Statistics and Risk
Management
Money Flow
Video URL:
jukebox.esc13.net/untdeveloper/Videos/Money%20Flow.mov
Vocabulary List:
Measure of Central Tendencies: The measurement of a relationship between two
variables.
Regression: The technique of predictive relationships based upon correlational data.
Sole Proprietor: Unincorporated business with one owner; the owner assumes personal
liability.
Corporation: A group of individuals legally established as a single entity.
Nominal Data: A level of measurement that includes categorical data, such as gender,
location, or age.
Ordinal Data: A level of measurement that includes data that can be ranked or ordered,
such as the responses to a rating scale.
Interval Data: A level of measurement that includes data than can be measured in equal
intervals, but does not have a true zero point, such as time or temperature.
Ratio Data: A level of measurement that includes data with a true zero point; examples
are measurements of height or weight.
Return on Investment (ROI): A ratio between the amount of money invested and the
amount of profit or loss on that investment.
Gross Profit: The difference between the net sales and the cost of goods sold.
Net Profit: The difference between the total revenue and total costs.
Asset: Any resource than has an economic value.
Liability: Any financial obligation from a past transaction that affects assets.
Net Worth: The value of assets minus liabilities.
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Resources:
We Are Not Ants
It is never too early to learn about the value of money and how to budget
and save. The earlier you can teach a child about earning versus paying,
the better prepared they will be to manage their own money. Learn about
teaching kids about money, personal finance, allowances, and teaching
to kids earn money and start their own businesses.
http://wearenotants.org/projects/money-instructor-2/
Basic Cash Flow Statement
This video by Khan Academy features a detailed explanation of a basic
cash flow statement. The video uses an example problem to explain how
to find the changes in a business’s cash flow from one month to another
via a statement.
http://www.khanacademy.org/finance-economics/core-finance/v/basiccash-flow-statement
Analyzing Operating Statements
These ten tips from Young Associates explain how one should go about
analyzing an organization’s operating statement. Each general step is
followed by an in-depth explanation of how that step of the analysis
should be approached.
http://youngassociates.ca/ten-tips-for-analysing-your-organizationsoperating-statements/
Copyright © Texas Education Agency, 2012. All rights reserved.
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Money Flow Practice Test
Name:_____________________
TRUE and FALSE: 1. A “Sole Proprietor” will have unlimited liability. A. True B. False 2. A “Sole Proprietor” will have earnings taxed at a corporate rate. A. True B. False 3. The Income statement shows tangible assets, liabilities and net worth of an organization. A. True B. False 4. Managers do not need to read the financial statements and reports of a company. A. True B. False 5. Gross income is calculated by subtracting your Cost of Goods Sold from your Sales. A. True B. False 6. If a company’s expenses are more than their revenue, they have a net loss. A. True B. False MATCHING: A.
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LIFO Book‐keeping FIFO Financial Accounting Managerial Accounting __________ This is an inventory valuation method which assumes the items purchased first by a company are the first items to be sold. __________ Refers to industry accepted accounting practices used for public accountability. __________ This is an inventory valuation method which assumes the items purchased last by a company are the first to be sold. __________ The collection of business operations data performed on an hourly/daily basis. __________ Company specific and usually used internally to identify problems Copyright © Texas Education Agency, 2012. All rights reserved.
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Money Flow Practice Test
Name:_____________________
MULTIPLE CHOICE: 12. ____ This shows the operating income and expenditures of a company. A. Balance Sheet B. Income Statement C. General Ledger D. Journal Entries 13. ____ Financial statements are read by which of the following? A. Vendors B. Owners/Investors C. Government D. All of the above 14. _____ is calculated so that management can understand what the sales of products generate in the area of profit. A. Sales B. Cost of Goods Sold C. Inventory D. Gross Profit 15. ____ are the funds received from the normal products and services provided by an organization. A. Sales B. Profit Margin C. Gross Income D. Inventory 16. Cash, inventory and equipment can all be found on the balance sheet in what section? A. Liabilities B. Assets C. Stockholder’s Equity D. None of the above 17. Special Purpose Entity’s, or SPE’s, are commonly used to ______. A. Show debt B. Show ownership C. Obscure relationships between D. None of the above different entities which are related to each other 18. A financial statement showing the operations of a business over a period of time is known as an income statement, operating statement or a ____ and _____ statement. A. Debit, Credit B. Gains, Losses C. Profit, Loss D. None of the above 19. The amount of profit generated by a firm in relation to the amount invested by the owners. A. Profit margin B. Sales C. Investment D. Return on Investment 20. Larger corporations need to project what they have to spend. For this they use a ______. A. Budget B. Balance Sheet C. Income Statement D. Sales projections Copyright © Texas Education Agency, 2012. All rights reserved.
