intro to business
Financial Accounting Standards Board (FASB
"establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards."
Affirmative action
"refers to both mandatory and voluntary programs intended to affirm the civil rights of designated classes of individuals by taking positive action to protect them" from discrimination
accounting
"the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information."
Cash inflows from operating activities affect items that appear on the income statement and include(operating activities):
(1) cash receipts from sales of goods or services; (2) interest received from making loans; (3) dividends received from investments in equity securities; (4) cash received from the sale of trading securities; and (5) other cash receipts that do not arise from transactions defined as investing or financing activities, such as amounts received to settle lawsuits, proceeds of certain insurance settlements, and cash refunds from suppliers.
Firms can raise the financial capital they need to pay for such projects in four main ways
(1) from early-stage investors; (2) by reinvesting profits; (3) by borrowing through banks or bonds; and (4) by selling stock
Cash outflows for operating activities affect items that appear on the income statement and include payments(Operating activities):
(1) to acquire inventory; (2) to other suppliers and employees for other goods or services; (3) to lenders and other creditors for interest; (4) for purchases of trading securities; and (5) all other cash payments that do not arise from transactions defined as investing or financing activities, such as taxes and payments to settle lawsuits, cash contributions to charities, and cash refunds to customers.
If banks are required to hold a greater amount in reserves,
, they have less money available to lend out
Whether a business calculates break-even in terms of dollars or units, the first step is to calculate the contribution margin or the portion of revenue that can be used to cover fixed costs. Let's say you're an entrepreneur who makes belts out of recycled bicycle tires. If your variable costs per belt are $5 and you sell your belts for $35, what is the contribution margin?
30
value proposition
A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.[1]
income statement
A financial statement showing the revenue and expenses for a fiscal period.
dividend
A firm can make a direct payment to its shareholders,
An economic system based on competition in the marketplace and private ownership of the factors of production is known as:
Capitalism
Disadvantages of Corporations
Double taxation of profits, Cost and complexity of formation, More government restrictions
Triangle.com has decided to implement a new, comprehensive Accounting system that takes advantage of cloud technology. Which of the following groups would be considered the primary stakeholder for this project?
Finance depatment
_____ deals with reporting to outsiders. _____ accounting deals with the internal operations of the firm.
Financial accounting; Managerial accounting
Role of Human Resource Management
Hiring Promotion Compensation equality Training Employee policies Legal regulations Ensuring accessibility of important documents (e.g., translating human resource materials into other languages so all staff can read them)
For-Profit
Incurs expenses for operations Provides goods and services to customers Generates revenues from sales Owned by individuals, partners, or shareholders Profit is used to pay owners, partners, or shareholders Pays salaries to employees and managers Profits are subject to taxation by local, state, and federal authorities
How Businesses Benefit from Diversity
Innovation, Localization, Adaptability
The U.S. money supply is composed of:
M1 money
key functional areas of a business
Management Operations Marketing/Sales Finance Research and Development
People
Methods of utilizing organization employees to support the marketing strategies of the company. All products have both tangible and intangible aspects. People (as a marketing strategy) are crucial to the development of the product's intangible aspects.
central bank has the following three traditional tools to implement monetary policy in the economy
Open market operations Changing reserve requirements Changing the discount rate
What does the WTO actually do
Oversees the implementation and administration of the agreements between nations that fall under the WTO's scope of authority Provides a forum for negotiations and settling disputes among nations.
The Fed's monetary policy objectives are price stability, maximum employment and long-term economic growth. Which of the following are tools the Fed uses to implement monetary policy?
Proposing interest rates and reserve rate legislation
Mixed Economic Systems
Pure capitalism and communism are extremes; real-world economies fall somewhere between the two.
Income Statement Equation
Revenues − Expenses = Net Income
Place
Some method of getting the product from the creator of the product to the customer. Place includes a myriad of important tasks: transportation, location, supply chain management (managing each entity that deals with the product in its route to the buyer), online presence, inventory, and atmospherics (how the office, store, or even the website looks).Promotion: Methods for informing and influencing customers to buy the product.
Price
Something given in exchange for a product. Price may be monetary or nonmonetary (such as waiting in long lines for a restaurant or giving blood at the local blood bank). Price has many names, such as rent, fees, charges, and others
Product
Something offered in exchange and for which marketing actions are taken and marketing decisions made. Products can be goods (physical things such as smartphones) or services (such as the telecommunications that must be used for a smartphone to work) or ideas (such as the thought that being constantly connected through telecommunications is absolutely crucial in today's society). All products have both tangible and intangible aspects.
