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My Introspective

by Laurus Nobilis
My BrainCast

Finance Management

Finance Basics: Starting the Business (B)

 

Starting the Business

 

What is initial financial statement? What is the initial balance sheet? What is the difference between investor and the Company? Learn through the step-by-step Business Case Study.

 

Posted: Jun 2009


STARTING THE BUSINESS

Before any business can begin to operate, it needs a starting point:

The initial financial statements

•  show the establishment of the company.

•  are the starting point before the business begins to operate

 

INITIAL FINANCIAL STATEMENTS

When establishing a company, you need:

• a balance sheet and

• a cash flow

Since the business is not operating yet, there is no profit & loss statement.

•  Shows where the money for the business is coming from (cash inflow).

•  There is no cash outflow, as no business decisions have yet been taken.

Investment

 

INITIAL BALANCE SHEET

•  Is drawn up before the beginning of any business related transactions

•  Shows how the business is being financed

Balance Sheet

 

INVESTOR VS. COMPANY

It is important to distinguish:

• The Investor as an individual and

•  The Company in which he is investing

Investor vs. Company

In order to fully understand the basic financial concept follow the next business case study.

 


BUSINESS CASE STUDY

 

STARTING UP THE BUSINESS

Jerry Smart (JS) decided to get involved in business.  He decides to start with a 10 days practice run, involving smaller stakes, in order to understand the basic financial principles...


Business Case Study


Business Case Study

 

 

STARTING UP THE BUSINESS

Jerry Smart (JS) decided to get involved in business.  He decides to start with a 10 days practice run, involving smaller stakes, in order to understand the basic financial principles.

JS decides to join in the Fast Food business near school and will test the idea for just ten days, using savings of $100.  The new company is called JS Fast Food.

JS wants to have full financial accounts prepared for JS Fast Food each day, in order to understand the process and properly assess the progress of the test run.

 

Starting Up The Business

 

KEY TIPS before starting up the Business:

Liabilities are the sources of funds and can also be understood as what the copmany owes.

• The Shareholder, as the investor of capital, is different from the company.

Assets are the uses of finds, and can also be understood as what the company owns.

• Before the business begins trading, all investment is held as cash on the assets side of the balance sheet.

>>> Next on Finance Basics: The Basic Links

 

 

 

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