Entrepreneurism. Chapters 14

Front 1

A tougher test of liquidity, which relates only cash and near-cash items to current liabilities.

Back 1

Acid-test ratio

Front 2

The ratio of credit sales to average accounts receivable.

_______________ and inventory turnover are two measures of the composition of current assets.

This ratio indicates how rapidly credit sales are being turned into cash.

Back 2

Accounts receivable turnover

Front 3

All expenses involved in directly evaluating quality, such as the costs of inspection or customer surveys.

Back 3

Appraisal Costs

Front 4

The process of comparing a company's performance measures to those of companies that are considered exemplars in that process.

Back 4

Benchmarking

Front 5

Managerial techniques that measure and monitor the operations on an ongoing basis. ____________ deals with ensuring tht operations are functioning effectively and according to standards

Ex: Entrepenuerial ventures transform resources through operating activities and processes.

________ consists primarily of actions by supervisors who direct the work of their subordinates.

Back 5

Concurrent Controls

Front 6

Managing the operations so that desired outcomes are consistently and efficiently achieved.

Back 6

Control

Front 7

Intervening when necessary to improve performance once deviations from performance standards have been discovered.

Individuals responsible for taking corrective action must know that:
(1) They are indeed responsible for the business process and
(2) They have the assigned authority to take corrective actions.

Back 7

Corrective Action

Front 8

The total expense involved in ensuring that a product or service meets established quality standards.

Back 8

Cost of Quality

Front 9

A liquidity ratio that compares a firm's current assets to its current liabilities.

The most often used measure is the current ratio.
- The standard of acceptability depends on the particular firm’s operating characteristics

Back 9

Current Ratio

Front 10

An assessment of the amount of financing being provided by creditors.

Two popular debt ratios are the debt-to-equity ratio and the debt-to-asset ratio.

Back 10

Debt Ratios

Front 11

An expression of the relationship of the firm's total debts to its total assets.

debt to asset ratio = total debts/total assets

Back 11

Debt to Asset Ratio

Front 12

A measure of the amount of assets financed by debt compared to that amount financed by profits retained by the firm and equity investments.

debt to equity ratio = assets financed by debt/assets financed by equity

Back 12

Debt to Equity Ratio

Front 13

The acts that entrepreneurs undertake to instruct employees in proper methods and procedures and to oversee the work of employees to ensure that it is done properly.

The relative importance of _______ depends almost entirely on the nature of the tasks.
Other factors also determine differences in the form of direction.

Back 13

Direction

Front 14

A measurement of profitability that takes into account the time value of money in the future cash flows that can be attributed to that investment.

It is similar to the payback method; only cash inflows and outflows are considered.

Back 14

Discounted rate of Return

Front 15

Expenses that once a defect is produced and identified. If the defect is found before it reaches the customer, the _______ are internal.

Back 15

Failure Costs

Front 16

Controls that provide the entrepreneur with information about how well various aspects of the operation performed and whether anything needs to be changed in the future. _______ is based on historical information that provides insight into areas that can be improved in the future

Ex: Entrepenuruial ventures control the output of the operations and activites of the venture and its people.

Periodically, the entrepreneur receives a set of financial statements including the cash flow statement, income statement, and balance sheet.

_________ employs outcomes as bases for correcting future actions. For example, a firm's financial statements can be used to evaluate the acceptability of historical results and to determine if changes should be made in future resource acquisitions or operational activities.

Back 16

Feedback Controls

Front 17

Costs incurred in an organization's operations that are difficult to measure and often not tracked properly.

- Prevention costs
- Appraisal costs
- Failure costs
These three components’ costs are often called hidden costs because they are not directly measured as part of an venture’s operations.

Hidden costs will be associated with any business process redesign initiative and may include:

- Integration costs
- Downtime costs
- training costs
- ongoing license or server fees
- maintenance fees

Back 17

Hidden Costs

Front 18

A predefined rate of return that companies expect to earn on investments.

Back 18

Hurdle Rate

Front 19

The ratio of cost of goods sold to average inventory.

_______ ratio consists of comparing cost of goods sold with average inventory. A high ratio could indicate a low inventory balance in relation to sales.

inventory turnover ratio = cost of goods sold/average inventory

Back 19

Inventory Turnover

Front 20

Decisions involving the commitment of present funds in exchange for future funds.

Back 20

Investment Decisions

Front 21

Performance measures that enable the entrepreneur to compare the venture's performance to competitors, other firms in the industry, and even to firms in other industries.

________ are used to examine the profitablity, liquidity, and solvency of the venture. They enable direct compatrison of the venture to other firms within the industry and even to firms in unrelated industries.

Entrepreneurs must have measures of and standards for profitability, liquidity, and solvency.
- An effective approach to financial statement analysis is through the use of key ratios.

