Exam 2 - Ch. 5, 6, 9, 12, 13, 15, + 16

Question 1

Sole Proprietorship

Answer 1

• A business owned by a single person
• Easy to establish
• Single layer taxation (cash flows through to owner)
• Make own decisions, flexibility + control

Question 2

Acquisition

Answer 2

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.

Question 3

Merger

Answer 3

An action taken by two companies to combine and perform as a single entity; it is like the birth of a new company.

Question 4

S Corporation

Answer 4

A type of corporation that combines the capital-raising options and limited liability of a corporation with the federal taxation advantages of a partnership

Question 5

Limited liability company (LLC)

Answer 5

• 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

Question 6

Benefit Corporation

Answer 6

A profit-seeking corporation whose charter specifies a social or environmental goal that the company must pursue in addition to profit

Question 7

Private Corporation (IKEA, Lego)

Answer 7

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

Question 8

Public Corporation (Panera Bread, GM)

Answer 8

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)

Question 9

General Partnership

Answer 9

Two or more owners; each partner is entitled to equal control unless agreement specifies otherwise

Question 10

Corporation

Answer 10

A legal entity, distinct from any individual persons, that has the power to own property and conduct business

Question 11

Small Business

Answer 11

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)

Question 12

What constitutes a small business?

Answer 12

• 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

Question 13

Entrepreneurial Spirit

Answer 13

The positive, forward thinking desire to create profitable, sustainable business enterprises

Question 14

What associated with entrepreneurship?

Answer 14

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.

Question 15

What constitutes a small business?

Answer 15

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)

Question 16

How does a large firm foster the entrepreneurial spirit?

Answer 16

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.

Question 17

Systems View of Business

Answer 17

An interconnected and coordinated set of elements and processes that converts inputs to desired outputs.

Question 18

Point View, System of business

Answer 18

A single task is completed in isolation

Question 19

Line View, system of business

Answer 19

A series of related tasks are completed in succession

Question 20

Circular view, System of business

Answer 20

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.

Question 21

Value chain

Answer 21

All the elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer

Question 22

Outsourcing

Answer 22

Contracting out certain business functions or operations to other companies

Question 23

Value webs

Answer 23

Multidimensional networks of suppliers and outsourcing partners

Question 24

Inventory

Answer 24

Goods and materials kept in stock for production or sale (turnover rates)

Question 25

Inventory control

Answer 25

Determining the right quantities of supplies and products to have on hand and tracking where those items are (QR codes)

Question 26

Procurement

Answer 26

The acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services

Question 27

Material requirements planning (MRP)

Answer 27

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

Question 28

Enterprise resource planning (ERP)

Answer 28

A planning system that addresses the needs of the entire organization, from manufacturing to sales to human resources

Question 29

When do consumers develop a need?

Answer 29

Product Scarcity

Question 30

Time utility

Answer 30

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

Question 31

Place utility

Answer 31

Making goods or services physically available or accessible to potential customers

Question 32

Form Utility

Answer 32

When companies change raw materials into finished goods

Question 33

Possession utility

Answer 33

The satisfaction that buyers get when they actually possess a product, both legally and physically.

Question 34

Relationship marketing

Answer 34

A focus on developing and maintaining long-term relationships with customers, suppliers

Question 35

Product development

Answer 35

Strategy that involves creating new products for those current markets

Question 36

Market development

Answer 36

• selling your existing products to new marketS

Question 37

Marketing research

Answer 37

Collection and analysis of information about customers, competitors, + related marketing issues

Question 38

Research Techniques

Answer 38

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

Question 39

Definition of goods vs. services

Answer 39

Goods’ are the physical objects, implies the tangible commodity or product

‘Services’ is an activity of performing work for others.

Question 39

Definition of goods vs. services

Answer 39

Goods’ are the physical objects, implies the tangible commodity or product

‘Services’ is an activity of performing work for others.

Question 40

Types of consumer products

Answer 40

Convenience product (toothpaste, cake mix, soap)

Shopping product (cameras,tvs,airline tix)

Specialty product (rolex, rolls royce)

Unsought product (burial insurance)

Question 41

Industrial Products

Answer 41

(capital goods, raw materials, component parts, major equipment, accessory equipment, operating supplies, and services)

Question 42

The stages of the product life cycle

Answer 42

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

Question 43

Difference between product development process, test marketing, and the product life cycle

Answer 43

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

Question 44

Business Analysis Stage

Answer 44

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.

Question 45

Difference between financial accounting & management accounting

Answer 45

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

Question 46

Bookkeeping

Answer 46

Recordkeeping; the clerical aspect of accounting

Question 47

Types of private accountants

Answer 47

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

Question 48

Type of public accountants

Answer 48

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

Question 49

Treasurer vs Comptroller

Answer 49

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.

Question 50

Controller

Answer 50

highest ranking accountant in a company, responsible for overseeing all accounting functions

Question 51

Comptroller

Question 51

Comptroller

Question 52

Accounting equation

Answer 52

Framework for the entire accounting process

Assets = liabilities + owners’ equity

Question 53

Difference between accounts receivable + accounts payable

Answer 53

Accounts receivable- amounts that are currently owed to a firm

Account payable- accounts that firm currently owes to other parties

Question 54

Types of budgets + approaches

Answer 54

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.

Question 55

Balance Sheet

Answer 55

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

Question 56

What does it mean when a company is highly leveraged?

Answer 56

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.

Question 57

What is a company faced with when it doesn’t have enough cash to meet short term needs?

Answer 57

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.

Question 58

Short term financing

Answer 58

financing that will be repaid within one year.