MORT3012 FINAL EXAM
Balance sheet technique
"Book value" of net worth=Total assets-Total liabilities
Income statement
"Moving picture." Compares the firm's expenses against its revenue over a period of time to show its net income (or loss): Net income=Sales Revenue-Expenses
Balance sheet
"Snapshot." Estimates the firm's worth on a given date; built on the accounting equation: Assets=Liabilities+Owner's Equity
Types of family businesses
- Owner-managed business - Sibling partnership - Cousin consortium
Key elements of a business plan
- Title Page and Table of Contents - Executive Summary - Mission Statement - Company History - Business and Industry Profile - Business Strategy - Description of Products/Services -Marketing strategy -Competitor analysis -Description of management team -Plan of operation -Projected financial statements -Loan or investment proposal
The big three of cash management
-Accounts receivable -Accounts payable -Inventory
Resume components
-Assertions: "I'm great!" -Evidence: "Here's why"
Disadvantages of partnership
-At least one person assumes total liability -Capital pool isn't that large -Harder to dissolve -Authority conflicts -Continuity conflicts/multiple inheritors
Types of operating ratios
-Average inventory turnover ratio -Age of inventory -Average collection period ratio
Resume evidence
-Backs up your assertions -Traditionally a "job history" -Can be arranged chronologically (more traditional) or functionally (more modern)
Valuation methods
-Balance sheet technique -Earnings approach
Partnership
-Business co-owned by two or more people -May have general partners and limited partners -Written agreement recommended, but not required by law
The 5 C's of credit
-Capital -Capacity -Collateral -Character -Conditions
Types of accounting
-Cash basis -Accrual
Sources of debt capital
-Commercial banks -Trade credit -Financing equipment purchase -Small business investment companies -Small business lending companies -State and local loan programs
Three types of competitive strategies
-Cost Leadership -Differentiation -Focus
Planning includes
-Crafting a vision -Setting goals and objectives -Analyzing call volume -Developing a mission statement
Organizing includes
-Creating a framework for success -Deciding how, the, and where actions should take place -Grouping work into logical patters -Dividing work into manageable units and giving specific employees responsibility for each unit
Types of assets
-Current -Quick -Fixed
Types of Liquidity Ratios
-Current ratio -Acid-test ratio (quick ratio)
Federally sponsored programs
-Economic Development Administration (EDA) -U.S. Department of Agriculture's Rural Business -Small Business Administration (SBA)
What is a cover letter for?
-Elaborates your summary of qualifications -Identifies you as the strongest candidate -Demonstrates your ability to communicate -Highlights your strengths -Can supplement a thin resume -Sets the stage for interview and follow-up
Qualities of a great cover letter
-Enthusiastic -Persuasive -Perfect grammar, spelling, verb tense, and punctuation -Personalized and tailored -Consistent with style of resume -Uses block paragraph format
Increasing efficiency in accounts receivable
-Establish a firm credit-granting policy -Ensure that invoices are accurate and timely -Offer payment incentives
Earnings approach variations
-Excess earnings method -Capitalized earnings method -Discounted future earnings method
Other types of evidence
-Experience (can include volunteer work or clinical rotation) -Education -Professional affiliations -Civic or community leadership -Personal interests (only if it relates to position) -References should always be a separate list
Disadvantages of buying an existing business
-Financial costs are high -It may be a "loser" -Previous owner may have created ill will -"Inherited" employees may be unsuitable -The location may have become unsatisfactory -Change and innovation can be difficult to implement -Equipment and facilities may be obsolete or inefficient -Inventory may be outdated or obsolete -Accounts receivable may be worth less than face value
Types of capital
-Fixed -Working -Growth
Cover letter components
-Heading and salutation -Opening paragraph -Main message paragraph -Call to action -Closing paragraph
Directing/actuating/leading includes
-Implementing planned activities -Guiding and supervising activities -Conducting services -Advertising -Completing paperwork -Maintaining compliance -Removing organizational obstacles that hinder employees
Disadvantages of corporations
-Incorporation may be complicated and expensive -Profits are taxed twice -Owner v. manager loyalty -Potential loss of authority of founder -Highly regulated
Advantages of buying an existing business
-It may continue to be successful -It may already have the best location -Employees and suppliers are established -Equipment is already installed -Inventory is in place and trade credit is established
Common interview questions
-Job history: What have you done? -Behavioral: Tell me about a time when... -Situational: What would you do if... -Personal opinion: How do you feel about...
