Exam 2 - Ch. 5, 6, 9, 12, 13, 15, + 16 Flashcards
Sole Proprietorship
- A business owned by a single person
- Easy to establish
- Single layer taxation (cash flows through to owner)
- Make own decisions, flexibility + control
Acquisition
Acquisition - An action taken by one company to buy a controlling interest in the voting stock of another company; it is about controlling another company.
Merger
An action taken by two companies to combine and perform as a single entity; it is like the birth of a new company.
S Corporation
A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership
Limited liability company (LLC)
- A structure that combines limited liability with the pass-through taxation benefits of a partnership
- The number of shareholders is not restricted, nor is members’ participation in management
Benefit Corporation
A profit-seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit
Private Corporation (IKEA, Lego)
A corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the public
Public Corporation (Panera Bread, GM)
A corporation in which stock is sold to anyone who has the means to buy it (typically regulated more than private corporations, e. g. 10-K, 10-Q SEC filings)
General Partnership
Two or more owners; each partner is entitled to equal control unless agreement specifies otherwise
Corporation
A legal entity, distinct from any individual persons, that has the power to own property and conduct business
Small Business
A company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry)
What constitutes a small business?
- They meet the needs of larger organizations
- They take risks that larger companies avoid
- Provide specialized goods + services
- Provide economic opportunities for a diverse range of people
- They provide jobs
Entrepreneurial Spirit
The positive, forward thinking desire to create profitable, sustainable business enterprises
What associated with entrepreneurship?
Confidence, passion, drive combined.
They love what they do, driven by passion, confident and optimistic, and control their own destiny. Inspire others, curious, don’t let failures drag them down, adaptable, moderate risk takers.
What constitutes a small business?
Most small firms have a narrow focus (concentrated core competency)
Small businesses have to get by with limited resources (typically limited to owner ability to raise funds only)
Small businesses often have more freedom to innovate (do not require layers of approval)
Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace innovate (do not require layers of approval)
How does a large firm foster the entrepreneurial spirit?
Reward risky behavior that might lead to innovation.
Helping them to develop certain entrepreneurial skills and traits such as improving their ability to take action, cultivating a selling mindset, building their visibility and presence, becoming more innovative and creative, organizing their time/productivity and growing their resilience.
Systems View of Business
An interconnected and coordinated set of elements and processes that converts inputs to desired outputs.
Point View, System of business
A single task is completed in isolation
Line View, system of business
A series of related tasks are completed in succession
Circular view, System of business
A series of related tasks are completed in succession, the results of the effort are analyzed, and the insights from that analysis are used to improve the quality and efficiency of the next cycle of the process.
Value chain
All the elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer
Outsourcing
Contracting out certain business functions or operations to other companies
Value webs
Multidimensional networks of suppliers and outsourcing partners
Inventory
Goods and materials kept in stock for production or sale (turnover rates)
Inventory control
Determining the right quantities of supplies and products to have on hand and tracking where those items are (QR codes)
Procurement
The acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services
Material requirements planning (MRP)
A planning system that works backward from a company’s sales forecasts to make sure it has enough of everything required to build those goods or perform those services in a timely manner
Enterprise resource planning (ERP)
A planning system that addresses the needs of the entire organization, from manufacturing to sales to human resources
When do consumers develop a need?
Product Scarcity
Time utility
When a company maximizes the availability of a product so that customers can buy it during the times that are the most convenient or desirable for them
Place utility
Making goods or services physically available or accessible to potential customers
Form Utility
When companies change raw materials into finished goods
Possession utility
The satisfaction that buyers get when they actually possess a product, both legally and physically.
Relationship marketing
A focus on developing and maintaining long-term relationships with customers, suppliers
Product development
Strategy that involves creating new products for those current markets
Market development
- selling your existing products to new marketS
Marketing research
Collection and analysis of information about customers, competitors, + related marketing issues
Research Techniques
Observations- Any in-person, mechanical, electronic technique that monitors and records behavior, including website usage tracking, television viewing monitoring, and social media monitoring.
Ethnographic Research- A branch of anthropology that studies people in their daily lives to learn about their needs, wants, and behaviors in real-life settings.
Surveys- Data collection efforts that measure responses from a representative subset of a larger group of people.
Interview/Focus groups- 1:1 or groups discussions that try to probe deeper into issues than a survey typically does.
Process data collection - Any method of collecting data during the course of other business activities, including warranty registrations, sales transactions, etc.
Experiments- Controlled scenarios in which researchers adjust one or more variable to measure the effect these have on customer behavior
Neuromarketing studies- Research that measures brain activity and other biological responses while customers are viewing/interacting with products
Emotion AI- AI based techniques that identify emotional states based on facial expressions+voice inflections.
Reverse Engineering-disassembling competitive products to see how they’re designed and manufactured
Definition of goods vs. services
Goods’ are the physical objects, implies the tangible commodity or product
‘Services’ is an activity of performing work for others.
Definition of goods vs. services
Goods’ are the physical objects, implies the tangible commodity or product
‘Services’ is an activity of performing work for others.