Core Functions of HR
Staffing, Training and Professional Development, Compensation, Safety and Health, Employee and Labor Relations
Accounting involves the _____ of the financial activities for firms.
Summarizing
discount rate.
The interest rate banks pay for such loans
central bank.
The organization responsible for conducting monetary policy and ensuring that a nation's financial system operates smoothly
value = benefit - price
Two products have exactly the same ingredients, but a customer selects the higher-priced product because of the name brand For the marketer, this means that the brand is adding value in the transaction. A customer shopping online selects a product but abandons the order before paying because there are too many steps in the purchase process The inconvenience of filling in many forms, or concerns about providing personal information, can add cost (which will subtract from the value the customer perceives).
International accounting standards:
U.S. GAAP, issued by the FASB. International Financial Reporting Standards (IFRS), issued by the IASB.
Whether a company is privately held or public has capital financing implications. Which of the following statements best highlights the difference in financing options?
Unlike a public company, an owner or owners of a privately held company cannot raise money by selling stock to the public
The _____ is an agreement that dramatically lowered trade barriers worldwide and created the new World Trade Organization (WTO).
Uruguay Round
You have just been hired as a marketing manager for one of Acme Corps product lines. What are the primary questions you would ask in order to get yourself up to speed on the marketing efforts for this product line?
Who is the customer for our products, How happy are they, how strong is the repeat business, what is our value?
General Agreement on Tariffs and Trade (GATT
a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions
In order to manage costs effectively (and to calculate the break-even point), a business owner or manager needs to be able to distinguish between fixed and variable costs. Which of the following statements accurately illustrates a fixed or variable cost?
a bakery would consider the cost of flour, yeast, sugar and other ingredients a variable
Each financial statement has a specific use and financial components. Which of the following best describes the use and financial information included on a balance sheet?
a balance sheet is a point in time reflection of assets, liabilities, and owners equity, used to determine business solvency
Equal Employment Opportunity Commission (EEOC),
a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it
As an evolution of international trade, globalization involves:
a shift toward more integrated world economy
Which of the following best describes the use and financial information included on a statement of cash flows?
a statement of cash flow reports the change in revenue and expenses over a period of time and is considered an indication of owner/manager expertise
identify
a want or need that you can address, as well as the prospective customers who possess this want or need.
Banks facilitate the effective use of money in our payment system by:
accepting and aggregating deposits and loaning those to borrowers.
Offshoring
actual relocation of a business process from one country to another
licensing agreement
agrees to let someone else use the property of the licensor in exchange for a fee; trademarks, images, patents, or production techniques
Which of the following best describes the use and financial information included on a income statement?
an income statement reports a business revenue and expenses over a period of time and reflects the profitablility
The Marketing Concept
an organization adopts the marketing concept when it takes steps to know as much about the consumer as possible, coupled with a decision to base marketing, product, and even strategy decisions on this information
managerial process can be described as
anticipating potential problems or opportunities and designing plans to deal with them, (2) coordinating and allocating the resources needed to implement plans, (3) guiding personnel through the implementation process, and (4) reviewing results and making any necessary changes.
GAAP
are a uniform set of accounting rules that allow users to compare the financial statements issued by one company to those of another company in the same industry.
External users
are people outside the business entity that use accounting information. These external users include potential investors, the Internal Revenue Service, banks and finance companies, as well as local taxing authorities.
Internal users
are the people within a business organization who use accounting information. For example, the human resource department needs to have information about how profitable the business is in order to set salaries and benefits.
Substitute offerings
are viewed by the user as alternatives. The substitution is not a perfect replication of the offering, which means that it will provide different value to customers.
Variable Costs
are volume related and are paid per quantity or unit produced. For your car, your variable costs are things like gas, maintenance, or tires because you only incur these costs when you drive your car. The more miles you drive, the more your gas expenses go up—such costs vary with the level of activity.
Which of the following calculations is a formal expression of the accounting equation?
assets = liabilities + owners' equity
The _____ summarizes an organization's financial status at the end of an accounting period.
balance sheet
Financial accounting information is used by both internal and external audiences. Which of the following best describes external users and use?
bank officer considering a business loan
Planning
begins by anticipating potential problems or opportunities the organization may encounter. Managers then design strategies to solve current problems, prevent future problems, or take advantage of opportunities. These strategies serve as the foundation for goals, objectives, policies, and procedures.
Tactical planning
begins the implementation of strategic plans. Tactical plans have a shorter (less than one year) time frame than strategic plans and more specific objectives designed to support the broader strategic goals. begin to address issues of coordinating and allocating resources to different parts of the organization.
