Term
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Definition
| The system within a business for converting raw data from source documents (like invoices, sales receipts, bills, and checks) into information that will help a manager make business decisions |
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Term
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Definition
| Any resource that a business owns and expects to use to its benefit. |
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Term
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Definition
| A debt owed by a business to another organization or individual. |
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Term
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Definition
| The amount of money the owner of a business would receive if all of the assets were sold and all of the liabilities were paid. |
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Term
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Definition
| An accounting system in which every business transaction is recorded in an asset account and a liability or owner’s equity account so that the system will balance. |
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Term
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Definition
| An accounting system in which the flow of income and expenses is recorded in a running log, basically like a checkbook. |
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Term
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Definition
| Liabilities + Owner’s equity |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| What you own − What you owe |
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Term
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Definition
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Term
| Profit = Revenue − Expenses |
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Definition
| represents the activity described on the income statement. In other words, the money you get to keep equals the money your business brings in minus what you have to spend. |
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Term
| Assets = Liabilities + Owner’s equity |
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Definition
| the basis of the balance sheet. Any entry that you make on one side of the equation must also be entered on the other side to maintain a balance. |
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Term
| Cash flow = Receipts − Disbursements, |
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Definition
| the basis of the cash- flow statement. The money you have on hand at any given time equals the money you bring in minus what you have to pay out. |
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Term
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Definition
| A method of accounting in which income and expenses are recorded at the time they are incurred rather than when they are paid. |
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Term
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Definition
| A method of accounting in which income and expenses are recorded at the time they are paid, rather than when they are incurred. |
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Term
| generally accepted accounting principles (GAAP) |
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Definition
| Standards established so that all businesses produce comparable financial statements. |
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Term
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Definition
| A chronological record of all financial transactions of a business. |
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Term
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Definition
| A record of all financial transactions divided into accounts and usually compiled at the end of each month. |
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Term
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Definition
| A financial statement that shows the revenue and expenses of a firm, allowing you to calculate the profit or loss produced in a specific period of time. |
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Term
| common-size financial statement |
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Definition
| A financial statement that includes a percentage breakdown of each item. |
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Term
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Definition
| The process of gathering information about consumers that will improve marketing efforts. |
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Term
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Definition
| A financial statement that shows a firm’s assets, liabilities, and owner’s equity. |
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Term
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Definition
| A financial statement that shows the cash inflows and outflows of a business. |
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Term
| pro forma financial statement |
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Definition
| Financial statements that project what a firm’s financial condition will be in the future. |
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Term
Daily Financial statements
(NAme Four) |
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Definition
1. Check your cash balance on hand.
2. Check your bank balance.
3. Calculate daily summaries of sales and cash receipts.
4. Note any problems in your credit collections. 5. Record any money paid out. |
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Term
weekly financial statements
(name Five) |
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Definition
1. Cash flow. Update a spreadsheet of regular receipts and disbursement entries. The discipline required by this endeavor will help you see what is going on in your busi- ness and help you to plan for any cash deficiencies.
2. Accounts receivable. Note especially slow-paying accounts.
3. Accounts payable. Note discounts offered.
4. Payroll. Calculate the accumulation of hours worked and total payroll owed.
5. Taxes. Note when tax items are due and which reports are required. |
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Term
Monthly Financial Statements
(NAme 7) |
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Definition
1. If you use an outside accounting service, provide records of your receipts, disburse- ments, bank accounts, and journals.
