BSBFIM601 Lecture notes 1 | P a g eRevised: January 2016BSBFIM601 – Manage finances lecture notes Plan financial management approaches Budgets are an integral part of the management of a business used both for planning and for diagnostics. The foundation and budgets is financial statements. Financial statements are nothing more than what you would expect from any statement. A Statement is a comment made by someone, generally, to a public audience or to a specific group of people. In everyday life there are different types of statements. One type is interview statements. Other statements may be those made by officials regarding a trade agreement or a new piece of legislation etc. Either way a statement is intended to let people know about a particular situation. In the case of financial statements, these are a summary of the most important financial data about the company. Just imagine if all individuals needed to have financial statements about themselves and an individual was asked to make a statement about their finances before s/he invited a group of friends to a restaurant. What would be the most important piece of financial data relevant to that situation? The answer is how much money the person has to spend on their guests. Likewise, the most important financial statements for a company are: •Balance sheet •Profit and loss statement •Cash flow statement Questions to ask yourself about budgets and financial plans: 1.How much money does the company have in the bank? 2.How much money does the company owe to others? 3.Does the company own anything else of value? 4.Is the company making a profit? 5.What are the costs the company is incurring and how much sales are those costs generating? Basically, these are the major questions that financial statements answer, so if you trust that our trip will be a short and simple one, let us start understanding these statements. The most basic components of financial analysis are assets and liabilities. Quite simply assets are things you own and liabilities are things you owe. Take a minute to review a fictional person’s assets and liabilities. Peter is a 26 year old male living in Sydney who works as a computer programmer. At this very moment, Peter has a bag with him which contains the following items: •A wallet worth $20 with a $50 note inside it

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BSBFIM601 – Manage finances

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