Chapter 6, 7, 8 Study Guide Intro to Business

An agency of the federal government designed to maintain and strengthen the nation's economy by aiding, counseling, assisting, and protecting the interests of small businesses.

What is the Small Business Administration (SBA) and what is its purpose?

A system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization.

What is the definition of accounting?

acquisition: one firm buys another merger: the two companies agree to a combination,form a new company

What is the difference between an acquisition and a merger?

c corporations

What is the most common type of corporation, which is also known as a general corporation?

get it in writing

What is the most effective way to form a general partnership?

finding the money to fund their business

What is the top challenge of their start-up year for many entrepreneurs?

external stakeholders, including stockholders, creditors, and government regulators.

Financial accounting is the branch of accounting that addresses the needs of whom?

target firm, acquiring frim

In an acquisition, the firm being purchased is the _____ and the firm which is purchasing the other firm is the _____.

Articles of Incorporation

In most states, the document that owners must file in order to form a corporation is referred to as the _________________ .

corporations

In the U.S., ____ are the dominant form of business ownership in terms of net income.

yes

Is it easy and inexpensive to form a sole proprietorship?

1. What service or product does your business provide, and what needs does it fill? 2. Who are the potential customers for your product or service, and why will they purchase it from you? 3. How will you reach your potential customers? 4. Where will you get the financial resources to start your business? 5. When can you expect to achieve profitability?

What 5 core questions do the basic elements of any business plan answer?

Local offices—affiliated with the Small Business Administration—that provide comprehensive management assistance to current and prospective small business owners.

What are Small Business Development Centers (SBDCs)?

Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership.

What are angel investors?

easy to form, retension of control, pride of ownership, retension of profits, possible tax advantages

What are the advantages of a sole proprietorship?

makes the most money, limited liability, permanence, ease of transfer of ownership, ability to make use of specialized management, ability to raise large amounts of financial capital

What are the advantages of corporations?

double taxed, expensive and complex, more regulations, less secrecy, possible conflicts of interest, more paperwork

What are the disadvantages of corporations?

liable for your mistakes as well as your partner"s, potnetial disagreements, lack of continuity, difficulty in withdrawing

What are the disadvantages of general partnerships?

can be sued for the personal assests of the business.

What are the disadvantages of sole proprietorships?

oversee the broad operation

What are the duties of a company's board of directors?

Companies that invest in start-up businesses with high growth potential in exchange for a share of ownership.

What are venture capital firms?

A deep-seated sense that the individual is personally responsible for what happens in his or her life.

What does an internal locus of control mean?

A formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives.

What is a business plan?

explicit costs

What is another name for out-of-pocket costs?

expansion into foreign markets

What is one of the biggest trends in franchising over the past several years?

plastic (credit cards)

A recent survey claims that half of all start-ups are funded with _____, even though this source can result in very high financing costs.

unqualified (or "clean") opinion

A(n) _____ is issued if the external auditor does not find any problems with the way a firm prepares and reports its financial statements.

accrual-basis accounting

According to the _________________ method of accounting, revenues are recognized when they are earned, and payment is reasonably assured.

The opportunity to make more money

Although many factors play a role, what is the primary reason (motivator) for many people to become entrepreneurs or small business owners?

Management

As a _____ accountant, you work within a company/organization, preparing reports and analyzing financial information such as budgets and cost management.

Financial Managerial

Comparing the different types of accounting: _____ accounting is concerned with preparing financial statements for external stakeholders according to a fixed schedule, _____ accounting provides information to internal stakeholders on an "as needed" basis.

no

Does a company's board of directors take an active role in the daily operations of the company?

Vision

Entrepreneurs who find new solutions to old problems and develop new products that people didn't even realize they needed are said to have this characteristic.

Market Niches Personal Customer Service Lower Overhead Costs Technology

Name 4 advantages, or opportunities, of small businesses.

greater financial success, independence, flexibility, and challenge. Others are simply seeking survival

Name 5 reasons that people start their own business.

1. High Risk of Failure 2. Lack of Knowledge and Experience 3. Too Little Money 4. Bigger Regulatory Burden 5. Higher Health Insurance Costs

Name 5 threats, or obstacles, that small businesses face.

vision, self-reliance, energy, confidence, tolerance of uncertainty, and tolerance of failure

Name 6 characteristics that virtually all successful entrepreneurs possess.

sole proprietorship partnership Corporation limited liability company

Name the 4 forms of businesses in the U.S.

They can hire fewer managers and fewer specialized employees. establishing headquarters in the owner's garage or offering employees flexible schedules instead of costly healthcare benefits

One advantage that small businesses often enjoy is the ability to keep overhead costs to a minimum. How do the owners/entrepreneurs do this?

the balance sheet, income statement, and statement of cash flows

One of the major responsibilities of financial accounting is the preparation of three basic financial statements. Name these three statements.

Unlimited

Sole proprietors have_________________ liability for the debts of their companies.

master budget

The _________________ budget brings together all of the firm's budgeting documents to provide a unified plan for a specific budget period.

franchisor

The _________________ is the business entity in a franchise relationship that allows others to operate a business using resources it supplies in exchange for money and other considerations.

savings, credit cards, family and freinds

The majority of new small business owners rely heavily on what four personal sources to finance their start-ups.

Management accountants

This type of accountant provides reports, information, and analysis to managers to assist them with making better informed decisions.

income statement

Which financial statement indicates whether a firm earned a profit or suffered a loss over the past accounting period?

statement of cash flows

Which financial statement shows the cash flowing in and out of a firm through its operating, investing, and financing activities?

balance sheet

Which financial statement summarizes a firm's financial position at a specific point in time (i.e., a specific quarter or year)?

sole proprietorship

Which form of business ownership is the majority of businesses today formed as?

limited liability company

Which form of business ownership maintains limited liability but offers more flexibility in terms of tax treatment than other forms of business ownership?

stockholders shareholders

Who are the owners of a corporation?

Administrative costs for small health plans are much higher than for large businesses, making it even tougher for small firms to offer coverage to their employees.

Why are small businesses at a disadvantage when it comes to providing employees with healthcare coverage?

Assets = Liabilities + Owners' Equity

Write the accounting equation.

Liabilities

_____ is/are what the firm owes its creditors/nonowners.

Public

_________________ accountants provide services such as tax preparation, external auditing, or management consulting to clients on a fee basis.

entrepreneur

_________________ are people willing to risk their time, money, and other resources to start, own, and operate a business.

market niche

_________________ are small segments within a market that can offer profit potential to entrepreneurs who know how to serve them.

activity-based costing (ABC)

_________________ is a technique used by managerial accountants to assign product costs based on links between activities that drive costs and the production of specific products.