Combo with mgmt351 t3 ch11 and 2 others – Flashcards
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Small Business Owners Get Into Trouble When
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determining their price floow when they assume their costs are the same as their competitors
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Skimming Price Strategy
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often used when a company introduces a unique product into a market with little or not competition. sets a higher than normal price in effort to quickly recover the initial developmental and promotional costs of the product
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Penetration Pricing Strategy
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enables the business to build market share quickly and establish itself as the market leader. sets the price just above total unit cost to develop a wedge in the market and quickly achieve a high volume of sales
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Discount Pricing Strategy
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reductions from normal list prices, to move stale, outdated, damages, or slow moving merchandise
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Leader Pricing
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a technique in which the small retailer marks down the customary price of a popular item in an attempt to attract more customers
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Price Lining
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a technique that greatly simplifies the pricing function. the manager stocks merchandise in several different price ranges or price lines
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If A Small Business Owner Doesn't Want To Make A Pricing Decision
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he can use a suggested retail pricing strategy
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Suggested Retail Pricing Strategy
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manufactures print suggested retail prices on their products or include them on invoices or in wholesale catalogs
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What Should A Small Business Owner Consider Regarding The Competition In Price Setting?
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competitors location and nature of the competing goods
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Steps In Managing Cash
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understand the company's cash flow cycle, begin whittling down the length of the cash flow cycle
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Cash Budget
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nothing more than a cash map showing the amount and the timing of the cash receipts and the cash disbursements week by week or month by month
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Accounts Receivable
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a creditor's accounts of money owed to him
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Accounts Payable
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the amount of money owed, or payable, to a business's creditors
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Notice Of Filing
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if a company files for bankruptcy, the court notifies creditors with this document
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Proof Of Claim
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a form stating the name of an unsecured creditor and the amount of the claim against the debtor
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Security Agreement
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a contract in which a business selling an asset on credit gets a security interest in that asset (the collateral), protecting the company's legal rights in case the buyer fails to pay
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Lock Box
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customers send payments to a post office box the bank maintains
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Bartering
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exchaning goods and services for other goods and services
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Zero Based Budgeting
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a shift in the philosophy of budgeting. rather than build the current year's budget on increases from the previous year's budget, ZBB starts from a budget of zero and evaluates the necessity of every item
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Cycle Billing
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a company bills a portion of its credit customers each day of the month to smooth our uneven cash receipts
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Cash Flow
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measures a company's liquidity and its ability to pay its bills and other financial obligations on time by tracking the flow of cash into and out of the business over time
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What Should You Keep In Mind When Creating A Cash Budget?
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the more variable the sales pattern, the shorter the planning horizon should be
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What Are The Steps To Creating A Cash Budget?
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determine a minimum cash balance, forecast sales, forecast cash receipts, forecast cash disbursements, and establish end of month cash balance
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A Cash Budget Is Only As Accurate
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as the sales forecast from which it is derived
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When A Firm Sells Goods Or Services On Credit, How Does That Affect Cash Budgeting?
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they are omitted entirely from the cash budget
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Most Small Business Owners Generally
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underestimate cash disbursements
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What Are The "Big Three" Of Cash Management?
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accounts recievable, accounts payable, and inventory
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What Are The Steps To Building An Effective Credit Policy?
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screen customers carefully before granting credit, establish a firms written credit policy and letting every customer know in advance the company's credit terms, to send invoices promptly becasue customers rarely pay before they receive their bills
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What Should A Small Business Owner Do Once A Credit Account Becomes Past Due?
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contact the customer immediately, ask for full payment and set a deadline
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What Should He Do When A "Notice Of Filing" Is Recieved?
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immediately file a proof of claim
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Effecient Cash Managers Set Up A
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payment calander in order to both pay on time and take advatage of cash discounts for early payment
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What Are The Key Objectives That A Small Business Owner Must Have When Investing Surplus Cash?
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liquidity and safety
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What Does The Statement "Collection Of Accounts Receivable Lags Behind Sales" Mean?
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customers who purchase goods on credit may not pay until a month or more later
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Pro-Forma Financial Statement
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preparing projected finacial statements
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What Does A Balance Sheet Show?
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estimates the firm's worth on a give date; built on the accounting equation: assets=liabilities +owners equity
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Assets
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valued at cost, not avtual market value
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Liabilities
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the creditors claims against the company's assets
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Ratio Analysis
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a method of expressing the relationships between any teo accounting elements, provides a convenient technique for performing financial analysis
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Profitability Ratios
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measure how effectively a firm is operating; offer information about a firm's "bottom line". net profit on sales ratio, net profit to assets (return on assets), net profit to equity ratio
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Operationg Ratios
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evaluate a firm's overall performance and show how effectively it is putting its resources to work. average inventory turnover ratio, average collection period ratio, average payable period ratio, net sales to total assets ratio
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Liquidity Ratios
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tell whether or not a small business will be able to meet its maturing obiligations as they come due. current ratio, quick ratio
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Leverage Ratios
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measures the financing provided by a firm's owners against that supplied by its creditors; a gauge of the depth of a company's debt. debt ratio, debt to net worth ratio, times interest earned
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The Profit And Loss Statement
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is also known as the income statement
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Gross Profit Margin
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is equal to gross profit divided by net sales
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The Statement Of Cash Flow
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shows changed in working capital by listing sources and uses funds
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Why Is Depreciation Expense Listed As A Source Of Funds?
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it's a noncash expense (meaning that we are not using cash to pay it) deducted as a cost of doing business
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The Owner Of A Small Business Needs To Use
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published statitics for his specific type of business to be able to translate the target profit into a net sales figure for the pro forma income statements
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The First Step In Creating Pro-Forma Income Statement
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is to determine a reasonable salary and return on investment in the company
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The Options For Repairing A Poor Gross Profit Margin
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are to cut manufacturing or purchasing cost, to raise prices or to refuse orders with low profit margins
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What Does The Current Ratio Measure?
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measures solvency by showing a firm's ability to pay current liabilities out of current assets (current assets/current liabilities)
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What Does The Quick Ratio Measure?
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shows the extent to which a firm's most liquid assets cover its current liabilites (quick assets/current liabilites)
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What Does A High Debt Ratio Mean?
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the company has a lot of debt relative to its assets
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A Debt To Net Worth Ratio Above 1:1 Is
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one indication that a small business may be undercapitalized. this means that too much debt financing has been used
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A Times Interest Earned Ratio That Is Far Below The Industry Average Is
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a sign that a company is overextended (meaning that it has too much debt) in its debt
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An Above Average Inventory Turnover Indicates
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that the business is healthy, with salable inventory
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Where Does The Break Even Point Occur?
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when the level of operation at which a business neither earns a profit nor incurs a loss
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The Most Meaningful Basis For Comparing Operating Ratios Is
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other companies of similar size in the same industry
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The Contribution Margin
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is the difference between price per unit and variable cost per unit
