© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e

C H A P T E R 12SLIDE 1

12-1 Financial Planning

12-2 Financial Records and Financial Statements

12-3 Payroll Management

12-4 Financial Decision-Making

12C H A P T E R

Financial Management


C H A P T E R 12

2

Job Opportunities• Clerks

– Sorts and files accounting information

• Bookkeeper– General accounting work with some analyzing and summarizing

• Accountant– Person who plans, summarizes, analyzes, and interprets

accounting information– Public, Private, CPA

– Earn better than average salary $37,000 to $74,000 to start

Climb your way

to the top!


C H A P T E R 12Need to know Vocabulary● Revenue, Sales, or Gross Income

● All income

● Expenses● Costs of operation● Fixed Costs (Overhead)= bills that do not change

based on output● Rent, insurance, loan costs, salary workers

● Variable Costs = bills that differ based on output● Materials, hourly workers,

● Earnings or Net Income● Income after taxes and expenses

SLIDE 3

https://www.youtube.com/watch?v=nQ5APwtB-ig


C H A P T E R 12SLIDE 4BASIC FINANCIAL EQUATION

● Profit / Loss● Difference in revenue and expenses

● Revenue – Expenses = Profit or Loss (Earnings)● Profit

● Revenue is greater than expenses● Revenue > Expenses = Profit

● Loss● Revenue is less than expenses● Revenue < Expenses = Loss

● Break Even● Revenue = Costs● No profit or loss


C H A P T E R 12

Budget

● Detailed plans for financial needs● Plan of all expenses and income

1. Predict income and expenses

2. Gather accurate information to support prediction

3. Create a budget

4. Share the budget with people who need to know

5. Edit your budget

SLIDE 5



TYPES OF BUDGETS● Start-up budget

● plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable

● Operating budget ● describes the plan for ongoing operations for a

specific period

● Cash budget ● is an estimate of the actual money received and paid

out for a specific period.


C H A P T E R 12

Check ● Book Work Question 1

● Identify several unique business expenses for three important times in a business’ life.

● Startup, ongoing, expansion

● Create an operational budget for your daily life, steps 1 to 3

1. Predict income and expenses

2. Gather accurate information to support prediction

3. Create a budget

4. Share the budget with people who need to know

5. Edit your budget

SLIDE 7

© 2012 Cengage Learning. All Rights Reserved.SLIDE 8

12-2 Financial Records and Financial Statements

Goal 1 Identify several types of financial records needed by businesses.

Goal 2 Describe the differences between an income statement and a balance sheet.


C H A P T E R 12SLIDE 9FINANCIAL RECORDS

● Financial records = Financial documents that are used to record and analyze performance of a business

● Question 2: Difference between budget and Financial Record● Budget = Plan, Record = What happened. Both to track and stay on goal

● Types of records● Asset records● Depreciation records

● Depreciation = loss of value over time

● Inventory records● Records of accounts● Cash records

● Question 3: Why is cash budget important?

● Payroll records● Tax records


C H A P T E R 12

Basics of Accounting• Assets (A)

• Anything of value that is owned– Cash, Inventory, Supplies, Accounts Rec.

• Liabilities (L)• Amount owed

• Accounts Payable

• Owner’s Equity (E) • Owner’s stake in the business

• How much $ invested

• Assets = Owner’s Equity + Liabilities – Complete Page 1 Accounting Worksheet

SLIDE 10


C H A P T E R 12Balance Sheet

● Show assets, liabilities and owner’s equity● Created once or twice a year

● Google’s Balance Sheet

● Complete PART 3:

Balance Sheet

SLIDE 11

http://finance.yahoo.com/q/bs?s=GOOG+Balance+Sheet&annual




C H A P T E R 12

Balance Sheet and T-Charts● Transaction = a business activity that changes

assets, liabilities, or owner’s equity● At least 2 accounts must be used

● T account● debit (dr)● credit (cr)

● Normal Balance● Assets = Left Side (dr)● Liabilities = Right Side (cr)● O.E. = Right Side (cr)

● Debits = Credits

SLIDE 12

Assets = L. + O.E.

Left Side

Debit Side

(A)

Right Side

Credit Side

(L and E)


C H A P T E R 12

T – Chart Practice

1. What accounts are affected?2. How is each account classified? (Normal

Balance)3. How is each account balance changed?4. How is each amount entered in the

accounts? 5. Do credits = debits?

SLIDE 13


C H A P T E R 12

14

Transactions - What Accounts are Affected?

1. Received cash from owner as an investment, 2,000

2. Paid cash for insurance, 600

3. Bought supplies on account from Swan’s Supply Company

1. Cash, Owners Equity2. Asset (prepaid insurance), Cash3. Assets (supplies), Accounts Payable

Complete Part 2 of Accounting Worksheet: Transactions on T-Charts


C H A P T E R 12Income Statement

● Report of revenue, expenses, and net income or loss

● Shows all income first, Shows all expenses, Shows the difference

● McDonalds Income Statement

● Question 4: What information

is in a Balance Sheet that is

not in an Income Statement?

SLIDE 15

http://finance.yahoo.com/q/is?s=MCD+Income+Statement&annual

http://finance.yahoo.com/q/is?s=MCD+Income+Statement&annual



Checkpoint ● Complete the Lemonade Stand

● Keep track of all transactions using T Charts● Fill out Multiple Balance Sheets● Credits = Debits


12-3 Payroll Management

Goal 1 Describe the components of a business payroll system.

Goal 2 Identify key information included in payroll records and paychecks.



PAYROLL SYSTEMS● Legally must pay on time (at least once a month)● Must pay taxes for employees

● Social Security and Medicare● Disability● Unemployment

● Take taxes that employees pay from checks● Income taxes● Social Security and Medicare


C H A P T E R 12SLIDE 19SAMPLE EARNINGS REPORT

AND DIRECT DEPOSIT RECEIPT


12-4 FinancialDecision-Making

Goal 1 Recognize important financial information managers use to make decisions.

Goal 2 Identify the steps in making financial decisions in business.


C H A P T E R 12SLIDE 21USING FINANCIAL

INFORMATION

● Every decision revolves around $$$● Preparing a budget.● Using the budget as a guide to the operation

of the business.● Making needed adjustments to bring

performance in line with the budget● Alter budget if it was incorrect / things change

● Understanding financial performance ratios


C H A P T E R 12SLIDE 22FINANCIAL PERFORMANCE

RATIOS

Current Liabilities

Current Assets=Current Ratio

Owner’s Equity

Total Liabilities=Debt to Equity Ratio

Net Profit=Return on Equity Ratio

Owner’s Equity

Net Income

Total Sales=Net Income Ratio

Complete Financial Performance Ratio Worksheet

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records.

Documents

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budget slide

expenses slide

principles of business

loss slide

credits slide

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balance sheet slide