Types of consumer products
Convenience product (toothpaste, cake mix, soap)
Shopping product (cameras,tvs,airline tix)
Specialty product (rolex, rolls royce)
Unsought product (burial insurance)
Industrial Products
(capital goods, raw materials, component parts, major equipment, accessory equipment, operating supplies, and services)
The stages of the product life cycle
Introduction - Extends from research+ development phase through product’s first commercial availability
Growth - Marked by rapid jump in sales, as competition increases so does the market share
Maturity - Longest in cycle, sales begin to level off.
Decline - When sales and profits slip and eventually fade away
Difference between product development process, test marketing, and the product life cycle
Product development process - a method of generating, selecting, developing, and commercializing product ideas
Test marketing - A product development stage in which a product is sold on a limited basis to gauge its market appeal
Product life cycle - Four stages through which a product progresses: intro, growth, maturity, + decline
Business Analysis Stage
A product that survives the screening stage is subjected to business analysis.
The company will review the sales, costs, profit projections, to determine whether they meet the company’s objectives. If it meets them, the product moved to the prototype development stage.
Difference between financial accounting & management accounting
Financial accounting - The area of accounting concerned with preparing financial information for users outside the organization
Management accounting - The area of accounting concerned with preparing data for use by managers within the organization
Bookkeeping
Recordkeeping; the clerical aspect of accounting
Types of private accountants
Bookkeeping - Recordkeeping; the clerical aspect of accounting
Private accountants
[In-house accountants] employed by organizations and businesses other than a public accounting firm
Also called corporate accountants, managerial accountants, and cost accountants
Controller (for profit)/comptroller(non-profit/govt)
The highest-ranking accountant in a company, responsible for overseeing all accounting functions
Certified public accountants (CPAs)
Professionally licensed accountants who meet certain requirements for education and experience, and who pass a comprehensive examination
Type of public accountants
Public accountants - Independent professionals who provide accounting services to other businesses and individuals for a fee such as tax and other filings
Audit - Formal evaluation of the fairness and reliability of a client’s financial statements
Treasurer vs Comptroller
Treasurer - a person appointed to administer or manage the financial assets and liabilities of a society, company, local authority, or other body.
Comptroller - the chief accountant of a company or government.
Controller
highest ranking accountant in a company, responsible for overseeing all accounting functions
Comptroller
Comptroller
Accounting equation
Framework for the entire accounting process
Assets = liabilities + owners’ equity
Difference between accounts receivable + accounts payable
Accounts receivable- amounts that are currently owed to a firm
Account payable- accounts that firm currently owes to other parties
Types of budgets + approaches
Competitive-comparison is budgeting based on the amount of spending by competing organizations for similar activities.
Co-op only budgeting primarily operates in a corporate setting. Its basis is limiting the budget size to cooperative (co-op) endeavors such as advertising support dollars from a vendor such as a manufacturer or an intermediary.
Cost-benefit analysis compares the cost of a venture to the anticipated outcomes. This method optimizes benefits in relation to associated costs.
Objective-based budgeting starts with business overall objectives, followed by the tactics needed to achieve them. The budget is based on the cost of executing the planned tactics.
Opportunity-cost-analysis, which is related to objective-based budgeting, is dependent upon objectives and weighs the costs of alternative combinations of tactics necessary to achieve specific objectives.
Past-spending planning is based on the costs of similar previous budgets, employing the same benchmarks and objectives, and assuming successful outcomes. In the interim, adjustments account for inflation.
Percentage-of-sales is the most common budgeting method utilized by organizations that market products and/or services. It is based on a percentage of sales, revenues, donations, or profit of a previous period, so that the budget links directly to a metric.
Unit-of-sales budgeting is a variation of the percentage-of-sales technique. It is based on the number of units sold. For example, for each unit sold or for each volunteer recruited, a set amount of funds is committed to the campaign for the subsequent year.
Month-to-month budgeting is based according to what resources are available rather than a long term, planned approach.
Stage-of-life-cycle budgeting is based on the progression of a product in conjunction with objectives.
Subjective budgeting is based on a practitioner expertise and experience. This type of budgeting considers objectives, but is it subjectively developed. The practitioner who sets the budget often uses features from other budgeting techniques.
Zero-based budgeting starts from zero. Resources are allocated based on prioritized objectives and tactics within those objectives. The elimination of less important objectives and tactics occur when budgetary resources are exhausted.
Balance Sheet
Current assets - Cash and items that can be turned into cash within one year
Fixed assets - Assets retained for long-term use, such as land, buildings, machinery, and equipment (also referred to as property, plant, and equipment)
Current liabilities - Obligations that must be met within a year
Long-term liabilities- Obligations that fall due more than a year from the date of the balance sheet
Retained earnings - The portion of shareholders’ equity earned by the company but not distributed to its owners in the form of dividends
What does it mean when a company is highly leveraged?
that item has more debt than equity. They lever their investments by using various instruments, including options, futures, and margin accounts. Companies can use leverage to finance their assets.
What is a company faced with when it doesn’t have enough cash to meet short term needs?
a liquidity problem, an acute increase in demand and decrease in supply of liquidity, and the resulting lack of available liquidity can lead to widespread defaults and even bankruptcies.
Short term financing
financing that will be repaid within one year.
