MGMT 470 FINAL EXAM
Arbitration
a way of settling disputes without going to court present to private judge give up legal right to sue if you arbitrate
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
Guerilla marketing
The use of creative and relatively inexpensive ways to reach your customer. Examples include door-knob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks.
Copyright
exclusive right given to the creator of a literary or artistic work to the make use
Intermediaries
frequently small businesses themselves provide the services of getting the end product to the consumer services such as inventory, delivery, advertising, warranty
Short-term assets
inventory and accounts receivable most small businesses need few capital assets assets are worth sum of future benefits book value, disposal value, replacement value, fair market value
Prestige pricing
items that are status symbols like a Rolex or Mercedes setting price above competition setting price above competition to indicate status
Pull through inventory system
just in time inventory system in which product is ordered and placed into production only after a sale is completed
Price gouging
legal and or ethical issue in charging too much charging an outrageously high price for something
Income statement
lists revenues and expenses and shows the amount of profit a business makes for a specified period of time
Commercial paper
notes issued by credit worthy companies short term financing (30 days to 1 year) issued to be paid to the bearer of the note cash equivalent
Sole proprietorships
owned by single individual unlimited personal liability single taxation complete control ends at death of sole proprietor
Pro forma financial statements
planning docs for future business activities that are formatted to look like the common financial statements of the income statement, balance sheet, and cash flows
Inelastic pricing
price change has a small impact on supply or demand, usually a necessity, something needed now, or low price (example gas for a car)
Elastic pricing
product demand is sensitive to a change in pricing lowering price to increase sales
Accounts receivable
records if you provide credit to customers essential for making decisions revolving around credit
Accounts Receivables
records if you provide credit to your customers essential for making credit decisions help produce accurate billing of customers maintain good customers
The law of supply and demand in pricing
stable pricing occurs when supply of a product meets customer demand for it a supply decrease or demand increase will cause price to increase
The six factors most valuable to employees
teamwork recognition training empowerment contribution communication
Weighted average cost of capital
the expected average future cost of funds more debt = lower WACC equity and debt mix
Price elasticity has to do with how essential a product is to customers
the more essential the product, the less elastic the price
Micro inventories
the purchase of inventory only after a sale is made very typical with internet firms the ultimate just in time process
Price escalation
the rise in a price that occurs after going through several intermediaries
Cash flow statement
the sources and uses of cash in a business for a specified period of time
Bounded rationality model of management
theories based on the assumption of limited human abilities more available information in decision making process leads to lower efficiency
Reasons why accounting is important for a small business
to produce information to meet legal requirements to be considered for funding or for a loan to plan and control
Accounts Payable
track what you owe money you have to pay
Multichannel marketing
use of several different channels to reach your customers website, direct mail, traditional retail
Accounting analysis
variable costs and fixed costs sum of these equal total costs breakeven - fixed cost/(price/unit - variable cost)
Considerations for adding full-time employees
wait until business ahs consistent income make use of any transition services their former employer offers change when family obligations are low and support is high
Balance sheet
what a business owns (assets), owes (liabilities), and invested value from owners (equity)
Empowerment zones
zones where special support is provided to companies located there; often in economically depressed areas, offer low cost space and tax advantages
Value
A customer's subjective assessment of benefits relative to costs in determining the worth of a product plays into pricing scarcity and uniqueness increase it
Debt-to-equity ratio
Evaluates the capital structure of a company. A ratio of more than 1 implies that the company is a leveraged firm; less than 1 implies that it is a conservative one. (Leverage Ratio) _____ = Total Liabilities / Total Equity other tools for financial management: ROI, current ratio
The main three types of accounting
Financial - a formal rule based set of principles intended for use by outside investors such as investment groups, banks, and regulators Managerial - specifically intended to be used by managers for planning, directing, and controlling Tax - based on specific accounting requirements set by governmental tax agencies
Long-term assets
PBLE values can be widely different held for more than one year
Surety bonds
agreement with insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements
Fidelity bonds
also called dishonesty bonds repay employers for losses caused by dishonest or negligent employees
Money, definition and 3 main purposes
an accepted medium of exchange used to facilitate exchange of unlike assets measure the value of tangible and intangible things keep track of wealth
