Financial management Flashcards
Accounting
Identification recording and communication a financial information
Auditing
Independent reviews of accounting and financial records
Generally excepted accounting principles GAAP
Provide consistency and prep and communication of financial statements
Cash Accounting
Recognizes monetary transaction at time cash is received
Accrual accounting
Method that recognizes revenues when earned or expenses incurred regardless of cash received
Accrual is most common
Depreciation
Part of accrual accounting. Decrease in value of an asset overtime typically annually equipment company car building
Budgets
Plans for operating a business to control expenses and profit against sales
Expense
Cost required to purchase some thing (materials) cost to operate a business (electricity)
Revenue/sales
Total money generated by sales of goods or services
Net income or net profit
Financial gain after all expenses have been paid. bottom line of a financial statement
Operating budget
Guide for day-to-day operations includes revenue and expense budget
To develop an operating budget first develop sales or revenue portion of the budget
A. Consider changed in pricing food prices board rates at universities
B. Consider competition economy industry trends
C. Consider profit objective and projected profit
Second part of planning operating budget
Budget expenditures estimates for food labor equipment repair and special projects.
Budget for labor account increases in salaries and wages, payroll taxes.
When should capital budget be completed?
At the same time as operational budgets
What is included in the capital budget?
Building improvements, new equipment,replacement of equipment, service maintenance, contracts expansions, repairs facilities
Payback Period
Time it takes an organization recover money invested
Cash budget
Estimate of the amount of money that will flow in and out of a business helps to determine if funds will be available to meet financial obligations
Incremental budget Or traditional budget
Begins with existing budget give slight increase is no change or slight decrease as the various line items departments or programs
Performance budget model
Less revenue and expenses by line item for each program or service and as a performance measure typically in government not-for-profit organization
Zero based budget model
Every function within an organization is organized for evaluation and starts at zero needs and cost for each function or reviewed with detail Time intensive
Flexible budget model
Adjust the various levels of operation or sales good for operations with Darian sales or revenues throughout the year
Fixed budget model
Prepared for one level of sales or revenues if you anticipated changes throughout the year common in government and nonprofit
Operating expenses
Labor supplies administrative and other general expenses
Fixed costs
Cost that remain constant regardless of increases in sales or customer volume
Examples include salaried personnel rent taxes depreciation insurance
Variable costs
Cost that change in direct proportion to sales volume this includes food paper products cleaning supplies hairnets facemasks
Semi variable cost
Portion remains fixed and a portion changes with sales volume this includes overtime utilities or maintenance or labor
Direct costs
Cost associated with a direct production of a good or service includes food and beverage direct labor costs
Indirect costs
Cost not associated with direct production of a good or service
Examples include utilities rent Marketing office supplies employee benefits gifts and Depreciation
Recurring revenue
Based on the idea of predictability business has reasonable assurance they will receive payment regular times example monthly subscription for Netflix
Project revenue
Generated through one time projects example catering operation may only work with client one time
Service revenue
Sells time not good example private practice dietitian corporate wellness dietetics consultant
Profitability
Primary goal of business
Measured using revenues versus expenses and other possibility ratios
Financial accountability I need for a company to make a profit
Resources allocation
Process and strategy of an operation deciding where resources like people equipment and food Should be used in the production of goods and services
Should be efficient to reach desired goals
Balance sheet in financial statements
List assets or resources liabilities or debts and owners equity or owners interest is a snapshot of a given date and time
Balance balance sheet
For the balance sheet to be balanced each increase or decrease in assets must be accompanied by an equal decrease in another asset or increase in liability or owners equity
Current assets (short term)
Cash and all assets that will be converted into cash in a short period of time
Fixed assets (long term)
Long-term permanent assets that are not intended for sale
Accounts receivable
Money owed to the company from outside entities
Debt to asset ratio
Financial leverage indicator if you have a 50% ratio this means 50% of each dollar has some form of debt shows ability to pay financial responsibilities
Current liabilities
Obligations that must be paid within a period of one year
Fixed liabilities or long-term liabilities
Obligations that will not be paid within the current year
Owners equity
Retained earnings
Monetary value of the company wants debts are paid off held by owners
Income statement or Profit and loss statement
A report of operating results over a period of time. Focuses on revenues or money made from sales and expenses including wages rent and utilities.
Net profit
Sales minus expenses
Gross profit
Sales minus the cost of goods sold
Profit margin
How many sense of profit the business generates for each dollar sales
Return on assets
Indicate sense of profit for every dollar in assets
Break even point
We’re company is not making profit or incurring any loss
