Chapter 17
Managing Business Finance
Chapter 17 Objectives
›  Identify
six reasons for creating a financial
plan (effectiveness).
›  Explain what a budget is and how it is
used.
›  Explain the purpose of accounting and
define the accounting equation.
›  Describe the three main financial
statements used by businesses.
The Purpose
›  Financial
Plan
›  Determining
the profitability of a business
An effective financial plan:
›  Identifies
assets
›  Determine needed capital
›  Describes the expenses
›  Describes financial record management
›  Forecasts finances
›  Describing growth and expansion
Identify Assets
›  Cash,
equipment, buildings, supplies,
inventory, and land
›  Conduct
research before purchasing
Determine Needed Capital
›  Money
supplied by investors, banks, or
business owners
›  Start-up
capital
›  Difficult
to obtain for a new business from
investors
Describe Expenses
›  Start-up
Expenses
›  Cost
of business assets, remodeling,
security, advertising
›  Operating
›  Payroll,
Expenses
rent, utility bills, delivery charges,
and bank fees.
Describe Financial Record
Management
›  Explains
records
how a business will manage its
›  Monitors
›  Legal
›  Who
cash flow
agreements
will manage the money and how will
it be managed?
Forecast Finances
›  An
estimate of a business’s financial
outlook for each of the next few years.
›  Consider
business conditions in the future
and economic conditions
›  Keep
estimates for income low and
expenses high.
Describe Growth and
Expansion
›  Growth
is needed to remain competitive
›  Always
make a plan!
›  Operational
and financial
Budget
›  A
plan stating how money will be used or
spent.
›  Prediction
›  Three main types of budgets
›  Start-up
›  Cash
(short term)
›  Operating (long term)