Chronological evidence format
-Job title -Place of employment -City and state of employer -Dates of employment -Bulleted accomplishments and skills
Life and health insurance
-Key-person insurance -Disability insurance
S-Corporation
-Largely similar to a c-corp except it must be domestic (within the U.S.) and cannot have more than 100 shareholders. -Single taxation like a partnership
Types of ratios
-Liquidity -Leverage -Operating -Profitability
Three types of risk control
-Loss avoidance -Loss prevention -Loss reduction
Prohibited interview questions
-Maiden name -Marital status -Parental status -Pregnancy status -Citizenship -Age -Birthplace -Race -Religion -Gender -Arrest record -Disabilities -Health -If you've sued employers -Credit rating -Type of military discharge
Increasing efficiency in inventory
-Monitor it closely; it can drain a company's cash -Avoid "overbuying." It ties up valuable cash at a zero rate of return -Arrange for deliveries at the latest possible date -Negotiate quantity discounts with suppliers when possible
Property and casualty insurance
-Named-peril approach -All-risk approach -Business interruption insurance -Commercial general liability (CGL) coverage -Automobile insurance -Workers' compensation insurance -Crime insurance -Business owner's policy (BOP) -Package policy
Types of profitability ratios
-Net profit on Sales Ratio -Net Profit to Assets Ratio -Net Profit to Equity Ratio
Basic components of resume assertions
-Objective -Summary of qualifications
Sources of capital
-Personal savings -Friends and family members -Crowd funding -Angels -Partners -Venture capital companies -Corporate venture capital -Public stock sale
Functions of management
-Planning -Organizing -Directing/leading/actuating -Evaluating/Controlling
Elements of a mission statement
-Purpose of the company: What are we in business to accomplish? -Business we are in: How are we going to accomplish the purpose? -Values of the company: What principles and beliefs form the foundation of the way we do business?
What three tests must a business plan pass?
-Reality test -Competitive test -Value test
Limited Liability Company (LLC)
-Resembles a cross between a partnership and a corporation -Limits liability with an s-corp, but with less regulation -Can divide tax liability among members at different percentages than their actual ownership percentage
Types of risk financing
-Risk transfer -Risk retention -Self-insurance -Aggregate stop loss limit -Specific stop loss limit -Partially self-funded program
Maslow's Hierarchy of Needs
-Self-Actualizing -Esteem -Affiliation -Safety -Physiological
Evaluating/controlling includes
-Setting goals and objectives -Customer surveys -Employee evaluations -Competition evaluation -Finances --> business plan
Resume summary of qualifications
-Short paragraph of phrases -Describes you -Reads like a personal ad -May include your objective
Sources of debt capital from commercial banks
-Short term loans (home equity loans, commercial loans, lines of credit) -Immediate and long term loans (installment loans, term loans)
Advantages of partnership
-Simple to create -Shared liability -Complementary skills -Larger capital pool -This type of business ownership itself is not subject to taxation
Advantages of Sole Proprietorship
-Simplest to create -Least costly startup -Great profit incentive -Total authority and flexibility -Least regulated -Simple to discontinue
Forms of business ownership
-Sole proprietorship -Partnership -Limited liability partnership (LLP) -Corporation (c-corp) -S-Corporation -Limited liability company (LLC)
Increasing efficiency in accounts payable
-Stretch out payment times as long as possible without damaging your credit rating -Verify all invoices before paying them -Negotiate the best possible terms with your suppliers -Schedule controllable cash disbursements to come due at different times -Take advantage of cash discounts
Qualities of a great resume
-Uniform and appealing layout -Perfect grammar, spelling, verb tense, and punctuation -Honest -Active verb use -Few abbreviations -Phrases used instead of sentences -Succinct -Catches reader's interest
Disadvantages of sole proprietorship
-Unlimited liability -Limited to one person's skills -Limited capital -Lack of continuity
Advantages of corporations
-Very limited liability -Plenty of opportunities for capital -Continuity and transferability through stock sales
Disadvantages of a family business
-risk (consequences of failure) to the family in launching a business -nepotism and the differences in competencies and merit of family members involved in the business -family traditions versus the business need to innovate and seize opportunities -unity and cooperation of family versus business need to foster diversity and competition -family loyalty versus the necessity to provide opportunities for non family employees
Advantages of a family business
-strength of family relationships during challenging periods of business change -financial sacrifices that family members make for the good of the firm -operation as a family business distinguishes the firm from its competitors -higher levels of concern for its community and non family employees -capability to plan and prepare for the long haul -emphasis on quality and value
Preparing a cash budget
1. Determine a minimum cash balance (rule of thumb: ¼ of current liabilities) 2. Forecast sales (prepare three sales forecasts: pessimistic, optimistic, and most likely) 3. Forecast cash receipts 4. Forecast cash disbursements 5. Estimate end-of-month cash balance
Steps of business creation
1. Develop an idea for a business 2. Define the business model 3. Perform a feasibility analysis 4. Create a business plan
Double entry bookkeeping steps
1. General journal 2. General ledger, or book of accounts 3. Trial 4. Financial statements 5. Closing entries
Two essential functions of a business plan
1. Guiding the company by charting its future course and defining its strategy for following it 2. Attracting lenders and investors who will provide needed capital
Porter's Five Forces
1. Rivalry among companies in the industry 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of new entrants 5. Threat of substitute products or services
Aging your A/R
365 days / accounts receivable turnover
Cash budget
A "cash map" that shows the amount and the timing of a firm's cash receipts and cash disbursements over time; predicts the amount of cash a company will need to operate smoothly; helps to visualize a company's cash receipts and cash disbursements and the resulting cash balance
Business owner's policy (BOP)
A business version of a homeowner's policy, designed to meet the real and personal property and liability insurance needs of small business owners
Peril
A cause of loss, either through natural events or through the acts of people (e.g., tornado, robbery)
Competitive test
A company's position relative to its competitors. Management's ability to create a company that will gain an edge over its rivals.
