SBM Chapters 11, 13, 14 ,15, 17 || Exam Review
Perpetual inventory
System of recording the receipt and sale of each item as it occurs; Maintains constant record of amounts and value of inventory that has been sold and inventory on hand
F
T or F: EVERY business process must be extensively documented
F
T or F: Firms that compete on price experience POSITIVE growth
T
T or F: If the business is a corporation or an LLC, the owner can only lose what he or she has invested in the business.
Procedure
The series of steps and activities required to complete a process
Guerrilla marketing
The use of creative and relatively cheap ways to reach customers (Ex. Doorknob hangers, flyers under windshield wipers, t-shirts, balloons)
You
Who is responsible for collecting payments in small-claims court?
F
T or F: Sipping documentation and other paperwork are very VAUGE to the product and the country to which it is going
T
T or F: Some forms of price discrimination are ILLEGAL
T
T or F: State laws applicable to a small business are extremely varied
T
T or F: You can get the clerk to serve the losing party with a certified letter reminding the customer of the small-claims court order
T
T or F: the small-claims court can help garnish the loser's income/attach assets of the losing party, making them yours until you get the payment court ordered
Equifax, Experian, Innovis, TransUnion
What are the 4 primary CRA's
- Estimates bank's available balance to manage cash flows - Identifies mistakes that were made by bank/bookkeeper - Checks accuracy of bank and biz records - Lets you know about items on bank statement that wouldn't be included in biz's accounting records
What are the 4 purposes of reconciling differences in bank and book balances?
- Increases sales of those who tend to buy more - Increases repeat biz - Reduces cost of selling because it is cheaper to obtain repeat customers than new customers - Increased sales = increased profit
What are the 4 reasons businesses provide credit to customers?
Being well networked
What can help prevent dirty negotiation tricks?
There are few language issues, the culture is similar to that of the US, and the government and economics are stable
Why is it best to ship to countries similar to the US? (Ex. Canada, UK, Australia)
Television
__________ is expensive, but attracts a large audience and is a good way to demonstrate what your product is capable of doing
1. Prepare 2. Position: Show confidence 3. Propose: What is your solution? (HARDEST) 4. Pounce: Move towards agreement
What are the 4 steps to structure a winning negotiation solution?
- CHARACTER of the managers - CAPACITY to repay principal and interest - CONDITIONS of biz's industry and economy - COLLATERAL to secure loan
What are the four C's of borrowing?
Production line layout and process layout
What are the two formats manufacturing processes are laid out as?
Checking accounts and savings accounts
What are two of the most common forms of demand deposits?
A businesses ability to pay debts/expenses in current accounting period
What do liquidity ratios measure?
The cost of everything you spend to acquire and prepare it for its first use
What is the acquisition cost of a capital asset?
What is the least expensive form of direct mail?
When the other party knows you won't retaliate
When do dirty negotiation tricks work?
Maximizing
When starting out, companies should focus on __________ profits
- Demand for P+S - Value delivered to customers - Prices set by competing firms - Your business strategy and product placement
What are the four key factors for determining an optimum price?
1. Use personal money 2. Borrow 3. Adjust scheduled purchases 4. Adjust scheduled payments 5. Collect money due 6. Sell incentives 7. Sell receivables 8. Lay off employees
What are the most common ways businesses handle money shortages? (8)
Nonpayment and contract default issues
What are the primary areas for conflict resolution?
Overdraft
Negative balance in a depositor's bank account
Comprehensive Budget
Sets of budgets that detail all projected receipts and spending for the budget period (AKA master budgets)
Risk
The level of probability that an investment will not produce expected gains
Price Lining
The practice of setting (usually) three price points: good quality, better quality, best quality; Appeals to market by having different versions of a product with different prices
Operations
The process of performing materials, labor, and energy into goods and services
Wholesaler
An intermediary business that buys (usually in large quantities) and sells (usually in smaller quantities) to business rather than consumers
Agent
An intermediary business that represents a manufacturer's P+S to other biz-to-biz intermediary firms
Retailer
An intermediary business that sells to consumers/end users of products (Single or small quantities)
Short-term debt
Any debt that must be paid in less than one year from the date of the financial statement on which it is reported; Form of short-term financing
Depreciation
Arbitrary, but regular and systematic, method used to take asset values as an expense for the purpose of calculating net income or loss
Fair Market Value
Price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction; Between disposal value and replacement value
Markup Pricing
Price-setting method where an amount is added to the cost of a product to set the retail price and provide a profit; Most used pricing method
Periodic inventory
Process of physically counting business assets on a set schedule
Growth trap
Financial crisis that is caused by a business growing faster than it can be financed
Pro forma
For businesses that gross in excess of $10 million/year, _________ amounts are usually rounded to the nearest $1000
Sales promotion
Form of communication that encourages the customer to act immediately, such as coupons, sales, or contests
Litigation
Formal dispute resolution method that operates using the court system,typically with a lawyer representing each side; Draining both financially and emotionally
Free-form layout
Format where the store is laid out in sections with aisles that angle or meander through the store; Found in upscale department stores, clothing stores, and the like
Grant
Gift of money given for a specific purpose
Pledging receivables
Giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid; Less expensive than factoring
Optimum Price
Highest price that will produce your desired level of sales in your intended market
Premium Pricing
Setting a price above that of the competition to indicate a higher quality
Skimming
Setting a price at the highest level the market will bear, usually because there is no competition at the time
Odd-even Pricing
Setting a price that ends in the number 5, 7, or 9.
