Statistics and Risk
Management
Money Flow
Performance Objective:
After completing this lesson, the student will understand the basic concepts of
business organization, accounting principles, financial statements, and
management reporting systems, cash flow reporting, and Returns on
investments.
Approximate Time:
When taught as written, this lesson should take 20-25 days to complete.
Specific Objectives:





The student will discuss the importance of organizational topologies.
The student will understand basic accounting principles.
The student will can read organizational operating statements and reports.
The student will understand cash flow reporting methodologies
Student will understand dividend and capital gains returns on investments.
This lesson corresponds with Unit 7 of the Statistics and Risk
Management Scope and Sequence. Copyright © Texas Education Agency, 2012. All rights reserved. 1 TEKS Correlations:
This lesson, as published, correlates to the following
TEKS for Regression. Any changes/alterations to
the activities may result in the elimination of any or
all of the TEKS listed.
130.169(g)(4)(E)
conduct cash-flow analysis to select an acceptable capital expenditure,
including:
(i) interpreting the nature of relevant cash flow-analysis;
(ii) explaining the nature of the payback period;
(iii) calculating the payback period;
(iv) calculating the net present value;
(v) explaining the relationship between the internal rate of return and net .
present value;
InterdisciplinaryTEKS:
English:
110.31 (C) (21) (B)
… organize information gathered from multiple sources to create a
variety of graphics and forms (e.g., notes, learning logs)…
110.31 (C) (22) (B)
…evaluate the relevance of information to the topic and determine the
reliability, validity, and accuracy of sources (including Internet sources)
by examining their authority and objectivity…
110.31 (C) (23) (C)
… use graphics and illustrations to help explain concepts where
appropriate…
Copyright © Texas Education Agency, 2012. All rights reserved. 2 110.31 (C) (23) (D)
… use a variety of evaluative tools (e.g., self-made
rubrics, peer reviews, teacher and expert evaluations)
to examine the quality of the research…
Math:
111.36 (C) (4) (A)
… compare theoretical and empirical probability;
111.37. (C) (3) (B)
… use probabilities to make and justify decisions about risks in everyday
life
Occupational Correlation
(O*Net - http://www.onetonline.org/)
Securities and Commodities Trader 41-3031.03
Similar Job Titles:
Tasks:



Agree on buying or selling prices at optimal levels for clients.
Buy or sell stocks, bonds, commodity futures, foreign currencies, or other
securities at stock exchanges on behalf of investment dealers.
Make bids or offers to buy or sell securities.
(Soft) Skills:
Deductive reasoning; Written comprehension; Critical Thinking
Copyright © Texas Education Agency, 2012. All rights reserved. 3 Instructional Aids:
1. Display for presentation, websites for
assignments and class discussion
2. Assignment Worksheets
3. Supporting Spreadsheets
Materials Needed:
1. Printer paper
2. Assignments and website information ready to distribute to
students.
Student projects will be displayed to increase interest in Statistics
Equipment Needed:
1. Computer with presentation and Internet Access
2. Computers for Students to Conduct Research and Collect Data
for Projects
Copyright © Texas Education Agency, 2012. All rights reserved. 4 References:
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 learn about teaching kids to earn money and to 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/basic-cash-flow-statement
Analyzing Operating Statements
These ten tips from Young Associates explain how one should go about analyzing an
organizations 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-organizations-operating-statements/
Copyright © Texas Education Agency, 2012. All rights reserved. 5 Teacher Preparation:
Teacher will:
1.
presentation, and
handouts.
2.
resources and websites.
3.
websites ready.
Review terms in outline,
Locate and evaluate various
Have assignments and
Learner Preparation:
It is time to wrap up what the students have learned about
statistics. You will briefly describe commercial software for
statistics with examples the student might find interesting. Then
the student will get to apply what they have learned to analyzing
data and take an exam.
