Chapter 12 Financial Management

  1. Definiton: Revenue
    All income that a business receives over a period of time.
  2. Definition: Expenses
    The  costs of operating a business.
  3. Definition: Budget
    A concept that provides a detailed plans for the financial needs of individuals, families, and businesses.
  4. What are the two main purposes for a business budget?
    1. Anticipate sources and amounts of income for a business.

    2. Predict the type and amounts of expenses for a specific business activity or the entire business.
  5. What is the purpose for The Small Business Administration (SBA)?
    It provides many planning tools for new businesses.
  6. Four steps for the 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.
  7. Definition: Start-up budget
    It plans income and expenses from the beginning of a new business or a major business' or a major business expansion until it becomes profitable
  8. Definition: Operating budget
    It describes the financial plan for ongoing operations of the business for a specific period
  9. Definition: Cash budget
    An estimate of the actual money received and paid out for a specific period.
  10. Definition: Financial record
    They're used to record and analyze the financial performance of a business
  11. Definition: Assets
    What a company owns
  12. Definition: Liabilities
    What a company owes
  13. Definition: Owner's Equity
    The value of the owner's investment of the business
  14. Definition: Balance sheet
    The assets, liabilities, and owner's equity for a specific date are listed on this apparatus.
  15. Definition: income statement
    Reports the revenue, expenses, and net income or loss from operations for a specific period.
  16. Definition: Payroll
    The financial record of employee comepnsation
  17. Concept: Income taxes, Social Security, and Medicare
    Requires employers to withhold and deposit contributions from employees' paychecks along with matching contributions by the employer
  18. Concept: Unemployment taxes
    Employers pay Federal Unemployment Tax (FUTA) tot he unemployment insurance system
  19. Definition: Payroll records
    Documents used to process earnings payments and record each employee's pay history.
  20. Definition: Direct Deposit
    The employer transfers net pay electronically into the employee's bank account
  21. Definition: Financial performance ratios
    Comparisons of a company's financial elements that indicate how well the business is performing
  22. Definition: Discrepancies
    Differences between actual and budgeted performance
  23. Concept: Records of accounts
    Identifies all purchases and sales made using credit
  24. Concept: Accounts payable record
    Identifies the companies from which credit purchases were made and the amount purchased, paid, and owed.
  25. Concept: accounts receivable record
    Identifies customers that made purchases using credit and the status of each account
Card Set
Chapter 12 Financial Management
Chapter 12 Financial Management Flashcards for Principles of Business of Administration