Other key ratios are...
- Rate of return on sales
- Owners' equity
- Total assets

Back 21

Key Ratios

Front 22

A reflection of a firm's ability to meet current obligations as they become due.

Back 22

Liquidity

Front 23

Performance measures that have valid and reliable means of data collection, usually over organizational processes that can be directly observed.

Back 23

Objective Metrics

Front 24

The processes and time lags between a firm's resource inputs and payments for those inputs, and its outputs and receipt of payments for those outputs

Back 24

Operating Cycle

Front 25

The rate of return that a firm could earn if it invested the capital in something else.

Back 25

Opportunity Costs

Front 26

A measurement of profitability based on a calculation of the number of years needed for the proposed capital acquisition to repay (pay back) its original cost out of future cash earnings.

Back 26

Payback Method

Front 27

Baseline levels of performance that are considered acceptable.

__________ should be aligned with the venture goals and objectives.

___________ can also be developed by benchmarking against industry averages and standards

Back 27

Performance Standards

Front 28

Control techniques that measure and monitor the inputs into the venture's operational systems. _________ deals with ensuring quality inputs.

Ex: Entrepeneurial ventures acquire human, financial, material, and operational resources from their environment.

Preliminary control methods increase the possibility that future results will compare favorably with planned results.

- Policies are important pre-control methods because they define appropriate future action.
- Other pre-control methods involve human, capital, and financial resources

Back 28

Preliminary Controls

Front 29

The costs of preventing product or service defects–the pre-control aspect of quality control.

Back 29

Prevention Costs

Front 30

Performance measures that attempt to measure organizational phenomena that are not usually directly observable, such as employee morale.

Back 30

Qualitative metrics

Front 31

A measure of the increased value created by a financial investment, usually defined as the rate of return.

Back 31

Return On Investment (ROI)

Front 32

A firm's ability to meet its financial obligations, that is, its fixed committememts.

An appropriate balance must be maintained—a balance that protects the interest of the owner yet doesn’t ignore the advantages of long-term debt as a source of funds

A commonly used measure of solvency is the ratio of net income before interest and taxes (usually called EBIT) to interest expense. EBIT indicates the margin of safety between profits and expenses related to repayment of loans. Naturally, most firms prefer a high ratio on this measure.

solvency = EBIT/interest expense

Back 32

Solvency

Front 33

The consideration that a dollar today is worth more than a dollar in the future.

Back 33

Time Value of Money

Front 34

The approach to quality management developed by W. Edwards Deming and based on his Fourteen Points of Quality. They articulate a management system that instills quality throughout the organization and focuses on people as the foundation of quality process

Total quality management (TQM), the generic name given to the approach to quality-based management developed by W. Edwards Deming, is heavily oriented toward treating the system as the primary source of error or defects in manufacturing or service work.

Deming articulated his quality perspective in his famous Fourteen Points of Quality.

Although total quality management uses a myriad of statistical techniques to control processes, it also offers some fundamental lessons for control from a human psychology perspective
- Process
- Organization
- Culture

Back 34

Total Quality Management (TQM)

Front 35

Standards of performance are one of the fundamental elements of venture control.
(T or F)

Back 35

True

Front 36

The term conscience refers to the management of operations so that desired outcomes are consistently and efficiently achieved. (T or F)

Back 36

False

Front 37

Whenever a venture manufactures a product, sells goods and services, or directly provides a service, it must be concerned about the perceived quality of its performance. (T or F)

Back 37

True

Front 38

With qualitative metrics, information is gathered and can be analyzed with precision. (T or F)

Back 38

False

Front 39

Objective metrics apply most easily to activities that produce specific results.
(T or F)

Back 39

True

Front 40

Appropriate attention to preliminary control of human resources ensures that the organization will meet its needs through the skills, abilities, and attitudes of its employees. (T or F)

Back 40

True

Front 41

The payback method produces a measurement of profitability.
(T or F)

Back 41

False

Front 42

As inventories of finished goods are sold, the supply of cash decreases. (T or F)

Back 42

False

Front 43

Liquidity reflects the firm's ability to meet its long-term obligations, that is, its fixed commitments. ( T or F)

Back 43

False

Front 44

Solvency refers to the firm's ability to meet current obligations as they become due. (T or F)

Back 44

False

Front 45

The cost of quality is made up of...

Back 45

- Prevention costs.
- Appraisal costs
- Failure Costs
- All of the Above

Front 46

Inventory turnover ratio =

Back 46

cost of goods sold/average inventory

Front 47

Debt to equity ratio =

Back 47

assets financed by debt/assets financed by equity

Front 48

In reference to total cost of quality, which of the following is not one of the three components of hidden costs?

Back 48

- Prevention costs
- Appraisal costs
- Failure costs
- None of the above

Front 49

Effective management of quality depends on...

