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2. Phase of a business: Financial planning includes determining whether enough money is made to cover growth opportunities. Expansion

3. Budget used by a new business or during expansion of a business until profits are made. Start up

4. Budget used to estimate cash flow in and out of a business Cash

5. What’s the first step in creating a budget? Prepare a list of income and expense items.

6. What’s the last step in creating a budget? Clearly communicate the budget to key employees in order to make sound business decisions.

7. These provide a picture of the financial performance of a business Financial statements

8. This financial statement lists assets, liabilities, and owner’s equity. Balance sheet

9. This financial statement includes sales, expenses, and net profit or loss. Income statement

10. Type of ratio: Equals current assets/current liabilities Current ratio

11. Type of ratio: Shows how much the business relies on money borrowed externally versus money from within the business. Ideally, this ratio should be less than 2.0. Debt to equity ratio

12. Type of ratio: Equals net profit/owner’s equity Return on equity ratio

13. Type of ratio: Shows the amount of sales needed for each dollar of net income. While there is not an ideal ratio, managers use this number to compare to past periods to determine how changes in sales affect net income. Net income ratio

14. What are the 2 classifications of financial institutions? Depository and nondepository

15. Type of depository institution: not-for profit, serve their members only, and are owned by their depositors. Credit unions

16. Type of depository institution: offer many different services, including savings, loans, and checking accounts. Commercial banks

17. Type of financial institution: Earns money to finance their business by selling specific services such as policies, investments, and loans Non-depository

18. Name 2 types of non- depository institutions. Life insurance companies Investment companies Consumer finance companies Mortgage companies Check-cashing outlets Pawnshops

19. What does the FDIC do? Insures each consumer’s bank account up to $250,000

20. What’s the first step in opening a checking account? Signing a signature card

21. This allows the payee to cash the check, deposit the check or transfer payment of the check to someone else. Endorsement

22. Anyone may cash a check with this type of endorsement. Blank

23. This type of endorsement transfers payment of a check to someone else. Special

24. This type of endorsement is the safest type of endorsement, as it cannot be cashed by a thief or someone who finds the check. Restrictive

25. What’s the last step in writing a check? Signing it

26. Document created to show how the two balances (your own record of your checking account and the bank’s record of your account) were brought into agreement or balance out. Bank reconciliation

27. Checks that have not been deducted from the bank statement balance (they haven’t been cleared by the bank). Outstanding

28. What is the centralized bank of the US? The Federal Reserve

29. Which banks are required to join the Federal Reserve? National banks

30. How many districts are in the Federal Reserve? 12

31. Name 2 services provided by the Fed. Supervision of banks Participation of open market activities Acting as a clearinghouse Holding reserves Approving bank mergers Supplying paper currency Managing the discount rate