_____ is the system used to record a firm's financial transactions in a routine and clerical process.
bookkeeping
Diversity in the workforce is associated with the following benefits:
broader cultural and geographic understanding
When a business owner states that he or she is operating at a break-even point, we know that:
business revenues are = to total cost including fixed and variable cost
According to GAAP, businesses are required to prepare four financial statements. Which of the following statements accurately summarizes the required statements and the relationship between the statements?
businesses are required to prepare an income statement, statement of owners equities, balance sheet, cash flow in that order
demand deposits.
checkable deposits because the banking institution must give the deposit holder his money "on demand" when a check is written or a debit card is used M1
Sales
close the revenue the company needs in order to operate profitably CRO
In a _____, the factors of production are owned collectively rather than individually, and no incentives to work harder or to produce quality products are provided.
communism
partnership
company run by a group
The Federal Reserve System is the central bank of the United States, an institution established by the Federal Reserve Act of 1913, the parameters of which can be amended by Congress. As a central bank, the key functions of the Fed are:
conducting monetary policies, supporting financial system, providing banking service to bank and fed government
bundle of goods and services
consists of a tangible good, an intangible service or benefit, and the price of the offering.
Outsourcing
contracts out a business process to another party and may include either or both foreign and domestic contracting.
C corporation
conventional or basic form of corporate organization.
Operational planning
creates specific standards, methods, policies, and procedures that are used in specific functional areas of the organization. objectives are current, narrow, and resource focused. They are designed to help guide and control the implementation of tactical plans.
Strategic planning
creating long-range (one to five years), broad goals for the organization and determining what resources will be needed to accomplish those goals.
The difference between the marketing concept versus the production concept or the sales concept is in the marketing concept:
customer drives the business strategy
retain
customers by creating new opportunities to win customer loyalty and business.
Liability
defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services, or other yielding of economic benefits in the future. include things like loans, monies owed to suppliers or creditors that the business will use assets (i.e., cash) to settle.
Which of the following best describes users and uses of managerial accounting information?
department managers developing their budgets and business plans for the next year
When Grand Metropolitan, a British company, purchased U.S.-based Pillsbury Co. in order to expand its product line and the market for its existing consumer products, it was an example of a(n):
direct foreign investment
Federal Reserve banks
each of which is responsible for supporting the commercial banks and economy generally in its district.
joint venture
establishes a new business that is jointly owned by two or more otherwise independent businesses.
Federal anti-discrimination legislation requires employers to:
evaluate candidates and employees on factors related to performance and not protected catagories
loss
expenses of the business exceed the revenue or income generated from operations
The least costly and least risky method for selling a product on the global market is:
export
The role of the WTO is to promote global trade by:
facilitating negotiations and settlements of trade disputes among nations
Suppliers are internal stakeholders.
false
There are a number of strategies a business can use to gain access to foreign markets. Exporting is considered to be ________ means of entering a new market.
fastest and least expensive
Venture capital firms
financial investments in new companies that are still relatively small in size but have substantial growth potential. These firms gather money from a variety of individual or institutional investors, including banks, institutions like college endowments, insurance companies that hold financial reserves, and corporate pension funds. Venture capital firms do more than just supply money to small start-ups. They also provide advice on potential products, customers, and key employees. Typically, a venture capital fund invests in a number of firms, and then investors in that fund receive returns according to how the fund performs as a whole.
Accounting is referred to as the language of business. In reality, accounting information is communicated in multiple languages, including:
financial, managerial, tax
initial public offering ( IPO)
first sale of stock to the public; IPO, and any stock issued thereafter, such as stock held as treasury stock or new stock issued later as a secondary offering, provides the funds to repay the early-stage investors and provides the established company with financial capital for a substantial expansion of its operations
The formula for calculating the break-even point is:
fixed cost/ contribution margin per unit
strategic alliance
formed between two or more corporations, each based in their home country, for a specified period of time. Unlike a joint venture, a new company is not formed. Generally, this is pursued when businesses find that they have gained all they can from exporting and want to expand into a new geographic market or a related business
Research and Development
functional area is the lifeblood of manufacturing businesses.
On an income statement, expenses, such as professional salaries, utilities, office supplies, rent, and insurance, are called _____ expenses.
general and administrative
Financing activities
generally include the cash effects (inflows and outflows) of transactions and other events involving creditors and owners Cash inflows from financing activities include cash received from issuing capital stock and bonds, mortgages, and notes, and from other short- or long-term borrowing. Cash outflows for financing activities include payments of cash dividends or other distributions to owners (including cash paid to purchase treasury stock) and repayments of amounts borrowed.
