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World of Business: Exam #1 > part 3 > Flashcards

part 3 Flashcards

1
Q

what is owner’s equity

A

The portion of a company’s assets that belongs to the owners after obligations to all creditors have been met

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2
Q

what are retained earnings?

A

The portion of owners equity earned by the company but not distributed to its owners in the form of dividends

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3
Q

what is the income statement?

A

statement of performance and tracks revenues and expenses

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4
Q

what are revenues?

A

sales, the outflow of goods and services, consumers will often pay cash for revenues, cash becomes an asset

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5
Q

what are expenses?

A

how much did we use up, an inflow of goods and services that will not benefit us in the future, consumed by firm/company

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6
Q

what is the formula for gross margin(gross profit)

A

gross margin/profit = sales - cost of goods sold

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7
Q

what are current or short-term assets/liabilities?

A

assets or liabilities are going to be resolved in less than a year

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8
Q

what are fixed or long-term assets?

A

Assets or Liabilities that are going to be resolved in longer than a year

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9
Q

what are operating expenses?

A

marketing, salaries, other expenses to run the business

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10
Q

what is the formula for operating income?

A

gross profit - operating expenses = operating income

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11
Q

what is operating income?

A

earnings before interest, depreciation, taxes, and amortization

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12
Q

what is depreciation?

A

the reduction in the value of an asset

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13
Q

what is the formula for net income?

A

revenues - expenses = net income

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14
Q

what is accrual accounting?

A

revenue is recorded when a sale is made, expenses are recorded when they occur

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15
Q

what is cash basis accounting?

A

a sale is recorded when cash is transferred

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16
Q

what is the statement of cash flows?

A

shows what happened to the cash

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17
Q

what are operating activities?

A

general operations of the business

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18
Q

what are investing activities?

A

buying and selling of long-term assets

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19
Q

what are financing activities?

A

The raising of debt or equity funds or the payments of cash related to the issuance or repayment of these funds

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20
Q

What is the earnings per share ratio?

A

A measure of a firm’s profitability for each share of outstanding stock,
net income/average number of shares

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21
Q

what is the debt-to-equity ratio?

A

A measure of the extent to which a business is financed by debt as opposed to invested capital,
total liabilities/total equity

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22
Q

what is the profit margin ratio?

A

the ratio between net income after taxes and net sales,

net income/net sales, we want it high

23
Q

what is the return on equity ratio?

A

the ratio between net income after taxes and total owners’ equity, Net Income/Total Owners’ Equity

24
Q

what is the current ratio?

A

A measure of a firm’s short-term liquidity, CA/CL, we want it to be greater than or equal to one

25
Q

what is the quick ratio?

A

A measure of a firm’s short-term liquidity,

(Cash + Marketable Securities + Receivables) / Current Liabilities

26
Q

what is the inventory turnover ratio?

A

A measure of the time a company takes to turn its inventory into sales,
COGS/average value of inventory

27
Q

what is the debt-to-asset ratio?

A

A measure of a firm’s ability to carry long-term debt,

TL/TA

28
Q

What is the health ratio?

A

total debt/total asset, we want it to be less than one

29
Q

what is the wholesale price?

A

price from manufacturer

30
Q

what is the retail price?

A

the price you see in the store

31
Q

what is MSRP?

A

manufacturer suggested retail price

32
Q

what are some things that could impact price?

A

COGS(variable cost, varies based on production), market demand, operating costs(fixed cost, independent of production), marketing strategies, profit margin, competition, or government regulations

33
Q

What is competition based pricing?

A

Setting a price based on competitors’ pricing

34
Q

What is skimming?

A

Introducing a product with a high price then lowering the price over time

35
Q

What is penetration pricing?

A

Offering new products at low prices in the hopes of achieving high sales volume

36
Q

What is odd-even pricing?

A

Setting the price at an odd number so consumers perceive a lower price (e.g., $19.95)

37
Q

What is demand-oriented pricing?

A

Set prices based on consumer demand

38
Q

What are tangible assets?

A

products and goods

39
Q

What are intangible assets?

A

services and ideas

40
Q

what is break even analysis?

A

minimum quantity needed to cover all costs given a price

41
Q

what is the formula for profit?

A

total revenue-total costs=profit

42
Q

what is the formula for total revenue?

A

average price x quantity sold = total revenue

43
Q

what is the formula for total costs?

A

fixed costs + (variable costs x units sold) = total costs

44
Q

What are fixed costs?

A

costs that will not change no matter how much money you make, (equipment, building you purchased, property tax)

45
Q

What are variable costs?

A

elements that go into a product(rubber to make a bike or income tax)

46
Q

what is the break even point?

A

the number of units sold to have 0 profit

47
Q

what is the formula for the break even point?

A

fixed costs / (price - variable cost per unit) = break even point

48
Q

what is price elasticity?

A

the sensitivity of the demand relative to the price

49
Q

When is a product elastic?

A

when total revenue/demand falls when the price rises

50
Q

when is a product inelastic?

A

when total revenue/demand is unchanged/rises when price rises

51
Q

what are the steps of the life cycle change of a product?

A
  1. Introduction
  2. Growth
  3. Maturity
  4. Decline
52
Q

What are the steps of product development?

A
  1. Idea generator
  2. Idea screen
  3. Business analysis
  4. Prototype
  5. Testing marketing
  6. Commercialization
53
Q

what is business analysis?

A

Product lines(different styles of mountain bikes) and product mixes(mountain bikes, road bikes, beach bikes, and accessories)

54
Q

What are the steps of brand loyalty?

A
  1. Brand awareness
  2. Brand preference
  3. Brand insistence

World of Business: Exam #1 (3 decks)

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