Allowance for bad debts (or doubtful accounts)
A contra-asset account utilized to accumulate totals against accounts receivable
Indemnification clause
A contractual clause that requires one party to assume the financial consequences of another party's legal liabilities
Establishing negligence
A legal duty between parties to act (or not to act) to cause injury (damage); a failure to provide the appropriate standard of care
Indirect loss
A loss arising from inability to carry on normal operations due to a direct loss to property (e.g., having to wake work off because your apartment flooded)
Direct loss
A loss in which physical damage to property reduces its value to the property owner (e.g., flood damage)
Ratio analysis
A method of expressing the relationships between any two elements on financial statements
Professional corporation (LLP)
A partnership in which all partners are limited partners, liability-wise. Generally restricted to professionals (i.e., doctors, attorneys, accountants).
Package policy
A policy for small businesses that do not qualify for a BOP that combines property insurance and commercial general liability insurance.
Resume objective
A sentence written to address the following questions: -What does the employer want? -Who is the perfect candidate? -What can you do for them?
Value test
A venture offers investors or lenders an attractive rate of return or a high probability of repayment.
Mission statement
A written expression of how the company will reflect an entrepreneur's values, beliefs, and vision
Equity capital
Also known as risk capital
Actual cash value (ACV)
An insurance term that refers to the depreciated value of a property
Family business
An organization in which either the individuals who established or acquired the firm or their descendants significantly influence the strategic decisions and life course of the firm.
Liability
Any debt a business owes
Capital
Any form of wealth employed to produce more wealth
Accounting equation
Assets = Liabilities + Owner's Equity
Goals
Broad, long-range attributes to be accomplished
Fixed assets
Cannot be easily converted into cash; relatively permanent property that is used in business operation and not intended for sale (equipment, vehicles, land, and buildings)
Current assets
Cash and assets that can easily be converted into cash or are expected to be within a year (accounts receivable, prepaid expenses, supplies and inventory)
Differentiation
Company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion
Focus
Company selects one or more customer segments in a market, identifies customers' special needs, wants, or interests, and then targets them with a product or service designed specifically for them
Cost leadership
Company's goal is to be THE low-cost producer in the industry (or market segment)
Noneconomic damages
Compensatory damages for such losses as pain and suffering, mental anguish, and loss of consortium
Economic damages
Compensatory damages related to an economic loss, such as medical expense, loss of income, or the cost of property replacement/restoration
Covenant not to compete (restrictive covenant or noncompete agreement)
Contract in which a business seller agrees not to compete with the buyer within a specific time and geographic area
commercial general liability (CGL) coverage
Covers bodily injury and property damage for which the business is liable
Lien
Creditors' claims against an asset
Types of liabilities
Current and fixed
Quick assets
Current assets minus inventory
Punitive damages
Damages intended to punish wrongdoers for gross negligence or a callous disregard for the interests of others and to have a deterrent effect
Current liabilities
Debts that are generally paid within one year (accounts payable, taxes payable, wages payables)
Fixed liabilities
Debts that are not due or payable within one year (mortgages, notes and bonds)
All-risk approach
Defines the perils covered by stating that all direct damages to property are covered except those cause by perils specifically excluded
Compensatory damages
Economic or noneconomic damages intended to make the claimant whole, by indemnifying the claimant for any injuries or damage arising from the negligent action
True or False? A business has to excel at ALL of its industry's key success factors in order to stay in business
False
True or False? A small company's cash balance is the difference between total revenue and total expenses
False
True or False? A written partnership agreement is required by law
False
True or False? Because funeral homes are usually small operations, formal documentation of disciplinary action is not needed except in cases that involve criminal activities, such as theft.
