Essential Standard 4.00

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Essential Standard 4.00

• Understanding the role of finance in business.

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Objective 4.01

• Understand financial management.

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Topics

• Financial planning
• Business budgets
• Financial records and statements
• Financial performance ratios

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Financial planning
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Financial Planning

• Why should a business do financial planning?
• What are the phases of business financial
  planning?
• Start-up
• Operation
• Expansion
• What happens during each phase?

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Financial Planning continued

• What is the basic financial equation?
• Revenue Expenses Profit or Loss
• In order to have a profit, which will be greater?
• In order to have a loss, which will be greater?

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Business budgets
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Business Budgets

• Types of business budgets
• Start-up budget
• Operating budget
• Cash budget

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Business Budgets continued

• Steps for preparing a business budget
• Prepare a list of income and expense items.
• Gather accurate information from business
  records.
• Create the budget.
• Clearly communicate the budget to key employees
  in order to make sound business decisions.

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Financial records and statements
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Financial Records and Statements

• What is the purpose of financial records?
• Financial records used by businesses
• Asset records
• Depreciation records
• Inventory records
• Records of accounts
• Cash records
• Payroll records
• Tax records

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Financial Records and Statements continued

• What are assets?
• What are liabilities?
• What is owners equity?
• What are financial statements?
• What is the difference between a balance sheet
  and an income statement?

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Financial performance ratios
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Financial Performance Ratios

• What are financial performance ratios?
• The four main types of financial ratios
• Current ratio
• Debt to equity ratio
• Return on equity ratio
• Net income ratio

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Financial Performance Ratios continued

• Current ratio
• How is current ratio calculated?
• What does this ratio represent?
• Which is more favorable, higher or lower?
• Debt to equity ratio
• How is debit to equity ratio calculated?
• What does the ratio represent?
• Which is more favorable, higher or lower?

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Financial Performance Ratios continued

• Return on equity ratio
• How is current ratio calculated?
• What does this ratio represent?
• Which is more favorable, higher or lower?
• Net income ratio
• How is current ratio calculated?
• What does this ratio represent?
• Which is more favorable, higher or lower?