Business and Finance Overview

Introduction

This module introduces you to the money part of the business. How do businesses plan for the finances in the business? What do they have to consider? Where will they make money or spend money? How do they keep up with their money and how do they protect their business?

Key Terms

Commercial Automobile Insurance– coverage of commercial vehicles (vehicles owned by the business) to pay for loss due to accident

Balance sheet - a statement of the assets, liabilities, and capital of a business at a particular point in time, detailing the balance of income and expenses over the preceding period

Costs vs. revenues - costs are what is spent and revenues are what is made through sales

Depreciation - taking a reduction of the value of an asset over a period of time to cover wear and tear

Excise taxes - a tax on certain goods such as fuel

Federal income tax - a percentage tax that is withheld from employees’ paychecks to pay the estimated taxes owed by the employee based on their pay

Fixed asset - a long-term, tangible piece of property that the firm owns

Franchise taxes - a tax based on the value of the company

Health – coverage for medical expenses that may be provided or sold at a discounted price to employees

Income statement - one of the main financial statements that tells whether the business is making a profit or not. It includes the revenue, costs of goods sold and net profit

Inventory tracking software - software that a business has to keep up with inventory, sales, orders, deliveries

Liabilities - obligations of money that a business owes

Liability – covers the business from being sued or pays when someone gets injured on company grounds or by a product or service of the business

Life/Key person – life insurance that covers the unexpected death or incapacitation of the owner or a key person for the business; to make sure if the person dies that the business doesn’t lose everything

Long-term assets -items owned by the company that are not easily converted to cash

Long-term liabilities - debts that are paid for over one year

Payroll taxes - income tax, social security tax, Medicare tax that is reported usually quarterly to the government and are withheld from employees’ paychecks

Pro forma - a document spelling out the expected costs of a transaction

Profit - the money the business makes after paying all expenses

Property – coverage to pay for the loss of buildings or other property

Property tax - a local tax that is levied on property (real estate, building and other property). It is usually based on a percentage of the stated value of the property.

Sales tax - tax that is levied and collected by a business on sales of merchandise

Self-employment tax - a tax on the profits of the business that is similar to income tax; to take the place of federal income tax since owners are not employees

Short-term assets - assets that can be quickly converted to cash

Short-term or current liabilities - debts that are owed in less than 1 year

Unemployment tax - a tax to cover payments of unemployment compensation to workers that have lost their jobs (usually when it isn’t their fault only)

Variable asset - an asset value that changes with demand

Worker’s compensation – covers medical expenses, lost wages, rehabilitation and death benefits of employees that get injured, ill or die on the job

Module Lessons Preview

In this module, we will study the following topics:

Finance Basics: In this lesson you will learn basic terms of business finance and how to complete financial statements for the business

Record Keeping: In this lesson you will learn how businesses keep track of their money and inventory.

Taxes and Insurance: In this lesson you will learn about the taxes businesses must pay to the government and the insurance that a business needs to protect from loss.

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