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
