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FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT

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FINANCIAL MANAGEMENT

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    1. FINANCIAL MANAGEMENT

    2. Definitions Accounting process of identifying, measuring, and communicating financial data Financial accounting provides information to external users Managerial accounting provides frequent operational data and information to internal users

    3. Basic Accounting Principles Balance sheet a financial report that gives a status report of assets, liabilities, and equity as of a specific date (used to show changes and the ability to pay debts) Income statement a financial report of revenues and expenses for a time period (used to analyze success) Matching account for revenues and expenses in same period Depreciation lowering the value of an asset as it ages

    4. Balance Sheet Assets (what is owned)* Current assets Cash Accounts receivable (owed by customers) Inventory Prepaid insurance Fixed assets Plant and equipment minus depreciation Property Liabilities (what is owed) Current liabilities Accounts payable (bills from suppliers) Accrued taxes or taxes payable (owed, but not paid) Accrued expenses (owed, but not paid) Deferred revenues (advanced payments) Notes payable (short-term loans) Long-term liabilities Mortgage loan Equity (investment) Funds invested Retained earnings (net worth minus withdrawals)

    5. BALANCE SHEET THE ATHLETIC ZONE SEPTEMBER 30, 2007

    6. Examples of Income Sources Advertising Concessions and food service sales Conference sharing Corporate sponsorships Donations and gifts Facility rentals Fund raising events Guarantees Institutional support Investment income Luxury boxes Merchandise sales Parking fees Premium seating Program sales Radio rights fees Stadium or arena naming rights Student fees Television rights fees Ticket sales

    7. Examples of Expenses Salaries and benefits Grants-in-aid Band Cheerleaders Equipment Insurance Officials Recruiting Uniforms Utilities Advertising and printing Athletic training supplies Capital expenses Facility maintenance General and administrative (office equipment; furniture; supplies; telephones; postage) Loan and interest repayment Marketing Media and community relations Transportation, lodging, and food

    8. INCOME STATEMENT PRIVATE ACADEMY ATHLETIC ASSOCIATION FOR THE YEAR ENDING DECEMBER 31, 2006 Salaries and benefits $34,000 Team equipment $14,000 Team uniforms $6,000 Travel $7,000 Officials $15,000 Security $1,300 Insurance $900 Office supplies and equipment $1,200 Telephone $800 Postage $4500 Athletic training supplies $8,000 Team awards $3,000 $91,700

    9. Managerial Accounting On the following slide are listed the expenses, revenues, assets, and liabilities for Private Universitys Athletic Department. These items need to be placed in the correct category for a balance sheet and an income statement. When these statements are completed correctly, the asset category and the liability/equity category on the balance sheet will each total $481,000. The athletic department's income and expenses will each equal $562,000.

    11. Fund Accounting For nonprofit entities Current unrestricted fund (operations) Current restricted fund (such as for coaches salary supplements) Endowment fund (usually for grants-in-aid) Retirement fund Plant fund (facilities)

    12. Types of Businesses Sole Proprietorship Advantages Revenues only taxed once Owner makes all decisions Few government restrictions Easy to form and to sell Disadvantages Unlimited personal liability Limited access to capital funds Partnership Advantages Revenues taxed only once Shared decision making and management Few government restrictions Easy to form and to sell Disadvantages Joint personal unlimited liability Limited access to capital funds

    13. Corporation Advantages Liability is limited to the corporate assets Ownership is easily transferable Led by talented managers Disadvantages Complex and costly to form Double taxation for C, not S, corporations Answerable to shareholders Must comply with state and federal laws Limited Liability Corporation or Limited Liability Partnership Advantages Classified as a partnership for income tax purposes Has the liability protection of a corporation Disadvantage Must comply with state and federal laws

    14. Advantages of Budgeting Plan and review entire operations Provide guidelines for staff Monitor expenditures Provide information for fiscal control Ensure accountability so expenditures can be measured and reported on Types of budgets Line item, such as for uniforms, public relations, or office equipment Program, such as for a team or the marketing department

    15. Itemized Budget Request from Coaches of each Team or Managers of each Department Cost and justification for each requested item Itemization of requested items, i.e., number, sizes, and description in full Quotes for each item to be purchased

    16. Budgeting Assignment You are the manager of Southwest Fitness Club. Each year you must develop and present a balanced budget to the owners. This budget must include realistic revenues and expenses given the size and scope of this club (which you should provide). You may include up to 5 revenue sources and must include at least 10 anticipated expenses, with amounts provided for each of the revenues and expenses. Your budget should include a brief justification for each budgetary item.

    17. Financial Planning Short-term planning usually for less than two years; examines mostly internal data, such as cash flow, working capital, and a cost-benefit analysis of day-to-day decisions Long-term planning forecasting the future by examining mostly external factors, such as the competition Pro-forma budget a financial plan for the future that reflects the mission and strategic plan expressed in financial terms

    18. Components of a Business Plan Plan summary Industry section Company section Analysis of the product or service Market section Marketing section Operations section Management and personnel section Financial projections section Capital needs section

    19. Fund Raising Establish a worthy cause (important opportunities for which to make a contribution) Identify prospective donors (be inclusive) Educate prospective donors about the worthiness of the giving opportunity Ask for a financial commitment (asking for money is a compliment)

    20. Fund Raising Make the collection (the larger the gift, the longer it takes) Express gratitude so as to leave a lasting appreciation (as simple as a thank-you letter; or a dignified public recognition if this is what the donor wishes) Report to donor how the gift has been used Recycle (the best prospect is a giver who is happy with the opportunity to give and the outcome of the process)

    21. Fund Raising Purpose Supplement budget Special needs Precautions Institutional policies Parental permission (in schools) Money collection procedures Examples A-thons (jog-a-thon; swim-a-thon; bike-a-thon) Bake/food sales Car washes Celebrity events, such as golf tournaments Raffles Summer sports camps Yard work projects Yard sales

    22. Fund Raising Assignment State appropriations for high school sports have not kept up with rising operational costs. The athletic director (who also is a coach) and other coaches have been asked by the principal to reduce the budget for the overall program by $25,000, develop plans for raising this amount of money, or identify two sports for boys and two sports for girls that will have to be dropped. Since as a group you do not want to cut the already small team budgets or eliminate teams, you choose to raise the needed funds. Develop plans for the fund raising projects that will be undertaken to raise $25,000. By School Board policy, you may not directly solicit gifts or donations from individuals or businesses.