Operating activities
generally include the cash effects (inflows and outflows) of transactions and other events that enter into the determination of net income
Investing activities
generally include transactions involving the acquisition or disposal of noncurrent assets Thus, cash inflows from investing activities include cash received from (1) the sale of property, plant, and equipment; (2) the sale of available-for-sale and held-to-maturity securities; and (3) the collection of long-term loans made to others. Cash outflows for investing activities include cash paid: (1) to purchase property, plant, and equipment; (2) to purchase available-for-sale and held-to-maturity securities; and (3) to make long-term loans to others.
If banks are allowed to hold a smaller amount in reserves
hey will have a greater amount of money available to lend out.
_____ is the process of hiring, developing, motivating, and evaluating people in order to achieve organizational goals.
human resource management
role of marketing
identify, satisfy, and retain customers.
HR contributes to business success by:
implementing policies, practices and procedures that comply with law
Accounting
includes bookkeeping, but it goes further to analyze and interpret financial information, prepare financial statements, conduct audits, design accounting systems, prepare special business and financial studies, prepare forecasts and budgets, and provide tax services.
Promotion
includes several different components - traditional advertising, sales promotion, public relations, personal selling, social media, and e-commerce. Promotion is often mistaken for marketing because it is the most visible part of marketing; however, marketing encompasses much more than just promotion.
M1 money supply
includes those monies that are very liquid such as cash, checkable (demand) deposits, and traveler's checks
Mergers and acquisitions
incredibly pervasive global business strategy, and ownership of many well-known products and brands has long been separated from the country of origin.
Financial accounting
information appears in financial statements that are intended primarily for external use (although management also uses them for certain internal decisions). Stockholders and creditors are two of the outside parties who need financial accounting information.
Tax accounting
information includes financial accounting information, written and presented in the tax code of the government—namely the Internal Revenue Code.
Managerial accounting
information is for internal use and provides special information for the managers of a company. focus on range of topics from production planning to budgets for raw material
Licensing and franchising are two options for gaining access to global markets. Licensing is generally used with ________; franchising is generally used to "export" ________.
intangible goods; branded products or services
Finance
involves planning for, obtaining, and managing a company's funds CFO
Bookkeeping
is a mechanical process that records the routine economic activities of a business.
Marketing
is a set of activities related to creating, communicating, delivering, and exchanging offerings that have value for others
service
is an action or work performed for monetary compensation. Services include things such as haircuts, hotel stays, or roller-coaster rides.
Asset
is an economic resource. Anything tangible or intangible that can be owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered). include things like cash, vehicles, buildings, equipment, patents, and debts owed to the company.
Direct foreign investment
is an investment in the form of a controlling ownership in a business enterprise in one country by an entity based in another country
Globalization
is broader than international business and describes a shift toward a more integrated world economy in which culture, ideas, and beliefs are exchanged in addition to goods, services, and resources.
Human resource management (HRM or HR
is essentially the management of human resources. It is a function in organizations designed to maximize employee performance in service of an employer's strategic objectives. HR is primarily concerned with the management of people within organizations, focusing on policies and on systems.
The Production Concept
is followed by organizations that are striving for low-production costs, highly efficient processes, and mass distribution (which enables them to deliver low-cost goods at the best price).
M2 money supply
is less liquid in nature and includes M1 monies plus savings and time deposits, certificates of deposits, and money market funds.
intermediary
is one who stands between two other parties
Differentiation
is simply the process of identifying and optimizing the elements of an offering that provide unique value to customers.
Exporting
is taking goods that were produced within a company's home country and shipping them to another country
break-even point
is that level of operations at which a company realizes no net income or loss.
Contribution margin
is the portion of revenue that is not consumed by variable cost. In a simple example, if you were to buy a candy bar for 75 cents and resell it for $1, then the contribution margin would be 25 cents—the amount not consumed by cost.
Importing
is the process by which a good is brought into a jurisdiction, especially across a national border, from an external source
Management
is the process of guiding the development, maintenance, and allocation of resources to attain organizational goals.