Introduction:
STUDENTS will watch the Unit video found here:
jukebox.esc13.net/untdeveloper/Videos/Money%20Flow.mov
STUDENTS will take the practice test and review using the Key,
found in Common/Student Documents.
EXHIBIT:
Excitement for the topic.
INTRODUCE:
Basic Accounting Principles.
ASK:
Who knows what return on investment is?
Copyright © Texas Education Agency, 2012. All rights reserved. 6 I. Financial Accounting Principles
A. Sole Proprietor or “S” Corp
1. Taxed as earned whether
taken as wages or NOT
(retained).
2. Unlimited Liability
B. Corporation (“C” type)
1. Earnings Taxed at
Corporate Rate.
2. Limited Liability (Maybe)
3. Easy Capitalization
(Sometimes)
II. Public Vs. Private
A. Public
1. Board of Directors
a. Extensive
Regulations
i. Sarbanes–
Oxley Act of
2002
2. Private
a. Less Accountability
b. Easier to Pierce the
Liability Vale
3. Non-Profit Vs. Profit
4. Some Serious Tax
Advantages
5. Salaries can still be BIG.
6. No Dividends Paid Out.
7. Can still Service Loans
8. Risk Management
9. Employs objective
analysis methodologies
including Descriptive and
Inferential Statistics to
identify opportunities and
reduce monetary risks.
10. Raw Data is Meaningless
11. Categorizing/Measuring
Data
a. Nominal
(Gender)
b. Ordinal (Zip Codes)
c. Interval (Sales by
Year)
Use 9.1_FinancialAccounting
Principles.pptx.
Copyright © Texas Education Agency, 2012. All rights reserved. 7 Ratio (Profit 0 to unlimited)
Summing the Data
Sum Up Total Sales
Sum Up Total Expenses
Sum Up Totals Assets
Sum Up Totals Loans
Sum Up Total Investments
Compare Data Over Time
Income This Month
Over Last Month
Same Period Last Year
Organize Data by Category
Breakout Revenue
Product Sales
Service Sales
Interests
Other Revenue
Organize Data by Category
Breakout Expenses
Payroll
Taxes
Utilities
Insurance
Bad Debt
Compare Data to Population
Your Sales/Expense Data
To your Local Competition
To the Industry
To the Economy
Extended Data Calculations
Gross Profit
Net Profit
Percentages (Sales/Gross)
Ratios (Acid Test)
Use
9.1_FinancialAccounting
Principles.pptx
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take
home-Instructor’s Option)
Copyright © Texas Education Agency, 2012. All rights reserved. 8 II.
A.
B.
C.
D.
E.
F.
G.
Procurement & Inventory
Control
Purchasing Overview
1. Materials and products used
for Product Production or
Resale.
2. Supplies needed for daily
operations.
Vendor Selection
1. Competitive Pricing & Terms
2. Product/Service Quality
3. Performance Criteria
4. Order Placement
Methodologies
5. Location
• Shipping Issues
• Political Issues
Bid Processes
1. Private Entity Process
• Creating RFP
• Evaluating Proposals
2. Public Entity Process
• Often strict laws
regulating the
process for both
government and
vendor employees.
Order Processing
1. Manual
• Vender
• Customer Managed
2. Automated
3. Maintain Stock Levels
4. Just-in-time
Inventory Management
1. Physical Inventory
2. Book Inventory
3. Reconciliation Process
Inventory Evaluation
1. Itemized (ID or Serial
Numbers)
2. LIFO (Last in First Out)
3. FIFO (First In First Out)
4. RDI (Retail Dollar Inventory)
Inventory Control
1. Minimum Stock Level
2. Minimum Order Size 3. Returns 4. Shrinkage ‐ Obsolescence Use 9.2_Procurement
Inventory.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 9 Real Cost of Acquisition
Payback Period
Return on Investment
Net Present Value
Human Resource
Application-Resume
Interview(s): Phone/Onsite
Testing
Background Check
Selection
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
III. Financial Data Collection
A. A Brief History
1. Robert (Bob) Cratchit (Scrooge’s
book-keeper-by hand-Tiny Tim’s
Dad)
2. Computer Assisted Book-keeping
3. Integrated and Automated
Accounting Systems
4. Small businesses often avoid bookkeeping processes.
a. No time
b. No expertise
c. No funds
5. Shoe Box Book-keeping
a. Save Receipts and Bank
Statements and give them to an
Accountant at Tax Time.
b. Is it unethical/unlawful to hide
income to avoid taxes….
