Check Point Questions
1. What is the basic financial equation for businesses?
Revenue - Expenses = Profit or Loss
2. What are the four steps in preparing a business budget?
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.
3. Identify and describe the three types of budgets needed by all businesses.
Start-up Budget; the budget that plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.
Operating Budget; describes the financial plan for ongoing operations of the business for a specific period.
Cash Budget; an estimate of the actual money received and paid out for a specific period.