U.S. plane manufacturer McDonnell-Douglas has authorized Mitsubishi Heavy Industries, a Japanese company, to use its trademarks, patents, and other proprietary knowledge to manufacture F-15 fighter planes. Mitsubishi Heavy Industries pays McDonnell-Douglas. This is an example of:
licensing
CoolBrands International has entered an agreement with Binney & Smith to create a line of frozen novelties based on the Crayola brand, including pops, bars, sandwiches, cups, cones, sundaes and shakes. CoolBrands will pay Binney & Smith a royalty for the right to use the Crayola trademark. This is an example of:
licensing agreement
The Federal Reserve System reports on money stock measures at an individual component and summary level, distinguishing between M1 and M2 money supply categories. Which of the following statements accurately describes the primary components of the two money supplies?
m1 coin currency and checking accounts; m2saving accounts and money markets
Federal Open Market Committee (FOMC)
makes the decisions regarding these open market operations.
_____ is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives
marketing
According to the _____, a firm should first identify consumer needs and then produce the goods and services that will satisfy them.
marketing concept
financial capital
money used to buy the tools and equipment used in production
Joint ventures and foreign strategic alliances are approaches used with large-scale, capital-intensive projects in global markets. Which of the following situations best reflects a joint venture?
new business is established with equal ownership where one party has in country expertise
competitive advantage
organizations seek to create an advantage in the marketplace whereby an organization's offerings provide greater value because of a unique strategy, asset, or approach that the firm uses that other cannot easily copy.
_____ refers to sending work functions to another country resulting in domestic workers losing their jobs.
outsouring
private company
owned by the people who run it on a day-to-day basis
Manila Water, the provider of the water and sewerage services in the capital of the Philippines has purchased the government owned water and sewerage system for the entire country. It promises to make the nation's water and sewerage system run as efficiently and profitably as the one it operates in Manila. The development, maintenance, and allocation of resources to achieve its goal will require:
planning
Four Functions of Management
planning, organizing, leading, controlling
The Product Concept
product orientation, in which the primary organizational focus is technology and innovation. All parts of these organizations invest heavily in building and showcasing impressive features and product advances, which are the areas in which these companies prefer to compete
_____ is the amount of money remaining from a firm's sales revenue after it deducts production costs, interest costs, and taxes.
profit
goods
provided by a business are tangible items such as cars, televisions, or soda.
competitor
providing the same offering but is accentuating different features and benefits
International business
refers to commerce in which goods, services, or resources cross the borders of two or more nations
Liquidity
refers to how quickly a financial asset can be used to buy a good or service. For example, cash is very liquid. Your $10 bill can easily be used to buy a hamburger at lunchtime. However, $10 that you have in your savings account is not so easy to use. You must go to the bank or ATM machine and withdraw that cash to buy your lunch. Thus, $10 in your savings account is less liquid.
balance sheet
reflects a company's solvency and financial position.
The Accounting Equation.
represents the relationship between assets, liabilities, and the owner's equity of a business. Assets − Liabilities = Owner's or Shareholders' Equity
The purpose of a for-profit business is:
return profit to owners
The Sales Concept
sales orientation. These businesses emphasize the sales process and try to make it as effective as possible.
statement of cash flows
shows the cash inflows and outflows for a company during a period of time.
statement of owner's equity—also called the statement of retained earnings
shows the change in retained earnings between the beginning and end of a period (e.g., a month or a year)
A(n) _____ is the financial statement that is used to assess the sources and uses of cash flow during the year.
statement of cash flow
Which of the following best describes the use and financial information included on a statement of owner's equity?
statement of the owners equity reports change in retained earnings between two dates and reflects the net change in the owners investement in the business
Some of the most common challenges to building a diverse workforce are the following:
stereotypes, culture, communications
The function of the Equal Employment Opportunity Commission is to:
stop unlawful employment discrimination
Foreign direct investments FDI can take one of two forms: a "greenfield" (new) venture or a merger with or acquisition of an existing foreign business. Relative to other strategies for entering a foreign market, using foreign direct investments is considered to be a ________ option.
strategic choice in the sense of controlling and long term potential
Open market operations
take place when the central bank sells or buys U.S. Treasury bonds in order to influence the quantity of bank reserves and the level of interest rates.
In a mixed economy, the government is involved in the economic system through:
taxing spending and welfare activities
financial intermediary
that is, an institution that operates between a saver who deposits money in a bank and a borrower who receives a loan from that bank
exchange process
the act of obtaining a desired object from someone by offering something of value in return
Federal Reserve
the central bank of the United States To conduct monetary policy To promote stability of the financial system To provide banking services to commercial banks and other depository institutions, and to provide banking services to the federal government
coins and currency in circulation
the coins and bills that circulate in an economy that are not held by the U.S. Treasury, at the Federal Reserve Bank, or in bank vaults M1
Greenfield venture
the company enters a foreign market and establishes a new subsidiary as a start-up business.