2. Review your income statement.
3. Review your balance sheet.
4. Reconcile your business checking account. 5. Balance your petty cash account.
6. Review federal tax requirements and make deposits.
7. Review and age your accounts receivable. |
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Term
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Definition
| Calculations that compare important financial aspects of a business. |
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Term
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Definition
| A comparison of a firm’s financial ratios to industry leaders. |
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Term
| industry average analysis |
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Definition
| A comparison of a firm’s financial ratios to the industry averages. |
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Term
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Definition
| A comparison of a single firm’s present performance with its own past performance, preferably for more than two years. |
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Term
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Definition
| Financial ratios used to measure a firm’s ability to meet its short-term obligations to creditors as they come due. |
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Term
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Definition
| A financial ratio that measures the number of times the firm can cover its current liabilities with its current assets. |
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Term
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Definition
Current assets -Divided by-
Current liabilities |
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Term
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Definition
| A financial ratio that measures the firm’s ability to meet its current obligations with the most liquid of its current assets. |
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Term
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Definition
Current assets − Inventory --divided by--
Current liabilities |
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Term
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Definition
| Financial ratios that measure the speed with which various asset accounts are converted into sales or cash. |
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Term
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Definition
| An activity ratio that measures the liquidity of the firm’s inventory— how quickly goods are sold and replenished. |
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Term
|
Definition
Cost of goods--divide by--
sold Inventory |
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Term
| average collection period |
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Definition
| A measure of how long it takes a firm to convert a credit sale (internal store credit, not credit card sales) into a usable form (cash). |
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Term
| Average collection period = |
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Definition
Accounts receivable --divided by--
Average sales per day |
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Term
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Definition
| An activity ratio that measures how efficiently a firm is using its assets to generate sales. |
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Term
|
Definition
Sales Net --divided by--
fixed assets |
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Term
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Definition
| An activity ratio that measures how efficiently the firm uses all of its assets to generate sales; a high ratio generally reflects good overall management. |
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Term
|
Definition
Sales --divided by--
Total assets |
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Term
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Definition
| Financial ratios that measure the extent to which a firm uses debt as a source of financing and its ability to service that debt. |
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Term
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Definition
| A leverage ratio that measures the proportion of a firm’s total assets that is acquired with borrowed funds. |
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Term
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Definition
total debt--divided by--
total assets |
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Term
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Definition
| A leverage ratio that calculates the firm’s ability to meet its interest requirements. |
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Term
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Definition
Operating income --divided by--
Interest expense |
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Term
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Definition
| Financial ratios that are used to measure the ability of a company to turn sales into profits and to earn profits on assets and owner’s equity committed. |
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Term
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Definition
| A profitability ratio that measures the percentage of each sales dollar that remains as profit after all expenses, including taxes, have been paid. |
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Term
|
Definition
net income--divided by --
sales |
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Term
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Definition
| A profitability ratio that indicates the firm’s effectiveness in generating profits from its available assets; also known as return on investment. |
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Term
|
Definition
Net profit after taxes --divided by--
Total assets |
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Term
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Definition
| A profitability ratio that measures the return the firm earned on its owner’s investment in the firm. |
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Term
|
Definition
Net profit after taxes --divided by--
Owner,s equity |
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Term
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Definition
| The sum of net income plus any noncash expenses, such as depreciation and amortization, or the difference between the actual amount of cash a company brings in and the actual amount of cash a company disburses in a given time period. |
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Term
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Definition
| The period of time from when money is spent on raw materials until it is collected on the sale of a finished good. |
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Term
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Definition
| A plan for short-term uses and sources of cash. |
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Term
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Definition
| A listing of a firm’s accounts receivable according to the length of time they are outstanding. |
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Term
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Definition
| A list of accounts receivable by age category. |
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Term
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Definition
| A list of accounts receivable showing each customer, the amount that customer owes, and the amount that is past due. |
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Term
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Definition
| Assets that will be converted into cash within one year. |
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Term
