1. FINANCIAL RESOURCES MANAGEMENT
Lesson 3.4
4/21/2017
LESSON 3.4
FINANCIAL RESOURCES MANAGEMENT
Explain how budgeting relates to financial planning
Describe two kinds of financial reports prepared by businesses
INTRO TO BUSINESS

2. 3.4
Financial Management
One of the reasons why small businesses often fail is that they do not manage their finances properly.
Businesses must wisely manage the money they take in and pay out to become profitable and to stay in business.

3. 3.4
Financial Planning
Profit is what is left over after paying all business expenses …. Profit is good!!
A business budget is a detailed plan for meeting the financial needs of the business.
Two main purposes:
1. Anticipating sources and amounts of income
2. Predicting the types and amounts of expenses for a specific business activity or for the entire business

4. Financial Planning Income or Revenue: the $$ a business receives
3.4
Financial Planning
Income or Revenue: the $$ a business receives
Typically from sales of products/services
Statement of Cash Flow: a financial record used to show the actual cash a business receives and has available
Expenses: the costs associated with running a business
Employee wages, advertising, rent, utilities, supplies, etc.

5. 3.4
Types of Budgets
Business budgets project the amounts of income and expenses
Start-up Budget – used to plan income and expenses from the beginning of a new business until it becomes profitable
Operating Budget – Financial plan for the day-to-day operations of a business
Cash Budget – an estimate of the money expected to be received and paid out over a specific amount of time
Helps to know if money will need to be borrowed to continue business operation

6. 3.4
BUSINESS MATH
To find the net profit or loss of a business over a specific time period, calculate the business revenue minus the business expenses
EX: Calculate the net profit or loss of the month for Galaxy Comic Books where:
cash sales were $3,560, charge sales were $1,240 and other revenue was $165
salaries were $2,450, advertising was $200, rent was $550 and supplies were $120

7. BUSINESS MATH REVENUES EXPENSES 3.4 Cash sales = $3,560
Charge sales = $1,240
Other revenue = $165
Total Revenues = $4,965
EXPENSES
Salaries = $2,450
Advertising = $200
Rent = $550
Supplies = $120
Total Expenses = $3,320
REVENUES – EXPENSES = NET PROFIT / NET LOSS
If a positive number remains it is a profit
If a negative number remains it is a loss
NET PROFIT = $1,645

8. 3.4
CheckPOINT
Describe three kinds of business budgets

9. 3.4
Financial Records
A financial record shows the financial performance of a business.
Asset records – buildings/equipment owned by the business and their values
Depreciation records – the amount that assets have decreased in value due to their age and usage
Inventory sales – the type and number of products on hand for sale
Payroll records – information on employee compensation and benefits
Cash records – all cash received and spent
Tax records – all taxes collected, owed and paid

10. 3.4
The Income Statement
An income statement is a financial statement that shows revenues, expenses, and net income (profit) or loss for a period of time.
Revenue – Expenses = Net Income or Loss
The income statement shows how a business does over a period of time

11. 3.4
The Balance Sheet
A balance sheet is a financial statement that lists a business’s :
Assets – what a company owns: buildings, equipment, cash, etc.
Liabilities – what a company owes: salaries, loans, accounts payable, etc.
Owner’s Equity – value of the owner’s investment in the business (net worth)
Owner’s Equity = Assets – Liabilities

12. 3.4
The Balance Sheet
In a balance sheet the Assets are listed on the left and the liabilities and OE (owner’s equity) are listed on the right
The left and right side must be in balance
Assets = Liabilities + Owner’s Equity
Balance sheets do not provide a picture of the business over a period of time, but shows what a business is worth on a certain date

13. Maintaining Financial Records
3.4
Maintaining Financial Records
Collecting information
Preparing financial records
Maintaining financial records

14. 3.4
CheckPOINT
Name several kinds of financial records commonly kept by businesses