The exchange involves:
the customer (or buyer): a person or organization with a want or need who is willing to give money or some other personal resource to address this need. the product: a physical good, service, experience or idea designed to fill the customer's want or need. the provider (or seller): the company or organization offering a need-satisfying thing, which may be a product, service, experience or idea. the transaction: the terms around which both parties agree to trade value-for-value (most often, money for product).
Equity
the difference between the value of the assets and the amount of the liabilities of something owned. Owner's equity consists of the net assets of an entity. Net assets is the difference between the total assets and total liabilities. When the owners are shareholders, the interest can be called shareholders' equity; the accounting remains the same, and it is ownership equity spread out among shareholders.
communist economic system
the government owns virtually all resources and controls all markets. Economic decision-making is centralized: the government, rather than the competitive forces in the marketplace, decides what will be produced, where it will be produced, how much will be produced, where the raw materials and supplies will come from, who will get the output, and what the prices will be.
satisfy
these customers by delivering a product or service that addresses these needs at the time customers want it
A business is an organization that strives for a profit by providing goods and services desired by its customers.
true
Which of these would make an effective value proposition for an online entertainment streaming service?
watch anywhere. cancel anytime
money market funds
where the deposits of many individual investors are pooled together and invested in a safe way, such as in short-term government bonds M2
certificates of deposit (CDs) or time deposits
which are accounts that the depositor has committed to leaving in the bank for a certain period of time, ranging from a few months to a few years, in exchange for a higher interest rate. M2
savings deposit
which are bank accounts on which you cannot write a check directly, but from which you can easily withdraw the money at an automatic teller machine or bank. M2
Federal Reserve Bank
which is the central bank of the United States, is a bank regulator. It's responsible for monetary policy, and it defines money according to its liquidity
reserve requirement,
which is the percentage of each bank's deposits that it is legally required to hold either as cash in their vault or on deposit with the central bank.
value proposition needs to very simply answer the question
who, what, why
Labor and safety legislation assumes that:
workers have a right to a safe workplace
Advantages of Corporations
Limited liability, Ease of transferring ownership, Unlimited life, Ability to attract financing
management, operations, marketing, accounting, and finance
Management ensures employees are on task and that each employee is being leveraged in the way that makes the business most efficient. Operations watches over production and ensures quality of product. Marketing brings in customers, both by making the business look appealing to customers and by taking customer feedback to improve the business. Accounting keeps track of the money currently coming in and the money currently being spent. Finance plans for future expenses and income.
Organizing
Managers are responsible for organizing the operations of a business in the most efficient way, enabling the business to use its resources effectively. COO
Planning
Managers plan by setting long-term goals for the business, as well short-term strategies needed to execute against those goals.
Leading
Managers serve as leaders for the organization, in practical as well as symbolic ways. The manager may lead work teams or groups through a new process or the development of a new product. The manager may also be seen as the leader of the organization when it interacts with the community, customers, and suppliers.
Capitalism, also known as the private enterprise system
, is based on competition in the market place and private ownership of the factors of production (resources). a large number of people and businesses buy and sell products freely in the marketplace.
bondholder
Anyone who owns a bond and receives the interest payments
A business seeking capital to finance investments in future growth has to evaluate the pros and cons of various options. If a business is interested in borrowing money, the primary options are bond or bank loan. Which of the following statements best summarizes the difference between the two options?
Bonds generally have better terms and lower interest rates and lack operating restrictions
Advantages of Partnerships
Ease of formation, Availability of capital, Diversity of skills and expertise, Flexibility, No special taxes, Relative freedom from government control
Advantages of Sole Proprietorships
Easy and inexpensive to form, Direct control of the business, No special taxation, Ease of dissolution
Marketing
consists of all that a company does to identify customers' needs and design products and services that meet those needs. also includes promoting goods and services, determining how the goods and services will be delivered, and developing a pricing strategy to capture market share while remaining competitive. CRO
market economy,
decisions about what products are available and at what prices are determined through the interaction of supply and demand
Vision and mission statement
describe the intended strategy and business philosophy for making the vision happen. Company values can also be included in this section.
Product and/or service plan
describes the product and/or service and points out any unique features, as well as explains why people will buy the product or service. This section should offer the following descriptions: product and/or service; features and benefits of the product or service that provide a competitive advantage; available legal protection—patents, copyrights, and trademarks.
command economy
economic effort is devoted to goals passed down from a ruler or ruling class.
