1. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ChapterChapter10 Operations Management 10.1 Operating Procedures 10.2 Inventory Management 10.3 Financial Management

2. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 2 Lesson 10.1 Operating Procedures Goals Define the five functions of management. Describe five types of policies that should be included in an operations manual.

3. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 3 Vocabulary manager management organizational structure authoritative management democratic management operations manual

4. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 4 Management Functions manager the person responsible for planning, organizing, staffing, implementing and controlling the operations of a business management the process of achieving goals by establishing operating procedures making effective use of people and other resources

5. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 5 Planning Strategic planning planning for the three to five years ahead setting broad, long-range objectives Intermediate-range planning planning for a one-year period set target dates for task completion Short-term planning planning for daily operations

6. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 6 Organizing Assignment of tasks determining which employee is responsible for specific tasks Grouping of tasks into departments grouping closely related tasks together

7. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 7 a plan that shows how the various jobs in a company relate to one another often represented in a chart Allocation of resources across the organization determining the most efficient use of resources Organizational structure

8. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 8 Staffing Managing the personnel needs of a business through: obtaining training compensating

9. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 9 Implementing Implementing involves directing and leading people to accomplish the goals of an organization. management style the way a manager behaves toward and works with employees

10. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 10 the manager is directive and controlling democratic management employees are involved in decision making the manager provides less direction mixed management a combination of authoritative and democratic management authoritative management

11. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 11 Controlling Controlling is the process of: setting organizational standards ensuring those standards are met comparing actual revenues and expenses with projected revenue and expenses determining if operations are running effectively inspecting products and services to ensure they are meeting performance standards

12. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 12 What are the functions of management?

13. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 13 Operations Manual operations manual contains all the rules, policies, and procedures that a business should follow to function effectively employee handbook details the rules, policies, and procedures that apply to employees

14. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 14 Set daily operating hours that are convenient for customers. Customer Service Policies Customer satisfaction is the goal. returns follow-up service Operating Policies

15. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 15 often offered for customer convenience The policy should cover: whether you will offer delivery delivery fee delivery timeframe Delivery Policies

16. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 16 application process testing requirements background checks Safety Policies Employees should be trained in emergency procedures. Hiring Policies

17. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 17 What type of information should be included in an operations manual?

18. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 18 Lesson 10.2 Inventory Management Goals Prepare a purchasing plan for inventory. Describe the perpetual and periodic inventory methods. Determine how much inventory to keep in stock.

19. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 19 Vocabulary perpetual inventory method stock card point-of-sale software system periodic inventory method stock turnover rate

20. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 20 Meet Inventory Needs inventory the stock of goods a business has for sale Inventory costs include: storage insurance taxes purchase price of inventory Inventory must be well managed if you want to make a profit.

21. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 21 Purchasing Plan The sales forecast can be used to calculate required inventory. Ending inventory = Beginning inventory + Purchases ─ Sales

22. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 22

23. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 23 What are some of the concerns managers have regarding inventory?

24. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 24 Track Your Inventory You will need to take a physical inventory once or twice a year.

25. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 25 Perpetual Inventory Method perpetual inventory method monitors inventory levels daily efficient avoids inventory shortages stock card a paper inventory record for a single item electronic versions available

26. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 26 the minimum amount you want to keep in inventory indicates when you should place an order to receive more units reorder point

27. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 27

28. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 28 Use a Computer point-of-sale (POS) software system updates inventory as each sale happens provides up-to-date inventory levels

29. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 29 taking a physical count of merchandise at regular intervals Take a Physical Inventory counting the number of items in stock should be done once or twice a year can highlight discrepancies caused by a failure to record sales theft damage Periodic Inventory Method

30. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 30 How does the perpetual inventory method differ from the periodic inventory method?

31. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 31 Manage Your Inventory Costs of Carrying Inventory Costs can increase for many reasons including: obsolescence deterioration interest fees insurance storage

32. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 32 Stock shortages can lead to: loss of sales loss of customer loyalty Stock Turnover Rate the rate at which inventory is sold and replaced with new inventory Months of inventory to stock = Months in year ÷ Stock turnover rate Costs of Being Out of Stock

33. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 33 What three factors determine the amount of inventory a business keeps in stock?

34. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 34 Lesson 10.3 Financial Management Goals Describe strategies for managing cash flow. Evaluate a business’s performance through financial statement analysis.

35. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 35 Vocabulary cash budget gross sales net sales

36. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 36 Manage Your Cash Flow Create a Cash Budget cash budget shows the projection of your cash coming in and going out estimated cash flow actual cash flow the difference between the two

37. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 37

38. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 38 Increase Cash Receipts discounts for timely payment tighter credit policies collect unpaid accounts receivable hold shipments to customers with unpaid bills Decrease Cash Disbursements inventory reductions reducing the payroll use credit from suppliers reduce variable expenses Improve Your Cash Flow

39. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 39 What are some ways you can improve your cash flow?

40. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 40 Prepare and Analyze Financial Statements Prepare Financial Statements cash flow statement cash inflows cash outflows

41. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 41 revenues expenses net income or loss over a specific period or time balance sheet assets liabilities owner’s equity income statement

42. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 42 Analyze Sales Sales records can: show trends and patterns be used to forecast future sales

43. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 43 helps you decide what type of inventory to stock helps you increase sales and profits Analyze Sales by Product

44. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 44

45. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 45 Analyze Net Profit on Sales Net profit on sales = Net income after taxes ÷ Net sales

46. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 46 Calculate Net Sales gross sales dollar amount of all sales net sales = gross sales ─ returns

47. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 47 Calculate Net Income After Taxes Gross profit = Net sales ─ Cost of goods sold Net income from operations = Gross profit ─ Operating expenses

48. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 48 Net income from operations ─ Interest expense Net income after taxes = Net income before taxes ─ Income tax paid Net income before taxes =

49. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 49

50. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 50 Calculate and Analyze Net Profit on Sales Net profit on sales = Net income after taxes ÷ Net sales Net profit helps to determine the profitability of your business. can compare with prior years can compare against industry standards

51. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 51 Set and Meet Profit Goals Profit goals reflect the amount of profit you hope to earn during a particular year.

52. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 52 Perform Breakeven Analysis breakeven point the volume of sales that must be made to cover all business expenses Profit occurs after the breakeven point is exceeded.

53. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 53

54. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Analyze Debt and Equity The four key areas entrepreneurs should review using data from the balance sheet are: Ability to pay debt as it comes due Return on assets Amount of debt the company is using Rate of return by the owners on their equity investment Chapter 1 Slide 54

55. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ability to Pay Debt A company is liquid if it has enough money to pay off any debt. Current ratio = Current assets ÷ Current liabilities Chapter 1 Slide 55

56. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Return on Assets ROA indicates how profitable a company is relative to the total amount of assets invested in the company. Return on assets = Net income ÷ Total assets Chapter 1 Slide 56

57. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Debt Ratio The amount of debt, relative to total assets, used to finance a business should be examined. Debt ration = Total debt ÷ Total assets Chapter 1 Slide 57

58. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Return on Equity The ROE is the rate of return the owners are receiving on their equity investment. Return on equity = Net income ÷ Owner’s equity Chapter 1 Slide 58

59. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 59

60. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 60 Why is it important for an entrepreneur to analyze the financial statements of the business?

61. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 10 Slide 61 PERFORMANCE COMPENTENCIES Demonstrate good communication skills Describe project development and implementation Describe the partnership Demonstrate the ability to make a professional presentation Answer questions effectively

62. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 62 GIVE IT A TRY Development (description of the partnership goals, description of planning activities used to build a partnership, and roles of business leaders and chapter members in developing the partnership)

63. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 63 Results (description of concepts learned from the project and the impact of the project) Implementation (description of activities, level of involvement from business leaders, and roles of business leaders and chapter members)

64. Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 1 Slide 64 Evidence of Publicity (description of the recognition received as a result of the partnership) Degree of Involvement (hours spent and contacts made)