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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records.

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Presentation on theme: "© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records."— Presentation transcript:

1 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records and Financial Statements 12-3 12-3Payroll Management 12-4 12-4Financial Decision-Making 12 C H A P T E R Financial Management

2 © 2012 Cengage Learning. All Rights Reserved. SLIDE 2 12-1 Financial Planning Goal 1Recognize important financial questions that must be answered in a business. Goal 2List the steps in budget preparation. Goal 3Describe three types of business budgets.

3 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 3 KEY TERMS ●revenue ●expenses ●budget ●start-up budget ●operating budget ●cash budget

4 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 4 FINANCIAL PLANNING ●Beginning a business ●Ongoing operations ●Business expansion

5 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 5 BASIC FINANCIAL EQUATION ●Revenue – Expenses = Profit or Loss ●Profit ●Revenue is greater than expenses ●Revenue > Expenses = Profit ●Loss ●Revenue is less than expenses ●Revenue < Expenses = Loss

6 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 6 Checkpoint ●What is the basic financial equation for businesses? ●The basic financial equation for businesses is revenue minus expenses equals profit or loss.

7 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 7 DEVELOPING BUSINESS BUDGETS ●Sources of budget information ●Budget preparation

8 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 8 Checkpoint ●What are the four steps in preparing a business budget? ●Preparing a list of each type of income and expense that will be a part of the budget ●Gathering accurate information from business records and other information sources for each type of income and expense ●Creating the budget by calculating each type of income, expense, and the amount of net income or loss ●Explaining the budget to people who need financial information

9 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 9 TYPES OF BUDGETS ●Start-up budget ●Operating budget ●Cash budget

10 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 10 Checkpoint ●Identify and describe the three types of budgets needed by all businesses. ●Start-up budget — plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable ●Operating budget — describes the plan for ongoing operations for a specific period ●Cash budget — is an estimate of the actual money received and paid out for a specific period.

11 © 2012 Cengage Learning. All Rights Reserved. SLIDE 11 12-2 Financial Records and Financial Statements Goal 1Identify several types of financial records needed by businesses. Goal 2Describe the differences between an income statement and a balance sheet.

12 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 12 KEY TERMS ●financial records ●assets ●liabilities ●owner’s equity ●balance sheet ●income statement

13 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 13 FINANCIAL RECORDS ●Types of records ●Asset records ●Depreciation records ●Inventory records ●Records of accounts ●Cash records ●Payroll records ●Tax records ●Maintaining financial records

14 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 14 Checkpoint ●How has the process of maintaining financial records been affected by technology? ●Most financial information is collected using point-of- production and point-of-sale technology and sent electronically to the people who prepare the financial records. ●Also, businesses use computerized financial systems that complete the necessary mathematical calculations and compare those records with budgets. ●The software can even complete what-if comparisons to help managers determine the impact of changes in budgets and financial performance.

15 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 15 FINANCIAL STATEMENTS ●The balance sheet ●The income statement

16 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 16 BALANCE SHEET

17 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 17 INCOME STATEMENT

18 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 18 Checkpoint ●What is the difference between a balance sheet and an income statement? ●A balance sheet reports assets, liabilities, and owner’s equity as of a specific date. ●An income statement reports sales, expenses, and net profit or loss for a specified time period.

19 © 2012 Cengage Learning. All Rights Reserved. SLIDE 19 12-3 Payroll Management Goal 1Describe the components of a business payroll system. Goal 2Identify key information included in payroll records and paychecks.

20 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 20 KEY TERMS ●payroll ●payroll record ●direct deposit

21 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 21 PAYROLL SYSTEMS ●Income taxes ●Social Security and Medicare ●Unemployment taxes

22 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 22 Checkpoint ●What is the purpose of the payroll system? ●The purpose of the payroll system is to maintain information on each employee to be able to calculate the company’s payroll and make the necessary payments to each employee, taking the proper legal state and federal deductions from each paycheck.

23 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 23 PREPARING A PAYROLL ●Payroll records ●Preparing paychecks

24 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 24 SAMPLE EARNINGS REPORT AND DIRECT DEPOSIT RECEIPT

25 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 25 Checkpoint ●What is the difference between a payroll record and an earnings report? ●A payroll record is documentation used to process earnings payments and record each employee’s pay history. ●An earnings report contains information for the current pay period as well as the cumulative amounts for the year.

26 © 2012 Cengage Learning. All Rights Reserved. SLIDE 26 12-4 Financial Decision-Making Goal 1Recognize important financial information managers use to make decisions. Goal 2 Identify the steps in making financial decisions in business.

27 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 27 KEY TERMS ●financial performance ratios ●discrepancies

28 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 28 USING FINANCIAL INFORMATION ●Important financial information ●Understanding financial performance ratios ●Current ratio ●Debt to equity ratio ●Return on equity ratio ●Net income ratio

29 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 29 FINANCIAL PERFORMANCE RATIOS Current Liabilities Current Assets =Current Ratio Owner’s Equity Total Liabilities =Debt to Equity Ratio Net Profit =Return on Equity Ratio Owner’s EquityNet Income Total Sales =Net Income Ratio

30 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 30 Checkpoint ●Identify four important financial performance ratios used by managers to determine how well the business is performing. ●Current ratio ●Debt to equity ratio ●Return on equity ratio ●Net income ratio

31 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 31 MAKING FINANCIAL DECISIONS ●Prepare a budget ●Look for discrepancies between actual and budgeted performance ●Make needed adjustments

32 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 32 Checkpoint ●List the three steps in financial decision- making. ●Preparing a budget. ●Using the budget as a guide to the operation of the business. ●Making needed adjustments to bring performance in line with the budget.


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