B. Book-keeping Vs. Accounting
1. Book-keeping is the collection of
business operations data performed
on a hourly/daily basis.
2. Accounting is compilation of the
collected statistical data structuring
it for high level analysis.
3. Book-keeping Methodologies
a. Receivables: Income/Revenue Data
Collection
b. Payables: Expenditure Data
Collection
i.
Internal Transaction
Data Collection
ii.
Use
9.2a_Procurement
Inventory.docx
9.2b_Procurement
Inventory.docx
Double-Entry
General Ledger
Copyright © Texas Education Agency, 2012. All rights reserved. 10 iii.
iv.
Double-Entry
General Ledger
a. Journals
i. Revenue
(Credit/De
bit
Balanced)
ii. Expenditu
re
(Debit/Cre
dit
Balanced)
iii. Adjustme
nt (Either
Order)
b. General Ledger
Accounts
i. Assets
(Debit
Balance
+)
ii. Liabilities
(Credit
Balance -)
iii. Income
(Credit
Balance -)
iv. Expense
(Debit
Balance
+)
Financial vs.
Managerial
a. Financial
Accounting refers
to industry
accepted
accounting
practices used for
public
accountability.
b. Managerial
Accounting is
company specific
and usually used
internally to
identify problems.
Copyright © Texas Education Agency, 2012. All rights reserved. 11 v.
Financial Reports
a. Balance Sheet
shows the
tangible assets,
liabilities, and
capital accounts
of an
organization (Net
Worth).
b. Income
Statement shows
the operating
income and
expenditures
(Profit or Loss).
vi.
For Whom?
a. Who will want to
read Financial
Statements/Repo
rts
i. Owners/In
vestors
ii. Managers
iii. Customer
s
iv. Vendors
v. Banks
vi. Governm
ents
(Taxes &
Agencies)
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
Use
9.3a_FinancialData
Collection.docx
IV. Financial Operating Statement
Analysis
Use 9.4_FinancialOperating
StatementAnalysis.pptx
A. Sales and Revenues
1. Sales are the funds
received from the normal
products and services
provided by an
organization.
1. Cash Registers
2. Bank Deposits
Copyright © Texas Education Agency, 2012. All rights reserved. 12 c. Additional Revenues
result from Interest
received, sales of
assets, etc.
3. Bank Statements
4. Contracts
2. Accrual Basis: Recognized
when Earned
3. Cash Basis: Recognized
when Received
B. Gross Profit
1. Gross Profit is computed
by subtracting the direct
costs of the sales from the
sales Revenue.
2. Gross Income = Sales –
Cost of Goods Sold
3. Gross Profit is calculated
so that management can
understand what the sales
of products generate in
the area of profit.
4. Inventory plays into this,
will cover that later.
C. Expense Summary
Compilation of Operating
Expenditures.
Use
9.4a_FinancialOperating
StatementAnalysis.docx
Use 9.5_FinancialBalance
SheetAnalysis.pptx
1. Fixed Expenses
(Depreciation, Rent….)
2. Variable Expenses
(Wages, Utilities…)
D. Depreciation & Amortized
Expense
1. Used when the cash price is
not expensed out all at once.
2. Buy a business vehicle for
$50,000 that will last 10
years. What is the cost per
year assuming the vehicle
will be junk in 10 years?
3. Buy a year’s insurance
policy for $12,000. What is
the expense per month?