False
True or False? Fringe benefits should be included in an employment offer letter, NOT an employee handbook
False
True or False? Goals are specific statements of ends, with specific dates for accomplishment and stated in measurably specific terms
False
True or False? If a business sells goods for cash, the cash account will be debited and another account will be either debited or credited.
False
True or False? If a sole proprietorship fails, the owner in not liable for its debts since the business is a separate legal entity
False
True or False? In a SWOT analysis, Strengths and Weaknesses are external factors and Opportunities and Threats are internal factors
False
True or False? Pro forma financial statements show a company's most recent financial position
False
True or False? The BFOQ Act of 1983 prohibits discrimination on the basis of disability statues and/or age
False
True or False? The goal of cash management is to maintain as much cash on hand as possible to meet any unexpected circumstances that might arise
False
True or False? To debit an account means to enter an amount on the right side of the account
False
True or False? To determine net profit, the owner records sales revenues for the year and subtracts total liabilities
False
True or False? To manage cash efficiently, business owners should strive to accelerate their accounts payable and stretch out their accounts receivable.
False
Cash management
Forecasting, collecting, disbursing, investing, and planning for the cash a company needs to operate smoothly
Leverage ratios
Gauge the depth of a company's debt
Named-peril approach
Identifies the specific perils covered
Profitability ratios
Indicate how well a company uses its resources to generate a profit
Hertzberg's Two-Factor Theory
Intrinsic factors (aka motivators): achievement; recognition; work; responsibility Extrinsic factors (aka hygienes): company policies; supervision; salary; coworker relationships; work conditions
Strategic management
Involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives, and to keep it on its desired course
Real property
Land and anything physically attached to the land, such as buildings
Workers' Compensation Legislation
Laws obligating the employer to pay the employee for an employment-related injury or illness, regardless of fault
Personal property
Machinery, equipment, furniture, fixtures, stock, and vehicles
Operating ratios
Measure how well the company uses its resources
Cash flow
Measures a company's liquidity and its ability to pay its bills
Net profit on sales ratio
Measures a firm's profit per dollar of sales revenue Net profit/Net sales
Net profit to assets ratio
Measures a firm's return on assets. Operating profits/Total assets
Net profit to equity ratio
Measures an owner's rate of return on the investment (ROI) in the business Net income/Owner's equity
Current ratio
Measures solvency by showing the firm's ability to pay current liabilities out of current assets. Rule of thumb: 2:1 Current assets/Current liabilities
Debt ratio
Measures the percentage of total assets financed by creditors rather than owners Total debt/Total assets
Objectives
More detailed, specific targets of performance that are: -Specific -Measurable -Assignable -Realistic (yet challenging) -Timely -Written down
Debt capital
Must be repaid with interest; is carried as a liability on the company's balance sheet
Accounts receivable turnover
Net Sales / Average Accounts Receivable
Sole proprietorship
Owned by a single individual; makes up 68.5% of small businesses
Corporation (c-corp)
Owned by shares of stock. May be publicly held (traded on stock market) or closely held (shared owned by small number of people). Is a separate, legal entity.
Contractual liability
Performance or financial obligations (risks) that firms assume when entering into contracts with other parties
Opportunities
Positive external factors the company can exploit to accomplish its mission, goals, and objectives.
Asset
Property of monetary value owned by a business
Automobile insurance
Protects against liability and physical damage to a vehicle resulting from insured perils such as collision, theft, vandalism, hail, and flood
Bulk transfer
Protects business buyer from the claims unpaid creditors might have against a company's assets
Workers' compensation insurance
Provides benefits to employees for medical expenses, loss of wages, and rehabilitation expenses, as well as death benefits for employees' families
Key-person insurance
Provides benefits upon the death of a firm's key personnel
Disability insurance
Provides benefits upon the disability of a firm's partner or other key employee
Accrual accounting
Recording applicable expenses in each fiscal period, whether paid or not, and income earner, whether collected or not
Quick Ratio (Acid Test Ratio)
Shows the extent to which a firm's most liquid assets (current assets-inventory) cover its current liabilities. Rule of thumb: 1:1. Quick assets/Current liabilities
STAR response format (for behavioral questions)
Situation: provide background and context Task: describe your role in the story Action: describe what actions you took Result: describe the impact of your actions
Liquidity ratios
Tell whether a small business will be able to meet its short-term financial obligations
Average collection period ratio (days sales outstanding, DSO)
Tells the average number of days required to collect accounts receivable. Funeral rule of thumb: <38 days.
