Chapter 9

Question 1

Accounting

Answer 1

system of recording and classifying a company’s financial transactions and summarizing and communicating those transactions in the form of financial statements

Question 2

accounting equation

Answer 2

assets = liabilities + equity

Question 3

accounts payable

Answer 3

account that includes vendors that the company owes money to

Question 4

accounts receivable

Answer 4

account that includes customers that owe the business money

Question 5

angel investor

Answer 5

wealthy

Question 6

Assets

Answer 6

items a business owns and derives future use from

Question 7

balance sheet

Answer 7

financial statement that summarizes a company’s financial condition according to the accounting equation

Question 8

Bartering

Answer 8

exchanging goods or services for other goods or services instead of for cash

Question 9

Bootstrapping

Answer 9

funding strategy that seeks to optimize use of personal funds and other creative strategies (such as bartering) to minimize cash outflows

Question 10

breakeven point

Answer 10

level of operations that results in exactly enough revenue to cover costs

Question 11

burn rate

Answer 11

rate at which cash outflow exceeds cash inflow

Question 12

charitable organization

Answer 12

nonprofit company founded for altruistic purposes

Question 13

Collateral

Answer 13

something of value pledged to secure a loan

Question 14

contribution margin

Answer 14

gross profit from a single item sold

Question 15

cost of goods sold

Answer 15

cost required to produce the product or service

Question 16

Credit

Answer 16

lending of funds in exchange for a promise to repay

Question 17

Crowdfunding

Answer 17

financing with investments of small amounts of money from a large number of people

Question 18

debt financing

Answer 18

borrowing funds that must be repaid

Question 19

Donation

Answer 19

financial gift intended to support an organization’s general operations

Question 20

early stage

Answer 20

company lifecycle stage in which the product or service has begun development

Question 21

Equity

Answer 21

owner’s interest in the assets of the business

Question 22

equity financing

Answer 22

funds provided in exchange for a share of ownership in a business

Question 23

Expenses

Answer 23

costs incurred in the normal course of business operations

Question 24

financial statement

Answer 24

output of an accounting system that is used to make financial decisions

Question 25

financial viability

Answer 25

long-term financial sustainability of an organization to fulfill its mission

Question 26

Financing

Answer 26

raising money to fund the startup and operation of a business

Question 27

financing activities

Answer 27

section of the statement of cash flows that shows where new infusions of cash are coming from

Question 28

fixed assets

Answer 28

major purchases with a long life

Question 29

fixed costs

Answer 29

costs that do not change

Question 30

Funds

Answer 30

financial resources for acquiring assets

Question 31

Grant

Answer 31

financial gift intended to fund a specific goal or project

Question 32

gross profit

Answer 32

selling price of a product or service minus its direct costs

Question 33

income (profit-and-loss) statement

Answer 33

financial statement that describes how much a company earned while the business was operating and what costs were incurred to generate those revenues

Question 34

initial public offering (IPO)

Answer 34

process by which a company lists its ownership shares on a public stock exchange

Question 35

investing activities

Answer 35

section of the statement of cash flows that shows major purchases of equipment or facilities

Question 36

Liability

Answer 36

company’s debt to another party

Question 37

mature stage

Answer 37

company lifecycle stage in which the business has reached commercial viability

Question 38

Moonlighting

Answer 38

earning income from a source outside of one’s primary employ

Question 39

net income

Answer 39

revenue minus expenses

Question 40

operating activities

Answer 40

section of the statement of cash flows that shows day-to-day activities of the business

Question 41

profit margin

Answer 41

amount by which revenue exceeds costs

Question 42

program services

Answer 42

basic offerings that a nonprofit provides to generate a portion of its revenue to sustain operations

Question 43

Projection

Answer 43

forecast of the future operations of a business

Question 44

Revenue

Answer 44

amount a business earns through product sales or providing a service

Question 45

run rate

Answer 45

cost of running a business over a specified period of time

Question 46

seed stage

Answer 46

company lifecycle stage in which the business is largely still an idea

Question 47

statement of cash flows

Answer 47

financial statement that explains the sources and uses of the company’s cash

Question 48

sustainable strategy

Answer 48

strategy that can maintain an organization’s financial stability

Question 49

tax-exempt status

Answer 49

treatment under U.S. tax law that removes the burden of taxes from nonprofit organizations

Question 50

Valuation

Answer 50

estimate of a company’s worth

Question 51

variable costs

Answer 51

costs that fluctuate with the level of revenue

Question 52

venture capitalist

Answer 52

individual or investment firm that specializes in funding startup companies

Question 53

working capital

Answer 53

funds available for day-to-day operations