Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
88 Cards in this Set
- Front
- Back
Define sole proprietorship |
A form of business ownership with a single owner who usually actively manages the company |
|
What are the characteristics of the 4 basic forms of business ownership? |
1. The sole proprietorship is simply an extension of the owner. Company earnings and debuts are treated just like the owner's income 2. Each partner has the right to participate in the company's management and share and profits, but also has unlimited liability for any debts the company and incurs 3. A corporation is a business entity created by Filing a form known as the articles of incorporation |
|
What are the advantages and disadvantages of a sole proprietorship? |
Advantages include -Minimal paperwork and set up costs -the owner retains total control, and gains a feeling of pride and personal satisfaction from running in owning their own business -if the business is successful of the owner gets all the prophets minus personal taxes - there is no double taxation, earnings are only taxed at the income of the proprietor Disadvantages include - Difficulty raising money to finance growth - Shoulder heavy workloads and responsibility - Unable to match high salaries and Perks of large corporations - If the owner withdraws from the business or dies the company legally ceases to exist |
|
Define partnership |
A voluntary agreement under which 2 or more people act as CO owners of a business for profit |
|
What are the pros and cons of partnerships? |
Advantages: -more ppl investing in the company,a stronger financial base - Partners share the burden of running a business - Relatively easy to set up And no double taxation Disadvantages: - all general partners have unlimited liability for the debts and obligations of their business - Disagreements among partners can undermine communication and cooperation - It can be difficult to withdraw from a partnership
|
|
Define general partnership |
Each partner has the right to participate in the company's management and share profits, but also has unlimited A liability for any debts the company incurs |
|
Define Limited liability |
When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but not their personal assets |
|
Define corporation |
A form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners |
|
Define articles of incorporation |
A Document filled with a state government to establish the existence of a new corporation |
|
Limited liability company (LLC) |
A form of business ownership that offers both limited liability to its owners and flexible tax treatment |
|
Define stockholder |
Owner of a corporation |
|
Board of directors |
The individuals who are elected by stockholders of a corporation to represent their interests |
|
Define acquisition |
A corporate restructuring in which one firm buys another |
|
Define merger |
A corporate restructuring that occurs when to formally independent business entities combined to form a new organization |
|
Define horizontal merger |
A combination of 2 firms that are in the same industry |
|
Define vertical merger |
A combination of firms at different stages in the production of a good or service |
|
Define a conglomerate |
A combination of 2 firms that are in unrelated industries |
|
Define franchise |
A licensing Arrangement under which a franchisor allows franchisees to use its name, trade mark, products, business methods, and other property in exchange for monetary payments and other considerations |
|
Define franchisor |
The business entity and a franchise relationship that allows others to operate its business using resources it supplies exchange for money and other considerations |
|
Define franchisee |
The party and a franchise relationship but please for the right to use resources supplied by the franchisor |
|
What are the and vantages and disadvantages of franchising? |
Advantages: -Less risk - Training and support - Brand recognition - Easier access to funding Disadvantages: - Costs - lack of control - Negative Halo effect - Growth challenges - Restrictions on sale - Poor execution |
|
Define entrepreneurs |
People who risk for time, money, and other resources to start and manage a business |
|
Why do entrepreneurs launch small businesses? |
Greater financial success, independence, flexibility, challenge, survival |
|
What is the typical entrepreneurial mindset and characteristics? |
Vision, self reliance, energy, confidence, tolerance of uncertainty, tolerance of failure |
|
What are funding options for small business? |
Personal resources loans crowd funding angel investors venture capital |
|
Define Angel Investors |
Individuals who invest In start up companies with high growth potential in exchange for a share of ownership |
|
Define venture capital firms |
Companies that invest in start up business with high growth potential in exchange for a share of ownership |
|
Define market niche |
A small segment of a market with fewer competitors than the market as a whole. Market niches tend to be quite attractive to small firms |
|
What are the opportunities and threats facing small businesses? |
Opportunities: - Market niches - Personal customer service - Lower overhead costs - Technology Threats: - High failure risk - Lack of knowledge and experience - Too little money - Bigger regulatory burden - Higher health insurance costs |
|
Define small business administration (sba) |
An agency of the federal government designed to maintain and strengthen the the nation's economy by aiding, counseling, assisting, and protecting the interests of small business |
|
Define business plan |
Formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives |
|
What are ways to become a business owner and facilitate success? |
Starting from scratch, buying an established business, or franchise Gain experience, learn from others come to educate yourself, access as be a resources, develop a business plan |
|
What is the size, scope, and economic contribution of small business? |
Small businesses comprise 99.9% of all businesses in the United States, They account for 40% of all private sector employees, The opening of new business has accounted for over 40% of new net jobs in the US economy over the past 2 decades Per capita income, opportunity costs, cultural/political environment |
|
Define accounting |
I system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization |
|
How is accounting information used? |
It is used to help make sound economic decisions |
|
Define financial accounting |
The branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders |
|
Define generally accepted accounting principles (GAAP) |
A set of accounting standards that is used in the preparation of financial statements |
|
What are the goals of generally accepted accounting principles? |
Financial statements are: Relevant Reliable Consistent Comparable |
|
Define financial accounting standards board (FASB) |
Private poured that establishes the generally accepted accounting principles used in the practice of financial accounting |
|
What are the key elements of the major financial statements? |
Balance sheet: what we own and how we get it.
