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Essential Financial Planning for Business Success: A Comprehensive Guide

This chapter outlines the importance of financial planning for businesses, detailing six key reasons to create a financial plan. It explains what a budget is, including its types and usage. Readers will learn about the purpose of accounting, including the fundamental accounting equation. The chapter also describes the three main financial statements vital for business management. It covers identifying assets, determining needed capital, handling expenses, managing financial records, forecasting finances, and planning for growth and expansion. Each strategy is critical for maintaining business profitability and competitiveness.

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Essential Financial Planning for Business Success: A Comprehensive Guide

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  1. Chapter 17 Managing Business Finance

  2. Ch 17 Objectives • Identify six reasons for creating a financial plan (effectiveness). • Explain what a budget is and how it is used. • Explain the purpose of accounting and define the accounting equation. • Describe the three main financial statements used by businesses.

  3. The Purpose • Determining the profitability of a business • Financial Plan

  4. An effective financial plan: • Identifies assets • Determine needed capital • Describes the expenses • Describes financial record management • Forecasts finances • Describing growth and expansion

  5. Critical Thinking • How is a financial plan like a road map?

  6. Identify Assets • Cash, equipment, buildings, supplies, inventory, and land • Conduct research before purchasing

  7. Determine Needed Capital • Money supplied by investors, banks, or business owners • Start-up capital • Difficult to obtain for a new business from investors

  8. Describe Expenses • Start-up Expenses • Cost of business assets, remodeling, security, advertising • Operating Expenses • Payroll, rent, utility bills, delivery charges, and bank fees.

  9. Describe Financial Record Management • Explains how a business will manage its records • Monitors cash flow • Legal agreements • Who will manage the money and how will it be managed?

  10. Forecast Finances • An estimate of a business’s financial outlook for each of the next few years. • Consider business conditions in the future and economic conditions • Keep estimates for income low and expenses high.

  11. Describe Growth and Expansion • Growth is needed to remain competitive • Always make a plan! • Operational and financial

  12. Budget • A plan stating how money will be used or spent. • Prediction • Three main types of budgets • Start-up • Cash (short term) • Operating (long term)

  13. EXTENSION ACTIVITY • Working in assigned teams of 4 complete the following task: • Your team is planning on opening a pretzel shop at school. Using the effective components of a financial plan, create your ‘road map’. • Also, determine an appropriate name for your pretzel shop, hours of operation, and how many employees are needed.

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