small business management Flashcards
functions of management
- planning
- organizing
- leading
- controlling/evaluating
manufacturing
business or company that makes or manufacturers a product
merchandising
company that buys products from another business and sells it to its customer
service
business that provides a particular service to its customers
service-merchandising
provides products and services
small business
a business that is independently owned and operated and is not dominant in its field operation
quantitative small business
- # of employees 25-300
- average annual revenue = less than 6 million
qualitative small business
- actively managed by its owners
- highly personalized
- largely local in its area of operation
- largely dependent on internal sources of capital to finance its growth
- nota major force in their industry
entrepreneur
one who organizes, manages, and assumes the risk or a business firm or venture (seeking wealth, not just in one business)
sole proprietorship
an individual conducting a business as an individual and sole owner. the owner is held personally responsible for all those of the employees
advantages of sole proprietorship
- ease of starting
- low cost of organization
- freedom of management
- profit incentive
disadvantages of sole proprietorship
- unlimited risk
- limited size
- limited life
- limited management ability
partnership (general)
- an association of 2 or more persons who conduct business as co owners. personally liable for the obligations of the business
partnership (limited)
general partners and partners with limited interest (money or experience). put up capital, have a limited interest in the profits, and their liability is limited to the amount of their capital
advantages of partnerships
- combined management, talent, and capital
- ease of formation
- efficiency of labor
disadvantages of partnership
- lack of continuity
- decisions binding on both parties
- unlimited liability
- frozen assets
C corporations
legal entities established under law
advantages of C corps
- continuity of existence
- ease of ownership
- limited liability
- large financial capability
disadvantages of C corps
- legal restrictions on activities
- separation of ownership/control
- lack of personal interest
double taxation of earnings
S corporation
special type of corporation that has the protection of limited liability and elects to have a pass of income and losses like the treatment of a partnership
advantages of S corp
- independent legal entity
- only shareholder taxed
disadvantages of S corp
- if not properly structured can be taxed as a C corp
- limited shareholders
- must have limited life
limited liability corporation (LLC)
taxed like a partnership, but shields liability like a corp
advantages of LLC
- limited personal liability
- flexibility of partnership
- no significant requirements
- members report taxes
disadvantages of LLC
- if not properly structured can be taxed as C corp
- must have limited life
you should have these things before starting business
- sales tax ID #
- state and local required permits and licenses
- federal employer identification number (EIN)
- build a team of advisors
- open a business checking account
- arrange for a business phone line to be installed
capital - circulating
money for day to day operations
capital - working
difference between current assets (less than 1 year) and current liabilities
capital - fixed capital
long term capital invested in the business
capital - sources of fund
- personal, equity capital
- debt equity
- trade credit
- venture capitalist
valuation
estimate the worth or price of a company
book value
the cost of a __ asset less accumulated depreciation
liquidation value
the anticipated value of an asset that would be realized in case of liquidation of the business
replacement value
an insurance concept in which the fair market price to purchase similar products in similar condition is used to settle claims (difficult to determine at any given time)
market value
an approach used in business valuation which determines value based upon previous sales of similar business
goodwill
an intangible asset such as the name of a funeral home; also an intangible asset which enables a business to earn a profit in excess of an normal rate of profit earned by businesses of the same kind
copyrights
the registered right of creator to reproduce, publish, and sell the work which is the product of the intelligence and skill of that person
patent
the registered right of an inventor to make, use, and sell and invention
trademarks
distinct name, sign, or symbol that the federal government grants exclusive rights to use for specific time
cash
money from private sources or personal assets used for purchase
owner finance
usually 10% down, then payments go to former owner, rather than financial institution
third part financing
bank, financial institution or private party finance the operation
cash flow
must meet business expenses, owners draw, and all payments from the earnings of the business. done with a cash flow projection
fixed expenses
a cost that, for a given period and range of activity called the “relevant range”, does not change in total, but becomes progressively smaller on the per unit basis as volume increases
variable expenses
a cost which is uniform per unit but fluctuates in total in direct proportion to change in the related activity or volume