Average inventory turnover ratio
Tells the average number of times a firm's inventory is "turned over" or sold out during the accounting period. Funeral rule of thumb: >6 COGS/Average Inventory
Owner's equity
The amount by which the total assets exceed the total liabilities of a business, or an owner's financial interest in a business (may also be called capital, net worth, or proprietorship)
Original cost basis
The amount originally paid for a depreciable asset.
Management
The art and science of motivating people toward the achievement of a goal.
Replacement value of property
The cost to replace or replicate property at today's prices
Profit
The difference between a company's total revenue and total expenses
Goodwill
The difference in the value of an established business and one that has not yet built a solid reputation for itself
Depreciation
The loss in value of a fixed asset due to wear and tear and the passage of time OR a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during its useful life
Cash
The money that is free and readily available to use
Depreciation expense
The portion of the original cost of a fixed asset that is assigned as an expense to the reporting period expected to benefit from its use
Business risk
The possibility of losses associated with the assets and the earnings potential of a firm
Risk
The possibility of suffering harm or loss
Evaluating/controlling
The process of evaluating organizational and individual performance with predetermined standards or expected results
Directing/actuating/leading
The process of guiding and/or supervising the activities of an organization to achieve plans and objectives
Double entry accounting (bookkeeping)
The process of recording equal debits and credits for a single business transaction (debits on left, credits on right)
Vision
The result of an entrepreneur's dream of something that does not exist yet and the ability to paint a compelling picture of that dream for everyone to see
Reasonable (prudent person) standard
The typical standard of care, based on what a reasonable or prudent person would have done under similar circumstances
Market risk
The uncertainty (gain or loss) associated with an investment decision
Pure Risk
The uncertainty associated with a situation where only loss or no loss can occur--there is no potential for gain (only downside); only form of risk that is insurable
Theory X and Theory Y
Theory X: the average person dislikes work; people must be coerced to perform; people seek money above all else; people are self-centered; people lack creativity Theory Y: Work is as natural as play; people have self-control when committed to an objective; commitment is a function of rewards; people will seek responsibility
True or False? A cash budget allows a small business owner to anticipate cash shortages and cash surpluses and gives him time to handle, or even avoid, approaching problems.
True
True or False? A competitive profile matrix is a tool that allows a business owner to evaluate their company against major competitors using the key success factors for that market
True
True or False? In 1978, the Civil Rights Act of 1964 was amended by the Pregnancy Discrimination Act
True
True or False? In t-accounts, Cash is credited whenever cash is paid out
True
True or False? In t-accounts, asset accounts generally carry their balance on the left side
True
True or False? Liquidity ratios, such as the current ratio and the quick ratio, tell whether a small business will be able to meet its short-term obligations as they come due
True
True or False? One difference between permanent and temporary accounts is that temporary accounts are generally "zeroed out" and closed at the end of each year.
True
True or False? The total amounts entered in t-accounts as debits must always equal the total amounts entered as credits
True
True or False? To project cash receipts, an entrepreneur must analyze accounts receivable to determine the company's collection pattern.
True
Fixed capital
Used to purchase the permanent or fixed assets of the business (e.g., buildings, land, equipment, and others)
Working capital
Used to support the small company's normal short-term operations (e.g., buy inventory, pay bills, wages, or salaries, and others)
Capitalized earnings method
Value=Net Earnings (After Deducting Owner's Salary)/Rate of Return
Benefit
What a customer gains from the product or service feature (e.g., "fewer problems with carpal tunnel syndrome and increased productivity")
Torts
Wrongful acts or omissions for which an injured can take legal action against the wrongdoer for monetary damages
Feature
a descriptive fact about a product or service (e.g., "an ergonomically designed, more comfortable handle")
Straight line depreciation
a method in which the depreciable cost basis (original cost basis less salvage value) of an asset is apportioned equally over its estimated useful life expressed in terms of months or years.
