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Chapter 17

Chapter 17. Managing Business Finance. Financial Planning. F inancial plan = outline of your expenses, needs, and goals, and how you expect to meet them Financial planning 1 st step – identifying your assets Asset = any property or item of value that your business owns

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Chapter 17

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  1. Chapter 17 Managing Business Finance

  2. Financial Planning • Financial plan = outline of your expenses, needs, and goals, and how you expect to meet them • Financial planning • 1st 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 assets • Do you need to borrow money? • 3rd step – recognizing the financial records you need to keep • Financial forecast = estimate of what business conditions will be like in the future

  3. Accounting • Accounting = 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.

  4. Financial Records • Fiscal year = reports are for one year • Summarize the year with an income statement and a balance sheet.

  5. Financial Statements • Assets = Liabilities + Owner’s Equity • The 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)

  6. Income Statement • Income Statement = a report of net income or net loss over an accounting period • Includes 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

  7. Balance Sheet • Balance Sheet= a report of the financial state of your business on a certain date. • Includes assets, liabilities, and owner’s equity • Assets on the left side • Liabilities and owner’s equity on the right side • The two sides must equal, or balance Example on next slide

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