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

2. Bell Ringer List how you would spend $100 today without going over budget. Copyright © Texas Education, 2011. All rights reserved 2

3. 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? Copyright © Texas Education, 2011. All rights reserved 3

4. Did You Know...? the failure rate of businesses within the first 5 years? WHY? Can you name a business that has come and gone within the last 3-5 years. Copyright © Texas Education, 2011. All rights reserved 4 50%

5. 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 budgetbudget to people who need financial. information to make decisions. Copyright © Texas Education, 2011. All rights reserved 5 Lets look at a personal Budget.

6. Question What is Cash Flow? Copyright © Texas Education, 2011. All rights reserved 6

7. Three Types of Business Budgets Start-up Budget Operating Budget Cash Budget Copyright © Texas Education, 2011. All rights reserved 7

8. Three Types of Business Budgets Copyright © Texas Education, 2011. All rights reserved 8 Strat Up Budget (Temp)Operating Budget (Ongoing)Cash Budget (Ongoing)

9. Financial Records and Financial Statements Recognize and Analyze the Financial Performance of a Business –Assets –Depreciation –Inventory –Account –Cash –Payroll –Tax records Copyright © Texas Education, 2011. All rights reserved 9

10. Questions Why it is important for a business or individual to have more ASSETS than LIABILITIES? Why do you think the government requires businesses to maintain accurate business records? Payroll records are not only important for individuals but also the government to keep track of personal income __________? Copyright © Texas Education, 2011. All rights reserved 10

11. Important Financial Statements Income statement –Revenue –Expenses –Net profit or loss Balance Sheet –Assets –Liabilities –Net worth Copyright © Texas Education, 2011. All rights reserved 11

12. Financial Performance Ratios Current ratio ( current assets/current liabilities) Debt to Equity Ratio (total liabilities/owner’s equity) Return on Equity Ratio (net profit/owner’s equity) Net Income Ratio (total assets/net income) Copyright © Texas Education, 2011. All rights reserved 12

13. 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 Copyright © Texas Education, 2011. All rights reserved 13

14. Reading A Paycheck Pay Stub A document included each pay period which outlines paycheck deductions Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

15. Reading A Paycheck Personal Information  States the employee’s full name, address, and social security number  Always check to ensure this information is correct Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

16. Reading A Paycheck Pay Period  The time for which an employee’s wages are calculated  The last day of the pay period is not always on payday Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

17. Reading A Paycheck Gross Pay  Money earned during a pay period before deductions  Multiplying total hours worked by the hourly rate  A salary is divided by the specified time period Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

18. Reading A Paycheck Net Pay The amount of money left after all deductions have been withheld from the gross pay earned in the pay period. Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

19. Reading A Paycheck Deductions The amount of money subtracted from the gross pay earned for mandatory systematic taxes, employee sponsored medical benefits, and/or retirement benefits Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

20. Reading A Paycheck Federal Withholding  The amount employers withhold to pay taxes  The amount deducted depends on the Form W-4  Largest deduction withheld from gross income Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

21. Reading A Paycheck State Withholding  The amount employers withhold to pay state taxes  The amount deducted depends on gross pay  Texas does not have personal income tax!! Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

22. Reading A Paycheck FICA (Social Security)  National Retirement and Disability Payment System  6.2% of Gross Income  Employer matches contribution of employee Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

23. Reading A Paycheck Medicare  National Health Care for the elderly and disabled  1.45% of Gross Income Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

24. Reading A Paycheck Medical  The amount taken for for medical benefits  If employer has a medical plan for employees but does not pay full coverage for employees Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

25. Reading A Paycheck Retirement  The amount the employee contributes each pay period to a retirement plan.  May be a 401K, a state, or local retirement plan Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

26. Reading A Paycheck Year To Date (YTD) Total of all of the deductions which have been withheld from an individual’s paycheck from January 1 to the last day of the pay period indicated on the paycheck stub Where’s the Money Getting Paid Taxes Starting a New Job Form W-4 Form I-9 Form W-2 Reading a Pay Stub

27. 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 Copyright © Texas Education, 2011. All rights reserved 27