samyak veera
TRANSCRIPT
Financial Management
A process that provides entrepreneurs with relevant financial information in an easy-to-read format on a timely basis; it allows entrepreneurs to know not only how their businesses are doing financially, but also why they are performing that way.
Samyak Veera
Basic Financial Statements (cont’d)
current assets- assets such as cash and other items to be converted into cash within one year or within the company’s normal operating cycle.fixed assets- assets acquired for long-term use in a business.liabilities- creditors’ claims against a company’s assets.current liabilities- those debts that must be paid within one year or within the normal operating cycle of a company.long-term liabilities- liabilities that come due after one year.owners equity- the value of the owner’s investment in the business.
Basic Financial Statements (cont’d)
The Statement of Cash Flows
a financial statement showing the changes in a company’s working capital from the beginning of the year by listing both the sources and the uses of those funds.
Ratio Analysis
A method of expressing the relationship between a y two accounting elements that allows business owners to analyze their companies’ financial performance
Ratio AnalysisOperating Ratios (cont’d) Average Payable Period Ratio:
measures the number of days it takes a company to pay its accounts payable
=365/Payables turnover ratio=365/Purchases/Accounts Payable=365/$939,827/$152,580=365/6.16=59.3 daysIndustry: 43 days
Interpreting Business Ratios
Critical numbers: indicators that measure key financial and operational aspects of a company’s performance; when these numbers are moving in the right direction, a business is on track to reach its objectives
Break-even Analysis
Break-even point: the level of operation (sales dollars or production quantity) at which a company neither earns a profit or incurs a loss
Fixed expenses: expenses that do not vary with changes in the volume of sales or production
Variable expenses: expenses that vary directly with changes in the volume of sales or production