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Chapter 17Managing Business
Finance
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Financial PlanningFinancial plan = outline of your expenses, needs,
and goals, and how you expect to meet them
Financial planning1st step – identifying your assets
Asset = any property or item of value that your business owns Examples: cash, equipment, buildings, supplies, inventory, land
2nd step – purchasing your assetsDo you need to borrow money?
3rd step – recognizing the financial records you need to keepFinancial forecast = estimate of what business
conditions will be like in the future
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AccountingAccounting = systematic process of
recording and reporting the financial position of a business.
Financial manager = person in charge of a business’s financial planning, funding, and accounting.
Budget = written plan of what you expect your income and expenses to be over a certain period of time.
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Financial RecordsFiscal year = reports are for one year
Summarize the year with an income statement and a balance sheet.
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Financial StatementsAssets = Liabilities + Owner’s EquityThe two sides of the equation must always balance
Liability = amount your business owes (debt)
Owner’s Equity = equal to the assets minus liabilities (what the business is worth)
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Income StatementIncome Statement = a report of net income or net loss over an accounting periodIncludes revenue and expenses
If revenue is greater than expenses, you have a net income
If expenses are greater than revenue, you have a net loss
Example on next slide
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Balance SheetBalance Sheet= a report of the financial state of your business on a certain date.Includes assets, liabilities, and owner’s equityAssets on the left sideLiabilities and owner’s equity on the right
sideThe two sides must equal, or balance
Example on next slide
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