Midterm Flashcards
Business
Any activity that seeks to provide goods and services to others while operating at a profit
Profit
The amount of money a business earns above and beyond what it spends for salaries and other expenses
Entrepreneur
A person who risks time and money to start and manage a business
Revenue
The total amount of money a business takes in during a given period by selling goods and services
Loss
When a business’s expenses are more than its revenues
Standard of Living
The amount of goods and services people can buy with the money they have
Quality of Life
The general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide
Factors of Production
The resources used to create wealth:
- Land
- Labor
- Capital
- Entrepreneurship
- Knowledge
Economics
The study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals
Microeconomics
The part of economics study that looks at the behavior of people and organizations in particular markets
Macroeconomics
The part of economics study that looks at the operation of a nation’s economy as a whole
Adam Smith
Believed freedom was vital to the survival of any economy, especially the freedom to own land or property and to keep the profits from working the land or running a business.
Invisible Hand
the process that turns self-directed gain into social and economic benefits for all
Four Basic Rights of Capitalism
- The right to own private property
- The right to own a business and keep all that business’s profits
- The right to freedom of competition
- The right to freedom of choice
Supply
The quantity of products that manufacturers or owners are willing to sell at different prices at a specific time.
Demand
The quantity of products that people are willing to buy at different prices at a specific time
4 Degrees of Competition
- Perfect Competition
- Monopolistic Competition
- Oligopoly
- Monopoly
Perfect Competition
When there are many sellers in a market and none is large enough to dictate the price of a product
Monopolistic Competition
When a large number of sellers produce very similar products that buyers nevertheless perceive as different
Oligopoly
When just a few sellers dominate the market
Monopoly
When only one seller controls the total supply of a product or service, and sets the price
Communism
An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production
Mixed Economies
Economic system in which some allocation of resources is made by the market and some by the government
Exporting
Selling products to another country
Importing
Buying products from another country
Free Trade
The movement of goods and services among nations without political or economic barriers
Comparative Advantage Theory
States that a country should sell to other countries those products that it produces most effectively and efficiently, and buy from other countries those products that it cannot produce as effectively or efficiently
Absolute Advantage
The advantage that exits when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries
Balance of Trade
The total value of a nation’s exports compared to its imports measured over a particular period
Balance of Payments
The difference between money coming into a country (from exports) and money leaving a country (for imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment
Sole Proprietorship
A business that is owned, and usually managed, by one person
Partnership
a legal form of business with 2 or more owners
Corporation
A legal entity with authority to act and have liability apart from its owners
Limited Liability Company
A company similar to an S Corp but without the special eligibility requirements.
- Choice of taxation
- Flexible ownership rules – can be a person, partnership or corporation
- Flexible distribution of profits and losses
- Operating flexibility – not required to keep minutes, file written resolutions or hold annual meetings
- No stock
- Can’t deduct the cost of fringe benefits for members owning 2% or more
- Members must pay self-employment taxes on their profits as opposed to just owners’ salaries as in s corps
Franchise
The right to use a specific business’s name and sell its products or services in a given territory
People take the entrepreneurial challenge because…
- Opportunity—Many people, including those new to this country, may not have the skills for today’s complex organizations, but they do have the initiative and drive to work the long hours demanded by entrepreneurship.
- Profit
- Independence—not having to work for someone else
- Challenge—Entrepreneurs take moderate, calculated risks; they don’t just gamble. They seek achievement more than power.
Micropreneur
Entrepreneur willing to accept the risk of starting and managing the type of business that remains small, let’s them do the kind of work they want to do, and offers them a balanced lifestyle
Intrapreneurs
Creative people who work as entrepreneurs within corporations
Learning about small business operations
- Learn from others
- Get some experience (rule of thumb: 3 years in comparable business first)
- Take over a successful firm
Business Plan
A detailed written statement that describes the nature of the business, the target market, the advantages the business will have in relation to competition, and the resources and qualifications of the owner(s).
- Cover letter
- Section 1: Executive Summary
- Section 2: Company Background
- Section 3: Management Team
- Section 4: Financial Plan
- Section 5: Capital Required
- Section 6: Marketing Plan
- Section 7: Location Analysis
- Section 8: Manufacturing Plan
- Section 9: Appendix
Small Business Administration
A U.S. government agency that advises and assists small businesses by providing
- management training
- financial advice
- loans
The SBA may provide the following types of financial assistance:
- Guaranteed loans
- Microloans
- Export express
- Community Adjustment and Investment Program (CAIP)—loans to businesses to create new, sustainable jobs or to preserve existing jobs in eligible communities that have lost jobs due to the adoption of NAFTA
- Pollution control loans
- 504 certified development company (CDC)—loans for rural or urban areas needing revitalization. Max guaranteed loan = $1.5 million
Functions of Management
- Planning
- Organizing
- Leading
- Controlling
Vision
An encompassing explanation of why the organization exists and where its trying to head
Mission Statement
An outline of the fundamental purposes of an organization
SWOT Analysis
A planning tool used to analyze an organization’s strengths, weaknesses, opportunities, and threats
Levels of Management
Top Management (President, Vice President)
Middle Management (Plant managers, Division heads)
Supervisory (First-Line) Management (Supervisors, Department heads)
Nonsupervisory (Employees)
Leadership Styles
- Autocratic
- Participative (Democratic)
- Free-Rein
Autocratic Leadership
Leadership Style that involves making managerial decisions without consulting others
Participative (Democratic) Leadership
Leadership style that consists of managers and employees working together to make decisions
Free-Rein Leadership
Leadership style that involves managers setting objectives and employees being relatively free to do whatever it takes to accomplish those objectives
Empowering
giving employees the authority to make a decision without consulting the manager and the responsibility to respond quickly to customer requests
Intrinsic Reward
The personal satisfaction you feel when you perform well and complete goals
Extrinsic Reward
something given to you by someone else as recognition for good work such as:
- pay increases
- praise
- promotions
Frederick Taylor
The father of scientific management
Scientific Management
Studying workers to find the most efficient ways of doing things and then teaching people those techniques
Hawthorne Effect
The tendency for people to behave differently when they know they are being studied
Maslow’s Hierarchy of Needs
Theory of motivation based on unmet human needs from basic physiological needs to safety, social, and esteem needs to self-actualization needs
Job Enrichment
A motivational strategy that emphasizes motivating the worker through the job itself. Work is assigned so that individuals can complete an identifiable task from beginning to end and are held responsible for successful achievement. Grew out of Herzberg and Maslow’s theories. Stands in contrast to Job Simplification.
5 characteristics of work are important in motivation and performance:
- Skill variety
- Task identity
- Task significance
- Autonomy
- Feedback
Theory X
A theory by management theorist Douglas McGregor that assumes:
- The average person dislikes work
- Because of this dislike, workers must be forced, controlled, directed or threatened with punishment
- The average worker prefers to be directed, wishes to avoid responsibility, has relatively little ambition, and wants security
- Primary motivators are fear and money
Theory Y
A theory by management theorist Douglas McGregor that assumes:
- Most people like to work
- Most people naturally work toward goals to which they are committed
- The depths of a person’s commitment to goals depends on the perceived rewards for achieving them
- Under certain conditions, most people not only accept but also seek responsibility
- People are capable of using a relatively high degree of imagination, creativity and cleverness to solve problems
Human Resource Management
The process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organizational goals
Performance Appraisal
An evaluation that measures employee performance against established standards in order to make decisions about promotions, compensation, training, or termination
