Test 1 Flashcards
Funds lent to a business with an agreement that the business will repay the lender with interest.
Credit (or Debit)
A person or a business with a strong credit score and the financial resources that make it likely they will be able to repay loan.
Credit-Worthiness
money owned by a company to suppliers. Ex: I purchase $10,000 of beauty supplies from a distributor to put in my store. The distributor gives me 60 days to pay it back. The $10,000 is now in accounts payable for my company meaning that I owe it to someone.
Accountants Payable
Money owned by a customer to a company. Ex: You purchase a new computer from me for $1,000. You put down $200 and signed a contract agreeing to pay the remaining $800 within the next 30 days. That $800 goes into accounts receivable in my company meaning someone owes my company $800.
Accounts Receivable
Individuals that make small investments in an enterprise or to support an entrepreneur where they do not expect an immediate or large return on the investment. They are typically friends and family who know the business owner and what to see them succeed.
Angle Investors
Something of value. Anything owned. Ex: A house, a diamond ring. A security is a financial asset – a piece of paper that represents ownership in something and is worth money.
Assets
debt from a bank. Banks require much more information from potential borrowers, and take more time to make a lending decision based on a great deal of analysis. Therefore, bank loans are less expensive than online lines credit.
Bank Loan
– a loan. A bond is a security that investors buy and sell, that represents a legal obligation from the company issuing the bond that they will repay the funds they received when they issued the bond.
Bond
A determination of how many units are needed to sell in order to pay for all fixed costs.
Break-even Analysis
A company that provides individuals and companies with access to financial markets. Ex: You buy stocks and bonds from a broker.
Brokerage
Proper business behavior beyond complying with legal requirements
Business Ethnics
Funds contribute by investors to a business. Investors contribute capital to a business because they expect a significant return on their investment when the business succeeds.
Capital (or Equity)
Expenditures on equipment the business will use for many years.
Capital Expenditures
Total revenues minus Total cost minus one-time expenditures (called “capital expenditures”) on equipment that will be used for many years.
Cash Flow
Cash, publicly traded stocks, government bonds, or corporate bonds that can be quickly turned into cash. Cash instruments can be turned into cash at values that are predictable and available to all holders of the cash instrument. Ex: apple stock is cash instrument because it can be sold and converted to cash immediately and the amount that anyone would get for that stock would be the same.
Cash Instruments
Equipment, inventory or other goods that are pledged to the bank in the case the company cannot make a loan payment.
Collateral
The ability to interact in a friendly and effective way with unfamiliar people. The ability to seem welcome and easy to talk to, even with people who are different in age, appearance, or background.
Comfort Engaging with Strangers
money earned when something is sold.
Commission
a promise to keep information you learn secret. This promise if often formalized by signing a Non-Disclosure Agreement (or NDA).
Confidentiality
A situation in which an individual might take an action to his/her advantage that would be to the disadvantage of a person or company that believes this individual is serving them. EX: a customer tells a supplier in confidence that they are buying a large quantity of specific product to advertise a major sale in two weeks. It would be a conflict of interest for that supplier to go to the competitor stores and use this information to get them to buy the product.
Conflict of Interest
unit price minus cost of goods sold.
Contribution Margin
actions entrepreneurs and companies take that go beyond their financial self-interest. EX: a local pet store makes a large donation to an animal shelter.
Corporate Social Responsibility
a corporation is a person in the eyes of the law. The corporations are taxed for profits and is liable for any debts or judgments. Corporations are owned by shareholders (individuals and corporations).
Corporation
Costs that make up one unit of what you sell. These can be labor costs as well as material costs. Ex. When you sell a hat, the variable cost includes: the hat’s material and the labor cost required to make the hat.
Costs of Goods Sold
