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74 Cards in this Set

  • Front
  • Back
What are the three primary causes of cash flow problems?
1) difficulty collecting money due
2) Seasonal variation in sales
3) unexpected decreases in sales
What is money?
Money is a medium of exchange accepted by the community, meaning its what people buy things with and sell things for. Money provides a standard for measuring value, so that the worth of different goods and services can be compared. And lastly, money is a store of value that can be saved for later purchases.
What are the two purposes of money?
1) to make exchanges
2) to keep track of wealth
What three sources can cash come from in a small business?
1) Cash can be obtained by selling products and services
2) cash can be obtained from investments the business has made
3) cash can be made through financing
What is a bank ledger balance?
The bank's accounting system for all recongnized transcation that affect the account
Why would one reconciling bank balances with company book balances?
1) Estimate the banks aviable balance
2) Identifies any mistakes
3) checks the accurarcy
4) lets you know about itmes that you wouldn't otherwise know
What is overdraft?
a negative balance in a depositor's bank account
What is float?
describes the delay in movement of money among depositors and banks
What are the two primary casues of float?
1) delays in transferring money due to internal procedures (availability float)
2) Delyas in delievering checks (processing float)
What are 5 techniques to increase cash flows?
1) factoring receivables
2) Asking for your money
3) taking on noncore projects
4) Taking deposits and progress payments
5) offering discounts for prompt payments
What are the two factors that must be controlled for cash outflows?
1) the amount of cash being paid out
2) the timing of cash being paid out
What is the largest source for credit and debt for a small business?
Commercial banks (57%)
Finance Company (11%)
Owner loans (12%)
What are the best ways to control cash shortages?
1) use personal money
2) borrow
3) adjust payment scheduales
4) adjust buying scheduales
5) tying to collect money due
6) lay off employees
7) sell investements
8) sell reveivables
Where do you get money to finance a small business?
Bank loan (traiditional or SBA backed)
Trade associated loans
Family or Friends
Credit Cards
Angle Investors and venture capitalists
Buy an existing one and have onwer finance it
Comperial lenders
Government programs
Community based financiers
Stock sales
What is the number one source of financing and other major sources?
Themselves
Family and friends
Credit Cards
Trade credit
banks
Commercial lenders
How do you use Rule of 72?
72/interest payment percent
(72/9% = 8 years)
What is personal equity?
How much you are worth
What is outside equity?
Money from selling part of your business. (The buyers are not part of the business and they do own some of it)
Financing with equity is what?
Expensive
Guaranteed to create problems of control and decision making
Why do you want outsiders to invest?
You will reduce your own exposure to financial loss
YOur business will not have increased cost in the form of interest
How do you get euity investment?
You show the investors that your business can probably make gains for them
What is a self directed IRA?
IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan.
What are two types of investments that are excluded under ERias and IRS codes?
1) life insurance contracts
2) collectibles such as works of art, rugs, jewelry
What is the most common source of capital for established ongoing small businesses?
borrowed funds
What are the three ways to get borrowed funds?
Direct loans of cash
Guaranteeing loans made by commercial loans banks
Reducing taxes by allowing interest to be deducted
Where can a small business get loans?
Your current bank
Small business administration guaranteed loan programs
Numerous small business investment companies
incubators or accelerators in your area
What are the two general sources of gift financing?
institutional
personal
What are some forms of personal gifts?
cash
picking up the tab
accelerated cash out
free use
free work
overpayment
forgiveness
piggybacking
How do not cause problems with personal gifts to a small business?
Put an agreement in writing.
If it a gift say so
If it is a loan, have the interest and payment terms
What can't be taxed as a gift?
tuition or medical expenses you pay for someone
gift to your spouse
gifts to a political organization
qualifying charities
What are instituional gifts?
Tax abatement
Tax credits
grants
What is a tax abatement?
a legal reduction in taxes
What is a tax credit
direct reduction dependent on meeting some legal criteria
Where are funds for start-ups usually obtained?
through founders personal resources, personal credit wothiness, and internally generated cash flows
What is risk?
the very real likelihood that a business may not succeed
What are the three general types of events that cause business risk?
Events related to the property of the business
Event related to personnel
Event related to customers and others
What kind of risk rises from property of the business?
inventory can be stolen, machinery can break
building can be damaged or destroyed
land may become contaminated
patents may be infringed upon
What kind of risks rise from events related to personnel?
Theft
violation of government regulations
Loss of key employees
what kind of risks arise from events related to customers and others?
Injuries sufered while upon business property
injury or damage that is caused during the use of the business's productes
What are the two greatest sources of theft?
Employee theft (45%0
sHOPLIFITNG (31%)
What is the primary method of enuring honesty in employees?
Internal control
What are some insurince for the property of the business?
business interruption insuraance
crime insurance
theft insurance
credit insurance
personnel insurance (life, disability, medical)
What are the seven types of business forms?
Sole propreitorship
General partneships
limited partnerships
C corporations
S corporations
LLC'
What are some advantages of Coroporations? Disadvatages?
Can have representitive management
Ease of rising learge amount of capital
LEgal entity separate from owners
relativily permanent