Bootstrapping
a process in which entrepreneurs tap their personal savings and use creative, low-cost start-up methods to launch their businesses
Which of the following is a strategy that entrepreneurs can consider when they face rapidly rising costs, if they DON'T want to raise their prices? a) Add a surcharge b) Offer products in larger sizes c) Add more discounts, coupons, and freebies d) Shift to more expensive raw materials e) All of these are strategies that can help entrepreneurs delay a price increase
a) Add a surcharge
The first section of a balance sheet lists: a) Assets b) Liabilities c) Claims credits have against the firm's assets payable within one year d) The owner's equity in terms of initial capital invested and retained earnings
a) Assets
_________ are those items of value the business owns; __________ are those things the business owes a) Assets; liabilities b) Liabilities; assets c) Ratios; equities d) Equities; liabilities
a) Assets; liabilities
The ____________ represents a "snapshot" of a business, showing an estimate of its value on a given date, while the ____________ is a "moving picture" of the firm's profitability over time a) Balance sheet; income statement b) Income statement; balance sheet c) Statement of cash flows; income statement d) Balance sheet; statement of cash flows
a) Balance sheet; income statement
In the ___________ form of ownership, the business' profits are subject to double taxation. a) C-Corporation b) Partnership c) Sole proprietorship d) Limited partnership
a) C-Corporation
"The combination of factors that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its competition" is the definition of: a) Competitive advantage b) Core competencies c) Key success factors d) Strategic management e) Strengths
a) Competitive advantage
In the Theory X and Theory Y model, employees are seen as either: a) Inherently lazy or inherently responsible people b) Inherently stupid or inherently smart people c) Inherently female of inherently male people d) Inherently low-energy or inherently high-energy people
a) Inherently lazy or inherently responsible people
In Hertzberg's Two-Factor Theory, people have two types of needs to obtain job satisfaction. These needs are either: a) Intrinsic or extrinsic factors b) Inside or outside factors c) Endogenous or exogenous factors d) Endoskeletal or exoskeletal factors
a) Intrinsic or extrinsic factors
The process of determining the critical components of a job for the purpose of selecting, training, and rewarding personnel is called a: a) Job analysis b) Job description c) Job posting d) Job outline
a) Job analysis
_____________ pricing is a technique that involves marking down the normal price of a popular item in an attempt to attract more customers who make incidental purchases of other items at regular prices a) Leader b) Markup c) Markdown d) Multiple unit
a) Leader
A pricing technique that sets prices that always end in numbers like "99" for prices such as $9.99 and $19.99 is an example of: a) Odd pricing b) Price lining c) Customized pricing d) Zone pricing
a) Odd pricing
On the balance sheet, for every dollar of assets there must be a dollar of financing in the form of debt or: a) Owner's equity b) Accounts receivable c) Accumulated depreciation d) Net profit
a) Owner's equity
Why do entrepreneurs develop business plans, primarily? a) To attract investors b) To attract employees c) To attract realtors d) To attract customers
a) To attract investors
What is the purpose of a feasibility analysis? a) To determine if a business concept might be viable in the marketplace b) To guide entrepreneurs as they launch and operate a business c) To brainstorm and discuss a variety of business concepts in one meeting d) To plan an existing business' operational strategies
a) To determine if a business concept might be viable in the marketplace
Developing a mission statement falls under which function of management? a) Planning b) Organizing c) Directing/actuating d) Evaluating/controlling
a) planning
Contra account
an account designed to accumulate totals to offset a related account
Cash basis accounting
an accounting practice in which revenue is not recognized in the accounting records until received and in which expenses are not recognized until paid
"A unique set of capabilities that a company develops in key operational areas that allow it to vault past competitors" is the definition of: a) Competitive advantage b) Core competencies c) Key success factors d) Strategic management e) Strengths
b) Core competencies
To increase owner's equity: a) Debit the owner's equity account b) Credit the owner's equity account c) Debit the revenues account d) Credit the revenues account e) Any of these may increase owner's equity
b) Credit the owner's equity account
A pricing technique that sets different prices on the same products and services for different customers using the information that a company collects about its customers is called: a) Market penetration b) Customized of dynamic pricing c) Predatory pricing d) Price skimming
b) Customized of dynamic pricing
Commitment that results from a sense of duty or expectation if called: a) Desire-based commitment b) Obligation-based commitment c) Cost-based commitment d) Need-based commitment
b) Obligation-based commitment
What three issues should a mission statement address? a) Vision, pricing strategy, location b) Purpose, business, values c) Corporate structure, accounting, technology d) Human capital, structural capital, customer capital e) Financial perspective, customer perspective, corporate citizenship
b) Purpose, business, values
A company's ethical obligations to the community are called: a) Ethical issues b) Social responsibilities c) Intellectual property d) Ethical relativism e) Underlying values
b) Social responsibilities
