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POB 4.01 Parts 1 & 2

POB 4.01 Parts 1 & 2. 4.01 Understand financial planning. Financing Terms. Revenue – all income a business receives over a period of time Expenses – costs of operating a business Profit – occurs when revenue is greater than expenses Loss – occurs when expenses are greater than revenue.

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POB 4.01 Parts 1 & 2

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  1. POB 4.01 Parts 1 & 2 4.01 Understand financial planning.

  2. Financing Terms • Revenue – all income a business receives over a period of time • Expenses – costs of operating a business • Profit – occurs when revenue is greater than expenses • Loss – occurs when expenses are greater than revenue

  3. Financial Planning for Businesses • Beginning of a Business • Money needed to start • Financing sources • Money to operate until profitable • Sources of sales • Expenses

  4. Financial Planning for Business, cont • Ongoing • Paying employees • Supplies & materials • Maintaining the building and equipment • Technology updates

  5. Financial Planning for Business, cont • Business Expansion • Reasons to expand – serve more customers, reach unserved markets, or sell new products • Costs associated with expansion – research, new employees, marketing activities • Need to determine if revenue will be greater than costs

  6. What is a Budget? • Budget – detailed plans for the financial needs of individuals, families, and businesses. • Purposes of a Budget • Anticipate sources and amounts of income • Predict types and amounts of expenses • A budget is successful when revenue > expenses

  7. 4 Steps in Planning a Budget • 1. Prepare a list of each type of income and expense • 2. Gather accurate info for each type of income and expense • 3. Create a budget and calculate income, expenses, and net profit or loss • 4. Explain the budget to those who make decisions

  8. Types of Budgets • Start-Up – plans income and expenses from the beginning of the new business or a major expansion until it becomes profitable. • Includes buildings, equipment, inventory, supplies, materials, employees, utilities, licenses, advertising and transportation

  9. Types of Budgets, cont • Operating Budget – a financial plan for ongoing operations of the business for a specific period of time • Usually 3 months, 6 months or 1 year

  10. Types of Budgets, cont • Cash Budget – estimate of actual money received and paid out for a specific period. • Need to determine if there will be enough money to pay bills or if the business will need to borrow money

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