Prestige Pricing
Setting price above that of competition to indicate your product is a status symbol
Captive Pricing
Setting the price for an item relatively low and then charging much higher prices for the expendables it uses (Ex. Freemium)
Just-in-time Delivery (JIT)
Shipment of parts and materials to arrive at a factory moments before they are needed
Infringer
Someone who uses intellectual property without the permission of the owner.
Collateral
Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Freight Forwarders
Specialists in export-related activists including tariff schedules, shipping, insurance, packing, transportation arrangements, customs clearing, and other export details
Work Instructions
Specific guidance for completing steps in a process
Company Book Balance
Sum of cash inflows and cash outflows recorded in the firm's accounting records
F
T or F: ALL laws apply to your business the day you open
Greater solvency and less biz risk
What does a low debt-to-equity ratio indicate?
Identify customers who become delinquent
What does maintaining constant "aging" of accounts do?
Financial reporting and income tax purposes
What does the GAAP require book value be used for?
- Amount of service charges taken from account - Amount of direct payments made to your account by customers - Amount of interest received or charged - Amount of checks that were returned because of nonsufficient funds
What info does the bank know about your account that YOU do NOT know?
CONSERVING WHAT LITTLE CASH YOU HAVE!
What should be emphasized during the start-up phase of your business?
Bootstrapping
What technique helps the majority of start-ups get funding?
One-time
What types of deals are prone to dirty negotiation tricks? (One-time or long-term?)
Multichannel marketing
The use of several different channels to reach your customers (Ex. Websites, direct mail, traditional retailing)
Retainer
A fee paid by a client to an attorney to engage the attorney's services; Usually comes with agreement that specifies what types of work monthly fees cover and how much additional fees are when circumstances change
Flat fees
A fixed amount paid for a certain task (Ex. Flat fees for handling paperwork to establish corporation)
Property
A general term for real estate, but it can also be applied as a legal term for anything owned or possessed
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
Interest
A charge for the use of money, usually figured as a % of the principal
Elastic
A(n) _______ product has any number of substitutes. A change in price for these types of products makes a difference in quantity purchased.
Inelastic
A(n) _________ product is something that is essential to how you live and does not have many substitutes or alternatives
Margin
Amount of profit as % of total price
Receivables
Amounts owed to a business for merchandise that was sold on credit
Payables
Amounts owed to vendors for merchandise or services purchased on credit
Etailers
An electronic retailer; a store that exists only on the internet
Hourly fees
Basis for legal charges in which the rate is based on a price per hour; Lawyers will often charge for fractions of an hour
Price Gouging
Charging an outrageously high price for something
Gift Capital
Capital resources that neither provide any ownership nor require any repayment to the giver.
Deposits and Progress Payments
Cash payments received before product is completed or delivered
Multiple/Bonus Pack
Combining more than one unit of the same product and pricing it lower than if each unit were sold separately
Bundling
Combining two or more products in one unit and pricing it less than if the units were sold separately; Creates customer loyalty
Internal Reference Price
Consumer's mental image of what a product's price should be based on experience and comparative value
External Reference Price
Cstimation of what a price should be based on information external to a consumer, such as advice, advertisements, or comparison shopping
More
Custom-made assets require (more/less) work but can be accurately priced through an engineering approach
- Salvage Value of asset - Useful Life of asset - The assumption that the asset has a fixed, determinable value that will decline over utility
Depreciation is based on...
