Chapter 6 Flashcards
Assumptions sheet
An explanation of the most critical assumptions on which entrepreneurs base their firm’s financial statements.
competitor analysis
A detailed analysis of a firm’s competitors.
contribution margin
The amount per unit of sale that remains and is available to “contribute” to covering the firm’s fixed costs and producing a profit.
due diligence
The process investors go through after they tentatively commit to an investment; finds individuals investigating the merits of a potential venture and verifying that the key claims made in the business plan are factual
market segmentation
The process of dividing a market into distinct segments.
mission statement
Describes why a firm exists and what it hopes to achieve by using its business model.
operating leverage
An analysis of the firm’s fixed costs versus its variable costs.
position
At the company level, a firm’s position determines how it will position itself relative to its competitors.
organizational chart
A representation of the distribution of authority and responsibility within a company.
pro forma financial statement
Projections for future-period forecasts; typically, firms complete them for two to three years in the future.
product prototype
The first physical manifestation of a new product, often in a crude or preliminary form.
ratio analysis
Entrepreneurs compute ratios, such as return on assets and return on sales, by taking numbers out of financial statements and forming ratios with them. Each ratio contributes uniquely to explaining the potential of a proposed business.
tagline
A catchy phrase that a firm uses consistently to reinforce its position in the marketplace. The firm uses its tagline in its literature, advertisements, stationery, social media platforms, and even invoices.