Income statement: How did we do?
The statement of cash flows: show me the money -operations, investing, and finance (Statement of retained earnings how they've changed over account periods or a stockholders equity statement shows How Net income and dividends effect retained earnings) |
|
Define balance Sheet |
A financial statement that reports the financial position of a firm by Identifying and reporting the value of the firm's assets, liabilities, and owner's equity |
|
What is the accounting equation? |
Assets= liabilities + owner's equity |
|
Define assets |
Resources owned by a firm |
|
Define liabilities |
Claims that outsiders have against a firm's assets |
|
Define owner's equity |
The claims of firms owners of against their company assets (often called "stockholders equity on balance sheets of corporations) |
|
Define income statement |
The financial statement that reports the revenues, expenses, and net income that resulted from a firm's operations over an accounting period |
|
Define revenue |
Increases and a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income |
|
Define expenses |
Resources that are used up as the result of business operations |
|
Define net income/loss |
The difference between the revenue a firm earns and expenses it incurs and a given time period |
|
Define statement of cash flows |
The financial statement that identifies a firm's sources and uses of cash in a given accounting period |
|
What our method steak callers can use to obtain useful insights from a company's financial statements? |
The independent auditors report, checking out the notes to financial statements, and looking for trends in comparative statements |
|
Define horizontal analysis's |
Analysis's of financial statements that compares account values reported on these statements over 2 or more years to identify changes and trends |
|
Define budgeting |
A management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period |
|
Define operating budgets |
Budgets that communicate and organization's sales and production goals and the resources needed to achieve these goals |
|
Define financial budgets |
Budgets that focus on the firm's financial goals and identify the resources needed to achieve these goals |
|
Define master budget |
A presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period |
|
Managerial or management accounting |
The branch of accounting that provides reports and analysis to managers to help them make informed business decisions |
|
What is the role of managerial accounting? |
To provide information to internal stakeholders, such as the managers of specific divisions or departments. This information is proprietary, meaning it isn't available to the general public |
|
Define costs |
The value of what is given up in exchange for something |
|
Define out of pocket costs |
A cost that involves the payment of money or other resources |
|
Define implicit costs |
The opportunity cost that arises when a firm uses owner supplied resources |
|
Define fixed costs |
Cos that remain the same one the level of production changes within some relevant range. This includes interest karma rent karma in other payments that are set by contract or by legal requirements |
|
Define variable costs |
Course that prize when the firm produces more of its goods and services. As a company ramps up its production, it is likely to need more labor and materials and use more electrical power |
|
Define direct costs |
Costs that are incurred directly as the result of some specific cost object. The wage payments made to workers directly involved in producing a good or service would be a direct cost for that product |
|
Define indirect costs |
Costs that are the result of a firm's general operations and not directly tied to any specific cost object, such hours maintenance, quality control. 10 the be there is all of the firm's general operation rather than the production of any specific object |
|
Define activity based costing |
A technique to assign product cost based on links between activities that drive cost and that production of specific products |
|
Define financial capital |
The funds a firm uses to acquire its assets and finance its operations |
|
The goal of financial management |
Finding the best sourcing of funds that maximize the value of the firm to its owners |
|
What issues do financial managers confront? |
Seems to conflict with social responsibility |
|
Define risk |
The degree of uncertainty regarding the outcome of a decision |
|
Define financial ratio analysis |
Computing ratios that compare values of key accounts listed on a firms financial statements |
|
What are the tools financial managers used to evaluate for companies financial conditions and develop future plans? |
Financial ratio analysis's, Liquidity ratios, leverage ratios, profitability ratios, budgeted income statement, budgeted balance sheet,cash budget |
|
Define Liquid asset |
An asset that can be quickly converted into cash with little risk of loss |
|
Define liquidity ratios |
Financial ratios that measure of the ability of a firm to obtain the cash it needs to pay its short term debt obligations as they come due |
|
Define financial leverage |
The use of debt in a firm's capital structure |
|
Define leverage ratios |
Ratios that measure the extent to which a firm relies on debt financing and its capital structure |
|
Define profitability ratios |
Ratios that measure the rate of return a firm is earning on various measures of investment |
|
Define line of credit |
A financial arrangement between a firm and a bank and which the bank pre approves credit up to a specified limit, Provided that the firm maintains an acceptable credit rating |
|
Define retained earnings |
The part of a firm's net income it reinvests |
|
Define covenant |
Or restriction lenders impose on borrowers as a condition of providing long term debt financing |
|
Define equity financing |
Funds provided by the owners of a company |
|
Define debt financing |
Funds provided by lenders (creditors) |
|
Define capital structure |
The mix of equity and debt financing a firm uses to meet its permanent financing needs |
|
Define time value of money |
The principle that a dollar received today is worth more than a dollar received in the future |
|
Define present value |
The amount of money that, if invested today at a given rate of interest, would grow to become some future amount in a specified number of time periods |
|
Define net present value (NPV) |
The sum of the present values of expected and future cash flows from an investment, minus the cost of that investment |
|
What are the major sources of funds evaluated to meet affirms short term and long term financial needs? |
Short term: Trade credit, factoring, short term bank loans, commercial paper Long term: Direct investments from owners, long term debt, term loans, or corporate bonds |
|
How do financial managers determine the firm's capital structure? |
Based on the comparing cash flows it will generate |