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Definition
| Assets that will not be converted into cash within one year. |
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Term
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Definition
| The ability to finance an investment through borrowed funds, increasing both the potential for return and the level of risk. |
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Term
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Definition
| The use of borrowed funds to finance a business. |
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Term
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Definition
| An amount of money borrowed from a lender. |
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Term
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Definition
| The amount of money paid for the use of borrowed funds. |
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Term
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Definition
| A loan whose interest rate remains constant. |
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Term
|
Definition
| A loan whose interest rate changes over the life of the loan. |
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Term
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Definition
| The length of time in which a loan must be repaid. |
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Term
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Definition
| The sale of common stock or the use of retained earnings to provide long- term financing. |
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Term
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Definition
| Payments based on the net profits of the business and made to the providers of equity capital. |
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Term
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Definition
| Assurance to a lender that a loan will be repaid. |
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Term
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Definition
| A short-term loan for which collateral is not required. |
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Term
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Definition
| An agreement that makes a specific amount of short- term funding available to a business as it is needed. |
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Term
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Definition
| A short-term loan that must be repaid (both principal and interest) in a lump sum at maturity. |
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Term
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Definition
| A loan made to a business for the purchase of fixed assets such as equipment and real estate. |
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Term
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Definition
| A loan that requires the borrower to make small monthly payments (usually enough to cover the interest), with the balance of the loan due at maturity. |
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Term
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Definition
| A loan made to an established business that has demonstrated a strong overall credit profile. |
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Term
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Definition
| A type of business loan generally made for “big- ticket” items. The business holds the item in inventory and pays interest, but it is actually owned by the lender until the item is sold. |
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Term
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Definition
| A loan that requires collateral as security for the lender. |
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Term
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Definition
| The practice of raising funds for a business through the sale of accounts receivable. |
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Term
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Definition
| A loan made to a business by an insurance company, using the business’s insurance policy as collateral. |
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Term
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Definition
| A loan made to a small business through a commercial bank, of which a portion is guaranteed by the Small Business Administration. |
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Term
| certified development company |
|
Definition
| A nonprofit organization sponsored either by private interests or by state or local governments. |
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Term
|
Definition
| A relatively new loan program available through the SBA that simplifies the paperwork that has historically been required. |
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Term
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Definition
| The purchase of goods from suppliers that do not demand payment immediately. |
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Term
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Definition
| A lender, usually a successful entrepreneur, who loans money to help new businesses. |
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Term
| initial public offering (IPO) |
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Definition
| The first sale of stock of a business made available to public investors. |
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Term
| There are three main reasons companies choose public offerings: |
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Definition
1. When market conditions are favorable, more funds can be raised through public of- ferings than through other venture capital methods, without imposing the repayment burdens of debt.
2. Having an established public price for the company’s stock enhances its image.
3. The owner’s wealth can be magnified greatly when owner-held shares are subse-
quently sold in the market. |
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Term
| Choosing a Lender or Investor |
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Definition
1. Size. The lender should be small enough to consider the entrepreneur an important customer, but large enough to service the entrepreneur’s future needs.
2. Desire. The lender should exhibit a desire to work with start-up and emerging busi- nesses, rather than considering them too risky.
3. Approach to problems. The lender should be supportive of small businesses facing problems, offering constructive advice and financing alternatives.
4. Industry experience. The lender should have experience in the entrepreneur’s indus- try, especially with start-up or emerging ventures. |
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Term
|
Definition
| Legislation that prohibits firms from combining in a way that would stifle competition within that industry. |
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Term
|
Definition
| Local laws that control where and how businesses may operate. |
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Term
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Definition
| A ruling granted by courts to release businesses or individuals from some or all of their debt. |
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Term
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Definition
| An agreement between two or more parties that is enforceable by law. |
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Term
| the only contracts that must be in writing are? |
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Definition
Sale of real estate
• Paying someone else’s debt
• More than one year to perform
• Sale of goods valued at $500 or more |
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Term
|
Definition
legality
agreement
consideration
capacity |
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Term
