Preface xiii Section I Preparing to Operate the Business 1 Chapter 1 Budgeting for Operations 3 Definition or Purpose of an Operating Budget 3 Signs of Budget Ineffectiveness 4 Improvements to the Budgeting System 6 Responsibility Accounting 9 Budget Tracking and Maintenance 21 The System of Interlocking Budgets 25 Need for Budget Updating 35 Summary 36 Chapter 2 Investing in Long-Term Assets and Capital Budgeting 39 Definitions 40 Overview and Use of Capital Budgeting 41 Life Cycles 42 Capital Budgeting Sequence 43 Producing Numbers to Get Dollars, the Use of Forms, and the Capital Budgeting Model 48 Miscellaneous Considerations 65 Product Discontinuance 66 Bailout 68 Summary 69 Appendix: Examples and Comparison of Calculations 70 Chapter 3 Basic Control Systems 77 The Need for Control Systems 77 Types of Fraud 79 Key Controls 81 When to Eliminate Controls 97 Summary 99 Section II Operating the Business 101 Chapter 4 Cash Flow Concerns 103 Cash 103 What to Do with Excess Cash 105 Cash Flows 108 Introduction to Cash Flow Budgets 112 Indications of Cash Flow Problems 112 Managing Cash 113 Preparation of the Cash Budget 126 Disbursements 127 Net Cash Flow and Cash Balances 130 Exceptions to Expected Cash Flows 131 Summary 132 Appendix: Cash Flow Example 133 Chapter 5 Financing 143 New Businesses 143 Zero Working Capital and Zero Fixed Assets 144 Types of Financing 148 Private Placement of Stock 157 Swapping Stock for Expenses 158 Stock Warrants 159 Stock Subscriptions 159 How to Obtain a Bank Loan 160 Sources of Debt Financing 167 Types of Loan Arrangements 168 Restrictions on Loans 171 Conditions That a Borrower Should Seek 173 Summary 175 Section III Evaluating the Operations of the Business 177 Chapter 6 Performance Measurement Systems 179 Financial Ratios 180 Types of Financial Ratios 182 Using Performance Measurements for Predictions 193 Operating Ratios 196 Other Ratios 202 The Balanced Scorecard 204 Summary 207 Chapter 7 Financial Analysis 209 Risk Analysis 209 Capacity Utilization 215 Breakeven Analysis 222 Summary 229 Chapter 8 Taxes and Risk Management 231 Controlling Tax Liabilities 232 Risk Management 237 Insurance 245 Types of Insurance Companies 249 Claims Administration 250 Summary 252 Chapter 9 Reporting 255 Federal Government Requirements 255 State Government Requirements 262 Local Government Requirements 267 Creditors 268 Equity Holders 269 Management Reports 269 Summary 286 Index 289
Steven Bragg, CPA, CMA, CIA, CPIM, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a Master's degree in finance from Bentley College, an MBA from Babson College, and a Bachelor's degree in Economics from the University of Maine. He has been the two-time president of the Colorado Mountain Club, is an avid alpine skier and mountain biker, and is a certified master diver. Subscribe to Steve's free best practices newsletter at www.stevebragg.com E. James Burton, Ph.D., CPA, CFE, is dean of the College of Business and a full professor of accounting at Middle Tennessee State University. He has founded, owned, managed, and sold a number of businesses in a variety of areas from service to manufacturing. He received a Bachelor of Arts degree from MacMurray College in economics/business, a Master of Business Administration degree from Murray State University in management, and a Ph.D. in accountancy from the University of Illinois at Urbana-Champaign. In addition to over 50 journal articles, he has written Total Business Planning: A Step-by-Step Guide with Forms that has continued through three editions and translation into Norwegian. He resides in Murfreesboro, Tennessee.