Foundations of Small Business Finance

This unit introduces core financial management concepts for small businesses, including reading and connecting profit & loss and balance sheet statements, cash flow and liquidity analysis, budgeting and profit modeling, and basic tax and control considerations. Students build practical skills in measuring profitability, assessing solvency, designing basic budgets, and evaluating tax and legal implications to prepare for deeper financial planning and decision-making in subsequent units.

Learning Objectives

• Analyze P&L statements and balance sheets to calculate and interpret key profitability metrics, cost behavior, and the relationships between income, retained earnings, and assets/liabilities.
• Apply cash-management and solvency tools by identifying sources of cash, computing cash flow and liquidity ratios, and assessing short- and long-term solvency for sample small business scenarios.
• Demonstrate the budgeting process and profit model by developing a basic operating budget, forecasting profit before income tax, estimating capital needs, and using budgeting tools to justify assumptions.
• Evaluate internal control needs, system requirements, and the tax implications of different business legal structures, and determine when business valuation or termination planning is warranted.