Principles of Business, Marketing, and

Finance

Financial Planning

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Financial Questions a Business
Must Answer
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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Three Types of Business
Budgets

Start-up Budget

Operating Budget

Cash Budget

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 Financial Records and
Financial Statements
Recognize and Analyze the Financial
Performance of a Business
Assets
Depreciation
Inventory
Account
Cash
Payroll
Tax records

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 Important Financial
Statements
Incomestatement
Revenue
Expenses
Net profit or loss

BalanceSheet
Assets
Liabilities
Net worth

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 Financial Performance
Ratios
Current ratio (current assets/current liabilities)

Debt to Equity Ratio (total liabilities/owners equity)

Return on Equity Ratio (net profit/owners equity)

Net Income Ratio (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
companys payroll and to make the necessary
payments to each employee
Payroll record-form used to document each
employees pay history
Name of employee
Social security number
Address
Tax and benefit records

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 Financial Decision-Making
CompanyStrength-assets, liabilities, owners
equity, sales, profits
Calculatefinancialperformanceratiosto make
decisions that result in the wise use of the
companys money
StepsinFinancialDecisionMaking
Prepare a budget
Use the budget as a guide to
the operations of the business
Make needed adjustments

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