Small Business Exam 3
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.
operating lease
A long-term rental in which ownership of the asset never passes to the person paying for the lease.
separation of duties
A type of internal control that separates the physical control of an asset from the person accounting for that asset.
Managerial Accounting
Accounting methods that are specifically intended to be used by managers for planning, directing, and controlling a business.
operating activities
Activities involved in producing and selling goods and services.
financing activities
Activities through which cash is obtained from and paid to lenders, owners, and investors.
Tax Accounting
An accounting approach based on specific accounting requirements set by governmental taxing agencies.
external (cost) factors
Aspects of the world outside the business which could cause the business's costs to change.
fidelity bonds
Bonds that repay employers for losses caused by dishonest or negligent employees
contingency fee
Fee paid by a client to an attorney for legal services that is dependent upon the outcome of a case.
assumed name filing or a fictitious name filing
Filing made with a state(s) in which the business operates disclosing the trade name or assumed name of the business along with the owners of the business.
tax codes
Laws and regulations that specify the requirements of taxation.
employee theft
Misappropriation of business property by employees of that business.
small business investment companies
Private businesses that are authorized to make SBA insured loans to start-ups and small businesses.
protected classes
States of being that are expressly prohibited from suffering discrimination: race, color, religion, sex, national origin, gender, age, or disability.
economy of scale
The idea that it is cheaper (per item) to make many of an item than few.
disposal value
The net amount realized after subtracting the costs of getting rid of an asset from its selling price.
gain on investment
The percentage amount that the payout of an investment differs from original cost
just-in-time inventory
The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer.
fair market value
The price at which goods and services are bought and sold between willing sellers and buyers in an arm's-length transaction.
capital budgeting
The process of deciding among various investment opportunities to create a specific spending plan.
variance analysis
The process of determining the effect of price and quantity changes on revenues and expenses.
retained earnings
The sum of all profits and losses, less all dividends paid since the beginning of the business.
acquisition cost
The total cost of acquiring an asset, including such costs as purchase price, transportation, installation, testing, and calibrating in order to ready it for its first productive use.
fair credit reporting act
US federal legislation specifying consumers right vis a vis credit reporting agencies
design patent
a 14-year patent for a new, original, and ornamental design for an article of manufacture
utility patent
a 20 year patent covering a process, machine, article of manufacture, composition of matter, or any new or useful improvement of an existing one
plant patent
a 20 year patent that covers new strains of living plant organisms, algae, or macro fungi
hourly fees
a basis for legal charges in which the rate is based on a price per hour
growth trap
a financial crisis that is caused by a business growing faster than it can be financed
litigation
a formal dispute resolution method that operates using the court system, typically with a lawyer representing each party
property
a general term for real estate but it can also be applied as a legal term for anything owned or possessed
debt
a legal obligation to pay money in the future
tax abatement
a legal reduction in taxes by a government
lock box
a locked receptacle for money, the keys to which are not available to those who physically handle the receptacle
overdraft
a negative balance in a depositors bank account
quality
a products or services fitness for use measured as durability, reliability, serviceability, style, ease of use, and dependability
discounts for prompt payments
a reduction in sale price provided to credit customers for paying outstanding amounts in a timely manner
internal control
a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance
nonsufficient funds
a situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check
economic order quantity
a statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost
best practices
activities identified by authoritative bodies as examples of optimal ways to get things done in a particular industry, profession, or trade
Articles of partnership
agreement between the partners of a firm on matters pertaining to the formation and operation of the partnership
Contracts
agreements in which the parties exchange promises
foundation
an institution to which private wealth is contributed and from which private wealth is distributed for public purposes
employee referral
an underused, low-cost method for finding worker that rewards your employees for recommending potential candidates that would be a great employee fit
bearer
any person or business entity who possesses a security
capital assets
assets that are expected to provide economic benefits for periods of time greater than one year
cash equivalents
assets that may be quickly converted to cash
personnel insurance
available to protect both you and your employees from specific risks
factoring receivables
borrowing money secured by a firms accounts receivable
deposits and progress payments
cash payments received before products is completed or delivered
standard contracts
company can just fill in the blanks as needed
trade secret
confidential information within a company that gives that company a competitive advantage
