Test on Friday

6 Steps in accounting

1) Analyzing transactions as they occur 2) Recording them in journals 3) Posting journal entries to general ledger 4) Adjusting assets with Trial Balance 5) Preparing Financial Statements 6) Closing temporary accounts

Control functions of management

1) Establish clear standards 2) Monitor and record performance 3) Compare results against standards 4) Communicate results 5) If needed, take corrective action

Liabilities

A company's debts or obligations.

Cash Flow

A measure of a company's financial health found by calculating the difference between cash receipts and cash payments.

Micropreneur

A micropreneur is an entrepreneur willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.

SWOT Analysis

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

Sole Proprietorship

A sole proprietorship is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.

Financial Statements & Equations

Accounting Equation Assets=Liabilities + Owner's Equity Income Statement- The financial statement that shows a firms profit/loss over a particular period of time. Trail Balance- An informal accounting schedule that lists general ledger account balances at a point in time. Balance Sheet- An accounting statement that reports the financial condition of a firm at a specific point in time. Lists assets in order of their liquidity. Statement of Cash Flows- Summary of actual or anticipated incomings and out comings of cash in a firm over an accounting period.

Angel Investor

An affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angels typically invest their own funds, unlike venture capitalists who manage the pooled money of others in a professionally-managed fund.

Mission Statement

An outline of the fundamental purposes of an organization.

Styles of Leadership

Autocratic leadership- Involves making managerial decisions without consulting others. Effective in emergencies and when absolute followership is needed. Participative (democratic) leadership- Involves managers and employees working together to make decisions. Free-Rein Leadership- Managers set objectives and employees are free to do whatever is appropriate to accomplish these objectives. Often most successful style in organizations which managers supervise doctors, professors, engineers, or other professionals.

Cooperatives

Business entity owned, controlled and operated by a group of users for their own benefit.

Small Business

Business that is independently owned and operated, organized for profit and not dominant in its field.

Acquisitions

Corporate action in which one company buys the assets and obligation of another company and assumes control.

Entrepreneur vs. Intrapreneur

Entrepreneur- a person who organizes and operates a business, taking on greater than normal financial risks in order to do so. Intrapreneur- Employees within a company who are assigned to develop a special project like an entrepreneur would.

Global Exporting

Exporting can absorb excess inventory, soften downturns in the domestic market, and extend production lives. It can also spice up dull routines.

Franchises

Form of business in which one party gives another rights to sell its products or services and use its business format in a certain geographic area.

General & limited partnerships

General Partnerships-Formed by two or more persons. The owners are all personally liable for any legal actions and debts the company may face Limited Partnerships- Individual who has shared ownership in a partnership but takes no part in managing it and has limited liability.

Empowerment

Giving employees the authority to make a decision without consulting the manager and the responsibility to respond quickly to customer requests.

Goals & Objectives

Goals- The broad, long-term accomplishments an organization wishes to attain. Objectives- Specific, short-term statements detailing how to achieve the organization's goals.

Types of Mergers

Horizontal Merger-A merger occurring between companies in the same industry. Horizontal merger is often as competitors offering the same good or service. Conglomerate Merger- A merger with two firms from unrelated industries combining their resources. Vertical Merger- A merger between two companies producing different goods or services for one specific finished product.

Sarbanes-Oxley (SOX)

Intended to protect investors from corporate abuses. Passed in 2002.

Venture Capitalist

Investors who provide capital to startup companies in exchange for ownerships interests.

Liquidity/leverage/performance ratios

Liquidity- The ability of an asset to be converted into cash quickly without any impact on the price of the asset. Leverage-The condition of having a relatively small amount of cost yield a relatively high level of returns. Performance ratios- Measure how effectively a firm's managers are using its various resources to achieve profits. Three of the more important ratios are earnings per share (EPS), return on sales, and return on equity.

Levels of Management

Low Level Management- People who directs employees, link between workers and middle management, require more technical and communication skills. Middle Management- People within a company who are in charge of departments or groups but below those in charge of the whole company. Top Management- The most senior staff of an organization. Ex. CEO, CFO, COO, President, Vice President

Four Accounting disciplines

Managerial Accounting- Provides information and analysis to managers INSIDE the organization to assist them in decision making. Financial Accounting- Differs from managerial in that the financial information and analyses it generates are for people primarily OUTSIDE the organization. Auditing- Reviewing and evaluating the information used to prepare a company's financial statements. Internal audits are conducted to guarantee that it is carrying out proper accounting procedures and financial reporting. Government & Not-For-Profit Accounting- Supports organizations whose purpose is not generating a profit, but serving ratepayers, taxpayers, and others according to a duly approved budget.

Four functions of management

Planning- The process of establishing organizational goals and determining how to accomplish them. Organizing- The grouping of people, resources and activities to accomplish the objectives of the organization. Leading- The process of guiding, influencing, and motivating others to work toward common goals. Controlling- The process of evaluating and regulating ongoing organizational activities to ensure that goals are achieved.

Measuring success

Profits or return on investment, pleasing employees, stakeholders, and customers.

Gross Profit

Revenue minus Cost of Goods Sold

Corporation - S & C

S Corporation- Entity taxed like a sole proprietorship or partnership but maintains benefits of incorporation like limited liability. C Corporation- Entity that is taxed separately from its owners.

Assets

Something that an entity has acquired or purchased, and that has money value. Ex. Cash, machinery, inventory, land, building, & accounts receivable.

Four types of planning

Tactical Plan- 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 Plan- Plan that establishes alternate courses of action if existing plans are disrupted or become ineffective. Strategic Plan- Plan that establishes organization's major goals and objectives and allocates resources to achieve them. Operational Plan- The process of setting work standards and schedules necessary to implement the company's tactical objectives.

Owner's Equity

The capital employed in a company, computed by deducting the book value of liabilities from the book value of the assets.

Equilibrium Price

The equilibrium price is the price where the the goods and services supplied by the producer equals the goods and services demanded by the customers.

SBA Guidelines

U.S. government agency that advises and assists small business through training, financial advice, and loans.

Business Plan

Written document describing nature of the business, target market, financial information and owner qualifications.