Dis:
Limit interest in activities
High taxes
Lots of reports
Limited power
What are some advantages of sol proprietorships? Disadvantages?
Ad:
Secrecy
Tax advantages
keeps all profits
Freedom of action and control
simpliest to form

dis:
limited capital
hard to obtain credit
inadequate management
unlimited liability
What are some advantages and disadvantages of partnerships?
Ad:
easy to form
Division of labor and mgmt
Specilized skills
can rise more capital
obtains resources from more than one person

dis:
limited life
unlimited liability
everyone is responbile for others
death termintes it
What are the six major factors at play for a business?
personal libiilty
taxation of the entity and its owners
complexity and organizational cots in setting up
contrl of the bus.
continuity o fthe bus.
ability to raise capital
what are the 4 ways to pay an attonry
hourly, flat, continquencey, and retainers
what are torts?
They are liabilities that arise when another's legal rights ar eviolated in ways other than form a breach of contract
What are some different kinds of contracts?
interstate contracts
noncompete clauses
exculpatory clauses
hold harmless agreements
What are design patents?
covers the look and design of product parts for 14 years
What is a utility patent?
covers processes and functions for at least 20 years
What is a trade secret?
information known to certain people in the company that makes the company more competitve
What is a trademark?
a way to identiy ceratin goods
What is a trade name?
name of a business used to identify itself to the public
What are the major legal protection laws for employees?
civil rights act of 1964
ADA of 1990
What is employee leasing?
the renting of personnel from an organiztaion that handles paperwork and administers benefits for those employees
What is a professional employement organization?
a personnel-leasing company that places employees on its own payroll then rents them to employers on a permanent basis
What is a job description?
a written summary o fthe essential duties required by a specific job
What is job specification?
a list of the skills and abilites needed by the job holder to successfully perform a specific job
What are two broad types of training?
on the job
off the job
what are the three guidelines for training?
give your employees opportunites to use new skills
making training an ongoing process
think of trainin as an investment
What are the 5 factors most valuable to employees when considering rewards?
teamwork
recognition
training
empowerment
contribution
What is emergence on the business cycle?
Person thinks and takes action towards starting a firm (only 7% start this step)
What is the second stage of the business cycle?
Existence: having the business in operation but not yet stable (Risk is high and owners don't know everything yet)
What is the third step in the business cycle?
Success: develop information, skills and routines to grow the business profits
what is the fourth step in the business cycle?
Resource maturity: stable level of sales and profits
What are the 4 key componenets to staving off customer complacency?
recency
frequency
potency
recommendation
What is the fifth step in the business cycle?
take: a period of exceptional growth
What are some growth strategies?
High growth ventures
High perfomring small businesses
traditional small business
Lifestyle or part time firms
What is Harvesting?
getting the maximum value an owner can for selling a small business
What is initial public offering?
selling stock to public on major stock exchange
What are critical success factors?
processes, benchmarks, or components of the business that are essential for he business to be proftibale and competitve (comes from outside help and entrepreneurial experience)
What are the 4 bottom lines
the firm
community
family
yourself