Business & Corporate Management II Finance Basics

Learn the “Lingo” ADD to Notes for 3 rd & 4 th Marking Periods  Accounts Payable  Accounts Payable – Obligations owed to others, list of outstanding bills  Accounts Receivable  Accounts Receivable – Obligations owed to your company by others, list of outstanding invoices  Angel Investors  Angel Investors – Private individuals who invest their money in new, small companies (usually a smaller amount than big businesses)

Learn the “Lingo” ADD TO NOTES:  Assets  Assets – Anything a company owns that has a “Positive Monetary Value.”  Current Assets  Current Assets – Cash and anything a company has that can be turned into cash relatively quickly, including accounts receivable and inventory  Fixed Assets  Fixed Assets – Any tangible property a company owns that could be turned into cash more slowly, including real estate, equipment and vehicles.

Learn the “Lingo” ADD TO NOTES:  Balance Sheet  Balance Sheet – a document listing all assets and liabilities.  Bottom Line  Bottom Line – The amount of money a company makes or loses is its “bottom line.”  Break Even Analysis  Break Even Analysis – A document that calculates the point at which sales exceed costs and company turns profitable.  Capital  Capital – Funds or money used to establish or run a business

Learn the “Lingo” ADD TO NOTES:  Capital Expenditures  Capital Expenditures – Purchase of tangible property; such as real estate, equipment, and vehicles  Working Capital  Working Capital – Cash available for ongoing operating expenses of the business, including payroll, administrative and operating expenses.  Cash  Cash – Immediately available money in the form of currency, checks, or bank deposits.

Learn the “Lingo” ADD TO NOTES:  Cost of Goods Sold  Cost of Goods Sold – the direct costs to make or acquire products sold (raw materials inventory, labor)  Cost of Sales  Cost of Sales – Expenses directly associated with selling a product or service (sales commissions, distributor’s fees – but not indirect costs such as marketing)  Debt  Debt – ongoing financial obligations (bank loan)  Depreciation  Depreciation – wear and tear on fixed assets (is a tax deduction)  Equity  Equity – Shares of stock in a company; owner interest in a company – shareholder’s equity

Learn the “Lingo” ADD TO NOTES:  Financing  Financing – Raising money to run or startup a business  Debt Financing  Debt Financing – Raising money for a business by borrowing  Equity Financing  Equity Financing – Raising money from investors who receive a share of the company’s ownership in return for their funds

Balance Sheet ADD TO NOTES: Balance Sheet - Major Business Financial Statement position of the business at a certain point in time Used by accountants & business owners to demonstrate the position of the business at a certain point in time  Quarterly  Yearly Used by creditors, bankers, customers, competitors, government agencies & labor unions to assess the success of a business

Balance Sheet ADD TO NOTES  A “Balance Sheet” includes 3 major elements: Assets Liabilities Owner’s (Stockholders’) Equity

Balance Sheet  Types of Assets (Add to Notes) Current Assets (Have current values that are “close” to the amounts reported on the Balance Sheet)  Cash (Petty Cash)  Accounts Receivable  Inventory  Supplies  Prepaid Insurance Investments Property, Plant & Equipment  Land  Land Improvements  Buildings  Equipment (less Accumulated Depreciation) Intangible Assets  Goodwill  Trade Names Other Assets

Balance Sheet Assets Assets are current Values of the Company, “objects & funds” that the Company owns and will appear on the “Positive side” of the Company’s Balance Sheet Liabilities Liabilities are current Values of the Company that are “owed” to other people, companies, banks, government, creditors, that are on the “Negative side” of the Company's Balance Sheet

Balance Sheet  Types of Liabilities (Add to Notes) Current Liabilities (Debt due within one year) have current values that are “close” to the amounts reported on the Balance Statement  Notes Payable  Accounts Payable  Wages Payable  Interest Payable  Taxes Payable  Warranty Liability  Unearned Revenues Long-term Liabilities (Often have current values that “differ” from the amounts reported on the Balance Sheet)  Notes Payable  Bonds Payable

Balance Sheet  Stockholder’s Equity Book Value of the company which is:  The difference between reported assets and liabilities Common Stock Retained Earnings  Less: Treasury Stock

Balance Sheet  By definition, the “Current Assets” and the “Current Liabilities” are “turning over” at least once per year Reported amounts are likely to be similar to their current value  “Long-term Assets” and “Long-term Liabilities” are “Not turning over” often. Long-term assets and Long-term liabilities are likely to be “different” from the current value of those items.

Balance Sheet - Assets  Equipment  Goodwill  Land  Supplies  Land Improvements  Prepaid Insurance  Buildings  Petty Cash  Trade Names  Accounts Receivable  Inventory  Cash (Petty Cash) Current Assets

Balance Sheet - Assets  Equipment  Goodwill  Land  Supplies  Land Improvements  Prepaid Insurance  Buildings  Petty Cash  Trade Names  Accounts Receivable  Inventory  Cash (Petty Cash) Property, Plants, & Equipment

Balance Sheet - Assets  Equipment  Goodwill  Land  Supplies  Land Improvements  Prepaid Insurance  Buildings  Petty Cash  Trade Names  Accounts Receivable  Inventory  Cash (Petty Cash) Intangible Assets

Balance Sheet - Liabilities  Notes Payable (1 year)  Unearned Revenues  Warranty Liability  Taxes Payable  Bonds Payable  Interest Payable  Wages payable  Accounts Payable  Notes Payable (Over 1 Year) Current Liabilities

Balance Sheet - Liabilities  Notes Payable (1 year)  Unearned Revenues  Warranty Liability  Taxes Payable  Bonds Payable  Interest Payable  Wages payable  Accounts Payable  Notes Payable (Over 1 Year) Long-term Liabilities

Balance Sheet – Stockholders Equity  Common Stock  Notes Payable  Bonds Payable  Wages Payable  Unearned Revenues  Retained Earnings Stockholders’ Equity

Finance Assignment – Part II  Annual Report Scavenger Hunt (20 pts.) Using the Annual Report Scavenger Hunt form on S://Finance folder, complete the form using Internet research.  If you can’t find what you are looking for using one search engine – use another! Change wording, or whatever leads you to the information you are looking for.  If a “couple” of pieces of information can’t be found, put Not Available in the form  Make reference to the site used in the last square of the form.