cost of owning
cost incurred in financing, insuring, taxing, or tracking an asset
trademark
distinctive word, slogan, or image that identifies a product and its origin
Articles of organization
document setting forth information about a limited liability company that is filed with the state to establish an LLC
Single taxation
earnings of the business are taxed once with the owners paying the taxes
key employees
employees whose experience and skills are critical to the success of a business
budget
financial plan for the future, based on a single level of operations
grants
gifts of money made to a business for a specific purpose
pledging receivables
giving a third party legal right to debts owed your business in order to provide assurance that borrowed money will be repaid
virtual employees
independent contractors who provide specialized business services or support from a distance, through internet, telephone, fax, or another method of communication
pro forma
indicates estimated or hypothetical information
vicarious liability
indirect or responsibility for the actions of another
buyout insurance
insurance that provides money to owners of a business to buy the shares of any decreased owner from that owners heirs
regulation of the workplace
laws and government rules that limit the freedom of business owners to manage their businesses as they please
equipment
machinery, tools, or materials used in the performance of the work of the business
internet recruiting
method of recruiting that allows you to search a resume database or post a job description to the web
debt capital
money borrowed for the purpose of investment in a business
equity capital
money contributed to the businesses in return for part ownership of the business
waiver
part of a contract in which a party intentionally gives up legal rights or claims
exculpatory clause
part of a contract in which a party to the contract states he or she will not be responsible for certain actions
noncompete clause
part of a contract in which a person agrees not to open a certain type of business or seek employment doing certain things in a particular area for a period of time
product liability
payment for injury or damage that occurs during the use of the business products
cash flow management
planning and tracking the amounts and timing of money to be received and paid during the business cycle
publicity
press release, public speaking, donate your product or service
periodic inventory
process of physically counting business assets on a set schedule
infringer
someone who uses intellectual property without the permission of the owner
collateral
something of value given pledged as security for payment of a loan
work instructions
specific guidance for completing steps in a process
antispyware program
spyware are programs designed to report on your keystrokes or data, or give remote control of your PC to other
marketable securities
stocks and bonds that are traded on an open market
permanent accounts
the account of assets, liabilities, and equity, excluding accounts for revenues and expenses
Living Wage
the amount needed for a person (or a family of a particular size) to meet the basic necessities of life from a single job
process
the business activities necessary to convert inputs into desired outputs
efficiency
the comparison of productivity ratios to see the extent that an organization has generated more outputs with fewer inputs
risk
the level of probability that an investment will not produce expected gains
consignment
the practice of accepting good for resale, without taking ownership of them and without being responsible to pay prior to their being sold
barter
the practice of trading goods and services without the use of money
business risk
the probability that the future state of the business will be less successful than planned, resulting in the loss of value of business assets
procedure
the series of steps and activities required to complete a process
outputs
the service or product that is produced for sale
Generally Accepted Accounting Principles (GAAP)
the standardized rules for accounting procedure out by the financial accounting standards board used in all audits and submissions of accounting reports to the government
probationary period
trial period in which an employee has temporary status before a formal offer to work full time is presented
an antivirus program
viruses are malicious programs designed to damage PC
legal entity
A being, human or nonhuman, such as a corporation, that is recognized as having rights and duties, such as the right to own property.
Public Business
A business that has its stock bought and sold on an organized stock exchange, such as the New York Stock Exchange.
financial flexibility
A business's ability to manage cash flows in such a manner that the company can respond appropriately to unexpected opportunities and needs.
Financial Accounting
A formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.
Cost-Volume-Profit Analysis
A managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales (volume) to maximize profits.
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.
internal (cost) factors
Aspects of or choices within the business which could cause the business's costs to change.
open-book policy
Concept that key employees should be able to see and understand a firm's financials
off-the-job
Includes lectures, special study, videos, television conferences, case studies, role-playing, simulation, programmed instruction, and laboratory training
financial strength
The ability of a business to survive adverse financial events.
going concern concept
The accounting concept that a business is expected to continue in existence for the foreseeable future.
payback period
The amount of time it takes a business to earn back the funds it paid out to obtain a capital asset.