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Money Flow Practice Test Key
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A B B B A A C D A B E B D D A B C C D A Copyright © Texas Education Agency, 2012. All rights reserved.
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Student Assignment
9.1a Financial Accounting Principles
Name:_____________________
Whether you work for an organization or have your own business it is
important to understand business structures and how businesses operate.
If you would want to start and own a business what kind of business
structure would you start with. Why would you choose that type of
structure? Why would you not select the other type of structures?
Would you change the structure as years pass if your business was very
successful and grew? What would you change it to (or NOT) and why?
Answers will vary per student, but look that they have made an effort to fulfill
the requirements of this assignment any various levels. You may ask
yourself does this student demonstrate the ability differentiate between sole
proprietor and corporation and do the really understand the difference
between S and C type corporations. Did they mention profit and not-forprofit entities?
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Student Assignment
9.2a Procurement Inventory
Name:_____________________
Secondary only to initial financing, procurement procedures are very
important to the implementation of a business plan.
Identify a business you find interesting.
List as many major acquisitions as you think will be essential to start this
type of business. You want to hit the ground running. You have the
money and want to spend it wisely. What will it take?
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Student Assignment
9.2b Procurement Inventory
Name:_____________________
Managing inventory shrinkage is a challenge for any business. Things
just have a way of just walking off.
Your company has priced all of their products at 50% mark up. That
means if they bought a widget for $24.50, they set the sales price at
$48.95 which is about $10.00 less than the manufacturer’s suggested
resale price of $59.95.
Your company started out this year with a cost of $154,000.00 in
Inventory in the warehouse. They ended the year with a cost of
$108,000.00 of Inventory. The sales for the year were $2,567,532.00.
Company records show the year’s purchases of stock that went toward
sale amounted to $1,345,987.00. Does this company have a serious
issue with inventory shrinkage or loss?
How much in inventory cost dollars is missing.
How many dollars in sales are missing?
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Student Assignment
9.3a Financial Data Collection
Name:_____________________
What is meant by “SUCCESS BREEDS SUCCESS?”
How does this relate to financial reports and those persons/entities who
might review such reports?
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Student Assignment
9.4a Financial Operating Statements
Name:_____________________
Create a Spreadsheet Revenue Statement with this set of Full Year
figures.
Revenue from Sales:
$2,456,098
Misc. Income:
$4567.00
Cost of sales:
$1,234,745
Payroll:
$590,890
Taxes:
$196,487
Rents:
$72,000
Other Expenses:
$100,000
Trucks and Equipment bought at $2,345,678 and amortized at 8.333%
per year.
Show Titles, Summaries, Gross Profit, Net Profit and try to include some
helpful ratios or percent figures.
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Student Assignment
9.5a Financial Balance Sheet
Name:_____________________
Create a Spreadsheet Financial Statement with this set of End of Year
figures.
Cash Petty
Cash Checking
Account Receivables
Utility Deposits
Inventory
Equipment (Basis)
Accumulated
Depreciation
2,000 Sales Tax Payables
42,010 Payroll Tax Payables
89,954 Supplier Accounts
Payable
4,000 Loans Payables
123,965 ------------2,345,678 ------------1,567,345 -------------
16,789
17,208
64,236
703,687
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You balance sheet should show the owner equity (net-worth) of a sole
proprietorship or retained earnings for a corporation. Show totals for
assets and liabilities. Show subtotals for short-term and long-term
assets and liabilities.