Joint ventures
an agreement between 2 or more entities to pool resources in order to complete a project each business keeps its identity and operates separately
External reference price
an estimation of what a price should be based on external information to a consumer such as advice, advertisements, or comparison shopping
Cash equivalents
assets that may be quickly converted to cash marketable securities, debt investments, commercial paper
Skimming
charging the highest price the market will bear usually when there is no competition really only possible if its the first product or service and if its something people really want
Bundle or satisfactions
combining two or more products into one and pricing them lower than if they were sold separately
Key factors impacting a pricing decision
company objectives marketing strategy distribution channels competition legal/regulatory issues
Worker Adjustment and Retraining Notification (WARN) Act
requires most employers with 100 or more employees to provide 60 calendar-day advance notification of plant closings and mass layoffs of employees
Factoring
selling your receivables to a factoring company factoring company pays 75-80% of what they collect difference between gross and what is collected is the factoring company's profit margin
Odd-even pricing
setting a price that ends with a 9, 7, or 5 to sound cheaper (9.99 vs 10)
Partitioned pricing
setting the price for a base item and then charging extra for each additional component; have a main component (computer) but everything else extra (printer)
Captive pricing
setting the price for an item relatively low and then charging much higher prices for the expendables it uses (printer and ink)
Errors and emissions insurance
special types of liability insurance that covers losses from harm caused during performance of your profession claims made by attorneys, accountants, and consultants
The three primary causes of cash flow problems
1. difficulty collecting money due from customers 2. seasonal variation in sales 3. unexpected decreases in sales
Freight forwarders
Firms specializing in arranging international shipments-packaging, transportation, and paperwork
The 3 main managerial accounting processes
Standard Budgeting - a method for business forecasting and control in which specific expected volumes and prices per unit are used Profit Planning - creating a set of interconnected budgets that combine into a master budget 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 the statement of cash flows
Mediation
a dispute resolution process held in place of court in which both sides present their case to a neutral third party who is not a judge NOT BINDING
Growth trap
a financial crisis that is caused by a business growing faster than it can be financed
Litigation
a formal dispute resolution that operates using the court system, typically with a lawyer representing each party
Patent
a grant by the us government to an inventor for an idea that is new, useful, and non obvious gives inventor exclusive right to idea
Crowdfunding
a method for entrepreneurs to obtain public financing do not need to meet SOX requirements anyone can invest but must be through SEC registered site or with licensed broker
Markup pricing
a price setting method where an amount is added to the cost of a product to sell the retail price and provide a profit
Internal controls
a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance primary method of ensuring honesty in employees most basic technique is to separate duties of maintaining the securities of assets from the duties of maintaining the records of assets
Economic Order Quantity (EOQ)
a statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost
An e-tailer
a store that exists only on the internet an electronic retailer serviced by distributors
Perpetual inventory
a system of recording the receipt and sale of each item as it occurs, maintains constant record of the amounts and value of inventory that have been sold
Audit trail
a system that traces the detailed transactions relating to any item in an accounting record (systems for small business)
Separation of duties
a type of internal control that separates the physical control of an asset from the person accounting for that asset
Hold harmless agreement
a waiver one party agrees not to hold another party responsible for certain events one party gives up legal right to sue must be drafted by lawyer
B-Corp certification
a way to publicly inform potential investors that a for profit firm is pursuing a social benefit role
the four accounting methods to value capital assets
book disposal replacement fair market
Factoring receivables
borrowing against receivables usually lend about 75 to 80% of uncollected receivables and factor will deduct principal as payments are collected
Exporting payment procedures
cash flow management how much and when money will come and go
The three major sources for financing
debt - a legal obligation to pay money in the future equity - money contributed to the business in return for part ownership of the business gift - valuable assets or services donated to the business w/o any obligation to repay or give up equity
Four factors used to determine the optimum price
demand for the product value delivered to the consumer prices set by competing firms business strategy and product placement
Psychological contract
employees beliefs about promises between them and the firm based on the perception that promises have been made in exchange for certain employee obligations
The three general events that cause business risk
events related to property of the business events related to personnel events related to customers and others