Principles of Business, Marketing, and
Finance
Financial Planning
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2
Financial Questions a Business
Must Answer
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How much money is needed for start-up?
Where to obtain financing?
How will funds be obtained to run the business
for the months or years until it becomes
profitable?
• What will be the best sources of sales and other
income?
• What will be the expenses and when will they be
paid?
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Four Steps for Budget
Preparation
• Prepare a list of income and expenses.
• Gather accurate information for each income and
expense.
• Create the budget by calculating each type of
income, expense, and amount of net income or
loss.
• Show and explain the budget
• to people who need financial
• information to make decisions.
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4
Three Types of Business
Budgets
• Start-up Budget
• Operating Budget
• Cash Budget
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5
Financial Records and
Financial Statements
• Recognize and Analyze the Financial
Performance of a Business
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Assets
Depreciation
Inventory
Account
Cash
Payroll
Tax records
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Important Financial
Statements
• Income statement
– Revenue
– Expenses
– Net profit or loss
• Balance Sheet
– Assets
– Liabilities
– Net worth
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Financial Performance
Ratios
• Current ratio (current assets/current liabilities)
• Debt to Equity Ratio
(total liabilities/owner’s equity)
• Return on Equity Ratio
• Net Income Ratio
(net profit/owner’s equity)
(total assets/net income)
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Payroll Management
• Financial records of employee compensation,
deductions, and net pay
• Information on each employee to calculate the
company’s payroll and to make the necessary
payments to each employee
• Payroll record-form used to document each
employee’s pay history
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Name of employee
Social security number
Address
Tax and benefit records
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9
Financial Decision-Making
• Company Strength-assets, liabilities, owner’s
equity, sales, profits
• Calculate financial performance ratios to make
decisions that result in the wise use of the
company’s money
• Steps in Financial Decision Making
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Prepare a budget
Use the budget as a guide to
the operations of the business
Make needed adjustments
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