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CHAPTER 9: MANAGING BUSINESS FINANCES Introduction to Business
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Accounting in Business Accounting: system used to record, classify, summarize and interpret the financial data of a business Used to keeps tabs on the flow of money in and out of a business Transaction: any activity that has an effect on the financial situation of the business Accounts are used to track the activity
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Accounting in Business Asset: property or any item of value OWNED by a business Liability: any amount ($) a business OWES Owner’s Equity: Owner’s claim on the business; assets-liabilities Equation: Assets = Liabilities + Owner’s Equity EX: 139
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Financial Statements To know where a company stands financially, companies make financial statements for a period of time= fiscal year 2 Main Types Income Statement Balance Sheet Companies use the information to make decisions
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Income Statement Reports Net Income or Net Loss for the fiscal period Net Income = Total Revenue > Total Expenses Net Loss = Total Revenue < Total Expenses
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Balance Sheet Reports total in assets, liability & owner’s equity on a specific date Same as Equation Assets = Liabilities + Owner’s Equity
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The Role of a Financial Manger 3 Main Responsibilities Managing company funds & meet financial obligations Obtaining funds to meet financial obligations Creating financial plans, setting objectives, & evaluating progress
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Meeting Financial Obligations Primary Responsibility: Business meet financial obligations and payments Figure 9-3 on page 145 Needs fund for Operating Expenses Expansion Additional income Investments Risk: uncertainty of gaining or losing money in an investment Return: amount of gain or loss an investment yields over a specified period.
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Finding Sources of Funding Business Revenue = sale of goods & services Profits = earnings left over after all expenses & taxes Borrow money Banks, insurance companies, & investment companies Selling stocks Look for new investors Owners contribute money
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Financial Planning Create long-range business plans Financial/business plan=document that specifies what funds are needed by a business and for what period Income and outgoing funds Outlines appropriate use Sets objectives & best path to accomplish them Are objectives being met Use Forecast: an estimate of the future business climate Reflects changes in business conditions in the community, nation, & international economy Evaluates the impact of changes on business
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Who Works in Accounting and Finance? Characteristics Mathematics Skills Aptitude for details Ability to work with others Computer skill Ability to analyze
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