[CIS] B1: Business Basics
dividend
A distribution of earnings to shareholders.
partnership agreement
A legal agreement between two or more business partners that outlines core business issues.
sole proprietorship
A business form in which a single person is the sole owner and is personally responsible for all the profits and losses of the business.
limited liability corporation (LLC)
A hybrid entity that has the legal protections of a corporation and the ability to be taxed (one time) as a partnership.
financial quarter
A three-month period (four quarters per year).
corporation (also called organization, enterprise, or business)
An artificially created legal entity that exists separate and apart from those individuals who created it and carry on its operations.
liability
An obligation to make financial payments.
accounting
Analyzes the transactional information of the business so the owners and investors can make sound economic decisions.
shareholder
Another term for business owners.
asset
Anything owned that has value or earning power.
finance
Deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities.
transaction
Exchange or transfer of goods, services, or funds involving two or more people.
balance sheet
Gives an accounting picture of property owned by a company and of claims against the property on a specific date.
product life cycle
Includes the four phases a product progresses through during its life cycle including introduction, growth, maturity, and decline.
human resources (HR)
Includes the policies, plans, and procedures for the effective management of employees (human resources).
marketing mix
Includes the variables that marketing managers can control in order to best satisfy customers in the target market.
managerial accounting
Involves analyzing business operations for internal decision making and does not have to follow any rules issued by standard-setting bodies such as GAAP.
financial accounting
Involves preparing financial reports that provide information about the business's performance to external parties such as investors, creditors, and tax authorities.
limited liability
Means that the shareholders are not personally liable for the losses incurred by the corporation.
limited partnership
Much like a general partnership except for one important fundamental difference; the law protects the limited partner from being responsible for all of the partnership's losses.
loss
Occurs when businesses sell products or services for less than they cost to produce.
profit
Occurs when businesses sell products or services for more than they cost to produce.
for profit corporations
Primarily focus on making money and all profits and losses are shared by the business owners.
accounting department
Provides quantitative information about the finances of the business including recording, measuring, and describing financial information.
revenue
Refers to the amount earned resulting from the delivery or manufacture of a product or from the rendering of a service.
expense
Refers to the costs incurred in operating and maintaining a business.
income statement
Reports operating results (revenues minus expenses) for a given time period ending at a specified date.
capital
Represents money whose purpose is to make more money, for example, the money used to buy a rental property or a business.
solvency
Represents the ability of the business to pay its bills and service its debt.
marketing communication
Seeks to build product or service awareness and to educate potential consumers on the product or service.
partnership
Similar to sole proprietorships, except that this legal structure allows for more than one owner.
statement of cash flows
Summarizes sources and uses of cash, indicates whether enough cash is available to carry on routine operations, and offers an analysis of all business transactions, reporting where the firm obtained its cash and how it chose to allocate the cash.
bookkeeping
The actual recording of the business's transactions, without any analysis of the information.
net income
The amount of money remaining after paying taxes.
market segmentation
The division of a market into similar groups of customers.
sales
The function of selling a good or service that focuses on increasing customer sales, which increases company revenues.
operations management
The management of systems or processes that convert or transform resources (including human resources) into goods and services.
break-even point
The point at which revenues equal costs.
owner's equity
The portion of a company belonging to the owners.
marketing
The process associated with promoting the sale of goods or services.
statement of owner's equity
Tracks and communicates changes in the shareholder's earnings.
not for profit (or nonprofit) corporation
Usually exists to accomplish some charitable, humanitarian, or educational purpose, and the profits and losses are not shared by the business owners.
financial statements
Written records of the financial status of the business that allow interested parties to evaluate the profitability and solvency of the business.