Principles of Business, Marketing, and
Finance
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Financial Questions a Business
Must 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
Four Steps for Budget
Preparation
•
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.
Three Types of Business
Budgets
•
Start-up Budget
•
Operating Budget
Financial Records and
Financial Statements
•
Recognize and Analyze the Financial
Performance of a Business
–
Assets
–
Depreciation
–
Inventory
–
Account
–
Cash
–
Payroll
Important Financial
Statements
•
Income statement
–
Revenue
–
Expenses
–
Net profit or loss
•
Balance Sheet
Financial Performance
Ratios
•
Current ratio (
current assets/current liabilities)
•
Debt to Equity Ratio
(total liabilities/owner’s equity)
•
Return on Equity Ratio
(net profit/owner’s equity)
Payroll 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
Financial 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
