Chapter 2 Small business management terms

Book Value
Value of company’s assets on its books
Cash Flow
Net profit after taxes + non cash charges such as depreciation, depletion, and amortization.
Conversion Franchising
Conversion of independent ongoing concerns into franchise-system members. Used to achieve rapid growth and market entry
system of distribution. Supplier (franchisor) arranges for a dealer (franchisee) to handle a specific product and service on agreed conditions.
Selling price over value of physical asset. It is an intangible asset.
Arrangement of fixtures, equipment, and machinery
Legal restraint of trade
Agreement to not compete with a current business for a period of time.
Liquidation value
How much a business would be worth today if its assets were purchased by knowledgeable buyers.
Market Analysis
Answers how a product or service would be received by the market.
New-new Approach
Development of new product or service, best to get into small business
New-old Approach
Does not start with a unique idea but rather “piggybanks” on someone else’s idea by improving or offering a service
Past earnings
Evaluated when buying someones business to learn how profitable it has been in the past and determines whether it will continue to be profitable
Replacement Value
Cost of buying machinery, materials, and merchandise on market today
Uniform Franchise Offering Circular (UFOC)
Written document through which franchisers make full pre-sale disclosure, pursuant to a rule established by the Federal Trade Commission.

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