part 3 Flashcards
what is owner’s equity
The portion of a company’s assets that belongs to the owners after obligations to all creditors have been met
what are retained earnings?
The portion of owners equity earned by the company but not distributed to its owners in the form of dividends
what is the income statement?
statement of performance and tracks revenues and expenses
what are revenues?
sales, the outflow of goods and services, consumers will often pay cash for revenues, cash becomes an asset
what are expenses?
how much did we use up, an inflow of goods and services that will not benefit us in the future, consumed by firm/company
what is the formula for gross margin(gross profit)
gross margin/profit = sales - cost of goods sold
what are current or short-term assets/liabilities?
assets or liabilities are going to be resolved in less than a year
what are fixed or long-term assets?
Assets or Liabilities that are going to be resolved in longer than a year
what are operating expenses?
marketing, salaries, other expenses to run the business
what is the formula for operating income?
gross profit - operating expenses = operating income
what is operating income?
earnings before interest, depreciation, taxes, and amortization
what is depreciation?
the reduction in the value of an asset
what is the formula for net income?
revenues - expenses = net income
what is accrual accounting?
revenue is recorded when a sale is made, expenses are recorded when they occur
what is cash basis accounting?
a sale is recorded when cash is transferred
what is the statement of cash flows?
shows what happened to the cash
what are operating activities?
general operations of the business
what are investing activities?
buying and selling of long-term assets
what are financing activities?
The raising of debt or equity funds or the payments of cash related to the issuance or repayment of these funds
What is the earnings per share ratio?
A measure of a firm’s profitability for each share of outstanding stock,
net income/average number of shares
what is the debt-to-equity ratio?
A measure of the extent to which a business is financed by debt as opposed to invested capital,
total liabilities/total equity
what is the profit margin ratio?
the ratio between net income after taxes and net sales,
net income/net sales, we want it high
what is the return on equity ratio?
the ratio between net income after taxes and total owners’ equity, Net Income/Total Owners’ Equity
what is the current ratio?
A measure of a firm’s short-term liquidity, CA/CL, we want it to be greater than or equal to one
what is the quick ratio?
A measure of a firm’s short-term liquidity,
(Cash + Marketable Securities + Receivables) / Current Liabilities
what is the inventory turnover ratio?
A measure of the time a company takes to turn its inventory into sales,
COGS/average value of inventory
what is the debt-to-asset ratio?
A measure of a firm’s ability to carry long-term debt,
TL/TA
What is the health ratio?
total debt/total asset, we want it to be less than one
what is the wholesale price?
price from manufacturer
what is the retail price?
the price you see in the store
what is MSRP?
manufacturer suggested retail price
what are some things that could impact price?
COGS(variable cost, varies based on production), market demand, operating costs(fixed cost, independent of production), marketing strategies, profit margin, competition, or government regulations
What is competition based pricing?
Setting a price based on competitors’ pricing
What is skimming?
Introducing a product with a high price then lowering the price over time
What is penetration pricing?
Offering new products at low prices in the hopes of achieving high sales volume
What is odd-even pricing?
Setting the price at an odd number so consumers perceive a lower price (e.g., $19.95)
What is demand-oriented pricing?
Set prices based on consumer demand
What are tangible assets?
products and goods
What are intangible assets?
services and ideas
what is break even analysis?
minimum quantity needed to cover all costs given a price
what is the formula for profit?
total revenue-total costs=profit
what is the formula for total revenue?
average price x quantity sold = total revenue
what is the formula for total costs?
fixed costs + (variable costs x units sold) = total costs
What are fixed costs?
costs that will not change no matter how much money you make, (equipment, building you purchased, property tax)
What are variable costs?
elements that go into a product(rubber to make a bike or income tax)
what is the break even point?
the number of units sold to have 0 profit
what is the formula for the break even point?
fixed costs / (price - variable cost per unit) = break even point
what is price elasticity?
the sensitivity of the demand relative to the price
When is a product elastic?
when total revenue/demand falls when the price rises
when is a product inelastic?
when total revenue/demand is unchanged/rises when price rises
what are the steps of the life cycle change of a product?
- Introduction
- Growth
- Maturity
- Decline
What are the steps of product development?
- Idea generator
- Idea screen
- Business analysis
- Prototype
- Testing marketing
- Commercialization
what is business analysis?
Product lines(different styles of mountain bikes) and product mixes(mountain bikes, road bikes, beach bikes, and accessories)
What are the steps of brand loyalty?
- Brand awareness
- Brand preference
- Brand insistence
