Test 3

Question 1

Lien

Answer 1

The right to take possession of collateral until a debt is repaid.

Question 2

Limited Liability Corporation (LLC)

Answer 2

A special type of corporation where individual owners (or members) are taxed on the profits of the company, but the corporation (not the members) is liable for debts or judgement against the company.

Question 3

Line of Credit

Answer 3

A loan that provides the borrower a maximum amount of money he/she can borrow – the borrower can then access or use the line of credit for only as much money as they need at any particular time.

Question 4

Liquid Assets

Answer 4

Cash or securities that can be immediately turned into cash, which can then repay any loan amount outstanding

Question 5

Louisiana Department of Revenue

Answer 5

The state agency that collects state taxes

Question 6

Marketing

Answer 6

How a business communicates to large numbers of customers, motivating them to learn more about the business and its offering.

Question 7

Maturity

Answer 7

The date is a loan is repaid in full

Question 8

Mentor

Answer 8

A person who coaches and supports an entrepreneur or a student studying to become an entrepreneur.

Question 9

Mortgage

Answer 9

money a person borrows to buy real estate

Question 10

Mutual Fund

Answer 10

An investment security that includes many different stocks purchases and held together. Investors purchase mutual funds because they are less risky than holding any individual stock.

Question 11

Net Income

Answer 11

“Net” means revenues after costs

Question 12

Obligation

Answer 12

A payment that is owed every month

Question 13

Online Credit

Answer 13

Debt obtained from a number of online companies. Borrowers need to disclose much less information about themselves to obtain online credit, and online credit companies make credit decisions much more quickly than banks. For these reasons, online credit is much more expensive for borrowers than bank loans

Question 14

Overdraft

Answer 14

When a company issues a check or makes a financial commitment for an amount greater than the amount the company has deposited in the bank. Also called a “bounced check.”

Question 15

Overhead

Answer 15

Cost that a business incurs that are not part or producing the goods or service it sells, but which are required to operate legally and efficiently. Ex. The salary the businesses pays its accountant is overhead – these funds don’t help us sell more products, but you need your accountant to keep your financial records and submit all required filings.

Question 16

Own “Free and Clear”

Answer 16

Owning an asset without nay associated debt. Ex. You paid off your car so you own it free and clear.

Question 17

Partnership

Answer 17

When two or more individuals own a company. Partners are taxed on the profits of the company, and are personally liable for any debts or judgement against the company.

Question 18

Principle

Answer 18

Amount of money borrowed

Question 19

Pro Forma

Answer 19

A Latin phrase (for the sake of form) that in business means a projection of future financial performance. A pro forma usually takes the form of a projection of future events and costs.

Question 20

Problem Solving

Answer 20

The ability to fine solutions to difficult or complex issues. The process of working through the details of a challenge or crisis – often under pressure – to reach a solution.

Question 21

Profit

Answer 21

Revenues minus cost

Question 22

Profits per Unit

Answer 22

Unit price minus cost of goods sold.

Question 23

Quarter

Answer 23

Most projections are for a year. A “quarter” means three months

Question 24

Real Estate

Answer 24

Real estate is property and the building(s) on it. Real estate can be a piece of land, or can be a home on that piece of land, or it can be a building. Real estate is typically purchases using a mortgage. The down payment the buyer makes is called the buyer’s “equity.”

Question 25

Secured Debt

Answer 25

Debt that includes a legal obligation by the borrower to repay the debt personally if the business is unable to make its scheduled debt payment. A secured debt can be guaranteed by the entrepreneur or by any credit-worthy guarantor