Issuing stock is one of multiple options for raising financial capital. A person who buys stock has a(n) ________ position in the firm and the investment represents ________ the issuing business.
equity; ownership in
Company overview
explains the type of company, such as manufacturing, retail, or service; provides background information on the company if it already exists; and describes the proposed form of organization—sole proprietorship, partnership, or corporation.
Operating plan
explains the type of manufacturing or operating system to be used and describes the facilities, labor, raw materials, and product-processing requirements. This section should offer the following descriptions: operating or manufacturing methods, operating facilities (location, space, and equipment), quality-control methods, procedures to control inventory and operations, sources of supply, and purchasing procedures.
Internal stakeholders are groups outside a business or people who don't work inside the business but are affected in some way by the decisions and actions of the business.
false
bond
financial contract: A borrower agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future.
Cathy starts a mobile car detailing business. After some initial growth, she hires two workers to help her keep up with customer demand. Cathy supplies the materials (soap, wax, etc.) for the operation which, in addition to paying the employees, constitutes her operating expenses. Cathy's revenues exceed her expenses and she donates 10% of her profits from her bank account to the local Humane Society. Is Cathy's business a for-profit or nonprofit?
for profit
equity
funds raised through the sale of stock (i.e., ownership) in the business
key features of a business plan
general description of the company, the qualifications of the owner(s), a description of the products or services, an analysis of the market (demand, customers, competition), sales and distribution channels, and a financial plan.
What is the primary difference between a good and a service?
goods are a tangible object; service is an action done
External stakeholders
groups outside a business or people who don't work inside the business but are affected in some way by the decisions and actions of the business. Examples are customers, suppliers, creditors, the local community, society, and the government.
Shareholders
have an interest in business operations since they are counting on the business to remain profitable and provide a return on their investment in the business.
S corporation
hybrid entity, allowing smaller corporations to avoid double taxation of corporate profits as long as they meet certain size and ownership requirements; taxed like a partnership. Income and losses flow through to the stockholders and are taxed as personal income.
limited liability company (LLC)
hybrid organization easy to set up; offers liability protection as corporations as well as the option of being taxed as a partnership or a corporation
Management plan
identifies the key players—active investors, management team, board members, and advisors— citing the experience and competence they possess. This section should offer the following descriptions: outside investors and/or directors and their qualifications, outside resource people and their qualifications, and plans for recruiting and training employees.
Lack of experience
inadequate business knowledge, management experience, and technical expertise (common causes of business closure)
Financial causes
inadequate capital, low cash balances, and high expenses (common causes of business closure)
venture capitalists
investment firms that specialize in financing small, high-growth receive an ownership interest and a voice in management in return for their money. They typically invest at a later stage than angel investors
Socialism
is an economic system in which the basic industries are owned by the government or by the private sector under strong government control.
business
is any activity that provides goods or services to consumers for the purpose of making a profit
market
is any situation that brings together buyers and sellers of goods or services.
Venture capital
is financing obtained from venture capitalists,
free market
is one in which the government does not intervene in any way. A free and competitive market economy is the ideal type of market economy, because what is supplied is exactly what consumers demand.
competitive market
is one in which there is a large number of buyers and sellers, so that no one can control the market price.
profit
is the amount of revenue or income that a business owner retains after paying all the expenses associated with the operation of the business.
corporate bond
issued by firms, but bonds are also issued by various levels of government. For example, a municipal bond is issued by cities, a state bond by U.S. states, and a Treasury bond (T-bond) by the federal government through the U.S. Department of the Treasury.
Owners and executives choose between different sources of financial capital based on the business stage, cash flow situation and objectives. Which of the following best summarizes considerations from the business owner/executive's perspective?
issuing stock is best for a growth firm that wants to raise it's market visibility and obtain capital without the requirement of debt services.
corporation
legal entity subject to the laws of the state in which it is formed, where the right to operate as a business is issued by state charter
Sea-Worthy is an ocean-shipping company. The company decided to develop their own internal ERP (Enterprise Resource Management) system since none of the existing commercial packages met the specific needs of their unique business segment. Halfway into development by their IT department, the company came to the realization that this system could be licensed to their competitors to offset their development cost and fund future enhancements. Which functional area of the company would be responsible for creating revenue from this internal system?
marketing
nonprofit or not-for-profit business
one that provides goods or services to consumers, but its primary goal is not to return profit to the owners of the business (as is the case with a for-profit business). Instead, it uses those profits to provide a public service, advance a cause, or assist others.
Executive summary
overview of the total business plan. Written after the other sections are completed, it highlights significant points and, ideally, creates enough excitement to motivate the reader to continue reading.