Copyright © Texas Education Agency, 2012. All rights reserved. 13 E. Net Profit (or Loss)
1. Take the Gross Profit and
subtract the Expenditures
and you have the Net Profit
(or Loss)
F. Using Ratios
1. Revenue Mix Ratios
2. Gross Profit Ratios
3. Expense Mix Ratios
4. Expense to Revenue Mix
Ratios
G. Provide Assignment sheets and
discuss and answer any
questions about assignment (In
class or take home-Instructor’s
Option)
V. Financial Balance Sheet
Analysis
A. Asset Section
1. Cash (Liquid) Assets
a. Petty Cash
b. Bank Accounts
c. Accounts
Receivables
2. Fixed Assets
a. Inventory
b. Equipment
c. Real Estate
B. Liability Section
1. Short Term
a. Accounts Payable
b. Current Loan
Payments
Use 9.5a_FinancialBalance SheetAnalysis.docx 2. Long Term
a. Loans
b. Notes
c. Bonds
C. Equity Section
1. Net-Worth (SoleProprietorship)
a. Assets-Liabilities
2. Equity (Corporation)
a. Retained Earnings
b. Capital Stocks
Copyright © Texas Education Agency, 2012. All rights reserved. 14 D. Capital Section
1. Equity Stock
a. Preferred
1. Paid First
2. Dividends
3. No Voting
Rights
b. Common
1. Capital Gains
2. Dividends
E. Special Purpose Entity
1. SPE is a legal entity created
to fulfill narrow, specific or
temporary objectives.
2. SPEs are typically used to
isolate the firm from financial
risk.
3. SPEs are also commonly
used to hide debt, hide
ownership, and obscure
relationships between
different entities which are in
fact related to each other.
Provide Assignment sheets and
discuss and answer any questions
about assignment (In class or take
home-Instructor’s Option)
VI. Cash Flow Analysis
Use 9.6_CashFlow
Analysis.pptx
A. Cash Flow
1. Cash Flow is different
from Profit.
2. You can be Rich but Cash
Starved.
B. Example
1. You firm sells a million
dollars in sales ON
CREDIT!!!!!
2. You think you might get paid
in 90 days?????
C. Example
D. You buy a prime location to
build a plant for $1,000,000.00
and have a $100,000.00
payment due now.
Won’t that reduce your profit?
Copyright © Texas Education Agency, 2012. All rights reserved. 15 Cash Flow Analysis
Cash Flow =
+ Net Profit
+ Payments on Account Receivables
– Sales on Account Receivables.
Example:
$53,610 = $69,000 + $22,500 - $37,890
Cash Flow Analysis
Cash Flow =
+ Net Profit
+ Depreciation Expense (No Land Allowed)
– Debt Service on Principle.
Example:
$70,822 = $69,000 +
$5,500 - $3678
D. Another way to look at the same
thing.
E. Internal Rate of Return
Used to Identify the rate
(percentage) of a return on
something you spend
money on. You can use actual
figures or
projections.
Use
9.6a_CashFlow
Analysis.docx
9.6b_CashFlow
Analysis.docx
Use
9ss_IRR_NPV
WorkSheet.xlsx
F. Net Present Value
a. Used to put a real current
value on revenue received
over time.
b. Could you sell your pension
or annuity?
Provide Assignment sheets and
discuss and answer any questions
about assignment (In class or take
home-Instructor’s Option)
VII. Dividends & Capital Gains
A. Return on Investment
1. Investors want to make
money on what they have
invested.
2. They are resigned to risk,
but expect returns above
and beyond the risk.
B. Debt Service
1. Contracted Interest and
principal payments with
lenders.
2
Use 9.7_Dividends
CapitalGains.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 16 2. Interest is Tax Deductible to
Company
3. Investor pays Full Income
Tax Rates
C. Stock Dividends
1. Declared amount paid out
on a per share basis.
2. Usually based upon profit
levels or historical trends.
3. Not Tax Deductible against
Corporate Income Taxes.
D. Capital Gains
1. The change in the market
value or book value of a
share of stock.
2. Recognized when stock is
sold.
