Principles of Business, Marketing, and Finance Financial Planning Copyright © Texas Education, 2011 . All rights reserved

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 paid? Over 50% of new businesses fail within five years. One of the biggest reasons for failure is not enough start-up funds. Cash flow is huge for a business. Ask students to name businesses that have come and gone within the last 3-5 years in their community. Copyright © Texas Education, 2011 . All rights reserved

Financial Questions a Business Must Answer Over 50% of new businesses fail within five years. One of the biggest reasons for failure is not enough start-up funds. Cash flow is huge for a business. Can you name businesses that have come and gone within the last 3-5 years in Pearland. Over 50% of new businesses fail within five years. One of the biggest reasons for failure is not enough start-up funds. Cash flow is huge for a business. Ask students to name businesses that have come and gone within the last 3-5 years in their community. Copyright © Texas Education, 2011 . All rights reserved

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. Show and explain the budget to people who need financial information to make decisions. Successful businesses and individuals prepare and follow a budget. Have students prepare a quick personal budget based upon $1,200 of income per month and no financial aid from other sources. How many ran out of money, were able to save money? What were their primary expenses? Copyright © Texas Education, 2011 . All rights reserved

Four Steps for Budget Preparation Successful businesses and individuals prepare and follow a budget! Successful businesses and individuals prepare and follow a budget. Have students prepare a quick personal budget based upon $1,200 of income per month and no financial aid from other sources. How many ran out of money, were able to save money? What were their primary expenses? Copyright © Texas Education, 2011 . All rights reserved

Three Types of Business Budgets Start-up Budget Operating Budget Cash Budget Ask students to define cash flow. Then explain why cash flow is so important to businesses. Also explain why businesses count on a line of credit for operation. 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 financial plan for ongoing operations of the business for a specific period of time Cash budget-an estimate of the actual money received and paid out for a specific period of time Copyright © Texas Education, 2011 . All rights reserved

Copyright © Texas Education, 2011 . All rights reserved Start-Up Budget Plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable. Ask students to define cash flow. Then explain why cash flow is so important to businesses. Also explain why businesses count on a line of credit for operation. 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 financial plan for ongoing operations of the business for a specific period of time Cash budget-an estimate of the actual money received and paid out for a specific period of time Copyright © Texas Education, 2011 . All rights reserved

Copyright © Texas Education, 2011 . All rights reserved Operating Budget Describes the financial plan for ongoing operations of the business for a specific period of time. Ask students to define cash flow. Then explain why cash flow is so important to businesses. Also explain why businesses count on a line of credit for operation. 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 financial plan for ongoing operations of the business for a specific period of time Cash budget-an estimate of the actual money received and paid out for a specific period of time Copyright © Texas Education, 2011 . All rights reserved

Copyright © Texas Education, 2011 . All rights reserved Cash Budget An estimate of the actual money received and paid out for a specific period of time. Ask students to define cash flow. Then explain why cash flow is so important to businesses. Also explain why businesses count on a line of credit for operation. 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 financial plan for ongoing operations of the business for a specific period of time Cash budget-an estimate of the actual money received and paid out for a specific period of time Copyright © Texas Education, 2011 . All rights reserved

Copyright © Texas Education, 2011 . All rights reserved Think about it Line of credit: an amount of credit extended to a borrower. Why do businesses count on a line of credit for operation? Ask students to define cash flow. Then explain why cash flow is so important to businesses. Also explain why businesses count on a line of credit for operation. 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 financial plan for ongoing operations of the business for a specific period of time Cash budget-an estimate of the actual money received and paid out for a specific period of time Copyright © Texas Education, 2011 . All rights reserved

Start-Up Budget For A New Office Location You are in charge of opening a new location for your business and are in need of office equipment for a total of 5 employees. You have a $5,000 budget to buy all the necessary items needed to make your office run efficiently. (Ex – Computers, desks, chairs, printers, router, paper, etc) e You will need to go online (Office Depot, Staples, Best Buy) and find office supplies for your business and put them in a purchase order being careful to not go over your $5,000 budget. Purchase Order Template (Use this to fill in) www.phsbmf.weebly.com Documents and Examples student_example_p_o__req__form.xls

Financial Records and Financial Statements Recognize and Analyze the Financial Performance of a Business Assets Inventory Account Cash Payroll Tax records Explain why it is important for a business or individual to have more assets than liabilities. Explain why the government requires businesses to maintain accurate business records for taxes. Payroll records are not only important for individuals but also the government to keep track of personal income taxes. Copyright © Texas Education, 2011 . All rights reserved

Important Financial Statements Income statement Revenue Expenses Net profit or loss Balance Sheet Assets Liabilities Net worth Copyright © Texas Education, 2011 . All rights reserved

Copyright © Texas Education, 2011 . All rights reserved 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 Tax and benefit records Show students a check stub that lists a variety of deductions. Explain each deduction Copyright © Texas Education, 2011 . All rights reserved

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 Use the budget as a guide to the operations of the business Make needed adjustments Explain how financial statements tell others about the strength of a company. The financial statements begin with the company’s budget. Investors, the government, shareholders, and others look at financial statements to determine the strength of a company. Copyright © Texas Education, 2011 . All rights reserved

Budget for a Franchise Project You will conduct research about a franchise to determine the amount of start-up money necessary to operate the business. Then prepare a PowerPoint presentation that has: A title slide with the name and logo of your franchise as well as your name. A slide that explains the franchise process including but not limited to, company history and information regarding what options you would have as a franchisee. A slide that states the start-up money needed for the business and details the full financial requirements A slide that describes to us why you would want to choose that particular franchise www.franchisedirect.com There is an example PowerPoint located at: www.tchscte.weebly.com / Documents and Examples Budget_for_a_franchise_ex