Presentation on theme: "FINANCIAL RESOURCES MANAGEMENT"— Presentation transcript:
1 FINANCIAL RESOURCES MANAGEMENT Lesson 3.44/21/2017LESSON 3.4FINANCIAL RESOURCES MANAGEMENTExplain how budgeting relates to financial planningDescribe two kinds of financial reports prepared by businessesINTRO TO BUSINESS
2 3.4Financial ManagementOne 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.
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. Anticipating sources and amounts of income2. Predicting the types and amounts of expenses for a specific business activity or for the entire business
4 Financial Planning Income or Revenue: the $$ a business receives 3.4Financial PlanningIncome or Revenue: the $$ a business receivesTypically from sales of products/servicesStatement of Cash Flow: a financial record used to show the actual cash a business receives and has availableExpenses: the costs associated with running a businessEmployee wages, advertising, rent, utilities, supplies, etc.
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 profitableOperating Budget – Financial plan for the day-to-day operations of a businessCash 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
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 expensesEX: 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
7 BUSINESS MATH REVENUES EXPENSES 3.4 Cash sales = $3,560 Charge sales = $1,240Other revenue = $165Total Revenues = $4,965EXPENSESSalaries = $2,450Advertising = $200Rent = $550Supplies = $120Total Expenses = $3,320REVENUES – EXPENSES = NET PROFIT / NET LOSSIf a positive number remains it is a profitIf a negative number remains it is a lossNET PROFIT = $1,645
8 3.4CheckPOINTDescribe three kinds of business budgets
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 spentTax records – all taxes collected, owed and paid
10 3.4The Income StatementAn 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 LossThe income statement shows how a business does over a period of time
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
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 rightThe left and right side must be in balanceAssets = Liabilities + Owner’s EquityBalance 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
13 Maintaining Financial Records 3.4Maintaining Financial RecordsCollecting informationPreparing financial recordsMaintaining financial records
14 3.4CheckPOINTName several kinds of financial records commonly kept by businesses