3. Lower Personal Income Tax
Rates on Gain.
E. Capital Gain Taxes
1. Depending on the current
tax laws have been as low
as 15% compared to regular
income taxes as high as
35%.
2. People who have large
investment returns may pay
very little tax. (Mitt Romney)
F. Social Security Taxes
1. None of these incomes are
taxed to investor using
FICA taxes (Social Security
and Medicare).
2. FICA is a highly regressive
tax. (Employee and
Employer parts)
G. However
Dividends and capital gains
are derived from corporate
revenues/retained earnings
which in most cases will be
taxed at corporate income
tax rates
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
Use
9.7a_Dividends
CapitalGains.docx
Copyright © Texas Education Agency, 2012. All rights reserved. 17 VIII. Operations Budgeting
A. Why Budgets?
1. Larger organizations
need to project what
they have to spend.
B. How to Budget?
1. They use their
historical data
(revenue and
expenditures), industry
projections, and
department requests
to formulate a budget.
C. Guess work?
1. Statistics remove much of
the guesswork.
2. Adjustments to the budget
will be required during the
covered period.
D. Line Item budgeting?
1. The budget contains
specifics on what amounts
will be spent on what things
or services.
2. A Favorite with
Governments.
E. Issues?
1. Sometimes money is wasted
at the end of the year.
2. Why
3. Sometimes departments
need more money and can’t
get it.
4. Why?
Use 9.8_Operations
Budgeting.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 18 IX. Capital Budgeting
A. Very Complex
1. What is being acquired?
2. How will it be paid for?
3. What will be expensed out
and when?
4. Will it Generate Revenue?
5. Will it Reduce Expenses.
B. Leasing
1. Land & Facilities
2. Equipment
3. Fleet Vehicles
C. Purchasing
1. Competitors
2. Land & Facilities
3. Equipment
4. Vehicles
5. Inventory for Production
and/or Resale
9.9_Capital
Budgeting.pptx
Use 9.9a_Capital
Budgeting.docx
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
Copyright © Texas Education Agency, 2012. All rights reserved. 19 Guided Practice:
See assignments.
Independent Practice:
See assignments.
Review:
Question:
Describe what is meant by a normal distribution?
Question:
What are some main uses of confidence Intervals?
Informal Assessment:
Instructor should observe student discussion and monitor interaction.
Formal Assessment:
Completion of provided assignments using included keys for grading.
Copyright © Texas Education Agency, 2012. All rights reserved. 20 Student Assignment
9.1a Money Flow Key
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?
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 to differentiate
between sole proprietor and corporation and do they really
understand the difference between S and C type
corporations. Did they mention profit and not-for-profit
entities?
Copyright © Texas Education Agency, 2012. All rights reserved. 21 Student Assignment
9.2a Key
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?
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 an ability to understand the
resources need to start up and operate a business.
Copyright © Texas Education Agency, 2012. All rights reserved. 22 Student Assignment
9.2b Key
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?
Copyright © Texas Education Agency, 2012. All rights reserved. 23 Student Assignment
9.2b Key
Name: ____________________
Answer: Cost of Goods sold or missing 154,000 +
1,345,987 - 108,000 = $1,391,987
How much in inventory cost dollars is missing.
Answer: Estimated Cost of Sales at 50% mark-up is
2,567,532 x .50 = 1,283,766 less Actual Cost $1,391,987
or $108,221 is possibly missing.
How many dollars in sales are missing?
Answer: Expected Sales at 50% mark-up 1,391,987 / .50
= 2,783,974 less Actual Sales of $2,567,532 or SHORT
sales of 216,442.
Copyright © Texas Education Agency, 2012. All rights reserved. 24 Student Assignment
9.3a Key
Name: ____________________
What is meant by “SUCCESS BREEDS SUCCESS?”
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 have an opinion on the positive
aspects of marketing.
How does this relate to financial reports and those
persons/entities who might review such reports?
