Small Business Management

accounts receivable

accounts receivable Money owed to your business by customers who purchased your product on credit.

acquisition cost

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.

arms length transaction

arm's-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. This approach is done to help guard against potential conflicts of interest.

captial assets

capital assets Assets that are expected to provide economic benefits for periods of time greater than one year.

capital budgeting

capital budgeting The process of deciding among various investment opportunities to create a specific spending plan.

cost of disposition

cost of disposition Cost incurred in the activities necessary to get rid of an asset.

cost of operating

cost of operating The direct cost incurred in using an asset for the purpose for which it was intended.

effieciency

efficiency (1) The entrepreneurial focus that refers to doing the most work with the fewest resources (2) The comparison of productivity ratios to see the extent that an organization has generated more outputs with fewer inputs.

equipment

equipment Machinery, tools, or materials used in the performance of the work of the business.

factoring

factoring Selling the rights to collect accounts receivable to an entity outside your business.

feedback

feedback The process of communicating within or to the organization about how the outputs worked or were received.

operating lease

operating lease A long-term rental in which ownership of the asset never passes to the person paying for the lease.

operations

operations The process of transforming materials, labor, and energy into goods or services.

outflow

outflow Fund being paid to others by the firm.

productivity

productivity The ratio measure of how well a firm does in using its inputs to create outputs. Literally, productivity is outputs divided by inputs.

property

property A general term for real estate, but it can also be applied as a legal term for anything owned or possessed.

straight line for a useful life of 10 years

straight line for a useful life of 10 years Depreciation is computed using a straight line method over 10 years, so an asset would lose 10 percent of its value each year.

supply chain

suppy chain A way to think about 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, with placement into the hands of customers.

bar coding

bar coding Obtaining a universal product code number and scan-ready visual tag, and printing it on the product or its packaging. Bar codes can then be scanned and recognized by others.

capital lease

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.

disposal value

disposal value The net amount realized after subtracting the costs of getting rid of an asset from its selling price.

economic order quantity

economic order quantity (EOQ) A statistical technique that determines the quantity of inventory that a business must hold to minimize total inventory cost.

fair market value

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.

just in time inventory

just-in-time (JIT) inventory The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer.

leasing

leasing A formal agreement, reduced to writing, that specifies the term and conditions that must be met to allow one entity to use a specified asset (or assets) of the other.

optimum stocking level

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. Also called reorder point.

outputs

outputs The services or products that are produced for sale.

Pull-through system

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.

quality

quality A product's or service's fitness for use, measured as durability, reliability, serviceability, style, ease of use, and dependability.

short term asset

short-term asset: something the business owns that is expected to be turned into cash (money) in less than one year of use.

best practices

best practices Activities identified by authoritative bodies as examples of optimal ways to get things done in a particular industry, profession, or trade.

book value

book value The difference between the original cost of an asset and the total amount of depreciation expense that has been recognized to date.

inputs

inputs The materials, labor, and energy put into the production of a good or service.

inventory

inventory Products that are held for sale to customers.

inventory valuation

inventory valuation Determination of the amount of assets held by the firm for sale or production.

outsourcing

outsourcing Contracting with people or companies outside your business to do work for your business.

payback period

payback period The amount of time it takes a business to earn back the funds it paid out to obtain a capital asset.

periodic inventory

periodic inventory The process of physically counting business assets on a set schedule.

perpetual inventory

perpetual inventory A system of recording the receipt and sale of each item as it occurs.

physical inventory

physical inventory A count of all the inventory being held for sale at a specific point in time.

plant

plant A general term for the facilities of a business.

pledging receivables

pledging receivables Giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid.

point of sale system

point-of-sale (POS) system Hardware and software combinations that integrate inventory management directly into accounting software.

procedure

procedure The series of steps and activities required to complete a process.

process

process The business activities necessary to convert inputs into desired outputs.

renting

renting An agreement between two entities that allows one to use assets of the other in return for a specified payment or series of payments.

replacement cost

replacement cost The total cost of replacing an asset with an essentially identical asset.

replacement value

replacement value The cost incurred to replace one asset with an identical asset.

return on investment

return on investment (ROI) 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.

safety stock

safety stock An amount of inventory carried to ensure that you will not run out of inventory because of fluctuating levels of sales.

vendor managed inventory

vendor-managed inventory Aninventory managementpractice in which a supplier of goods is responsible for optimizing the inventory held by a distributor of the goods.

whole of life costs

whole of life costs The sum of all costs of capital assets, including acquisition, ownership, operation, and disposal.

work instructions

work instructions Specific guidance for completing steps in a process.