small business management final exam terms – Flashcards
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business plan
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A formal document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives
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dehydrated plan
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A short form of a business plan that presents only the most important issues and projections for the business.
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comprehensive plan
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A full business plan that provides an in-depth analysis of the critical factors that will determine a firm's success or failure, along with all the underlying assumptions.
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executive summary
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A section of the business plan that conveys a clear and concise overall picture of the proposed venture. this includes: description of the opportunity an explanation of the business concept industry overview target market competitive advantage market research management team offering
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product/service plan
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A section of the business plan that describes the product and/or service to be provided and explains its merits.
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marketing plan
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a section of the business plan that describes the user benefits of the product or service and the type of market that exists
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operations and development plan
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A section of the business plan that offers information on how a product will be produced or a service provided, including descriptions of the new firm's facilities, labor, raw materials, and processing requirements.
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management team
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section of the business plan that describes the new firm's organizational structure and the backgrounds of its key players
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critical risks
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section of the business plan that identifies the potential risks that may be encountered by an investor
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offering
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section of the business plan that indicates to an investor how much money is needed and when, and how the money will be used
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financial plan
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a section of the business plan that projects the companys financial position based on well substantiated assumptions and explains how the figures have been determined
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pro forma statements
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Projections of a company's financial statements for up to five years, including balance sheets, income statements, and statements of cash flows, as well as cash budgets.
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prospectus
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A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.
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small business marketing
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Business activities that direct the creation, development, and delivery of a bundle of satisfaction from the creator to the targeted user and that satisfy the targeted user.
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three levels of a procuct or service
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augmented p/s actual p/s core p/s
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insider in new firm
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entrepreneurs and management team employees
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outsiders in new firm
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customers lenders suppliers investors(private, family, or venture capitalists)
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parts of the marketing plan
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market analysis competition market strategy(p/s, distribution, pricing, promotion
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customer profile
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description of potential customers in target market
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market research
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gathering, processing, interpreting and reporting of market info
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secondary data
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market information that has been previously compiled
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primary data
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new market info that is gathered by firm conducting the research
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market
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a group of customers or potential customers who have purchasing power and unsatisfied needs
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market segmentation
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The division of a total market into smaller, more specific groups
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segmentation variables
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The parameters used to distinguish one form of market behavior from another.
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benefit variables
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Specific characteristics that distinguish market segments according to the benefits sought by customers.
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demographic variables
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Specific characteristics that describe customers and their purchasing power.
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unsegmented strategy
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a strategy that defines the total market as the target market
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multisegment strategy
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A strategy that recognizes different preferences of individual market segments and develops a unique marketing mix for each.
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single-segment strategy
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A strategy that recognizes the existence of several distinct market segments but focuses on only the most profitable segment.
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sales forecast
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The amount of a product a company expects to sell during a specific period at a specified level of marketing activities.
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conditions that make forecasting easier
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established business experienced entrepreneur/manager entrepreneur familiar with forecasting techniques
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conditions that make marketing difficult
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new venture limited ent/mangement experience poor understanding of forecast techniques
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breakdown process
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a forecasting process that begins with a macro-level variable and systematically works down to the sales forecast. Also called a chain-ratio method.
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buildup process
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A forecasting method in which all potential buyers in the various submarkets are identified and then the estimated demand is added up.
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direct forecasting
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a forecasting method in which sales is the estimated variable
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indirect forecasting
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a forecasting method in which variables related to sales are used to project future sales
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management team
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managers and other key persons who give a company its general direction
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social network
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an interconnected system comprising relationships with other people
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social capital
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advantage created by individuals connections in social network
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reciprocation
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powerful social rule based on an obligation repay in kind what another has done for or provided to us
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sole proprietorship
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a business owed by one person, who bears all responsibility and liability for the enterprise
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common forms of legal organization
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sole proprietorship partnership corporation
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unlimited liability
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liability on the part of an owner that extends beyond the owners investment in the business
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partnership
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a legal entity formed by two or more co-owners to carry on a business for profit
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advantages of a partnership
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shared workload shared emotional burden procuring exec talent otherwise unaffordable companionship
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disadvantages of a partnership
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interpersonal conflict dissatisfaction with partner absence of one clear leader dilution of equity not being able to call ones own shots
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partnership agreement
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document that states explicitly the rights and duties of partners
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agency power
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the ability of any one partner to legally bind the other partners
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corporation
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a business organization that exists as a legal entity and provides limited liability to owners
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legal entity
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a business org that is recognized by law as having a legal separate existence
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c corporation
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an ordinary corporation taxed by federal government as legal separate entity
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corporate charter
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document that establishes a corporations existence
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stock certificate
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document specifying the number of shared owned by a stockholder
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pre-emptive right
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The right of stockholders to buy new shares of stock before they are offered to the public.
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limited partnership
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A partnership with one or more general partners and one or more limited partners.