Arbitation
Dispute resolution process help instead of court cases in which both sides present their case to a legal professional; You give up legal right to sue if you do not like the result
Mediation
Dispute resolution process where both sides present case to neutral third party who isn't a judge; Decisions aren't binding, so litigation and arbitration are still possible
Articles of Organization
Document setting forth information about a limited liability company that is filed with the state to establish an LLC.
Business-to-Consumer (B2C)
E-commerce transactions between businesses and consumers; Internet contract
Law of Supply and Demand
Economic theory that describes how the demand for P+S's and the supply of them affect each other
Copyright
Exclusive legal right given to the creator of a literary or artistic work to make use of that work
Indirect exporting
Exporting with the use of agents, export management companies, or export trading companies as intermediaries to handle most of the exporting process
Buyer
Key person you are trying to find (by phone, mail, and online websites) after you've found your target catalogs
Tax Abatements
Legal reduction in taxes; Provided by state and local govs to encourage activities that are expected to improve blighted areas/provide additional employment
Up
LoSaD: When demand grows, prices go...
Stable
LoSaD: When supply is adequate, prices are...
Up
LoSaD: When supply shrinks, prices go...
Unsecured debt
Loans that do not allow a lender to seize specific assets in the event of nonpayment; Lender must use court action, lawsuit, or forced bankruptcy to collect unpaid unsecured debt
Operating lease
Long-term rental in which ownership of the asset never passes to the person paying for the lease.
Equipment
Machinery, tools or materials used in the performance of the work of the business
Financial leverage
Measure of the amount of debt relative to total investment
Debt Capital
Money borrowed for the purpose of investment in a 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
Accounts receivable
Money owed to your business by customers who purchased your product on credit
Commercial paper
Notes issued by credit-worthy corporations; Form of short-term financing
Partnership, Corporation, LLC
Obtaining outside equity is done by selling ownership in your business, which you can only do if your business is organized as one of three forms. What are those 3 forms?
Community Development Organization
Organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific geographic area.
Exculpatory Clause
Part of a contract in which a party to the contract states that he or she will not be responsible for certain actions.
Noncompete Clause
Part of a contract in which a person agrees to not open a certain type of business or seek employment doing certain things in a particular period of time
Channel
People and firms who connect producers of P+S with customers; # and cost of intermediaries differ, so the price of your P+S may rise
Plaintiff
Person or party filing a lawsuit
Consignment
Practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold.
Pull-through system
Practice of acquiring inventory only in response to a completed purchase
Barter
Practice of trading goods and services without the use of money
Optimum Capital Structure
Ratio of debt to equity that provides the maximum level of profits
Noncore Projects
Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business.
Noncash Incentives
Rewards that do not require payment of cash, such as stock options, compensating time off, or added vacation days; MOST WIDELY USED WAY TO REDUCE AMOUNT OF CASH THAT MUST BE PAID OUT
Periodic Discounting
Sales conducted at predictable intervals, such as before major holidays
Cash Disbursements Budget
Schedule of the amounts and timings of payments of cash out of a business
Cash Receipts Budget
Schedule of the amounts and timings of the receipt of cash into a business.
Direct marketing
Selling your product directly to consumers without intermediaries
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 (AKA reorder point)
Replacement Value
The cost to acquire an essentially identical asset; Determined with greater confidence than book value or disposal value
Information
The essence of money is that it is a form of...
Salvage value
The fixed and determinable value of an asset that will exist when the depreciation process is complete.
Useful Life
The fixed, determinable period of utility
Elasticity
The idea that the market's demand for P+S is sensitive to changes in its price (Ex. Dropping price = increasing sales)
Off-peak Pricing
Type of bundle; Charging lower prices at certain times to encourage customers to come during slack periods
Intellectual Property
Type of intangible property in which what is being protected is an idea or form of expression
Hold Harmless
Type of waiver in which a party agrees not to hold another party responsible for certain events.
Angel Investors
Wealthy individual who invests in companies in relatively early stages of development
Assumed name and Doing-business-as (DBA) name
What are other names for the term "trade name"?
Free use, cash, picking up the tab, free work, overpayment, forgiveness
What are some forms of personal gifts?
- Discounting techniques (Ex. Coupons, rebates, BOGO) - Introductory techniques (Ex. Giveaways and samples) - Contest techniques (Ex. Sweepstakes and games) - Loyalty techniques (Ex. Referral programs, social media likes
What are some good examples of sales promotions?