|
Definition
| A violation of one or more terms of a contract by a party involved in the contract. |
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Term
|
Definition
| Money awarded by the courts to a party of the contract who has suffered a loss due to the actions of another party. |
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Term
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Definition
| A nonmonetary award granted by the courts to a party of the contract who has suffered a loss due to the actions of another party. |
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Term
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Definition
| A court order that prohibits certain activities. |
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Term
|
Definition
| Property that is created through the mental skills of a person. |
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Term
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Definition
| A form of protection for intellectual property provided to an inventor for a period of 17 years. |
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Term
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Definition
| A form of protection for intellectual property provided to the creator of a literary, musical, or artistic work for a period of the creator’s life plus 50 years. |
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Term
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Definition
| A name, term, symbol, design, or combination of these elements that clearly identifies and differentiates your products from those of your competitors. |
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Term
|
Definition
| A form of protection for intellectual property provided to the owner of a brand name or symbol. |
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Term
|
Definition
| The philosophy of a business in which the wants and needs of customers are determined before goods and services are produced. |
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Term
|
Definition
| The philosophy of a business that concentrates more on the product that the business makes than on customer needs. |
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Term
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Definition
| The philosophy of business that concentrates on establishing a long- term buyer-seller relationship for the benefit of both parties. |
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Term
|
Definition
| What the marketing efforts of a business are intended to accomplish and how the business will achieve its goals. |
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Term
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Definition
| The quantity of products a business plans to sell during a future time period. |
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Term
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Definition
| A forecasting method that uses historical sales data to identify patterns over a period of time. |
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Term
|
Definition
| A forecasting method that predicts future sales by finding a relationship between sales and one or more variables. |
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Term
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Definition
| A group of people who have a common want or need that your business can satisfy, who are able to purchase your product, and who are more likely to buy from your business. |
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Term
|
Definition
| Characteristics or ways to group people that make them more likely to purchase a product. |
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Term
|
Definition
| Treating entire populations of people as potential customers for specific products. |
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Term
|
Definition
| Breaking down populations of people into groups, or target markets. |
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Term
|
Definition
| Segmenting populations of people into smaller target markets. |
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Term
|
Definition
| Adjusting the marketing mix of a business to treat individual persons as separate target markets. |
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Term
|
Definition
| The group of brands or businesses that come to a customer’s mind when she thinks of a type of product. |
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Term
|
Definition
| The conflict (i.e., remorse) that buyers feel after making a major purchase. |
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Term
|
Definition
| The process of gathering information about consumers that will improve marketing efforts. |
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Term
|
Definition
| Marketing data that have been gathered, tabulated, and made available by an outside source. |
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Term
|
Definition
| Marketing data that a business collects for its own specific purposes. |
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Term
|
Definition
| The factors that a business can change in selling products to customers—product, place, price, and promotion. |
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Term
|
Definition
| A tangible good, an intangible service, or a combination of these. |
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Term
|
Definition
| An agreement in which the owner of intellectual property grants another person (or another company) permission to produce that product. |
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Term
| private label manufacturing |
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Definition
| Producing products under another company’s name. |
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Term
|
Definition
| The choice of whether to purchase parts and components or to produce them. |
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Term
|
Definition
| Goods a business owns for the completion of future sales. Also, the act of counting the goods held in stock. |
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Term
|
Definition
| The loss of goods held in inventory due to theft or spoilage. |
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Term
|
Definition
| When products become outdated or fall out of fashion. |
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Term
|
Definition
| Expenses related to keeping inventory on hand. |
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Term
|
Definition
| Expenses related to procuring inventory. |
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Term
|
Definition
| The period of time from the point when inventory is at its highest until it is replenished. |
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Term
|
Definition
| The period of time from order placement until the goods are received. |
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Term
|
Definition
| A traditional method of controlling inventory that minimizes total inventory costs by balancing annual ordering costs with annual holding costs for an item. |
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Term
|
Definition
| An inventory control system that classifies items based on the total dollar volume of sales each generates. |
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Term
| electronic data interchange EDI |
|
Definition
| The computerized application-to-application exchange to track items within a business in a standard data format. |
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Term
| perpetual inventory system |
|
Definition
| An inventory system that indicates how many units of an item are on hand at any given time. |
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Term
|
Definition
| A Japanese approach to inventory management that aims to reduce order sizes and to time orders so that goods arrive as close to when they are needed as possible. |
