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74 Cards in this Set
- Front
- Back
What are the three primary causes of cash flow problems?
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1) difficulty collecting money due
2) Seasonal variation in sales 3) unexpected decreases in sales |
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What is money?
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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.
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What are the two purposes of money?
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1) to make exchanges
2) to keep track of wealth |
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What three sources can cash come from in a small business?
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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 |
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What is a bank ledger balance?
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The bank's accounting system for all recongnized transcation that affect the account
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Why would one reconciling bank balances with company book balances?
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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 |
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What is overdraft?
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a negative balance in a depositor's bank account
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What is float?
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describes the delay in movement of money among depositors and banks
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What are the two primary casues of float?
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1) delays in transferring money due to internal procedures (availability float)
2) Delyas in delievering checks (processing float) |
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What are 5 techniques to increase cash flows?
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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 |
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What are the two factors that must be controlled for cash outflows?
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1) the amount of cash being paid out
2) the timing of cash being paid out |
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What is the largest source for credit and debt for a small business?
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Commercial banks (57%)
Finance Company (11%) Owner loans (12%) |
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What are the best ways to control cash shortages?
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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 |
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Where do you get money to finance a small business?
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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 |
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What is the number one source of financing and other major sources?
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Themselves
Family and friends Credit Cards Trade credit banks Commercial lenders |
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How do you use Rule of 72?
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72/interest payment percent
(72/9% = 8 years) |
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What is personal equity?
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How much you are worth
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What is outside equity?
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Money from selling part of your business. (The buyers are not part of the business and they do own some of it)
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Financing with equity is what?
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Expensive
Guaranteed to create problems of control and decision making |
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Why do you want outsiders to invest?
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You will reduce your own exposure to financial loss
YOur business will not have increased cost in the form of interest |
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How do you get euity investment?
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You show the investors that your business can probably make gains for them
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What is a self directed IRA?
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IRA that requires the account owner to make investment decisions and investments on behalf of the retirement plan.
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What are two types of investments that are excluded under ERias and IRS codes?
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1) life insurance contracts
2) collectibles such as works of art, rugs, jewelry |
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What is the most common source of capital for established ongoing small businesses?
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borrowed funds
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What are the three ways to get borrowed funds?
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Direct loans of cash
Guaranteeing loans made by commercial loans banks Reducing taxes by allowing interest to be deducted |
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Where can a small business get loans?
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Your current bank
Small business administration guaranteed loan programs Numerous small business investment companies incubators or accelerators in your area |
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What are the two general sources of gift financing?
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institutional
personal |
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What are some forms of personal gifts?
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cash
picking up the tab accelerated cash out free use free work overpayment forgiveness piggybacking |
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How do not cause problems with personal gifts to a small business?
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Put an agreement in writing.
If it a gift say so If it is a loan, have the interest and payment terms |
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What can't be taxed as a gift?
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tuition or medical expenses you pay for someone
gift to your spouse gifts to a political organization qualifying charities |
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What are instituional gifts?
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Tax abatement
Tax credits grants |
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What is a tax abatement?
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a legal reduction in taxes
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What is a tax credit
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direct reduction dependent on meeting some legal criteria
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Where are funds for start-ups usually obtained?
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through founders personal resources, personal credit wothiness, and internally generated cash flows
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What is risk?
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the very real likelihood that a business may not succeed
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What are the three general types of events that cause business risk?
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Events related to the property of the business
Event related to personnel Event related to customers and others |
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What kind of risk rises from property of the business?
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inventory can be stolen, machinery can break
building can be damaged or destroyed land may become contaminated patents may be infringed upon |
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What kind of risks rise from events related to personnel?
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Theft
violation of government regulations Loss of key employees |
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what kind of risks arise from events related to customers and others?
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Injuries sufered while upon business property
injury or damage that is caused during the use of the business's productes |
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What are the two greatest sources of theft?
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Employee theft (45%0
sHOPLIFITNG (31%) |
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What is the primary method of enuring honesty in employees?
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Internal control
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What are some insurince for the property of the business?
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business interruption insuraance
crime insurance theft insurance credit insurance personnel insurance (life, disability, medical) |
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What are the seven types of business forms?
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Sole propreitorship
General partneships limited partnerships C corporations S corporations LLC' |
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What are some advantages of Coroporations? Disadvatages?
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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 |
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What are some advantages of sol proprietorships? Disadvantages?
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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 |
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What are some advantages and disadvantages of partnerships?
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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 |
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What are the six major factors at play for a business?
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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 |
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what are the 4 ways to pay an attonry
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hourly, flat, continquencey, and retainers
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what are torts?
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They are liabilities that arise when another's legal rights ar eviolated in ways other than form a breach of contract
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What are some different kinds of contracts?
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interstate contracts
noncompete clauses exculpatory clauses hold harmless agreements |
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What are design patents?
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covers the look and design of product parts for 14 years
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What is a utility patent?
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covers processes and functions for at least 20 years
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What is a trade secret?
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information known to certain people in the company that makes the company more competitve
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What is a trademark?
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a way to identiy ceratin goods
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What is a trade name?
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name of a business used to identify itself to the public
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What are the major legal protection laws for employees?
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civil rights act of 1964
ADA of 1990 |
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What is employee leasing?
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the renting of personnel from an organiztaion that handles paperwork and administers benefits for those employees
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What is a professional employement organization?
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a personnel-leasing company that places employees on its own payroll then rents them to employers on a permanent basis
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What is a job description?
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a written summary o fthe essential duties required by a specific job
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What is job specification?
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a list of the skills and abilites needed by the job holder to successfully perform a specific job
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What are two broad types of training?
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on the job
off the job |
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what are the three guidelines for training?
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give your employees opportunites to use new skills
making training an ongoing process think of trainin as an investment |
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What are the 5 factors most valuable to employees when considering rewards?
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teamwork
recognition training empowerment contribution |
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What is emergence on the business cycle?
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Person thinks and takes action towards starting a firm (only 7% start this step)
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What is the second stage of the business cycle?
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Existence: having the business in operation but not yet stable (Risk is high and owners don't know everything yet)
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What is the third step in the business cycle?
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Success: develop information, skills and routines to grow the business profits
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what is the fourth step in the business cycle?
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Resource maturity: stable level of sales and profits
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What are the 4 key componenets to staving off customer complacency?
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recency
frequency potency recommendation |
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What is the fifth step in the business cycle?
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take: a period of exceptional growth
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What are some growth strategies?
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High growth ventures
High perfomring small businesses traditional small business Lifestyle or part time firms |
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What is Harvesting?
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getting the maximum value an owner can for selling a small business
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What is initial public offering?
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selling stock to public on major stock exchange
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What are critical success factors?
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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)
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What are the 4 bottom lines
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the firm
community family yourself |