Chapter 10 ppt

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10 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

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SMALL BUSINESS
MANAGEMENT

Chapter 10

Financial Management

Accounting Information

Entrepreneurs

To _____ and control

To motivate employees



Investors

To _____ performance

Lenders

To evaluate creditworthiness

Government

To _____ taxes owed

To approve new stock issues

Recording Transactions

Classifying Transaction Totals

Summarizing Data

Balance Sheet

(Statement of Financial Position)

Income Statement

(Statement of Profit and Loss)

Cash Flow Statement

and/or
Changes in
Financial Position

The Accounting Cycle

Financial Statements


Balance Sheet

(Statement of Financial Position)


_____ of what a business owns and what it
owes



Income Statement

(Statement of Profit and Loss)


_____

of operations over a given period of time



Cash Flow Statement (Ch 7)





Changes in Financial Position


_____

in balance sheet accouts of a set period of time

Accounting Systems for Small Business


One
-
Book System


One
-
Write System


Multi
-
journal System


Outsourcing Financial Activities


Accounting Systems for Small Business


Small Business Computer Systems


Top 5

Accounting Software For Small
Business


Simply Accounting Accounting Software



MYOB Plus Accounting Software



Intuit QuickBooks Accounting Software



Peachtree Complete Accounting Software



AccountEdge Accounting Software



Accounting Systems for Small Business


Disadvantages


Cost


Obsolescence


Employee _____


Capabilities


Setup Time


Failure to Compensate for _____
Bookkeeping


Management of Financial Information for Planning


Short Term Financial Planning


Preparing an estimated future financial
result ( Proforma or budget )



Budget is valuable because


Clarification of Objectives


Coordination


Evaluation and Control


Variance analysis


Management of Financial Information for Planning


Long Term Financial Planning


The Capital Investment Decision


Baron of _____


The Capacity Decision


Cottage _____


The Expansion Decision



The Capital Investment Decision


rate of return method (PG 315 )



payback method (PG 315 )



present value method


NPV or IRR ( Get a financial calculator )




The Capacity Decision


break even point


which tells you the sales volume you need to
break even, under different price or cost
scenarios


Management of Financial Information for Planning


The Expansion Decision


Effect of fixed cost adjustments


Effect of variable cost adjustments


Use BEP on incremental basis

Evaluation of Financial Performance


Management of Current Financial
Position


Making profit but cash poor


length of time for payments


three essential components


time taken to pay accounts payable


time taken to sell inventory


time taken to receive payment for
inventory

Evaluation of Financial Performance


Evaluation of Financial Statements


Ratio Analysis


Liquidity ratios


current ratio = current assets / current
liabilities


over 1:1, usually between 1:1 and 2:1


Acid test/ Quick ratio = current assets
-
inventories/ current liabilities


1:1 is considered healthy

Evaluation of Financial Performance


Evaluation of Financial Statements


Ratio Analysis


Productivity ratios


Inventory turnover = COGS / Average
inventory at average cost


Inventory turnover = Sales / Average
inventory at retail price


Collection period = Accounts receivable /
Daily credit sales

Evaluation of Financial Performance


Evaluation of Financial Statements


Ratio Analysis


Profitability ratios


Gross margin = sales
-

COGS


Profit on sales = net profit before tax /
sales


Expense ratio = Expense item / Sales


Return on Investment = Net profit before
tax / owner’s equity


Evaluation of Financial Performance


Evaluation of Financial Statements


Ratio Analysis


Debt ratio



Total debt to equity = Total debt /
owner’s equity


not greater than 4:1


Credit and the Small Business


Advantages of Credit Use


will undoubtedly increase sales


necessary to _____ competitive


credit customers exhibit more store
loyalty


credit customers are more concerned
with _____ of service vs. price


credit records can be _____ for future
planning

Credit and the Small Business


Disadvantages of Credit Use


will be some bad debts
-

depends on
credit policy and monitoring


slow _____ cause lost interest and
capital


increases bookkeeping, _____ and
collection expenses

Credit and the Small Business


Management of a Credit Program


Determine Administrative Policies


Set Criteria for Granting Credit


Set up a System to Monitor Accounts


Establish a Procedure for Collection

Credit and the Small Business


Use of Bank Credit Cards


Maybe cheaper and easier than running
your own credit program


Usually 2%
-
6% of transaction

Sam’s Paint and Drywall

Pg 324


6a.

From the above balance sheet and
income statement of Sam's Paint and Drywall
determine the following ratios:


1.

Current


2.

Inventory turnover


3.

Profit to sales


4.

Return on investment


5.

Total debt to equity



6b.

From Dunn & Bradstreet's Key
Business Ratios on industry norms, evaluate
each of the above ratios.

Concept Checks


1. Describe the three steps in the
accounting cycle.


2. What are the three financial
statements , as discussed in the
text, that are valuable to a small
business owner?


3. List the bookkeeping systems
used by a small business.

Concept Checks


4. What are some of the capabilities of
computers which can benefit small
business?


5. What are some possible
disadvantages of computer
ownership?


6. In the short term, why is budgeting
a valuable tool?

Concept Checks


7. What are the three types of long
-
term financial planning decisions
that could affect the business?


8. What measure can be used to
evaluate the results which are found
in the financial statements?


9. What is the business cycle of a
small business? Why is it
important?

Concept Checks


10. Why is ratio analysis important?

Appendices


A. Checklist for buying a small
business computer


B. Use of Financial Ratios for a
Small Business (Car Dealer)