Back 49

- Policy.
- Information.
- Engineering.
- All of the above

and...
- Materials
- Equipment
- People
- Field support

Front 50

_______ are targets; to be effective, they must be stated clearly and they must be measurable. _________ are the criteria that enable entrepreneurs to evaluate future, current, or past actions. They are measured in a variety of ways, including in physical, monetary, quantitative, and qualitative terms.

Back 50

Standards

Front 51

Organizational strategies are being achieved; organization has well-recognized brand and "good image" in community

Back 51

Top or executive

Front 52

Organizational goals are being achieved; organization is functioning efficiently and effectively; organizational communications are providing information when and where needed

Back 52

Middle or managerial

Front 53

Customers are satisfied with level of services received; employee morale is high; objectives are being achieved efficiently and effectively

Back 53

Bottom or frontline

Front 54

The three bsic components of a venture control system

Back 54

- Performance Standards
- Control Techniques
- Quality Outcomes

Front 55

________ depends on job requirements. Job requirements predetermine the skills needed by the jobholders. Knowing the kind of person a job candidate is will not do any good without first knowing what kind of person the company is looking for

Back 55

Preliminary Control of Human Resources

Front 56

____________ involves ensuring that the raw materials a firm purchases meet quality standards. At the same time, a sufficient inventory or just-in-time delivery system must be in place to ensure that a firm can meet customer demand.

Back 56

Preliminary control of materials

Front 57

_____________ or capital reflects the need to replace existing equipment or to expand the firm's productive capacity.

Managers use several methods to control capital; three of these are:
- The payback method
- Rate of return on investment
- Discounted rate of return

Preliminary control of financial resources must ensure payment of obligations arising from current operations
- Materials must be purchased, wages paid, and interest charges and due dates met.
- Budgets—particularly cash and working capital budgets—are the principal means for pre-controlling the availability and cost of financial resources

Back 57

Preliminary control of financial resources

Front 58

The term used to refer to the managerial skill of applying digital technologies to improve work flow is ____________

Back 58

Business process redesign.

Front 59

The term ________ has been defined as "a set of logically related tasks performed to achieve a defined business outcome

Back 59

Business process

Front 60

In general, processes have two important characteristics:

Back 60

- They have customers (internal or external).
- They have cross-organizational boundaries; in other words, they occur across or between organizational subunits.

Front 61

________ is "a structured, measured set of activities designed to produce a specified output for a particular customer or market

Processes are identified in terms of beginning and end points, interfaces, and organization units involved. Examples of processes include developing a new product, ordering goods from a supplier, creating a marketing plan, or processing and paying an insurance claim

Back 61

A process

Front 62

The term used to refer to the overall costs associated with implementing a technology-based business process redesign is _______________

Back 62

Total cost of ownership (TCO).

Front 63

Quality has a number of different definitions.

Despite these many perspectives on quality, the customer is the key perceiver of quality because his or her purchase decision determines the success of the venture’s products or services and often the fate of the venture itself.

A consumer’s perception of the excellence of a product or service is generally based on the degree to which the product or service meets his or her specifications and requirements.

Two points are noteworthy concerning a consumer’s perception of excellence or quality.
First, consumers emphasize different dimensions of quality when judging a product or service.
Second, the perception of excellence can be highly subjective.

One other important element of the quality concept concerns the relationship between quality and price.
In many cases, the relationship between the quality of a product or service and its price is positive and linear.

Back 63

Venture Control and Quality

Front 64

- Planning to go from A-Z
- Not banking when you are bankable
- Becoming a terminal entrepeneur
- Follow your gut! Once you have all the data
Living out ofyour business
- Hiring family and close friends
- Not having an exit strategy
- Cash Flow

Back 64

7 deadly sins from that speaker Scott Conley

Front 65

Managers use several methods to control capital; three of these are:

Back 65

- The payback method
- Rate of return on investment
- Discounted rate of return

Front 66

Revenue-Cost=

Back 66

Profit

Front 67

Assets =

Back 67

Liabilities + Owner's Equity
(Owner's equity represents the claims of the owners, partners, and shareholders against the firms assets)

Front 68

Revenue =

Back 68

Price * Volume

Front 69

is a market model in which trade in goods and services between or within countries flow unhindered by government-imposed restrictions. Restrictions to trade include taxes and other legislation, such as tariff and non-tariff trade barriers. Reductions to these barriers is trade liberalization

Back 69

Free Trade

Front 70

The essential elements of management control are...

Venture control techniques can be classified according to their focus. The three different types of control methods are...

Back 70

Corrective action directed at changing either actual or desired performance

- Actual performance of human, financial, material, and operational resources
- Entrepeneur compares actual results against established performance standards
- Standard performance of human, financial, and opertional resources