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Student Assignment
9.6a Cash Flow Analysis
Name:_____________________
Create a Cash Flow Statement using a Spreadsheet from the information
listed below.
XYZ Company made $2,000,000 last year. However, they wanted to
know if they could pay out $500,000 in dividends to the stockholders.
The cash they had available at the beginning of the year was $789,000.
They will not allow the dividends to lower the cash account below
$200,000.
$1,000,000 of their sales was on credit for the year. They received
$890,000 on payment for their Account Receivables.
They made payments of $225,000 for equipment. The depreciation
expense for the same equipment was $200,000.
Can they pay the $500,000 in Dividends?
What could they pay out in Dividends and still keep the cash account at
$200,000?
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Student Assignment
9.6b Cash Flow Analysis
Name:_____________________
Use the 9.0ss_IRR_NPVWorksheet for this assignment
You have a settlement from a car wreck where you will receive $1000.00
per month for the rest of your life. Your life expectancy is 20 years.
A TV Quick Cash company has offered you $150,000 right now for your
settlement and they will collect the $1000.00 a month (no COLAS). Is
that a good deal for you? Explain your reasoning.
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Student Assignment
9.7a Dividend Capital Gains
Name:_____________________
ABC Company has 100,000 shares outstanding. They decide to pay
$1.00 per share to the stockholders. This is not a public company and all
of the stockholders paid $25.00 per share.
What will be this year’s ROI or return on investment with this soon to be
declared $1.00 dividend?
If the company goes public and the investors get the chance to sell their
shares for $45.00 each what will be the tax per share if the capital gains
tax is 15%?
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Student Assignment
9.8a Operations Budgeting
Name:_____________________
Your parents have a yearly combined Gross income of $121,000.00.
They have the following expenses:
House payments of $21,600
Car payments of $8000
Health-dental costs of $6900
Groceries of $3260.00
Various Insurances totaling $1200
Motor Fuels for $8000
Utilities of $3789
Cell phone and Internet service of $2800
Cable TV at $1200.00
Clothing at $2400.00
Entertainment and vacations at $1500
They contribute 10% into a tax deferred college and retirement account.
Finally they pay a 25% income tax-rate on their gross income.
Using a Spreadsheet, compute their discretionary income…if they have
any.
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Student Assignment
9.9a Operations Budgeting
Name:_____________________
The ABC Company wants to know if it is better to lease a fleet of 20
trucks or buy them outright.
Each truck, as they want them equipped, will cost $82,000.00 with sales
taxes.
They can lease each one of them for 10 years at $950.00 a month. At
the end of 10 years, they can buy them for $10,000 each.
If they buy the trucks outright they have secured a full pay-back loan at
6% over a 10 year period. They will fully depreciate the trucks 10% per
year with an estimated recoverable value of $15,000 each at the end of
the 10 year loan payback. Use a “loan repayment calculator” (search on
web).
Which do you think is the best deal for ABC? Explain your reasoning.
Have some calculations to back up your claim.
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Explore Activity:
Virtual Business – In several of the lesson
assignments for this section. you came up with business
ideas and models. Now you have an opportunity to try
out some of your ideas. The MIT Sloan Management School has produced
an on-line game called Platform Wars in which you run a video game
company competing against other game console companies (think Sega vs.
Sony vs. Nintendo). You make various financial decisions and then see
those decisions in action with a “yearly” report (one turn = one year).
To access the game go to:
https://mitsloan.mit.edu/MSTIR/system-dynamics/platformwars/Pages/default.aspx
Start with the Student Instructional Video (it’s about 25 minutes). Then you
can proceed with the game. You can either play as an individual (no
registration required – just create a screen name) or as part of a class if
your teacher chooses this option for your class.
Be sure to keep “annual records” of your decisions so you can try them out
again to see if what you did was just a fluke or if your strategies really work.
Note there is an option to copy data to the clipboard so you can then paste
into a spreadsheet or word processor.
Make a presentation of your most successful strategy to the class.
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