Managing Business Finance Chapter 17 Managing Business Finance

Financial Planning Financial plan = outline of your expenses, needs, and goals, and how you expect to meet them Financial planning 1st step – identifying your assets Asset = any property or item of value that your business owns Examples: cash, equipment, buildings, supplies, inventory, land 2nd step – purchasing your assets Do you need to borrow money? 3rd step – recognizing the financial records you need to keep Financial forecast = estimate of what business conditions will be like in the future

Accounting Accounting = systematic process of recording and reporting the financial position of a business. Financial manager = person in charge of a business’s financial planning, funding, and accounting. Budget = written plan of what you expect your income and expenses to be over a certain period of time.

Financial Records Fiscal year = reports are for one year Summarize the year with an income statement and a balance sheet.

Financial Statements Assets = Liabilities + Owner’s Equity The two sides of the equation must always balance Liability = amount your business owes (debt) Owner’s Equity = equal to the assets minus liabilities (what the business is worth)

Income Statement Income Statement = a report of net income or net loss over an accounting period Includes revenue and expenses If revenue is greater than expenses, you have a net income If expenses are greater than revenue, you have a net loss Example on next slide

Balance Sheet Balance Sheet= a report of the financial state of your business on a certain date. Includes assets, liabilities, and owner’s equity Assets on the left side Liabilities and owner’s equity on the right side The two sides must equal, or balance Example on next slide