Copyright © Texas Education Agency, 2012. All rights reserved. Financial Accounting Principles Statistics & Risk Management 1

1Copyright © Texas Education Agency, 2012. All rights reserved.

Financial Accounting Principles

Statistics & Risk Management

2Copyright © Texas Education Agency, 2012. All rights reserved.

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Copyright © Texas Education Agency, 2012. All rights reserved. 3

Sole Proprietor vs. Corp

Sole Proprietor or “S” Corp– Taxed as earned whether taken as wages or

NOT (retained).–Unlimited Liability

Corporation (“C” type)– Earnings Taxed at Corporate Rate.– Limited Liability (Maybe)– Easy Capitalization (Sometimes)


Public Vs. Private

Public–Board of Directors– Extensive Regulations• Sarbanes–Oxley Act of 2002

Private– Less Accountability– Easier to Pierce the Liability Veil

http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act


Non-Profit Vs. Profit

Some Serious Tax Advantages– Salaries can still be BIG.– No Dividends Paid Out.– Can still Service Loans


Risk Management

• Employs objective analysis methodologies including Descriptive and Inferential Statistics to identify opportunities and reduce monetary risks.


Raw Data is Meaningless

Categorizing/Measuring Data–Nominal (Gender) –Ordinal (Zip Codes)– Interval (Sales by Year)–Ratio (Profit 0 to unlimited)


Summing the Data

Sum Up Total SalesSum Up Total ExpensesSum Up Totals AssetsSum Up Totals LoansSum Up Total Investments


Compare Data Over Time

Income This MonthOver Last MonthSame Period Last Year


Organize Data by Category

Breakout Revenue– Product Sales– Service Sales– Interests– Other Revenue


Organize Data by Category

Breakout Expenses– Payroll– Taxes– Utilities– Insurance– Bad Debt


Compare Data to Population

Your Sales/Expense Data – To your Local Competition– To the Industry– To the Economy


Extended Data Calculations

Gross ProfitNet ProfitPercentages (Sales/Gross)Ratios (Acid Test)

Documents

Copyright © Texas Education Agency, 2012. All rights reserved. Financial Accounting Principles Statistics & Risk Management 1