MGT 3210: Midterm Exam

budget

a financial plan for the future, based on a single level operations. A quantitative expression of the use of resources necessary to achieve a business' strategic goals

litigation

a formal dispute resolution method which operates using the court system, typically with a lawyer representing each party

debt

a legal obligation to pay money in the future

tax abatement

a legal reduction in taxes by a government

financial leverage

a measure of the amount of debt relative to owner investment

timing purchases

a method of controlling the timing of cash outflows that is invisible to suppliers and vendors

royalty financing

a method of raising capital financing where investors provide money to a business in return for a guaranteed percentage of revenues

money

an accepted medium of exchange

investment

an asset that is acquired for the purpose of either generating future incomes and cash flows or appreciating in value to provide an increase in future wealth

accelerator

an organization that supports start-up technology business by providing inexpensive office space, a variety of support services, and resources

bearer

any person or business entity who has possession of a security

deposits and progress payments

cash payments received before is delivered or completed

interest

charge for the use of money, usually figured as percentage of the principal

infringer

someone who uses intellectual property without the permission of the owner

collateral

something of value given or pledged as security for payment of a loan

asset

something that the business owns that is expected to have economic value in the future

barter

the practice of trading goods and services without the use of money

financial accounting

a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators

managerial accounting

accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business

non-profit corporation

a business form specific to charitable organizations. Nonprofit business charters differ in the kinds of responsibilities the nonprofit has, compared to other forms of for-profit business forms. Nonprofits are the only form of business that can seek 501(c)(3) status from the IRS, which permits donations to the nonprofit to be considered tax-deductible to the donor

financial flexibility

a business' ability to manage cash flows in such manner that the company can respond appropriately to unexpected opportunities and needs

cash budget

a cash budget identifies when, how, and why cash is expected to come into the business, and when, how, and why it is expected to leave

arbitration

a dispute resolution process held instead of court cases in which both sides present their case to a legal professional

discounts for prompt payment

a reduction in sales price provided to credit customers for paying outstanding amounts in a timely manner

income statement

a statement that lists revenues, expenses, and show the amount of profit a business made for specified period of time

budget cycle

a term applied to the schedule and the process for setting the schedule for making purchases by an individual or an organization

Hold harmless

a type of waiver in which a party agrees not to hold another party responsible for certain events

angel investor

a wealthy individual who invests in companies in relatively early stages of development

clearinghouse

an entity that processes checks and electronic transfers for banks and other financial organizations

cost of goods sold

an expense recognized at the time of a sale of merchandise in the amount of the cost of the merchandise to the seller

grace period

an idea in patent law that says disclosing the idea starts a one-year clock for filing a provisional or regular patent, where the disclosure would not count as "prior art" and disqualify the idea from being patented. These grace period disclosures are strongest if they are limited to specific people

expense

an increase in owner's equity caused by selling your product

revenue

an increase in owners' equity caused by selling your product or service

foundation

an institution to which private wealth is contributed and from which private wealth is distributed for public purposes

short term debt

any debt that must be paid in less than one year from the date of financial statement on which it is reported

legal entity

existence of being, human or non-human, such as corporation, that is recognized as having rights and duties, such as the right to own property in the entity's name

contingency fee

fee paid by client to attorney for legal services that is dependent upon the outcome of a case

assumed name filing

filing made with the state (s) in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business

fictitious name filing

filing made with the state(s) in which the business operate disclosing the trade name or assumed name of the business along with the owners of the business

growth trap

financial crisis that is caused by a business growing faster than it can be financed

net present value (NPV)

the difference between the present value of cash inflows and the present value of cash outflows over a specified period of time

check the box taxation

the election of a subchapter-s corporate form, by checking the appropriate box on a tax return. this form of taxation produces single taxation for the owner

optimum capital structure

the ratio of debt to equity that provides the maximum level of profits

financial risk

uncertainty of returns, the probability of losing money

gaming the payment process

using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided

gift capital (or gift)

valuable assets or services donated to the business without any obligation to repay or any ownership interest

operating activities

activities involved in producing and selling good and services

retainer

A fee paid by a client to an attorney to engage the attorney's services.

provisional patent

A preliminary description of your idea submitted to the U.S. Patent Office according to its specifications. It is intended to serve as a sort of placeholder for a full (or regular) patent, which needs to be filed within one year of the filing of the provisional patent.

trade secret

Confidential information within a company that gives that company a competitive advantage

single taxation

Earnings of the business are taxed once with the owners paying the taxes.

double taxation

Earnings of the business are taxed twice with the business as well as its owners being subject to tax.

vicarious (indirect) liability

Indirect liability or responsibility for the actions of another.

Waiver

Part of a contract in which a party intentionally gives up legal rights or claims.

independent contractors

Persons working to achieve a certain goal without being subjected to substantial controls by another.

non-core projects

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business.

