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BUS 101 > BUS 101 Test 3 Study Guide > Flashcards

BUS 101 Test 3 Study Guide Flashcards

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1
Q

Greater Financial Success
Independence
Flexibility
Challenge
Survival

A

Reasons to launch a small business

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2
Q

People who risk their time, money, and other resources to start and manage a business

A

Entrepreneurs

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3
Q

Entrepreneurs aim to change the world through goods and services
Hope to better themselves but most do not expect huge, transformative growth

A

The Entrepreneurial Mindset

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4
Q

Vison
Self-reliance
Energy
Confidence
Tolerance of uncertainty
Tolerance of Failure

A

Entrepreneurial Characteristics

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5
Q

Friends, family, and personal credit cards

A

Personal resources

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6
Q

Sources include commercial banks, U.S Small Business Administration (SBA), and peer-to-peer lending

A

Loans

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7
Q

Process of funding ventures by raising money from a large number of investors via the internet

A

Crowdfunding

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8
Q

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

A

Angel Investors

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9
Q

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

A

Venture Capital Firms

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10
Q

Market niches
Personal customer service
Lower overhead costs
Technology

A

Opportunities

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11
Q

High risk of failure
Lack of knowledge and experience
Less money and more regulatory burden
High health insurance costs

A

Threats

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11
Q

High risk of failure
Lack of knowledge and experience
Less money and more regulatory burden
High health insurance costs

A

Threats

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12
Q

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

A

Small Business Administration (SBA)

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13
Q

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

A

Business Plan

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13
Q

Rates are higher for “necessity entrepreneurship”—where people have few options

A

Per capita income

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14
Q

Lower in countries that provide a high level of employment protection

A

Opportunity Costs

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15
Q

Complex regulations or lack of cultural support contribute to low rates

A

Cultural/political environment

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16
Q

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

A

Accounting

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17
Q

To provide users with relevant, timely information that can help them make better economic decisions

A

Accounting’s goal

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18
Q

Provides services such as tax preparation, external auditing, and management consulting to clients on a fee basis

A

Public accountants

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19
Q

Work within a company and provide analysis, prepare reports and financial statements, and assist managers

A

Management accountants

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20
Q

Perform accounting functions for local, state, or federal government agencies

A

Government accountants

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21
Q

The branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders

A

Financial accounting

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22
Q

A set of accounting standards that is used in the preparation of financial statements

A

Generally accepted accounting principles (GAAP)

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23
Q

The private board that establishes the generally accepted accounting principles used in the practice of financial accounting

A

Financial Accounting Standards Board (FASB)

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24
Q

Balance sheet
Income statement
Statement of cash flows

A

Basic financial statements

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25
Q

A financial statement that reports the financial position of a firm by identifying and reporting the value of the firm’s assets, liabilities, and owners’ equity

A

Balance sheet

26
Q

Assets = Liabilities + Owners’ Equity

A

Accounting equation

27
Q

Resources owned by a firm

A

Assets

28
Q

Claims that outsiders have against a firm’s assets

A

Owners’ equit

29
Q

The financial statement that reports the revenues, expenses, and net income that resulted from a firm’s operations over an accounting period

A

Income statement

30
Q

Increases in a firm’s assets that result from the sale of goods, provision of services, or other activities intended to earn income

A

Revenue

31
Q

Resources that are used up as the result of business operations

A

Expenses

32
Q

The difference between the revenue a firm earns and the expenses it incurs in a given time period

A

Net income

33
Q

The financial statement that identifies a firm’s sources and uses of cash in a given accounting period

A

Statement of cash flows

34
Q

Show the amount of cash that flowed into the company from the sale of good and services, as well as cash from dividends and interest received from ownership of the financial securities of other firms

A

Cash flows from operating activities

35
Q

Show the amount of cash received from the sale of fixed assets (such as land and buildings) and financial assets bought as long-term investments to grow or improve the business

A

Cash flows from investing activities

36
Q

Show the cash the firm received from issuing additional shares of its own stock or from taking out short-term and long-term loans

A

Cash flows from financing activities

37
Q

Shows how retained earnings have changed from one accounting period to the next

A

Statement of retained earnings

38
Q

Shows how net income and dividends affect retained earnings
Shows changes in stockholders’ equity, such as changes that arise from the issuance of additional shares of stock

A

Stockholders’ equity statement

39
Q

Prepared after conducting an annual external audit of the financial statements
Included in the annual report that a firm sends its stockholders

A

Independent Auditor’s Report

40
Q

Analysis of financial statements that compares account values reported on these statements through two or more years to identify changes and trends

A

Horizontal analysis

41
Q

A management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period

A

Budgeting

42
Q

Helps managers specify how they intend to achieve goals set during the planning process
Encourages communication and coordination among managers and employees
Serves as a motivational tool
Helps managers evaluate progress and performance

A

Advantages of budgeting

43
Q

The branch of accounting that provides reports analysis to managers to help them make informed business decisions

A

Managerial (or management) accounting

44
Q

The funds a firm uses to acquire its assets and finance its operations

A

Financial capital

45
Q

The functional area of business that is concerned with finding the best sources and uses of financial capital

A

Finance

46
Q

Maximise the value of the firm to its owners

A

Goal of financial management

47
Q

The degree of uncertainty regarding the outcome of a decision

A

Risk

48
Q

The observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return

A

Risk-return trade-off

49
Q

Computing ratios that compare values of key accounts listed on a firm’s financial statements

A

Financial ratio analysis

50
Q

The use of debt in a firm’s capital structure

A

Financial leverage

51
Q

Measures ability to pay short-term liabilities as they come due

A

Liquidity (Current)

52
Q

Measures how effectively a firm is using its assets to generate revenue

A

Asset management (Inventory turnover/Average collection period)

53
Q

Measures the extent to which a firm relies on debt to meet its financing needs

A

Leverage (Debt-to-assets)

54
Q

Compares the amount of profit to some measure of resources invested

A

Profitability (Return on equity/Earnings per share)

55
Q

Provided by owners

A

Equity financing

56
Q

Provided by creditors and lenders

A

Debt financing

57
Q

The degree to which a firm depends on one versus the other

A

Capital structure

58
Q

Interest payments are a tax-deductible expense
Firms can acquire additional funds without requiring existing stockholders to invest more of their own money or the sale of stock to new investors

A

Pros of Debt Financing

59
Q

Requirement to make fixed payments
Creditors often impose covenants on the borrower

A

Cons of Debt Financing

60
Q

More flexible and less risky than debt financing

Imposes no required payments

A

Pros of Equity Financing

61
Q

Does not yield the same tax benefits as debt financing

Existing owners might not want a firm to issue more stock as it may dilute their share of ownership

Company that relies mainly on equity financing forgoes the opportunity to use financial leverage

A

Cons of Equity Financing

62
Q

The process a firm uses to evaluate long-term investment proposals

A

Capital bugeting

63
Q

The principle that a dollar received today is worth more than a dollar received in the future

A

Time value of money

BUS 101 (2 decks)

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