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 have an opinion on the positive
aspects of marketing, but taking into consideration
accuracy, validity, and ethics.
Copyright © Texas Education Agency, 2012. All rights reserved. 25 Student Assignment
9.4a Key
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.
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
have an understanding on using a spreadsheet and how to
create a basic operating statement from the examples
provided.
Copyright © Texas Education Agency, 2012. All rights reserved. 26 Student Assignment
9.5a Key
Name: ____________________
Create a Spreadsheet Financial Statement with this set of End
of Year figures.
Cash Petty
Cash Checking
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
Account
64,236
Receivables
Utility Deposits
703,687
Inventory
-----Equipment (Basis)
-----Accumulated
-----Depreciation
Your balance sheet should show the owner’s 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.
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 have an
understanding on using a spreadsheet and how to create a
basic balance sheet from the examples provided.
Copyright © Texas Education Agency, 2012. All rights reserved. 27 Student Assignment
9.6a Key
Name: ____________________
Create a Cash Flow Statement using a Spreadsheet from
the information listed below.
XYZ Company made $1,000,000 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.
$1,400,000 of their sales was on credit for the year. They
received $990,000 on payment for their Account
Receivables.
They made payments of $225,000 for equipment. The
depreciation expense for the same equipment was
$450,000.
They increased the value (paid cash) of their inventoried
products by $1,000,000
Can they pay the $500,000 in Dividends?
Copyright © Texas Education Agency, 2012. All rights reserved. 28 Student Assignment
9.6a Key
Name:
________________________
Answer:
BOY Opening Cash Balance
$789,000
Add EOY Net Profit
$1,000,000
SUBTOTAL
$1,789,000
Subtract Sales on Credit (A.R.)
-$1,400,000
Add Payments Received on A.R.
$990,000
Subtract Payments on
-$225,000
Equipment
Add Equipment Depreciation
$450,000
Expense
Subtract Cash paid for
-$1,000,000
Inventory
SUBTOTAL of ADJUSTMENTS
-$1,185,000
NET AMOUNT CASH ON HAND
$604,000
Answer: NO they could not distribute $500,000 in dividends
and keep cash reserves at a budgeted level.
What could they pay out in Dividends and still keep the cash
account at $200,000?
Answer: They could distribute $404,000 in dividends and
keep the cash account within $200,000.
Copyright © Texas Education Agency, 2012. All rights reserved. 29 Student Assignment
9.6b Key
Name: ____________________
Use the 9.0ss_IRR_NPVWorksheet for this assignment
You have a settlement from a car wreck where you will
receive 1000.00 month for the rest of your life (NO
COLA). 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 COLA). Is that a good deal for
you? Explain your reasoning.
Answer: Students’ answers will vary. The Quick Cash
Company will make about $50,000 over the students’
life by give them $150,000 now.
Copyright © Texas Education Agency, 2012. All rights reserved. 30 Student Assignment
9.7a Key
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?
Answer: and ROI of 4%
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%?
Answer: $45 - $25 x .15 = $3.00 per share
Copyright © Texas Education Agency, 2012. All rights reserved. 31 Student Assignment
9.8a Key
Name: ____________________
Your parents have a yearly combined Gross income of
$121,000.00. They have house payments of $21,600, Car
payments of $8000, Health-dental costs of $6900. Groceries
of $3260, Various Insurances totaling $1200, Motor Fuels for
$8000, Utilities of $3789, Cell phone and Internet service of
$2800, Cable TV at $1200, Clothing at $2400, Entertainment
and vacations at $15000. 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. Answers will vary per student, but look that
they have made an effort to fulfill the requirements of this
assignment any various levels. If you count vacations and
entertainment as discretionary then they have a discretionary
income of $19,501.00. If not then it is $4,501.00
Income Home Payments Car Payments Health & Dental Groceries Insurances Motor Fuels Utilities Cell & Internet Cable Clothing Tax Deferred College Income Tax NET Amount
121,000.00
‐21,600.00
‐8,000.00
‐6,900.00
‐3,260.00
‐1,200.00
‐8,000.00
‐3,789.00
‐2,800.00
‐1,200.00
‐2,400.00
‐12,100.00
‐30,250.00
19,501.00
Copyright © Texas Education Agency, 2012. All rights reserved. 32 Student Assignment
9.9a Key
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 payback 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.