Non-cash incentives

Rewards that do not require payment of cash, such as stock options, compensating time off, or added vacation days.

microlender

SBA approve partners who offer SBA- guaranteed micro-loans to eligible small business. These loans require much less paperwork than regular SBA or bank loans and are for amounts $50,000

bank ledger balance

The sum of deposits and withdrawals recorded in a bank's accounting records.

bank available balance

The sum of money that has actually been received and paid out of a depositor's account.

Fair Credit Reporting Act (FCRA)

U.S. federal legislation specifying consumer's rights vis-a-vis credit reporting agencies

design patent

a 14-year patent for a new, original, and ornamental design for an article of manufacture

Accredited Investor

as defined by the SEC in title 17, chapter II, part 230 of the code of federal regulations: "any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to the person: banks, business development companies, companies worth more $5 million, an executive, an executive of the firm making the offering, or an individual with a personal net worth of more than $1 million. You may access the regulation online

sophisticated investor

as defined by the SEC, people who "have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment"

internal factors

aspects of or choices within a business which cause the business's costs to change

external factors

aspects of the world outside the business which could cause the business's costs to change

cash equivalents

assets that may be quickly converted to cash

outsourcing

contracting with people or companies outside your business to do work for your business

account

in terms of accounting practice, an account is a chronological list of all additions to and subtractions from a single type of asset, eg. cash, receivables, loans outstanding

cash

money that is immediately available to be spent

commercial paper

notes issued by credit worthy corporations

exculpatory clause

part of a contract in which a party to the contract states that he will not be responsible for certain actors

non-compete clause or a non-compete

part of a contract in which a person agrees not to open a certain type of business or seek employment doing certain things in an area for a period of time

dividends

payments of profits to the owners of corporations

trade discounts

percentage discounts from gross invoice amounts provided to encourage prompt payment

plaintiff

person or other entity a law suit

defendant

person or other entity being sued

cash flow management

planning and trading the amount and timing of money to be received and aid during the business cycle

harvest

recover value through sale of a firm or profits

SaaS

stands for software as a service and refers to an internet-based program that you would use in work or leisure. These are paid for by a timeframe, project of some measurement of usage

marketable securities

stocks and bonds that are traded on an open market

cash-to-cash cycle

the time that is required for a business to acquire

total cost

total costs are simply the sum of all costs that are incurred within an accounting period. For the purposes of cost-volume-profit analysis, total costs are set equal to the sum of fixed costs, and variable costs

operating agreement

A contract among LLC members outlining how the LLC will conduct itself.

subcontract

A contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform.

MACRS rate

An Internal Revenue Service acronym for the Modified Accelerated Cost Recovery System. The MACRS approach lets taxpayers depreciate more of the cost earlier in the life of a capital expense.

community development organization

An organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area.

Sarbanes-Oxley Act of 2002

a federal law describing the steps publicly traded businesses must take to protect and provide key financial information

piercing the veil

The dissolution of a corporate form, making it back into a sole proprietorship or general partnership, if the court finds that the owner carelessly mixed up personal and business assets or finances.

utility patent

a 20 year patent covering a process, machine, article of manufacture, or composition of matter, or any new or useful improvement of an existing one

plant patent

a 20-year patent which covers new strains of living plant organisms, algae, or macro fungi

hourly fees

a basis for legal charges where the rate is based on a price per hour. Often lawyers will charge for fractions of an hour

credit reporting agency (CRA)

a business that collects, collates, and reports information concerning an entity's use of debt

patent

a grant by the United States government to an inventor for an idea which is new, useful, and non-obvious, giving the inventor the exclusive right to make, use, or sell his or her idea

corporation

a legal "artificial" entity that is formed by filing specific documents with a state government

Limited Liability Company (LLC)

a legal form of business organization that is created by filing required documentation with a state government

liquidity

a measure of how quickly a company can raise money through internal sources by converting assets to cash

standard budgeting

a method for business forecasting and control in which specific expected volumes and prices per unit are used

cost-volume-profit

a method for planning operations necessary to attain a specified profit goal. Break-even analysis is a specific application of cost-profit-volume analysis

overdraft

a negative balance in a depositor's bank account

mediation

a non-binding problem resolution process making use of a neutral third-party

charge back

a reduction in the bank account of a merchant by a credit card company

opinion of patentability

a report (typically written as a letter) from a patent attorney or patent agent that is his or her professional opinion of the possibility of obtaining a patent for an idea that you have explained. The opinion is based on the attorney's or agent's research of patents for similar or related ideas. Typically the first official step in the patenting process

cash disbursement budget

a schedule of the amounts and timings of payments of cash out of a business

Cash Reciepts Budget

a schedule of the amounts and timings of the receipt of cash into a business

financial management

a set of theories and techniques used to optimize the receipt and use of capital assets

non-sufficient funds (NSF)

a situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount the check

statement of cash flows

a statement of the sources and uses of cash in a business for a specific period of time. Also called a cash flow statement

cash flow statement

a statement of the sources and uses of cash in a business for a specific period of time. Also called statement of cash flows.

