Chapter 17Managing Business

Finance

Financial PlanningFinancial plan = outline of your expenses, needs,

and goals, and how you expect to meet them

Financial planning1st 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 assetsDo you need to borrow money?

3rd step – recognizing the financial records you need to keepFinancial forecast = estimate of what business

conditions will be like in the future

AccountingAccounting = 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 RecordsFiscal year = reports are for one year

Summarize the year with an income statement and a balance sheet.

Financial StatementsAssets = Liabilities + Owner’s EquityThe 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 StatementIncome Statement = a report of net income or net loss over an accounting periodIncludes 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 SheetBalance Sheet= a report of the financial state of your business on a certain date.Includes assets, liabilities, and owner’s equityAssets on the left sideLiabilities and owner’s equity on the right

sideThe two sides must equal, or balance

Example on next slide