Chapter 12 Financial Management 12 1 Financial Planning

Chapter 12 Financial Management 12 -1 Financial Planning 12 -2 Financial Records and Financial Statements 12 -3 Payroll Management 12 -4 Financial Decision-Making Chapter 12 Slide Introduction to Business © Thomson South-Western

LESSON 12 -1 Financial Planning Goals n Recognize important financial questions that must be answered in a business. n List the steps in budget preparation. n Describe three types of business budgets. Chapter 12 2 Introduction to Business © Thomson South-Western

Key Terms n revenue n expenses n budget n start-up budget n operating budget n cash budget Chapter 12 3 Introduction to Business © Thomson South-Western

FINANCIAL PLANNING n Beginning a business n Ongoing operations n Business expansion Chapter 12 4 Introduction to Business © Thomson South-Western

BASIC FINANCIAL EQUATION Revenue – Expenses = Profit or Loss Chapter 12 5 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T What is the basic financial equation for businesses? Chapter 12 6 Introduction to Business © Thomson South-Western

DEVELOPING BUSINESS BUDGETS n Sources of budget information n Budget preparation Chapter 12 7 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T What are the four steps in preparing a business budget? Chapter 12 8 Introduction to Business © Thomson South-Western

TYPES OF BUDGETS n Start-up budget n Operating budget n Cash budget Chapter 12 9 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T Identify and describe three types of budgets needed by all businesses. Chapter 12 10 Introduction to Business © Thomson South-Western

LESSON 12 -2 Financial Records and Financial Statements Goals n Identify several types of financial records needed by businesses. n Describe the differences between an income statement and a balance sheet. Chapter 12 11 Introduction to Business © Thomson South-Western

Key Terms n financial records n assets n liabilities n owner’s equity n balance sheet n income statement Chapter 12 12 Introduction to Business © Thomson South-Western

FINANCIAL RECORDS n Types of records n n n n Asset records Depreciation records Inventory records Records of accounts Cash records Payroll records Tax records n Maintaining financial records Chapter 12 13 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T How has the process of maintaining financial records been affected by technology? Chapter 12 14 Introduction to Business © Thomson South-Western

FINANCIAL STATEMENTS n The balance sheet n The income statement Chapter 12 15 Introduction to Business © Thomson South-Western

Chapter 12 16 Introduction to Business © Thomson South-Western

Chapter 12 17 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T What is the difference between a balance sheet and an income statement? Chapter 12 18 Introduction to Business © Thomson South-Western

LESSON 12 -3 Payroll Management Goals n Describe the components of a business’ payroll system. n Identify information included in payroll records and paychecks. Chapter 12 19 Introduction to Business © Thomson South-Western

Key Terms n payroll record n direct deposit Chapter 12 20 Introduction to Business © Thomson South-Western

PAYROLL SYSTEMS n Income taxes n Social Security and Medicare n Unemployment taxes Chapter 12 21 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T What is the purpose of the payroll system? Chapter 12 22 Introduction to Business © Thomson South-Western

PREPARING A PAYROLL n Payroll records n Preparing paychecks Chapter 12 23 Introduction to Business © Thomson South-Western

AN EMPLOYEE’S PAYCHECK AND EARNINGS REPORT Sample Earnings Report Sample Paycheck Chapter 12 24 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T What is the difference between a payroll record an earnings report? Chapter 12 25 Introduction to Business © Thomson South-Western

LESSON 12 -4 Financial Decision-Making Goals n Recognize important financial information managers use to make decisions. n Identify the steps in making financial decisions in business. Chapter 12 26 Introduction to Business © Thomson South-Western

Key Terms n financial performance ratios n discrepancies Chapter 12 27 Introduction to Business © Thomson South-Western

USING FINANCIAL INFORMATION n Important financial information n Understanding financial performance ratios n n Current ratio Debt to equity ratio Return on equity ratio Net income ratio Chapter 12 28 Introduction to Business © Thomson South-Western

FINANCIAL PERFORMANCE RATIOS Chapter 12 29 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T Identify four important financial performance ratios used by managers to determine how well the business is performing. Chapter 12 30 Introduction to Business © Thomson South-Western

MAKING FINANCIAL DECISIONS n Prepare a budget n Look for discrepancies between actual and budgeted performance n Make needed adjustments Chapter 12 31 Introduction to Business © Thomson South-Western

>> C H E C K P O I N T List the three steps in financial decisionmaking. Chapter 12 32 Introduction to Business © Thomson South-Western