Managers Hot Seat: AccountingPlanning the Future through Finances

Accounting for a small business is much more than the day-to-day bookkeeping. Taking the time to track financial metrics like cashflow, income statements, and inventory turnover year-over-year are important to developing an overall plan and achieving financial growth over time.

Holly Lee, owner of Hollys Boutique, has been reluctant to relinquish any control of her small business, but as her business grows shes decided to hire Chad, a full-time marketing manager, and Stella, a part-time accountant. Holly and Chad are meeting with Stella for the first time to talk about financial planning. What are Hollys takeaways from this meeting? Would you make any different financial decisions than Holly has?

Stella shows Holly and Chad several financial reports to use when considering financial planning for Hollys Boutique. The financial statement that focuses on the reporting of incomes and expenses over a defined period of time is the

Multiple Choice

• statement of cash flows.

• balance sheet.

• statement of owners equity.

• income statement.

What is a financial obstacle that has an increased impact on Hollys Boutique and the fashion industry?

Multiple Choice

• seasonality of cash flow

• paying suppliers

• increased marketing costs

• hiring of employees

Stella walks Holly and Chad through the inventory turnover ratio for the boutiques top three products. Why is it important to consider inventory turnover in the retail industry?

Multiple Choice

• Selling products with a higher inventory turnover ratio will lead to greater profitability.

• Retail has a product-driven revenue strategy.

• Customer service is more important to retail.

• Inventory turnover for online versus in person will be different.

Stella advises Holly to consider consignment for her line of accessories. Why does consignment make sense for Hollys Boutique?

Multiple Choice

• Consignment allows Holly to increase her sales with little upfront costs.

• Consignment does not make sense for Hollys Boutique. Holly should create her own line of accessories and keep all of the profits.

• Adding more products will only increase sales.

• Consignment is only for secondhand retail stores and Craigslist.

Stella advises Holly to consider forming an LLC or another corporation structure for her business. She says this will protect Holly financially in case any fiscal problems should arise and also

Multiple Choice

• lower the businesss tax liability.

• make the company sound more official.

• allow Holly to sell accessories on consignment.

• increase cash flow.