A funeral business has two main objectives. Which of the following is NOT one of them? a) To meet the death-related needs of grieving families b) To be a market leader/dominate other funeral competitors c) To ensure funerals generate enough money to maintain the business
b) To be a market leader/dominate other funeral competitors
What is one of the primary purposes of a business plan? a) To determine if a business concept might be viable in the marketplace b) To guide entrepreneurs as they launch and operate a business c) To brainstorm and discuss a variety of business concepts in one meeting d) To plan an existing business' operational strategies
b) To guide entrepreneurs as they launch and operate a business
In an interview, your potential employer CANNOT ask about: a) Your personality type b) Your church affiliation c) Your employment history d) Your past education e) Your potential employer cannot ask about any of these
b) Your church affiliation
Which of the following would generally NOT be an important component of a mission statement? a) the reason the business exists b) names of owner(s) and key staff c) areas of specialization d) geographic territory e) all of these should be included in a mission statement
b) names of owner(s) and key staff
Dividing work into manageable units and giving specific employees responsibility for each unit falls under which function of management? a) Planning b) Organizing c) Directing/actuating d) Evaluating/controlling
b) organizing
Contract assignment
buyer's ability to assume rights under seller's existing contracts
The __________ shows what assets the business owns and what claims creditors and owners have against those assets, and is built on the basic accounting equation: Assets = Liabilities + Owner's Equity a) Income statement b) Sources and uses of funds statement c) Balance sheet d) Cash budget
c) Balance sheet
A razor is sold at a price close to the break-even point, but the blades for the razor are prices at a premium. This is an example of: a) Optional-product pricing b) Bundling c) Captive-product pricing d) Multiple-unit pricing
c) Captive-product pricing
What are the three basic business strategies proposed by Michael Porter? a) Cooperative, competitive, cut-throat b) Bargain, retail, elite c) Cost leadership, differentiation, focus d) Customer focused, investor focused, profit focused e) None of these
c) Cost leadership, differentiation, focus
Commitment based on the belief that the opportunity for gain is too great to pass up is called: a) Desire-based commitment b) Obligation-based commitment c) Cost-based commitment d) Need-based commitment
c) Cost-based commitment
An accounting system in which every business transaction is recorded in at least two accounts is called: a) Cash basis accounting b) Accrual accounting c) Double entry accounting d) General ledger accounting
c) Double entry accounting
Which of the following is NOT a component of a business model? a) The definition of your target customers b) Point of differentiation c) Feasibility analysis d) Distribution process e) Pricing
c) Feasibility analysis
A customer who purchases a television from Ace Appliance Store and pays for it in 36 monthly payments is most likely using: a) Trade credit b) Charge account credit c) Installment credit d) Debit card credit
c) Installment credit
Which of the following is TRUE when crafting a resume? a) Recruiters appreciate fancy fonts, graphics, and other visual details b) Using digits (e.g., 30) instead of written numbers (e.g., thirty) looks sloppy c) It's helpful to have a separate "Skills" section that highlights skills that relate to the job d) More bullet points per job shows off your accomplishments--the more the merrier e) All of these are true
c) It's helpful to have a separate "Skills" section that highlights skills that relate to the job
"Controllable variables that determine a company's ability to compete successfully in an industry" is the definition of: a) Competitive advantage b) Core competencies c) Key success factors d) Strategic management e) Strengths
c) Key success factors
"Positive internal factors that a company can use to accomplish its mission, goals, and objectives" is the definition of: a) Competitive advantage b) Core competencies c) Key success factors d) Strategic management e) Strengths
c) Key success factors
Which of the following items would NOT be listed as a current asset in a company's financial reports? a) Cash b) Accounts receivable c) Land d) Inventory
c) Land
A technique offering customers discounts if they purchase in quantity is referred to as: a) Optional product pricing b) Bundling c) Multiple-unit pricing d) Customized pricing
c) Multiple-unit pricing
CD Connection sells all their CDs at three price levels: $11, $14, and $17. This illustrates which of the following pricing techniques? a) Odd pricing b) Leader pricing c) Price lining d) Suggested retail pricing
c) Price lining
The form of business ownership that is the simplest to create is the: a) C-Corporation b) Partnership c) Sole proprietorship d) Limited partnership
c) Sole proprietorship
Which of the following is NOT a part of self-actualization, according to Maslow? a) The need to grow b) The need to realize one's potential c) The need to own one's own business d) The need to feel fulfilled e) All of these are a part of self-actualization
c) The need to own one's own business
Which of the following tips DOES NOT make it easier to skim a resume? a) Don't center any of your text b) Don't justify your resume c) Use all-caps to structure and highlight important information d) Keep everything the same size font e) All of these make it easier to skim a resume
c) Use all-caps to structure and highlight important information
Removing organizational obstacles that hinder employees falls under which function of management? a) Planning b) Organizing c) Directing/actuating d) Evaluating/controlling