Business entity concept
The concept that a business has an existence separate from that of its owners.
master budget
a budget which consist of sets of budgets that detail all projected receipts and spending for the budgeted period
arms length transaction
a business deal where the parties have a prior relation or affiliation, but where the business is conducted as if they were unrelated
corporation
a legal "artificial" entity that is formed by filing specific documents with a state government
limited liability company
a legal form of business organization that is created by filing required documentation with a state government
Nepotism
a management philosophy of selecting and promoting people based on family ties
Meritocracy
a management philosophy of selecting and promoting people based solely on their being the most capable person for the job
liquidity
a measure of how quickly you can raise money through internal sources by converting assets to cash
financial leverage
a measure of the amount of debt relative to total investment
flat fees
a method of billing for lawyers in which a fixed amount is paid for a certain task
timing purchases
a method of controlling the timing of cash outflows that is invisible to suppliers and vendors
charge back
a reduction in the bank account of a merchant by a credit card company
cash receipts budget
a schedule of the amounts and timing of the receipt of cash into a business
cash disbursements budget
a schedule of the amounts and timings of payments of cash out of a business
cost of goods sold budget
a schedule that shows the predicted cost of product actually sold during the accounting period
activity based cost estimates
an accounting method which assigns costs based on the different types of work a business does in order to sell a particular product or service
reconciling
an accounting process that identifies the causes of all differences between book and bank balances
joint venture
an agreement between two or more entities to pool resources in order to complete a project
surety bonds
an agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual requirements
deductible
an amount of loss that will not be paid by an insurance company
community development organization
an organization authorized by the SBA to make insured loans to small businesses that are expected to increase economic activity within a specific area
accelerator
an organization that supports startup technology businesses by providing inexpensive office space, a variety of support services and resources
intellectual property rights
comprise the legal rights to use unique features of products or services that provide competitive advantage
outsourcing
contracting with people or companies outside your business to do work for your business
coverage
contractual provisions of insurance policies that specify what risks the insurance company is assuming
cost of disposition
cost incurred in the activities necessary to get rid of an asset
credit insurance
covers abnormal losses from credit customers not paying their bills
job description
defines and discusses all the essential knowledge, skills, and abilities that are needed to fill a position
on-the-job-training
delivered to employees while they perform their regular jobs
inventory valuation
determination of the amount of assets held by the firm for sale of production
point-of-sale system
hardware and software combinations that integrate inventory management directly into accounting software
account
in terms of accounting practice, an account is a chronological list of all additions to and subtractions from a single type of asset
entrepreneurial leadership
leadership really means administration. two key factors: task and person
unsecured debt
loans that do not allow a lender to seize specific assets in the event of nonpayment
secured debt
loans that provide the lender with the legal right to seize assets in the event of nonpayments
outside equity
money from selling part of your business to people who are not and will not be involved in the management of the business
demand deposit
money held in checking and saving account
accounts receivable
money owed to your business by customers who purchased your product on credit
cash
money that is immediately available to be spent
bar coding
obtaining a universal product code number and scan-ready visual tag, and printing it on the product or its packaging
dividends
payments of profits to the owners of corporation
trade discounts
percentage discounts from gross invoice amounts provided to encourage prompt payments
independent contractors
person working to achieve a certain goal without being subjected to substantial controls by another
a firewall
programs or pieces of equipment called routers which serve as a barrier between your PC and the internet
intellectual property
property coming from some sort of original thought; for example, patents, trade secrets, trademarks, and copyrights
intangible property
property that has no value of its own but that represents value, such as a stock certificate
key person
protects you in the event that a key employee dies or is disable and cannot work
life insurance
provided to employees to provide security for their families
SaaS
refers to an internet based program that you would use in work or leisure
Psychological contract
refers to employees beliefs about the promises between the employee and the firm
Depreciation
regular and systematic reduction in income that transfers asset value to expense over time
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 payments of cash such as stock options, compensating time off, or added vacation days
Microlender
sba approved partners who offer sba guaranteed microloans to eligible small business
Factoring
selling the rights to collect accounts receivable to an entity outside your business
comprehensive budget
set of budgets that detail all projected receipts and spending for the budget period
perpetual inventory
system of recording the receipt and sale of each item as it occurs
insurable value
the amount of an asset for which a company will write an insurance policy
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
cost or operating
the direct cost incurred in using an asset for the purpose for which it was intended
mediation
the dispute is put to a neutral third party who is not a judge
Piercing the veil
the dissolution of a corporate form, making it back into a sole proprietorship or general partnership, if the court finds that the owner carelessly mixed up personal and business assets or finances
