Financial Management

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Financial Management
2013-10-01 11:48:47
Chapter 12 Financial Management Business Principles

Chapter 12 Financial Management for Principles of Business Administration
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  1. Revenue
    all income that a business receives over a period of time
  2. Expenses
    costs of operating a business
  3. Budget
    detailed plans for the financial needs of individuals, families, and businesses
  4. Business Budget
    • 2 Main Purposes:
    • 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
  5. Budgeting Process
    • 1. Prepare a list of each type of income and expense that will be a part of the budget.
    • 2. Gather accurate information from business records and other information sources for each type of income and expense.
    • 3. Create the budget by calculating each type of income, expense, and the amount of net income or loss.
    • 4. Explain the budget to people who need financial information to make decisions.
  6. Start-Up Budget
    Plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.
  7. Operating Budget
    describes the financial plan for ongoing operations of business for a specific period
  8. Cash Budget
    an estimate of the actual money received and paid out for a specific period
  9. Financial Records
    used to record and analyze the financial performance of a business
  10. Types of Record 1: Asset Record
    identify the buildings and equipment owned by the business, their original and current value, and the amount owed if money was borrowed to purchase the assets
  11. Types of Records 2: Depreciation Records
    identify the amount assets have decreased in value due to their age and use
  12. Types of Records 3: Inventory Records
    identify the type and quantity of resources and products on hand along with the current value of each. Accurate records are crucial to determine if adequate resources are available to meet operating and production needs as well as customer demand.
  13. Types of Records 5: Records of accounts
    • identify all purchases and sales made using credit.
    • - accounts payable record: identifies the companies from which credit purchases were made and the amounts purchased, paid, and owed.
    • - accounts receivable record: identifies customers that made purchases using credit and the status of each account.
  14. Types of Records 6: Cash Records
    list all cash received and spent by the business
  15. Types of Records 7: Payroll Records
    contain information on all employees of the company, their compensation, and benefits.
  16. Types of Records 8: Tax Records
    show all taxes collected, owed, and paid.
  17. Assets
    what the company owns
  18. Liabilities
    what the company owes
  19. Owner's Equity
    the value of the owner's investment in the business
  20. Balance Sheet
    where assets, liabilities, and owner's equity for a specific date are listed
  21. Income Statement
    reports the revenue, expenses, and net income or loss from operations for a specific period
  22. Payroll
    the financial record of employees compensation, deductions, and net pay
  23. Payroll Records
    the documentation used to process earnings payments and record each employee's pay history
  24. Direct Deposit
    auto transfer to employee's savings, etc.
  25. Financial Performance Ratios
    comparisons of a company's financial elements that indicate how well the business is performing
  26. Discrepancies
    differences between actual and budgeted performance