Copyright © Texas Education Agency, 2012. All rights reserved. 33 Student Assignment
9.9a Key
Name: ____________________
Answer: Will vary widely per student but they should
look something like this.
Leasing 20 trucks for 10 years
$2,228,000.00
Buying 20 trucks
Purchase Price
$1,640,000.00
Loan payment of $18207.36 x 120 mos
$2,184,883.20
Either way requires you to maintain the trucks.
With leasing, you can buy the trucks for $200,000 more
after 10 years.
With buying, you might be able to sell the 20 trucks for
$300,000 at the end of 10 years.
SO BUYING seems BETTER by about HALF a MILLION
Copyright © Texas Education Agency, 2012. All rights reserved. 34 NAME:________________________________ DATE:______________________ CLASS:______________ MONEY FLOW TEST TRUE and FALSE: 1. A “Sole Proprietor” will have unlimited liability. A. True B. False 2. A “Corporation” will have earnings taxed at a corporate rate. A. True B. False 3. The Profit/Loss Statement shows tangible assets, liabilities and net worth of an organization. A. True B. False 4. Managers need to read the financial statements and reports of a company. A. True B. False 5. Gross income is calculated by subtracting your Sales from your Cost of Goods Sold. A. True B. False 6. If a company’s expenses are less than their revenue, they have a net profit. A. True B. False MATCHING: A.
B.
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Capital Book‐keeping Special Purpose Entity Financial Accounting Managerial Accounting __________ Refers to industry accepted accounting practices used for public accountability __________ Preferred Stock and Common Stock are found in this section of the balance sheet __________ Company specific and usually used internally to identify problems __________ Is a legal entity created to fulfill narrow, specific or temporary objectives __________ The collection of business operations data performed on an hourly/daily basis. MULTIPLE CHOICE: 12. _____ 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 13. ____ Financial statements are read by which of the following? A. Vendors B. Managers C. Owners/Investors D. All of the above 14. ____ are the funds received from the normal products and services provided by an organization. A. Sales B. Profit Margin C. Gross Income D. Inventory Copyright © Texas Education Agency, 2012. All rights reserved. 35 15. ____ This shows the assets, liabilities and capital accounts of an organization.
16.
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A. Balance Sheet B. Income Statement C. General Ledger D. Journal Entries Loans, notes and bonds can all be found on the balance sheet in what section? A. Liabilities B. Assets C. Stockholder’s Equity D. None of the above Special Purpose Entity’s, or SPE’s, are commonly used to ______. A. Hide debt B. Hide ownership C. Obscure relationships between D. All of the above different entities which are related to each other 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 The amount of profit generated by a firm in relation to the amount invested by the owners. A. Profit margin B. Sales C. Return on Investment D. Investment 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 The change in the market value or book value of a share of stock. A. Stock Dividend B. Capital Gain C. Debt Service D. Return on Investment Declared amount paid out on a per share basis and is usually based upon profit levels or historical trends. A. Stock Dividend B. Capital Gain C. Debt Service D. Return on Investment _____ has contracted interest and principal payments with lenders. A. Stock Dividend B. Capital Gain C. Debt Service D. Return on Investment This process often has strict regulation laws for both government and vendor employees. A. Private Entity B. Public Entity C. Non‐Profit D. Sole Proprietorship This department is associated with the interviews, application process and employee relations of a company. A. Marketing B. Finance C. Human Resources D. None of the above Copyright © Texas Education Agency, 2012. All rights reserved. 36 Money Flow Test Key
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A A B A B A D A E C B D D A A A D C C A B A C B C Copyright © Texas Education Agency, 2012. All rights reserved. 37