Business Finance

Goals of Business

To respond to consumer needs and wants with goods and services that people are willing to buy. Goods

Articles of merchandise that are brought or produced by a business and sold to customers for profit.

Services Helpful acts such as pedicures, home cleaning, nursing

Producer The people and businesses that make goods and provide

services. Consumer

The people or businesses who purchase the goods and services.

Needs or Wants

Needs Essential services that are required to live

Food, clothing, and shelter

Wants Things that people enjoy having, and possibly make

you life easier, but are NOT necessary for survival Computer, phone, cars

Needs or Wants

Some reasons these may change throughout life are: Increased Income Major life events Changes in technology Increased family responsibilities Changes in priorities

Needs or Wants

Consider the changing stages of life: University student Young professional Parent of young children Parent of grown children Retired individual

How do your needs and wants change through these phases of life?

Try to come up with 2 needs and 2 wants specific to each phase of life.

Is being an entrepreneur the right for you?

A score of 41 to 65 Indicates that you will almost certainly fit well into the

role of business owner. You have what it takes to fight for success and stick with it when the going gets tough. You have a better than average chance of surviving in what is a tough and challenging environment.

A score of 66-89 Shows that you have a good chance of being

successful as an entrepreneur, however there are some skills and attitudes that you might want to develop to improve your chances.

Is being an entrepreneur the right for you?

A score of 90-122 Means that you should consider taking some courses on

starting a business. Also talk to several entrepreneurs and ask them what they feel are the key characteristics and personality traits you will need to be successful, and ask yourself honestly if you possess them. Talk to them about what life is like as an entrepreneur and consider carefully whether this is really the life you want for yourself.

A score of 123 Is unlikely, but if that’s what it adds up to, think long and

hard as to whether this is the life for you. No one should enter into self-employment lightly, it’s a very tough life. Be honest with yourself, wouldn’t you better off and happier working for someone else?

Math Skills: Fractions, decimals and percents

Decimals Place value

Fractions Place value tells you the bottom number of the fraction

Percent Literally means per 100 As a fraction, 100ths, how much out of 100 As a decimal, how many 100ths,

Math Skills: Compound Interest

Compound Interest Interest is paid on original amount of deposit, plus any

interest earned. Where

A = Amount P = Principal r = rate t = time in years n = # of compounding periods per year

Semi-annually - twice a year Quarterly – four times a year Monthly – twelve times a year Daily – 365 times a year

1ntrA P

n

Example

You take out a loan $3500 for 3 years that charges 6.5% per annum, compounded monthly. How much will you owe at the end of 3 years?

Goals of Business

What makes a business successful? Understanding the needs and wants of consumers Producing a quality product or service Marketing and distributing the product or service

effectively Offering the product or service at a competitive price. The entrepreneur!

Feasibility of a Small Business

Factors to consider Are there enough potential customers to support your

business?

Are there competitors?

What are the costs involved? Start-up costs

Purchases you need to make before you start the business• Furniture, equipment, tools, etc

Operating expenses Ongoing costs of your business

• Location, utility bills, consumable supplies

How will you finance this?

Examples: Rayyan

Moose Jaw population of 33 274 approximately 6% ≤ 5 years old 30 licensed daycares operating in the city.

Regina population of 193 100 approximately 6% ≤ 5 years old 142 licensed daycares operating in the city.

Approximately how many children aged 5 and under are there in Moose Jaw and in Regina?

How many children aged 5 and under are there in each city for each daycare?

In which location would you recommend Rayyan open her daycare?

Examples: Hazel

What are her total start-up costs?

If Hazel has $5000.00 saved, how much more does she need to cover her expenses?

Hazel does not want to take out a loan. Suggest two ways she could adjust her start-up costs.

Homework

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Financial Terminology

Revenue amount earned

through the sale of goods or services

Fixed expenses Expenses that occur on

a regular basis and do not change in value

Variable expenses Expenses that change

in value or frequency

Profit amount by which revenue

exceeds expenses for a given period

Loss the amount by which

expenses exceed sales for a given period

Break even the point at which

business expenses equal sales revenue

Statement of Revenue and Expense

Just Desserts Catering Company

Statement of Revenue and Expense For the month ending July 31, 2012

TotalsREVENUE

Payment from Mr. Dorn 403.43Payment from Mrs. Towers 483.72Tip from Mrs. Towers 20Cheque from Mr. Rogers 309.91Payment from Mr. Oswich 421.39Payment from Mrs.Zedrickowsky 376.76Payment from Mr. Ozaki 395.62Payment from Ms. Li 508.26

TOTAL REVENUE 2919.09EXPENSES

Gas for car 296.74Food containers 72.84Groceries 141.51Car Insurance 106.53Refund to Mr. Zibit 25.34Employee salary 1254.25Monthly fee paid for Advertisement 100.00Telephone bill (flat rate plan) 80.00

TOTAL EXPENSES 2077.21PROFIT 841.88

Question to expect…

Determine from a spreadsheet if an entry is a revenue or an expense

Classify expenses as fixed or variable.

Determine the profitability of a company over a short period Determine expenses and revenue… find the difference!

See the examples on pages 288 and 290 if you get stuck!

Homework

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