Business 101 - Exam 3

Decision Making

Choosing among two or more alternatives

Brainstorming

Coming up with as many solutions to a problem as possible in a short period of time with no censoring of ideas

Operating Expenses

Costs involved in operating a business, such as rent, utilities, and salaries

Leading

Creating a vision for the organization and guiding, training, coaching and motivating others to work effectively to achieve the organization's goals and objectives

Accounts payable

Current liabilities are bills the company owes to others for merchandise or services purchased on credit but not yet paid for

External Customers

Dealers, who buy products to sells to others and ultimate customers (or end users) who buy products for their own personal use

Enabling

Giving workers the education and tools they need to make decisions

Hygiene factors

In Herzberg's theory of motivating factors, job factors that can cause dissatisfaction if missing but that do not necessarily motivate employees if increased

Motivators

In Herzberg's theory of motivating factors, job factors that cause employees to be productive and that give them satisfaction

Theory Z

Includes long-term employment, collective decision making, individual responsibility for the outcomes of decisions, slow evaluation and promotion, moderately specialized career paths, and holistic concern for employees

Internal Customers

Individuals and units within the firm that receive services from other individuals or units

Current Assets

Items that can or will be converted into cash within one year

Participative (democratic) leadership

Leadership style that consists of managers and employees working together to make decisions

Autocratic Leadership

Leadership style that involves making managerial decisions without consulting others

Free-rein leadership

Leadership style that involves managers setting objectives and employees being relatively free to do whatever it takes to accomplish those objectives

PMI

Listing all the pluses for a solution in one column, all the minuses in another and the implications in a third column

Intangible assets

Long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value

Capital expenditures

Major Investments in either tangible long-term assets such as land, buildings and equipment or intangible assets such as patents, trademarks and copyrights

Supervisory Management

Managers who are directly responsible for supervising workers and evaluating their daily performance

Financial Managers

Managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm

Leverage

Raising needed funds through borrowing to increase a firm's rate of return

Net income or net loss

Revenue left over or depleted after all costs and expenses, including taxes, are paid

Notes payable

Short-term or long-term liabilities that a business promises to repay by a certain date

Human Relation Skills

Skills that involve communication and motivation; they enable managers to work through and with people

Technical Skills

Skills that involve the ability to perform tasks in specific discipline or department

Conceptual Skills

Skills that involve the ability to picture the organization as a whole and the relationships among its various parts

Extrinsic Reward

Something given to you by someone else, as recognition for good work; include pay increases, praise, and promotions

Objectives

Specific, short-term statements detailing how to achieve the organization's goals

Ratio Analysis

The assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements

Goals

The broad, long-term accomplishments an organization wishes to attain

Operating (or master) Budget

The budget that ties together the firm's other budgets and summarizes its proposed financial activities

Problem solving

The process of solving the everyday problems that occur, less formal than decision making and usually calls for quicker action

Depreciation

The systematic write-off of the cost of tangible asset over its estimated useful life

Hawthorne Effect

The tendency for people to behave differently when they know they are being studied

Indenture Terms

The terms of agreement in a bond issue

Principle of motion economy

Theory developed by Frank and Lillian Gilbreth that every job can be broken down into a series of elementary motions

Maslow's hierarchy of needs

Theory of motivation based on unmet human needs from basic pyhsiological needs to safety, social, and esteem needs to self-actualization needs

Reinforcement Theory

Theory that positive and negative reinforcers motivate a person to behave in certain ways

Expectancy Theory

Victor Vroom's theory that the amount of effort employees exert on a specific task depends on their expectations of the outcome

Liabilities

What the business owes to others (debts)

Job Simplification

Which produces task efficiency by breaking a job into simple steps and assigning people to each

High-Context Culture

Workers build personal relationships and develop group trust before focusing on tasks

Low-Context Culture

Workers often view relationship building as a waste of time that diverts attention from the task

Cost of goods sold

(or cost of goods manufactured) A measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale

Gross profit

(or gross margin) How much a firm earned by buying or making and selling merchandise

Budget

A financial plan that sets forth management's expectations and, on the basis of those expectations, allocates the use of specific resources throughout the firm

Line of Credit

A given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available

Trial balance

A summary of all the financial data in the account ledgers that ensures the figures are correct and balanced

Financial Statement

A summary of all the transactions that have occurred over a particular period

Tax Accountant

An accountant trained in tax law and responsible for preparing tax returns or developing tax strategies

Unsecured Bond

A bond backed only by the reputation of the issuer; also called a debenture bond

Secured Bond

A bond issued with some form of collateral

Cash Budget

A budget that estimates cash inflows and outflows during a particular period like a month or a quarter

Capital Budget

A budget that highlights a firm's spending plans for major asset purchases that often reuire large sums of money

Job Enlargement

A job enrichment strategy that involves combining a series of tasks into one challenging and interesting assignment

Job Rotation

A job enrichment strategy that involves moving employees from one job to another

Revolving Credit Agreement

A line of credit that's guaranteed but usually comes with a fee

Secured Loan

A loan backed by collateral, something valuable such as property

Unsecured loan

A loan that doesn't require any collateral

Planning

A management function that includes anticipating trends and determining the best strategies and tactics to achieve organizational goals and objectives

Organizing

A management function that includes designing the structure of the organization and creating conditions and systems in which everyone and everything work together to achieve the organization's goals and objectives

Staffing

A management function that including hiring, motivating, and retaining the best people available to accomplish the company's objectives

Controlling

A management function that involves establishing clear standards to determine whether or not an organization is progressing toward its goals and objectives, rewarding people for doing a good job, and taking corrective action if they are not

Job Enrichment

A motivational strategy that emphasizes motivating the worker through the job itself

SWOT Analysis

A planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats

Financial Control

A process in which a firm periodically compares its actual revenues, costs, and expenses with its budget

Certified Management Accountant (CMA)

A professional accountant who has met certain educational and experience requirements, passed a qualifying exam, and been certified by the Institute of Certified Management Accountants

Term-loan Agreement

A promissory note that requires the borrower to repay the loan in specified installments

Accounting Cycle

A six step procedure that results in the preparation and analysis of the major financial statements

Ledger

A specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place

Management By Objectives (MBO)

A system of goal setting and implementation; it involves a cycle of discussion, review, and evaluation of objectives among top and middle level managers, supervisors, and employees

Promissory Note

A written contract with a promise to pay a supplier a specific sum of money at a definite time

Annual Report

A yearly statement of the financial condition, progress and expectations of an organization

Financial Accounting

Accounting information and analyses prepared for people outside the organization

Government and not-for-profit accounting

Accounting system for organizations whose purpose is not generating a profit but serving ratepayers, taxpayers, and others according to a duly approved budget

Managerial Accounting

Accounting used to provide information and analyses to managers inside the organization to assist them in decision making

Certified Internal Auditor (CIA)

An accountant who has a bachelor's degree and two years of experiences in internal auditing, and who has passed an exam administered by the Institute of Internal Auditors

Public Accountant

An accountant who provides accounting services to individuals or businesses on a fee basis

Private Accountant

An accountant who works for a single firm, government agency or nonprofit organization

Vision

An encompassing explanation of why the organization exists and where its trying to head

Independent Audit

An evaluation and unbiased opinion about the accuracy of a company's financial statements

Mission Statement

An outline of the fundamental purposes of an organization

Fundamental Accounting Equation

Assets = Liabilities + Owners' equity This is the basis for the balance sheet

Fixed Assets

Assets that are relatively permanent, such as land, buildings, and equipment

Theory Y

Assumes that most people like work, most people naturally work toward goals, people seek responsibility and that people are motivated by a variety of rewards

Theory X

Assumes the average person dislikes work, workers must be forced, controlled and directed, and its primary motivators are fear and punishment

