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© 2011 South-Western | Cengage Learning
GOALS
LESSON 3.4
FINANCIAL RESOURCES MANAGEMENT
Explain how budgeting relates to financial planning
Describe two kinds of financial reports prepared by businesses
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 2
3.4
Financial Management
One of the reasons why small businesses often fail is that they do not manage their finances properly.
Businesses must wisely manage the money they take in and pay out to become profitable and to stay in business.
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 3
3.4Financial PlanningProfit is what is left over after paying all
business expenses …. Profit is good!!A business budget is a detailed plan for
meeting the financial needs of the business.
Two main purposes: 1.1. Anticipating sources and amounts of income
2.2. Predicting the types and amounts of expenses for a specific business activity or for the entire business
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 4
3.4Financial PlanningIncome or Revenue: the $$ a business
receives Typically from sales of products/services
Statement of Cash Flow: a financial record used to show the actual cash a business receives and has available
Expenses: the costs associated with running a businessEmployee wages, advertising, rent, utilities,
supplies, etc.
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 5
3.4Types of BudgetsBusiness budgets project the amounts of
income and expensesStart-up Budget – used to plan income and
expenses from the beginning of a new business until it becomes profitable
Operating Budget – Financial plan for the day-to-day operations of a business
Cash Budget – an estimate of the money expected to be received and paid out over a specific amount of timeHelps to know if money will need to be borrowed to
continue business operation
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 6
3.4BUSINESS MATHTo find the net profit or loss of a business
over a specific time period, calculate the business revenue minus the business expenses
EX: Calculate the net profit or loss of the month for Galaxy Comic Books where: cash sales were $3,560, charge sales were
$1,240 and other revenue was $165salaries were $2,450, advertising was $200,
rent was $550 and supplies were $120
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
BUSINESS MATHREVENUES
Cash sales = $3,560Charge sales = $1,240 Other revenue = $165
Total Revenues = $4,965
EXPENSESSalaries = $2,450Advertising = $200 Rent = $550 Supplies = $120
Total Expenses = $3,320
SLIDE 7
3.4
REVENUES – EXPENSES = NET PROFIT / NET LOSSIf a positive number remains it is a profitIf a negative number remains it is a loss
NET PROFIT = $1,645
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
CheckPOINT
Describe three kinds of business budgets
SLIDE 8
3.4
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 9
3.4Financial RecordsA financial record shows the financial
performance of a business.Asset records – buildings/equipment owned by the
business and their valuesDepreciation records – the amount that assets have
decreased in value due to their age and usageInventory sales – the type and number of products on
hand for salePayroll records – information on employee
compensation and benefitsCash records – all cash received and spent Tax records – all taxes collected, owed and paid
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 10
3.4
The Income Statement
An income statement is a financial statement that shows revenues, expenses, and net income (profit) or loss for a period of time.Revenue – Expenses = Net Income or Loss
The income statement shows how a business does over a period of time
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 11
3.4The Balance SheetA balance sheet is a financial statement
that lists a business’s :Assets – what a company owns: buildings,
equipment, cash, etc. Liabilities – what a company owes: salaries,
loans, accounts payable, etc.Owner’s Equity – value of the owner’s
investment in the business (net worth)
Owner’s Equity = Assets – Liabilities
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 12
3.4The Balance SheetIn a balance sheet the Assets are listed on
the left and the liabilities and OE (owner’s equity) are listed on the right
The left and right side must be in balanceAssets = Liabilities + Owner’s Equity
Balance sheets do not provide a picture of the business over a period of time, but shows what a business is worth on a certain date
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
SLIDE 13
3.4
Maintaining Financial Records
Collecting informationPreparing financial recordsMaintaining financial records
© 2011 South-Western | Cengage Learning
INTRO TO BUSINESS, 2e LESSON
CheckPOINT
Name several kinds of financial records commonly kept by businesses
SLIDE 14
3.4