04 fin plan
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Principles of Business, Marketing, and Principles of Business, Marketing, and FinanceFinanceLesson FourLesson Four
Financial PlanningFinancial Planning
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Financial Questions a Business Financial Questions a Business Must AnswerMust Answer
• How much money is needed for start-up?• Where to obtain financing?• How will funds be obtained to run the business • for the months or years until it becomes
profitable?• What will be the best sources of sales and other
income?• What will be the expenses and when will they be
paid?
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Four Steps for Budget Four Steps for Budget PreparationPreparation
• Prepare a list of income and expenses.• Gather accurate information for each income and
expense.• Create the budget by calculating each type of
income, expense, and amount of net income or loss.• Show and explain the budget• to people who need financial• information to make decisions..
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Three Types of Business Three Types of Business BudgetsBudgets
• Start-up Budget
• Operating Budget
• Cash Budget
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Financial Records and Financial Records and Financial StatementsFinancial Statements
• Recognize and Analyze the Financial Performance of a Business– Assets– Depreciation– Inventory– Account– Cash– Payroll– Tax records
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Important Financial Important Financial StatementsStatements
• Income statement– Revenue– Expenses– Net profit or loss
• Balance Sheet– Assets– Liabilities– Net worth
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Financial Performance Financial Performance RatiosRatios
• Current ratio (current assets/current liabilities)
• Debt to Equity Ratio (total liabilities/owner’s equity)
• Return on Equity Ratio (net profit/owner’s equity)
• Net Income Ratio (total assets/net income)
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Payroll ManagementPayroll Management
• Financial records of employee compensation, deductions, and net pay
• Information on each employee to calculate the company’s payroll and to make the necessary payments to each employee
• Payroll record-form used to document each employee’s pay history– Name of employee– Social security number– Address– Tax and benefit records
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Financial Decision-MakingFinancial Decision-Making
• Company Strength-assets, liabilities, owner’s equity, sales, profits
• Calculate financial performance ratios to make decisions that result in the wise use of the company’s money
• Steps in Financial Decision Making– Prepare a budget– Use the budget as a guide to– the operations of the business– Make needed adjustments
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