2002) International marketing strategy. London: Elsevier Science Ltd. Drummond, G., Ensor, J,. and Ashford, R (2003) Strategic Marketing Planning and Control. London: Butterworth-Heinemann Publications. Hill, C.W.L (2005) International Business. New York: The McGraw-Hill Companies. John, R., Letto-Gillies, G., Cox, H., and Grimwade, N. (1997) Global Business Strategy. London: International Thomson Business Press. Johnson, G. and Scholes, K (2002) Exploring Corporate Strategy. Edinburgh: Pearson Education Limited. Ketelhohn,W(1993)International Business Strategy.London: Butterworth-Heinemann Ltd. Lasserre, P (2003) Global Strategic Management. New York: Palgrave Macmillan Houndmills. Manu, F.A. (1992), â€Å"Innovation Orientation, Environment and Performance: A Comparison of U.S. and European Markets,† Journal of International Business Studies, 23 (2), 332-59.

A Secret Weapon for Internship Reflection Paper Essay

A Secret Weapon for Internship Reflection Paper Essay Although reframing is crucial in many conditions, the aim of counseling is life improvement. You just have to share an experience. If you need assistance, just ask! The Seventeen Days program is quite unique as it is a video based and interactive intervention in which girls have the capability to tailor the intervention to target their personal needs. If you draw proper conclusions, you will demonstrate the high degree of understanding what you've depicted in your story. It is critical to select the right words and phrases while reflecting your ideas and showing what you feel. Emphasize on reflection in place of a summation. Keep it in memory and take some notes to have the capacity to select an acceptable topic and finish your assignment. On occasion, you might be missing some excellent suggestions for your reflective essay topics. From time to time, you could possibly be requested to compose a reflective essay. By w ay of example, after completing an internship, you might be asked to compose a reflection essay on such experience. A fantastic reflective essay may be a fantastic reflective essay with the appropriate planning. If you like your employer and you've done a nice job, the internship can lead to an offer of full time employment. For instance, if you analyzed an industry as a portion of your internship, describe what you learned about the business. Though co-op programs aren't the only means of improving the standard of practice of future pharmacists, they're an important step in the proper direction, providing pharmacy students with a better knowledge of the pharmacy world. A comprehensive understanding of guidelines governed by the State of Ohio will be found. Even if the internship doesn't lead to a work offer, it provides you practical experience and improves your resume. They may also have the opportunity to provide nutrition and health fair programs to the community. The I ntern will finish an important project as assigned in this rotation to satisfy competency standards. Interns within this rotation might have the chance to observe a high-risk shipping or surgery. In experiential learning and internships, the actual learning comes afterthe work term when you've got a chance to consider about what you saw and experienced. Strong emphasis is put on learning the pathophysiology of disease states in regard to nutritional therapy. As soon as it is your duty to track down an internship, there are an assortment of methods to come across a position. It is essential for folks to involve themselves in internship programs as a way to be in a position of understanding the important part of the job. On one specific occasion, one of our diabetic patients was planning a visit to a tropical destination where he wouldn't have accessibility to a fridge because of his insulin for no less than a week. My personal IT skills are becoming updated every single day. A suitable start sufficiently increases your odds of success. How to Choose Internship Reflection Paper Essay When you make an outline, you are going to have clearer view of the additional evoluti on of your literature work. The investigative issues portrayed within this report have been facilitated by the usage of journals, and the several reports given by authors of distinct newspapers. The report is an official business report. Therefore, the procedure for writing will turn out to be much simpler. We become mindful of our existence along with the significance of life and all the things which surround us. The very first thing I realized was that communication is usually a crucial element to success. Verify the body paragraphs center on providing appropriate reflection and critique. To compose a reflective short essay, you have to have the proper disposition together with the momentum. Finding the Best Internship Reflection Paper Essay While I was having my main pressure of serving an extremely significant level people but that is among the best opportunities whom I think not many students will be experienced for their very first internship. Not many college stud ents know the things that they need to do, and it's something which is just not worth worrying about. We guarantee you will get much better grades with us! Not simply the 2nd graders. Internship Reflection Paper Essay: the Ultimate Convenience! You will require a lot of things to contemplate, reflect and explain. You could learn a good deal and find some wonderful ideas. It was interesting to find the other side of the company and I gained lots of valuable experience from that. The great thing is there is going to be a distinct convenient process throughout the obstacle. Choosing Internship Reflection Paper Essay You can find out a lot about office etiquette procedures from the ones who've been there for twenty decades. It may also supply a document that future interns can examine as a way to find out more about the corporation. If you own a mentor, look at discussing these questions with your mentor to acquire their perspective. My paralegal internship taught me the b est way to get together with unique folks well, how to ask questions when I didn't understand something and the way to communicate nice and bad news to attorneys.

What Financial Planning Can Help People Plan For The Future

Larson, Brian talks about what financial planning is and how to help people plan for the future. How many of you want to be able to go to college and be able to pay it off? Long term financial planning is what people do when they are getting older and thinking about graduating. The key word here is ‘Long-Term’ this means that you will need to start planning now rather than later. The sooner you start the better off you will be. This will mean that when you get older you will have enough money to pay off college loans and sustain yourself. This can be a hard thing to do and that is why there are people who can help you plan for the future and save money so that you won’t go broke after four or more years of college. So, the first thing we need to discuss is what long term financial planning means. Long term financial planning is when you decide how much money you have now and how much money you want to have after college or for retirement. 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