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Presentation on theme: "FINANCIAL RESOURCES MANAGEMENT"— Presentation transcript:

Lesson 3.4 4/21/2017 LESSON 3.4 FINANCIAL RESOURCES MANAGEMENT Explain how budgeting relates to financial planning Describe two kinds of financial reports prepared by businesses INTRO TO BUSINESS

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.

3 3.4 Financial Planning Profit 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 income 2. Predicting the types and amounts of expenses for a specific business activity or for the entire business

4 Financial Planning Income or Revenue: the $$ a business receives
3.4 Financial Planning Income or Revenue: the $$ 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 business Employee wages, advertising, rent, utilities, supplies, etc.

5 3.4 Types of Budgets Business budgets project the amounts of income and expenses Start-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 time Helps to know if money will need to be borrowed to continue business operation

6 3.4 BUSINESS MATH To 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 $165 salaries were $2,450, advertising was $200, rent was $550 and supplies were $120

Charge sales = $1,240 Other revenue = $165 Total Revenues = $4,965 EXPENSES Salaries = $2,450 Advertising = $200 Rent = $550 Supplies = $120 Total Expenses = $3,320 REVENUES – EXPENSES = NET PROFIT / NET LOSS If a positive number remains it is a profit If a negative number remains it is a loss NET PROFIT = $1,645

8 3.4 CheckPOINT Describe three kinds of business budgets

9 3.4 Financial Records A financial record shows the financial performance of a business. Asset records – buildings/equipment owned by the business and their values Depreciation records – the amount that assets have decreased in value due to their age and usage Inventory sales – the type and number of products on hand for sale Payroll records – information on employee compensation and benefits Cash records – all cash received and spent Tax records – all taxes collected, owed and paid

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

11 3.4 The Balance Sheet A 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 3.4 The Balance Sheet In 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 balance Assets = 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

13 Maintaining Financial Records
3.4 Maintaining Financial Records Collecting information Preparing financial records Maintaining financial records

14 3.4 CheckPOINT Name several kinds of financial records commonly kept by businesses


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