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Term
| materials requirements planning (MRP) |
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Definition
| Inventory control system that depends on computers to coordinate product orders, raw materials in stock, and the sequence of production. |
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Term
|
Definition
| The series of intermediaries a product passes through when going from producer to consumer. |
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Term
|
Definition
| A distribution channel in which products and services go directly from the producer to the consumer. |
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Term
|
Definition
| A distribution channel in which the products pass through various intermediaries before reaching the consumer. |
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Term
|
Definition
| The use of two or more channels to distribute the same product to the same target market. |
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Term
|
Definition
| An intermediary who brings buyers and sellers together and facilitates the exchange. |
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Term
|
Definition
| An intermediary who represents clients who buy or sell specialized goods or seasonal products. |
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Term
|
Definition
| An intermediary who buys products in bulk from producers and resells them to other wholesalers or to retailers. |
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Term
|
Definition
| An intermediary who sells products to the ultimate consumer. |
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Term
| effective buying index (EBI) |
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Definition
| The amount of personal income after taxes and deductions made by people in a specific geographic area. |
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Term
|
Definition
| The effect of more consumers coming into a town to purchase goods than leaving it to buy the same product. |
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Term
|
Definition
| The effect of more consumers leaving a town to purchase goods than entering it to buy the same product. |
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Term
|
Definition
| A large retail store that attracts people to shop at malls. |
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Term
|
Definition
| A type of layout used by small retail stores that encourages customers to wander and browse through the store. |
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Term
|
Definition
| A type of layout used by retail stores to move customers past merchandise arranged on rows of shelves or fixtures. |
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Term
|
Definition
| A type of retail layout with a predominant aisle running through the store that quickly leads customers to their desired department. |
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Term
|
Definition
| A way to arrange a manufacturing business by placing all comparable equipment together in the same area. |
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Term
|
Definition
| A way to arrange a manufacturing business by placing equipment in an assembly line. |
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Term
|
Definition
| A type of layout for a manufacturing business in which the product stays stationary while workers and equipment are brought to it. |
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Term
|
Definition
| Changes that make a property more valuable, such as painting, adding shelves, or installing new lighting. |
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Term
|
Definition
| A lease in which the monthly payment made by the tenant remains the same and the landlord pays the operating expenses of the building. |
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Term
|
Definition
| A lease in which the tenant pays a base monthly rent plus some or all real estate taxes of the building. |
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Term
|
Definition
| A lease in which the tenant pays a base monthly rent plus real estate taxes and insurance on the building. |
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Term
|
Definition
| A lease in which the tenant pays a base monthly rent plus real estate taxes, insurance, and any other operating expenses incurred for the building. |
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Term
|
Definition
| A lease in which the tenant pays a base monthly rent plus a percentage of their gross revenue. |
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Term
|
Definition
| A lease that varies according to the amount of inflation in the economy. |
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Term
|
Definition
| A lease that varies according to the amount of inflation in the economy. |
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Term
|
Definition
| The number of units of a product that people would be willing to purchase at different price levels |
|
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Term
| price elasticity of demand |
|
Definition
The percentage change in quantity demanded for a product in response
to a one percent change in price. |
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Term
|
Definition
| Costs that do not change with the number of sales made. |
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Term
|
Definition
| Costs that change in direct proportion to sales. |
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Term
|
Definition
| Setting the price of a new product lower than expected to gain fast market share. |
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Term
|
Definition
| Setting the price of a new product higher than expected to recover development costs. |
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Term
|
Definition
| Setting the price of a product in a way that will alter its perception by customers. |
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Term
|
Definition
| Psychological pricing strategy used with goods whose quality is difficult to determine by inspection or for products about which consumers have little solid information. |
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Term
|
Definition
| Psychological pricing strategy in which goods are priced at, say, $9.99 rather than $10.00 in the belief that the price will seem lower than it really is. |
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Term
|
Definition
| Psychological pricing strategy common in retailing goods for which consumers have an idea of what the price “should be.” |
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Term
|
Definition
| Grouping product prices into ranges, such as low-, medium-, and high-priced items. |
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Term
|
Definition
| The amount added to the cost of a product in setting the final price. It can be based on selling price or on cost. |
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Term
|
Definition
| Credit extended from one business to another. |
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Term
|
Definition
| Credit extended by retailers to the ultimate customers for the purchase of products or services. |
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Term
|
Definition
| price product promotion place |
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Term
|
Definition
| An aspect of public relations consisting of any message about your company communicated through the mass media that you do not pay for. |
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Term
|
Definition
| businesses have 2 basic functions : marketing and innovation |
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Term
|
Definition
| all activities needed to get a product from the producer to the ultimate consumer |
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