balance sheet

a statement of what a business owns (assets), what it owes to others (liabilities) and how much value the owners have invested in it

financing activities

activities through which cash is obtained from and paid to lenders, owners, and investors

articles of partnership

agreement between the partners on matters pertaining to the formation and operation of the partnership

comprehensive budget

also called the master budget, a series of budget that detail all projected receipts and spending for the budget period

payables

amounts owed to vendors for merchandise or services purchased on credit

receivables

amounts that are owed to a business for merchandise that was sold on credit

tax accounting

an accounting approach based on specific accounting requirements set by governmental taxing agencies

reconcile

an accounting process to identify the causes of all differences between book and bank balances

currency

bills and coins printed by governments to represent money

factoring recievables

borrowing money secured by a firm's accounts receivable

Business-to-business (B2B)

business to business transactions using e-commerce

business-to-consumer (B2C)

business to consumer transactions using e-commerce

tax credit

direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria

trademark

distinctive word, slogan, or image that identifies the product and its origin

articles of organization

document setting forth information about a limited liability company that is filled with the state to establish a LLC

Pass-through taxation

earnings of the business are distributed to the business owners and those owners pay individual tax on the earnings

copyright

exclusive right given to the creator of literary or artistic work to make use of that work

financial statement

formal summaries of the content of an accounting system's records of transactions

grant

gifts of money made to a business for a specific purpose

liabilities

legal obligations to give up things of value in the future

unsecured debt

loans that do not allow the lender to seize assets in event of non-payment

secured debt

loans that provide the lender with the legal right to seize specific assets in the event of nonpayment. Most automobile loans are secured debt and if you don't make your payments your car will be repossessed

on account

merchandise purchased or sold with payment due in the future, usually within one month

debt capital

money borrowed for the purposes of investment in a business

equity capital (or equity)

money contributed to the business in return for ownership of the business

outside equity

money from selling part of your business to people who are not and will not be involved in the management of the business

demand deposits

money held in checking and savings accounts

pro forma financial statements

planning documents for future business activities that are formatted to look like the common financial statements of the income statement, balance sheet, and statement of cash flows

small business investment company

private businesses that are authorized to make SBA insured loans to startup and small businesses

intellectual property

property coming from some sort of original thought, e.g patents, trade, secrets, trademark, and copyright

intangible property

property that has no value of its own, but that represents value, such as stock certificate

501 (c)(3)

refers to a section of the U.S. tax code that specifies the conditions for a nonprofit organization to be certified tax-exempt, meaning it does not pay any federal income taxes. In addition to saving taxes, 501 (c)(3) status gives the recipient organization the ability to legally tell donors that their donations are also tax-exempt, which makes such donations a way to decrease the amount on which taxpayers would have to pay income taxes. This is one of the big incentives to nonprofits to increase the attractiveness of getting donations.

depreciation

regular and systemic reduction in income that transfers asset value to expense over time

financial strength

the ability of a business to survive adverse financial events

going concern concept

the accounting concept that a business is expected to continue in existence for the foreseeable future

permanent account

the accounts of assets, liabilities, and owner's equity, excluding accounts for reviews and expunges

operating income

the amount of income earn ed by the regular operations of the business

profit, profitability

the amount that revenues exceed expenses

business entity concept

the concept that a business has an existence separate from that of its owners

articulate

the concept that data flows from the income statement through the statement of retained earnings and owner's equity to the balance sheet

variance

the difference between an actual and budgeted revenue and cost

owners' equity

the difference between assets and liabilities of a business

weighted average cost of capital (WAC)

the expected average future costs of funds

risk

the level of profitability that an investment will not produce expected gains

Doing Business As (DBA)

the name under which the business is operated

assumed name

the name under which the business is operated

trade name

the name under which the business is operated

gain on investment

the percentage amount that the payout of investment differs from original cost: calculated (payout-investment + dividends)/investments

cost of capital

the percentage of obtaining future funds

consignment

the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold

profit planning

the process of creating a set of interconnected budgets that combine into a master budget that can be used for assessing and controlling the business processes

variance analysis

the process of determining the effect of price and quantity changes on revenues and expense

investing activities

the purchase and sell of land, buildings, equipment, and securities

accounting equation

the statement that assets minus liabilities equals owner's equity (assets- liabilities= owner's equity)

retained earnings

the sum of all profits and losses, less all dividends paid since the beginning of the business

company book balance

the sum of cash inflows and cash outflows recorded in the firm's accounting records

Operating Cycle

the time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale

current ratio

the value of current assets divided by current liabilities

generally accepted accounting principles (GAAP)

these are standardized rules for accounting procedures set out by the financial account standards board and used in all audits and submissions of accounting reports to the government

flat fees

this described a method of billing for lawyers where a fixed amount is paid for a certain task

variable costs

those costs that change with each unit produced. Example: raw materials

fixed costs

those costs that remain constant regardless of the quantity produced, ex: rent

diversify

to invest in multiple investments of differing risk profiles for the purpose of reducing over-all investment risk

partnership

two or more people cooperating to conduct a business enterprise

bootstrapping

using funds generated by business operations to capitalize growth