Chapter 16 - Small Business Entrepreneur's

arm's length transaction

a business deal where the parties have a prior relation of affiliation, but where the business is conducted as if they were unrelated

return on investment

a capital budgeting equation used to measure the relationship between initial investment and the profits that are expected to be received from making the investment

economic order quantity

a statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost

safety stock

an amount of inventory carried to ensure that you will not run out of inventory because of fluctuating levels of sales

capital assets

assets that are expected to provide economic benefits for periods of time greater than one year

outsourcing

comprises obtaining a needed business process from a firm that is independent of the entrepreneur's business

cost of owning

cost incurred in financing, insuring, taxing, or tracking an asset

cost of disposition

cost incurred in the activities necessary to get rid of an asset

inventory valuation

determination of the amount of assets help by the firm for sale or production

outflow

funds being paid to others by the firm

pledging receivables

giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid

point of sale system

hardware and software combinations that integrate inventory management directly into accounting software

equipment

machinery, tools, or materials used in the performance of the work of the business

accounts receivable

money owed to your business by customers who purchased your product on credit

bar coding

obtaining a universal product code number and scan-ready visual tag, and printing it on the product or its packaging.

inventory

products that are held for sale to customers

factoring

selling the rights to collect accounts receivable to an entity outside your business

perpetual inventory

system of recording he receipt and sale of each item as it occurs

optimum stocking level

the amount of inventory that results in the minimum cost, when considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory

payback period

the amount of time it takes a business to earn back the funds it paid out to obtain a capital asset

acquisition cost

the total cost of acquiring an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready for its first productive use

replacement cost

the total cost of replacing an asset with an essentially identical asset

physical inventory

a count of all the inventory being held for sale at a specific point in time

property

a general term for real estate, but it can also be applied as a legal term for anything owned or possessed

best practices

activities identified by authoritative bodies as examples of optimal ways to get things done in a particular industry, profession, or trade

book value

the difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date

cost of operating

the direct cost incurred in using an asset for the purpose for which it was intended

supply chain

the line of distribution of a product from its start as materials outside the target firm to its handling in the target firm to its handling by sellers into the hands of customers

inputs

the materials, labor, and energy put into the production of a good or service

disposal value

the net amount realized after subtracting the costs of getting rid of an asset from its selling price

plant

a general term for the facilities of a business

capital lease

a lease in which at the end of the lease period the asset becomes the property of the lessee, possibly with an additional payment

lock box

a locked receptacle for money, the keys to which are not available to those who physically handle the receptacle; a common example is the coin receptacle for a parking meter

operating lease

a long-tern rental in which ownership of the asset never passes to the person paying for the lease

quality

a product or service's fitness for use, measured as durability, reliability, serviceability, style, ease of use, and dependability

just-in-time inventory

the practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer

feedback

the process of communicating within or to the organization about how the outputs worked or were received

capital budgeting

the process of deciding among various investment opportunities to create a specific spending plan

periodic inventory

the process of physically counting business assets on a set schedule

operations

the process of transforming materials, labor, and energy into goods and services

microinventory

the purchase of inventory only after a sale is made, very typical with internet firms

productivity

the ratio measure of how well a firm does in using its inputs to create outputs, literally productivity is outputs divided by inputs

outputs

the service or product that is produced for sale

whole of life costs

the sum of all costs of capital assets, including acquisition, ownership, operation, and disposal

pull-through system

a term for just-in-time inventory systems in which product is ordered and placed into production only after a sale has been completed

efficiency

the comparison of productivity ratios to see the extent that an organization has generated more outputs with fewer inputs

fair market value

the cost at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction

replacement value

the cost incurred to replace one asset with an identical asset