weighted average cost of capital
the expected average future cost of funds
supply chain
the line of distribution of a product from its start as materials outside the target firm to its handling in the target firm to its handling by sellers into the hands of customers
employee fit
the match between the needs, expectations, and culture of the small business with the expectations and the skills of the individual
inputs
the materials, labor, and energy put into the production of a good or service
trade name or assumed name or doing business (dba)
the name under which a business is operated
cost of capital
the percentage cost of obtaining future funds
breakeven point
the point at which total costs equal gross revenue
feedback
the process of communicating within or to the organization about how the outputs worked or were received
operations
the process of transforming materials, labor, and energy into goods or services
investing activities
the purchase and sale of land, buildings, equipment, and securities
microinventory
the purchase of inventory only after a sale is made; very typical with internet firms
productivity
the ratio measures of how well a firm does in using its inputs to create outputs, literally productivity is outputs dividend by inputs
optimum capital structure
the ratio of debt to equity that provides the maximum level of profits
whole of life costs
the sum of all capital assets, including acquisition, ownership, operation, and disposal
company book balance
the sum of cash inflows and cash outflows recorded in the firms accounting records
bank ledger balance
the sum of deposits and withdrawals recorded in a banks accounting record
bank available balance
the sum of money that has actually been received and paid out of a depositors account
cash-to-cash cycle
the time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale
replacement cost
the total cost of replacing an asset with an essentially identical assets
diversify
to invest in multiple investments of differing risk profiles for the purpose of reducing overall investment risk
partnership
two or more people cooperating to conduct a business enterprise
credit reporting agency
a business that collects, collates, and reports information concerning an entitys use of debt
return on investment
a capital budgeting equation used to measure the relationship between initial investment and the profits that are expected to be received from making the investment
cash budget
a cash budget identifies when, how, and why cash is expected to come into the business, and when, how, and why it is expected to leave
interest
a charge for the use of money, usually figured as a percentage of the principal
check the box taxation
a choice LLCs can make on their tax returns to be taxed as a corporation or a partnership
insurance
a contract between two parties in which one party protects the other against certain types of loss in exchange for payments
subcontract
a contract by which a new party agrees to perform a duty that one of the original parties to a contract was already legally obligated to perform
co-insurance
a contract stipulation that requires a policyholder to carry insurance in an amount equal to a stated minimum percentage of the market value of the property insured
plant
a general term for the facilities of a business
word of mouth
discounts, local signage, facebook, cooperative advertising
pass through (taxation)
earnings of the business are distributed to the business owners and those owners pay individual tax on the earnings
articulate
the concept that information flows from the income statement through the statements of retained earnings and owners equity to the balance sheet
replacement value
the cost incurred to replace one asset with an identical asset
variance
the difference between an actual and budgeted revenue or cost
book value
the difference between the original cost of an asset and total amount of depreciation expense that has been recognized to date
physical inventory
a count of all the inventory being held for a sale at a specific point in time
Arbitration
a dispute resolution process held instead of court cases in which both sides present their case to a legal professional
Nonexmempt
a federal government descriptor of employees under the fair labor standards act who get an hourly wage and time-and-a-half for overtime
exempt
a federal government descriptor of employees who are exempt
patent
a grant by the US government to an inventor for an idea that is new, useful, and non-obvious, giving the inventor the exclusive right to make, use, or sell his idea
pull-through system
a term for just-in-time inventory systems in which product is ordered and placed into production only after a sale has been completed
hold harmless
a type of waiver in which a party agrees not to hold another party responsible for certain events
angel investor
a wealthy individual who invest in companies in relatively early stages of development
activity-based cost estimates
an accounting method which assign costs based on the different types of work a business does in order to sell a particular product or service
clearinghouse
an entity that processes checks and electronic fund transfers for banks and other financial organizations
tax credits
direct reductions in the amount of taxes that must be paid, dependent upon meeting some legal criteria
double taxation
earnings of the business are taxed twice with the business as well as its owners being subject to tax
copyright
exclusive right given to the creator of a literary or artistic work to make use of that work
medical
most highly desired from of insurance for most employees
commercial paper
notes issued by credit-worthy corporations
currency
the bills and coins printed by governments to represent money
specialty contacts
unique contract terms, large dollar amounts at stake
bootstrapping
using low-cost or free techniques to minimize your cost of doing business
gaming the payment process
using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided
gift
valuable assets or services donated to the business without any obligation to repay or give up any ownership interest
sarbanes-oxley act
a federal law describing the steps publicly traded businesses must take to protect and provide their key financial information
retainer
a fee paid by a client to an attorney to engage the attorneys service
safety stock
an amount of inventory carried to ensure that you will not run out of inventory because of fluctuating levels of sales