Appendix of supporting documents
provides materials supplementary to the plan. This section should offer the following descriptions: management team biographies; the company's values; information about the company culture (if it's unique and contributes to employee retention); and any other important data that support the information in the business plan, such as detailed competitive analysis, customer testimonials, and research summaries.
Stock
represents ownership of a firm; that is, a person who owns 100 percent of a company's stock, by definition, owns the entire company.
Marketing plan
shows who the firm's customers will be and what type of competition it will face; outlines the marketing strategy and specifies the firm's competitive edge; and describes the strengths, weaknesses, opportunities, and threats of the business. This section should offer the following descriptions: analysis of target market and profile of target customer; methods of identifying, attracting, and retaining customers; a concise description of the value proposition; selling approach, type of sales force, and distribution channels; types of marketing and sales promotions, advertising, and projected marketing budget; product and/or service pricing strategy; and credit and pricing policies.
Financial plan
specifies financial needs and contemplated sources of financing, as well as presents projections of revenues, costs, and profits. This section should offer the following descriptions: historical financial statements for the last 3-5 years or as available; pro forma financial statements for 3-5 years, including income statements, balance sheets, cash flow statements, and cash budgets (monthly for first year and quarterly for second year); financial assumptions; breakeven analysis of profits and cash flows; and planned sources of financing.
Sole proprietorships
the most popular form of business ownership; A private company can be run by a single individual
Personal reasons
the owners may decide to sell the business or move on to other opportunities (common causes of business closure)
value
the relationship between the price a customer pays for the good or service and the perceived benefits the customer receives in exchange for his or her time and money.
A stakeholder is an individual or group that has a legitimate interest in a company, organization, or business.
true
Management is the process of guiding the development, maintenance, and allocation of objectives.
true
The local community is an external stakeholder.
true
Disadvantages of Sole Proprietorships
unlimited liability, limited financial resources, management difficulties, overwhelming time commitment, few fringe benefits, limited growth, limited life span Losses are the owner's responsibility
The terms "profit," "loss," and "value" can be described by the following, respectively:
when revenue exceeds cost; when cost exceeds revenue; the perceived benefits by a customer of price to time and money spent.
noncompete clause
which generally means that the owner of the company being sold may not be allowed to compete in the same industry of the acquired business for a specific amount of time.
bootstrapping
which is basically funding the operation with your own resources.
Disadvantages of Partnerships
Unlimited liability, Potential for conflicts between partners, Complexity of profit sharing, Difficulty exiting or dissolving a partnership
Controlling
A large percentage of a manager's time is spent controlling the activities within the business to ensure that it's on track to achieve its goals. When people or processes stray from the path, managers are often the first ones to notice and take corrective action.
Not-for-Profit/Nonprofit
Incurs expenses for operations Provides goods and services to customers Generates revenues from sales and/or contributions Operated by board of directors, trustees, or managers Profit is used to further the mission of the organization Pays salaries to employees and managers Profits are NOT subject to taxation by local, state, and federal authorities
Which functional area of a business is responsible for converting the factors of production into goods and services?
Operations
External stakeholders consist of the following groups:
Shareholders, Customers, Federal, state, and local governments, Creditors, local community, Society, Suppliers
debt
borrowed funds that must be repaid with interest over a stated time period
bank loan
The firm borrows an amount of money and then promises to repay it, including some rate of interest, over a predetermined period of time. If the firm fails to make its loan payments, the bank (or banks) can often take the firm to court and require it to sell its buildings or equipment to make the loan payments.
capital gain
The increase in the value of the stock (or of any asset) between when it is bought and when it is sold
public company
When a firm decides to sell stock, which in turn can be bought and sold by financial investors,
Alice takes her car to the dealership for a routine scheduled maintenance i.e., oil change, filter change, lubrication, and tire rotation. Alice receives a call from the dealership later that day stating that the technician discovered serious wear in her two front tires during the rotation and recommends replacing the tires. Alice agrees and tells the dealership that she will purchase two new tires and asks if they can be installed by the time she picks up her vehicle. Has the dealership provided a good or a service for Alice?
both goods and service
Economic factors
business downturns and high interest rates (common causes of business closure)
stakeholder
an individual or group that has a legitimate interest in a company, organization, or business.
How do we define the term "business"?
any activity that provides goods or services to customers for the purpose of making a profit
Internal stakeholders
are groups or people who work directly within the business, such as managers, employees, and owners
Angel investors
are individual investors or groups of experienced investors who provide financing for start-up businesses by investing their own money, often referred to as "seed capital."