c) directing/actuating
The acceptable price range of a product of service is the area between the ___________ defined by customers in the market and the ____________ established by the company's cost structure. a) price flow; price ceiling b) image; quality c) price ceiling; price floor d) price floor; value
c) price ceiling; price floor
Crime insurance
coverage against employee dishonesty
Macy's buys white, pinpoint Oxford blouses at $14 each and sells than at $30 each. Macy's percentage (of cost) markup is: a) 46.7% b) 87.5% c) 53.3% d) 114.3%
d) 114.3%
Which of the following is NOT a common advantage of a family business? a) Long-range thinking b) Commitment to goals c) A stable culture d) Ability to innovate e) All of these are common advantages of family business
d) Ability to innovate
The average inventory turnover ratio: a) Measures the number of times a company's inventory is sold out during the accounting period b) Tells a business owner whether she is managing the company's inventory properly c) Tells a business owner how fast the merchandise is moving through the business d) All of the above e) None of the above
d) All of the above
Which of the following is TRUE about employee manuals in funeral homes? a) They should demonstrate the importance of the employee b) They should include the firm's mission statement c) They are the first formal communication with the new employee d) All of these are true e) None of these are true
d) All of these are true
A _______________ defines the process a company will use to generate sales and profit. a) Feasibility analysis b) Business plan c) Focus group d) Business model e) Prototype
d) Business model
A business in third and subsequent generations when family members take ownership and management positions is called: a) Sibling rivalry b) Family business c) Family feud d) Cousin consortium e) Business brotherhood
d) Cousin consortium
The belief that ethical standards are subject to local interpretation is called: a) Ethical issues b) Social responsibilities c) Intellectual property d) Ethical relativism e) Underlying values
d) Ethical relativism
Commitment based on an individual's belief that s/he lacks career options outside the current business is called: a) Desire-based commitment b) Obligation-based commitment c) Cost-based commitment d) Need-based commitment
d) Need-based commitment
When crafting bullet points on your resume, which of the following would be considered the weakest word? a) Analyzed b) Generated c) Resolved d) Participated e) All of these are weak words
d) Participated
"The process of developing a game plan to guide a company as it strives to accomplish its vision, mission, goals, and objectives and to keep it from straying off course" is the definition of: a) Competitive advantage b) Core competencies c) Key success factors d) Strategic management e) Strengths
d) Strategic management
Which of the following is NOT one of the five forces proposed by Michael Porter? a) Rivalry among companies b) Threat of substitutes c) Bargaining power of buyers d) Threat of future innovations
d) Threat of future innovations
In double-entry bookkeeping, every transaction affects: a) Exactly one account b) Exactly two accounts c) One or more accounts d) Two or more accounts e) None of these
d) Two or more accounts
Which of the following is a disadvantage of a partnership? a) Potential for diminished managerial incentives b) Regulatory red tape with the SEC c) Double taxation d) Unlimited liability of at least one partner e) All of these are disadvantages of a partnership
d) Unlimited liability of at least one partner
Annual employee reviews fall under which function of management? a) Planning b) Organizing c) Directing/actuating d) Evaluating/controlling
d) evaluating/controlling
A/an _________ account is increased with a debit a) Income b) Revenues c) Liabilities d) Owner's equity e) Assets
e) Assets
Unarticulated ethical beliefs that provide a foundation for behavior in a firm are called: a) Ethical issues b) Social responsibilities c) Intellectual property d) Ethical relativism e) Underlying values
e) Underlying values
Threats
negative external forces that inhibit a company's ability to achieve its mission, goals, and objectives
Weaknesses
negative internal factors that inhibit the accomplishment of a company's mission, goals, and objectives
Ongoing legal liabilities
physical premises, product liability lawsuits, and labor relations issues
Strengths
positive internal factors a company can draw on to accomplish its mission, goals, and objectives
Reality test
proves that market really does exist for your product or service, and you can actually build or provide it for the cost estimates in the plan
Business interruption insurance
reimburses for lost income plus continuing expenses due to direct loss impacting business revenues
Funeral service management
the administration of a funeral service enterprise, the activities of which encompass marketing, office, personnel, facilities, and financial management
Book value (undepreciated cost)
the cost of a fixed asset less its accumulated depreciation
Useful life
the estimated determinable life of a fixed asset
Salvage value
the estimated value of a fixed asset at the end of its useful life
Debt capital
the financing that an entrepreneur borrows and must repay with interest
Organizing
the process of assigning tasks, allocating resources, and coordinating the activities of individuals and groups to implement plans
Planning
the process of setting performance objectives and determining what actions should be taken to accomplish them
Layered financing
the technique of raising capital from multiple sources
Growth capital
used to help the small business expand or change its primary direction