[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.