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Module 5 - Managing the Small Business Finance.docx -...

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TOPIC 1: FINANCIAL PLANNING FOR SMALL BUSINESSTOPIC 2: WHAT IS A BUDGETSources and application are two of the most important concerns of the smallbusiness owner. Error in decision-making regarding these two concerns could put thejeopardy the existence and survival of the firm.Importance of Financial PlanningFinancial planning provides the small business operator with a detailed approachto managing the financial activities of the firm. Decisions can be made in advance, thusminimizing the risk of errors brought by making choices in the middle of operationswithout the benefit of careful analysis.What is Financial PlanningFinancial planninginvolves an analysis of possible future events and how theseevents might affect the firm. It is an activity that involves analyzing the financial flows ofthe firm as a whole, forecasting the consequences of various investments, financing,profit decisions, and weighing the effects of various alternatives.For the small firm, financial planning will mean knowing the profit objectives ofthe firm, identifying the sources and uses of funds, and making decisions on variousfinancing alternatives. The preparation of a budget will satisfy most of the requirementsfor financial planning in small business.A budget is an estimate of the income and expenditures for a future period oftime, usually one year. A budget must be made with the objective of satisfying thetarget market, employees, and management goals.Steps in Budget Preparation1.Build the foundation for the budget.Module 5Managing the Small BusinessFinanceTOPICSFinancial Planning for Small BusinessWhat BudgetTypes of Budget Applicable to Small BusinessFinancial AnalysisSources of FinancingLEARNING OUTCOMESAt the end of the lesson, you should be able to:apply the guidelines in starting up business; anddiscuss the functions of a financial manager, uses and sources of funds, the rules ofsound financing and financial record keeping.1
TOPIC 3: TYPES OF BUDGET APPLICABLE TO SMALL BUSINESSa.Project the best estimate of the volume products and services (or both) expectedand the revenue that will be received.b.Divide the estimate into monthly figures.c.Obtain an estimate of monthly cost of sales or rentals, by product or service.2.Determine anticipated fixed cost.3.Establish projected non-operating income and costs.Listed below are the type of budgets and the type of business they are mostapplicable to:1.Cash budgets – for all types of forms;2.Production budgets – for small manufacturing firms; and3.Sales budgets – for small service firms.The Cash BudgetA cash budget is a forecast of a future cash receipts and cash disbursementsover various intervals of time. It is also alternately referred to as cash receipts and cashdisbursement statement.

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Term
Fall
Professor
Maxine
Tags
Balance Sheet, Financial Ratio, Generally Accepted Accounting Principles, SBO

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