Assets

Economic resources (things of value) owned by a firm

Balance Sheet

Financial statement that reports a firm's financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owners' equity

Statement of Cash Flows

Financial statement that reports cash receipts and disbursements related to a firm's three major activities; operations, investments, and financing

Knowledge Management

Finding the right information, keeping the information in a readily accessible place and making the information known to everyone in the firm

Long-Term Forecast

Forecast that predicts revenues, costs, and expenses for a period longer than 1 year and sometimes as far as 5 or 10 years into the future

Short-Term Forecast

Forecast that predicts revenues, costs, and expenses for a period of one year or less

Cash Flow Forecast

Forecast that predicts the cash inflows and outflows in future periods, usually months or quarters

Short-term financing

Funds needed for a year or less

Long-term financing

Funds needed for more than a year (usually 2 to 10 years)

Debt financing

Funds raised through various forms of borrowing that must be repaid

Equity Financing

Money raised from within the firm, from operations or through the sale of ownership int he firm (stock or venture capital)

Venture Capital

Money that is invested in new or emerging companies that are perceived as having great profit potential

Commercial Finance Companies

Organizations that mark short-term loans to borrowers who offer tangible assets as collateral

Time-motion studies

Studies, begun by Frederick Taylor, of which tasks must be performed to complete a job and the time needed to do each task

Scientific management

Studying workers to find the most efficient ways of doing things and then teaching people those techniques

Retained earnings

The accumulated earnings from a firm's profitable operations that were reinvested in the business and not paid out to stockholders in dividends

Owners' equity

The amount of the business that belongs to the owners minus any liabilities owed by the business

Cash Flow

The difference between cash coming in and cash going out of a business

Liquidity

The ease with which an asset can be converted into cash

Income statement

The financial statement that shows a firm's profit after costs, expenses, and taxes; it summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm (expenses) and the resulting net income or net loss

Finance

The function in a business that acquires funds for the firm and manages those funds within the firm

Top Management

The highest level of management, consisting of the president and other key company executives who develop strategic plans

Equity Theory

The idea that employees try to maintain equity between inputs and outputs compared to others in similar positions

Goal-Setting Theory

The idea that setting ambitious but attainable goals can motivate workers and improve performance if the goals are accepted, accompanied by feedback, and facilitated by organizational conditions

Financial management

The job of managing a firm's resources so it can meet its goals and objectives

Auditing

The job of reviewing and evaluating the information used to prepare a company's financial statements

Middle management

The level of management that includes general managers, division managers, and branch and plant managers who are responsible for tactical planning and controlling

Intrinsic Reward

The personal satisfaction you feel when you perform well and complete goals

Trade Credit

The practice of buying goods and services now and paying for them later

Double-entry bookkeeping

The practice of writing every business transaction in two places

Transparency

The presentation of a company's facts and figures in a way that is clear and apparent to all stakeholders

Risk/Return Trade-off

The principle that the greater the risk a lender takes in making a loan, the higher the interest rate required

Strategic Planning

The process of determining the major goals of the organization and the policies and strategies for obtaining and using resources to achieve those goals

Tactical planning

The process of developing detailed, short-term statements about what is to be done, who is to do it, and how it is to be done

Contingency Planning

The process of preparing alternative courses of action that may be used if the primary plans don't achieve the organization's objectives

Factoring

The process of selling accounts receivable for cash

Operational Planning

The process of setting work standards and schedules necessary to implement the company's tactical objectives

Management

The process used to accomplish organizational goals through planning, organizing, leading and controlling people and other organzational resources

Cost of Capital

The rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders

Journal

The record book or computer program where accounting data are first entered

Bookkeeping

The recording of business transactions

Accounting

The recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

Commercial Paper

Unsecured promissory notes of $100,000 and up that mature (come due) in 270 days or less

Bonds payable

long-term liabilities that represent a money lent to the firm that must be paid back