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POB 4.01 Parts 1 & 2. 4.01 Understand financial planning. Financing Terms. Revenue – all income a business receives over a period of time Expenses – costs of operating a business Profit – occurs when revenue is greater than expenses Loss – occurs when expenses are greater than revenue.

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pob 4 01 parts 1 2

POB 4.01 Parts 1 & 2

4.01 Understand financial planning.

financing terms
Financing Terms
  • Revenue – all income a business receives over a period of time
  • Expenses – costs of operating a business
  • Profit – occurs when revenue is greater than expenses
  • Loss – occurs when expenses are greater than revenue
financial planning for businesses
Financial Planning for Businesses
  • Beginning of a Business
    • Money needed to start
    • Financing sources
    • Money to operate until profitable
    • Sources of sales
    • Expenses
financial planning for business cont
Financial Planning for Business, cont
  • Ongoing
    • Paying employees
    • Supplies & materials
    • Maintaining the building and equipment
    • Technology updates
financial planning for business cont1
Financial Planning for Business, cont
  • Business Expansion
    • Reasons to expand – serve more customers, reach unserved markets, or sell new products
    • Costs associated with expansion – research, new employees, marketing activities
    • Need to determine if revenue will be greater than costs
what is a budget
What is a Budget?
  • Budget – detailed plans for the financial needs of individuals, families, and businesses.
  • Purposes of a Budget
    • Anticipate sources and amounts of income
    • Predict types and amounts of expenses
  • A budget is successful when revenue > expenses
4 steps in planning a budget
4 Steps in Planning a Budget
  • 1. Prepare a list of each type of income and expense
  • 2. Gather accurate info for each type of income and expense
  • 3. Create a budget and calculate income, expenses, and net profit or loss
  • 4. Explain the budget to those who make decisions
types of budgets
Types of Budgets
  • Start-Up – plans income and expenses from the beginning of the new business or a major expansion until it becomes profitable.
    • Includes buildings, equipment, inventory, supplies, materials, employees, utilities, licenses, advertising and transportation
types of budgets cont
Types of Budgets, cont
  • Operating Budget – a financial plan for ongoing operations of the business for a specific period of time
    • Usually 3 months, 6 months or 1 year
types of budgets cont1
Types of Budgets, cont
  • Cash Budget – estimate of actual money received and paid out for a specific period.
    • Need to determine if there will be enough money to pay bills or if the business will need to borrow money