General Definitions & Concepts Flashcards
Why teach vet business?
o Mandated by American Veterinary Medical Association on Education… due to the increase in debt of students coming out of vet school. And survey suggestions
Business
An organization or enterprising entity engaged in commericial, industrial, or professional activities. They are put in place to organize some sort of economic production of goods or services.
Commerce
exchange of goods and services between businesses and entities
Going Concern
a company has the resources needed to continue operating for at least the next 12 months
Goodwill
the intangible asset that comes with a company’s name, their customer relations or database.
Ex. Sell business with a good client base to Bob. This guarantees Bob will be receiving that “goodwill”.
How is goodwill calculated?
Calculated as the difference between cost of purchase and the fair market value of all tangible assets
Agent
a person or party that acts on behalf of another person or party
Creditor
typically a financial institution that lends money or extents credit to another party
Debtor
person on the other side of the transaction who now owes the creditor money
Revenue
the total amount of money that the business gets for selling its goods and services
Income (“Bottom Line”)
the net profit. What is left after paying all expenses and taxes
Asset
A resource (tangible or intangible) owned or controlled by an entity and has future economic value
Liability
obligation to pay for a past transaction
Liquidation
Process in law when a company that is closing sells all their assets and distributes the cash proceeds to the creditors or shareholders
Order of Liquidation
The cash must first be distributed to the secured creditors (ex. banks- mortgage or car loan) and what is left over goes to the unsecured creditors.
Secured creditors may place a lien on a property which gives them the ability to sell it for the money that they are owed
Bankruptcy (also called restructuring)
Occurs when debts are greater than assets. Filing for bankruptcy allows or someone to have a fresh start from their debts while treating the creditors fairly.
Remember, certain debts are not discharged under bankruptcy. Ex. student loans less than 7yrs after school.
Scarcity
Everyone has unlimited wants and needs, but we live in a world of limited resources. We must make a decision on how to allocate resources to satisfy needs and wants
Opportunity Cost
The value of the most valuable choice not taken, or the cost of the foregone alternative.
Ex. What is the value of converting farm land from cattle to crops. Potential to earn more money from crops, but that opportunity to switch will have some sort of cost. Nothing is free.
Law of demand
The higher the cost of something, the less people will want it
Law of Supply
As the price of goods increases (due to low supply), the quantity of those goods being supplied will increase and vice versa
Supply and Demand (“The Invisible Hand of Economy”)
A decrease (scarcity) of goods leads to increase in prices which then stimulates providers to produce more because the price is high. Then as more is provided, there is lots of the goods so prices decrease.
Equilibrium Price
The place where the demand and supply intersect
Price change and Inflation
If prices are increasing faster than inflation, then there must be a shortage.
SWOT Analysis
- Used to make business decisions
- involves strengths, weaknesses, opportunities, and threats
SWOT Analysis Example
Ex. Vet profession
- Threats- Average age is 50-55, so lots of retirement and lots of very new grads
- Opportunities- shortage of vets, so lots of jobs right now
- Weaknesses- hard workload and stress
- Strengths- various fields within vet med to work, won’t get bored
