Personal Saving and Borrowing (Part 1) / Business Finance and Accounting (Part 2)

Topics

1. 3.1 Saving for Future PurchasesWhy consumers save, the barriers to saving, and how to build a savings plan.
2. 3.2 Borrowing, Credit, and DebtWhy consumers borrow, how lenders judge creditworthiness, and strategies to manage debt.
3. 3.3 Accounting and Financial ManagementWhy businesses and consumers track financial data, and the roles of accounting and finance departments.
4. 3.4 Business ExpensesStartup costs and the expenses of operating a business.
5. 3.5 Financial CapitalWhy businesses raise outside capital, where it comes from, and how to pitch lenders and investors.
6. 3.6 The Income StatementThe components of an income statement and how to use one to evaluate performance.
7. 3.7 The Balance Sheet and Net WorthThe components of a balance sheet and what net worth means for a business or an individual.
8. 3.8 The Cash Flow StatementThe components of a cash flow statement and how stakeholders use it.
9. 3.9 Ethics and Financial ReportingIncentives for unethical financial reporting, and the laws and professional codes that push back.

Sadie's festival fund

Sadie is a high school senior with one steady part-time job and one want that has a price on it. She needs $450 by the end of May for a three-day festival weekend with three friends, the last weekend the four of them will share before graduation. She funds it entirely from her own paychecks, and the two personal-finance topics of this unit follow the plan she builds and the borrowing offer she almost accepts.

Sadie, eighteen, a cashier at Hillcrest Market since her junior year · Theo, the Unit 2 anchor, appearing once in the 3.1 handoff

1. Sadie, eighteen and a cashier at Hillcrest Market since her junior year, wants a three-day festival weekend at the end of May with three friends, the last weekend the four of them will have before graduation scatters them. The package prices out at $450. Twelve weeks out, she opens an account at her credit union that charges no monthly fee, then schedules $40 to move each Friday, on the day her pay lands.

   A savings plan is a goal, a deadline, and an automated transfer sized against real take-home pay. · 3.1

2. In week 5 the passes go on sale at $260 with the fund holding $200, and the sale page says the current price holds only while supplies last. A pay-in-four checkout sits open on her phone with her details already entered and a 24% student card offer in the next tab. She runs all three prices, waits, and buys in week 7 with cash she actually has, routing it through a $500-limit starter card she pays in full.

   Credit is a tool when the cash exists first and a trap when it does not, and the true cost has to be computed before the tap. · 3.2

3. Her budget card runs a four-week month on $560 of net pay: $160 to savings, $40 for her share of the phone plan, $60 for transport, $120 for food and fun, $40 for gifts and other, $20 repaying an advance from her parents, and $120 left unallocated.

   A consumer budget is a personal projected income statement, and it must carry a debt-payment line. · 3.6

4. In festival week she holds $220 in savings, $160 in checking, and about $360 of belongings, against $60 still owed on a $100 advance from her parents. Her net worth is $680.

   Personal net worth uses the same equation a business uses for owners' equity. · 3.7

5. The unit closes on her card rather than a scene: $220 saved by festival week, $190 spent on the weekend, and about $30 left over. Twelve weeks of automatic $40 transfers did exactly what they were set up to do.

   A plan sized with cushion at the start survives an early purchase and still lands ahead. · 3.9

Continues in Unit 5.

Steep Street Boba

Steep Street Boba sells bubble tea from a strip storefront sitting between a high school and a community college. It is three years old, runs on two part-time baristas, moves roughly 100 cups a day at a $6.00 average, and books event catering on the side. Its founding equipment loan carries Cami's grandmother as co-signer, because a business that new could not borrow against a record it did not have. The business half of this unit watches the shop's records mature, from one balance on a phone to a complete statement packet, and ends at the spring refinancing that would release the co-signer.

Cami, twenty-one, founder of Steep Street Boba, which she opened at eighteen · Dorothy, sixty-five, Cami's grandmother, retired, and the co-signer on the equipment loan · Priya, nineteen, a part-time barista and community college student

1. Cami opened Steep Street Boba at eighteen, immediately after finishing high school, in a rented storefront between the two schools. Through the first year she managed it from one figure on a banking app, which read healthy right up to the week a $1,400 sales-tax bill landed alongside payroll. She now logs transactions weekly and assembles statements every month.

   Transactions move a business's assets, liabilities, and equity whether or not anyone writes them down. · 3.3

2. The founding flashback opens the folder of quotes: $700 of one-time fees, a $15,000 equipment package itemized to the dollar, a $2,500 lease deposit, $1,800 of first inventory, and $1,000 of opening marketing. Every initial expense on that list became a monthly bill the day the doors opened.

   Startup costs have two halves, and only one of them is genuinely one-time. · 3.4

3. At eighteen she had $6,000 of her own saved money against a $15,000 equipment quote. The bank returned the application with the co-signer line circled, and her grandmother Dorothy signed it. A year later she declined $15,000 for a 25% stake and kept the whole shop. Her stated goal for the unit is that the bank take Dorothy's name off the loan.

   A loan ends and an equity stake does not, and a new business often cannot borrow on its own record at all. · 3.5

4. A typical month now runs 3,000 cups at a $6.00 average. The statement builds from $18,000 of revenue down through $4,500 of COGS, $9,900 of operating expenses, $50 of interest, and $710 of tax to a net profit of $2,840, with the margin cascade reading 75%, 20%, and just under 16%.

   An income statement measures a period and grades the business three times on the way down. · 3.6

5. On March 31, at the end of a rough first quarter, the sheet reads $24,500 of assets against $7,500 of liabilities, leaving $17,000 of owners' equity. A faded prior-year column beside it shows $19,400, $10,400, and $9,000, so the loan is down $3,000 and equity is up $8,000 across the year.

   A balance sheet freezes one instant, and a second column turns condition into direction. · 3.7

6. The season curve runs from a July peak of 4,200 cups to a February trough of 1,800 with costs nearly flat underneath. July nets positive $6,700 of cash and February negative $4,100, and the summer cushion is why $9,000 of cash sits on the March sheet. A catering deposit is planted here as cash today for drinks not yet poured.

   Profit is annual and payroll is Friday, so a profitable business with an empty drawer still fails. · 3.8

7. A $10,000 refinancing application would clear the $6,000 loan balance and release Dorothy. The honest first quarter reads $38,000 against $41,000, down 7.3%, entirely explained by an eight-day street closure. Counting $3,500 of April deposit checks inside the quarter would report a 1.2% increase instead. She files the honest quarter with a one-page note, writes a rule that deposits are recorded on the day the event happens, and the bank approves subject to one more clean quarter.

   The incentive to shade a report is strongest when the reader is someone the preparer cares about. · 3.9

Continues in Unit 4.

What is free and what is paid

• Free: every lesson video, the notes, worked examples, the glossary, this unit’s story and the diagnostic.
• Free with an account: progress tracking and saved flashcard state.
• Paid: the unit question bank is still in review and is not on sale yet.

The unit cheat sheet covers 7 sections, and this unit is 25-35% of the exam.