Chapter 12: Financial Management

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  1. Revenue
    All the money a company receives over a period of time
  2. Expenses
    The cost of operating a business
  3. basic financial equation
    total revenue-expenses= profit
  4. What does business expansion call for?
    research to develop new products and locate new markets
  5. Budget
    Provides detailed plans for the financial needs
  6. Two main purposes of a business budget
    • 1) anticipate sources and amounts of income for a business
    • 2) predict the types and amounts of expenses for a specific business activity or the entire business
  7. Small Business Administration (SBA)
    Provides many planning tools for new businesses
  8. Budget preparation
    Most important step is creating a budget
  9. Start-up Budget
    Plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable
  10. Budget process has 4 steps
    • 1)prepare a list of each type of income and expense apart of the budget
    • 2)gather accurate info. from business records and other sources
    • 3)create the budget
    • 4)explain the budget to people who need financial info. to make decisions
  11. Operating Budget
    Describes the financial plan for ongoing operations of the business for a specific period
  12. Cash Budget
    An estimate of the actual money received and paid out for a specific period.
  13. Financial Records
    Are used to record and analyze the financial performance of a business
  14. Types of Records
    Asset Records, Depreciation Records, Inventory Records, Records of Accounts, Cash Records, Payroll Records, Tax Records
  15. Assets
    what a company owns
  16. Liabilities
    What a company owns
  17. Owner's Equity
    Value of the owner's investment in the business.
  18. Balance Sheet
    • Assets, liabilities, and owners equity for a specific date are listed
    • Prepared every six months or once a year
  19. Income Statement
    To report the revenue, expenses, and net income or loss from operations for a specific period
  20. Net income and net loss
    • Net income is when revenue is greater than expenses
    • Net loss occurs when expenses are greater than revenue
  21. Payroll
    is the financial record of employee compensation, deductions, and netpay
  22. Payroll Records
    documentation used to process earnings payments and record each employee's pay history
  23. Direct Deposit
    employer transfers net pay electronically in to the employees bank account.
  24. financial Performance Records Ratios
    Are comparisons of a company's financial elements that indicate how well the business is performing
  25. formulas
    • Current Ratio: Current Assets/Current Liabilities
    • Debt to Equity Ratio: Total Liabilities/Owners Equity
    • Return on Equity Ratio: Net Profit/Owner's Equity
    • Net Income Ratio:Total Sales/Net Income
  26. Discrepancies
    Differences between actual and budgeted performance
Card Set:
Chapter 12: Financial Management
2013-10-01 17:23:41
accounting financial management

Chapter 12 Financial Management Cards Vocab
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