money doesn't create man but it is the man who created money. -warren buffet
TRANSCRIPT
Sources of Business Capital Debt
Loan from Friends/Family Loan from Banks Bonds
Equity Personal savings Investment by Friends/Family Investors
4
Why Do Businesses Perform the Functions?
To produce and market goods and services (resulting in revenues)
To produce and market goods and services (resulting in revenues)
Key Terms Assets The economic resources owned by an entity; entailing
probable future benefits to the entityExample: Land, Building, Machinery
Owners' equity It represents the collective interest or position of the
entity's owners Debt/Outsider’s LiabilitiesIt represent the obligation to the outsiders. E.g.. Loan, any unpaid expense
Assets = Equity + DebtAssets= Liabilities
How is the Revenue a Business Generates Used?
Profits are retained or distributed
Profits are retained or distributed
Key terms Assets: the resources a business owns –
Fixed Assets – those lasting more than one year and not used up in production – equipment, machinery, buildings, etc.
Current Assets – assets used up during production and which will realise cash within a year – debtors, raw materials, stock, etc.
Key terms
Liabilities: The financial obligations of a business – what
a business owes Loans, shareholders funds, creditors, tax
liability, interest owing Current liabilities – those obligations the
business has to meet within a year
Key terms Expenses
The costs incurred in producing revenues Revenue
Value of goods /services sold by the organization
13
Equity Shares–Features Claim on Income Right to Control Voting Rights Limited Liability Dividend Source of Permanent capital
14
Term Loans–Features
Maturity Direct Negotiations Security Repayment Schedule Interest and Principle need to paid back
Exercise -IJensen Publishing Company operates newspapers in a
number of small communities. Determine whether each of the following is an asset, a liability, a revenue, or an expense from Jensen's viewpoint. Give reasons too.
a. A loan that is owed to the bank b. The cost of paper used in printing c. Monthly rental charges paid to a landlord d. Receipts collected from subscribers e Machinery owned by the company and used in
the business f. Amounts owed to suppliers of ink