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Essential Standard 4.00. Understanding the role of finance in business. Objective 4.01. Understand financial management. Topics. Financial planning Business budgets Financial records and statements Financial performance ratios. Financial planning. Financial Planning.

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essential standard 4 00

Essential Standard 4.00

Understanding the role of finance in business.

objective 4 01

Objective 4.01

Understand financial management.

topics
Topics
  • Financial planning
  • Business budgets
  • Financial records and statements
  • Financial performance ratios
financial planning1
Financial Planning
  • Why should a business do financial planning?
  • What are the phases of business financial planning?
    • Start-up
    • Operation
    • Expansion
  • What happens during each phase?
financial planning continued
Financial Planning continued
  • What is the basic financial equation?

Revenue – Expenses = Profit or Loss

  • In order to have a profit, which will be greater?
  • In order to have a loss, which will be greater?
business budgets1
Business Budgets

Types of business budgets:

  • Start-up budget
  • Operating budget
  • Cash budget
business budgets continued
Business Budgets continued

Steps for preparing a business budget:

  • Prepare a list of income and expense items.
  • Gather accurate information from business records.
  • Create the budget.
  • Clearly communicate the budget to key employees in order to make sound business decisions.
financial records and statements1
Financial Records and Statements
  • What is the purpose of financial records?
  • Financial records used by businesses:
    • Asset records
    • Depreciation records
    • Inventory records
    • Records of accounts
    • Cash records
    • Payroll records
    • Tax records
financial records and statements continued
Financial Records and Statements continued
  • What are assets?
  • What are liabilities?
  • What is owner’s equity?
  • What are financial statements?
  • What is the difference between a balance sheet and an income statement?
financial performance ratios1
Financial Performance Ratios
  • What are financial performance ratios?
  • The four main types of financial ratios:
    • Current ratio
    • Debt to equity ratio
    • Return on equity ratio
    • Net income ratio
financial performance ratios continued
Financial Performance Ratios continued
  • Current ratio
    • How is current ratio calculated?
    • What does this ratio represent?
    • Which is more favorable, higher or lower?
  • Debt to equity ratio
    • How is debit to equity ratio calculated?
    • What does the ratio represent?
    • Which is more favorable, higher or lower?
financial performance ratios continued1
Financial Performance Ratios continued
  • Return on equity ratio
    • How is current ratio calculated?
    • What does this ratio represent?
    • Which is more favorable, higher or lower?
  • Net income ratio
    • How is current ratio calculated?
    • What does this ratio represent?
    • Which is more favorable, higher or lower?