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general partner
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partner in a partnership that has unlimited personal liability
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limited partner
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partner in limited partnership who is not active in its management and has limited personal liability
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s corporation
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A unique government creation that looks like a corporation but is taxed like sole proprietorships and partnerships.(as in subchapter)
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LLC(limited liability company)
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for or organization in which owners have limited liability but pay personal income taxes on business profits
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professional corporation
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form of corporation that shields owners from liability and is set up for individuals in certain professional practices
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nonprofit corporation
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for of corporation for enterprises established to serve civic, educational, charitable, or religious purposes but not for generation of profits
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organizational test
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verification of whether a nonprofit organization is staying true to its stated purpose
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strategic alliance
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A long-term partnership between two or more companies established to help each company build competitive market advantages.
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board of directors
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the governing body of a corporation, elected by stockholders
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advisory council
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a group that functions like a board of directors but acts only in an advisory capacity
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financial statements(accounting)
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reports of a firms financial performance and resources, including: income statement balance sheet cash flow statement
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income statement(profit and loss)
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financial report showing the profit or loss from a firms operations over a given period of time
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income statement formula
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sales-cogs=gross profit-operating exp=op income-interest exp=ebt-income tax=net income
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cost of goods sold
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cost of producing or acquiring goods or services sold by a firm
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gross profit
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sales -cogs
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operating expense
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costs related to the marketing and selling a p/s plus general administrative expenses and depreciation
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operating income
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earnings after operating expense but before interest and taxes are paid
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financing costs
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amount of interest owed to lenders on borrowing money
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earnings before taxes
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earnings after operating expenses and interest but before taxes
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net income
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income that may be distributed to owners or reinvested in the company
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depreciation expense
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costs related to a fixed asset, such as building or equipment, allocated over its useful life
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balance sheet
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a financial report showing a firm's assets, liabilities and ownership equity at a specific point in time
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current assets(gross working capital)
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assets that can be converted into cash within a company's operating cycle
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accounts receivable
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the amount of credit extended to customers that is currently outstanding
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inventory
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a firms raw materials and products held in anticipation of eventual sale
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fixed assets
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relatively permanent assets intended for use in the business, such as plant and equipment
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depreciable assets
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assets whose value declines over time
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gross fixed assets
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original cost of depreciable assets before any depreciation expense has been taken
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accumulated depreciation
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total depreciation taken over the assets life
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net fixed assets
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gross fixed assets less accumulated depreciation
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other assets
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assets other than current assets and fixed assets, ie patents, copyrights, and goodwill
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debt
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business financing provided by creditors
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current debt( short term liabilities)
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borrowed money that must be paid back within 12 months
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accounts payable(trade credit)
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outstanding credit payable to suppliers
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accrued expenses
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short-term liabilities that have been incurred but not paid
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short-term notes
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cash amounts borrowed from a bank or other lending sources that must be repaid within a short period of time
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long-term debt
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loans from banks or other sources with repayment terms of 12 months or more
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mortgage
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a long-term loan from a creditor for which real estate is pledged as collateral
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ownership equity
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owners investments in a company plus profits retained in the firm
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retained earnings
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profit less withdrawals(dividends) over the life of the business
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cash flow statement
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a financial report showing a firms sources and use of cash
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accrual-basis accounting
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a method of accounting that matches revenues when they are earned against the expenses associated with those revenues, no matter when they are paid
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cash-basis accounting
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a method of accounting that reports transactions only when cash is received or a payment is made
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cash flows from operations
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net cash flows generated from operating a business, calculated by adding depreciation back to operating income, deducting income taxes, and factoring in any changes in working capital
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adjusted income
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after-tax cash flow
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net working capital
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money invested in current assets, other than cash, less accounts payable and accruals
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pro forma financial statements
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statements that project a firms financial performance and condition
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bootstrapping
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minimizing a firms investments
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percentage-of-sales technique
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A method of forecasting asset investments and financing requirements.
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assets-to-sales financing relationships
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increase in sales>increase in asset requirements>increase in financing requirements
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liquidity
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the degree to which a firm has working capital available to meet maturing debt obligations
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current ratio
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a measure of a companys relative liquidity determined by dividing current assets by current liabilities
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debt ratio
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a measure of the fraction of a firms assets that are financed by debt determined by dividing total debt by total assets
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spontaneous financing
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short-term debts, such as accounts payable, that automatically increase in proportion to a firms sale
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external equity
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capital that comes from the owners investment in the firm
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internal equity
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capital that comes from retaining profits within a firm
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customer relationship management(crm)
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a company wide business strategy designed to optimize profitability and customer satisfaction by focusing on highly defined and precise customer groups
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importance of CRM to a small firm
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new customers have big aquisition costs. long-time customers spend more money than new ones. happy customers refer friends and colleagues. order-processing costs are higher for new customers. old customers will pay more for products.
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transactional relationship
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an association between a business and a customer that results in a purchase or a business deal
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components of customer satisfaction
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providing the most basic benefits of the p/s. offering general support services. setting up system to counteract bad customer experiences. delivery extraordinary service to make p/s seem customized to customer.
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customer profile
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a collection of information about a customer, including a demographic data, attitudes, preferences, and other behavioral characteristics, as defined by CRM goals
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evaluative criteria
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the features or characteristics of a p/s that customers use to compare brands
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evoked set
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a group of brands that a consumer is both aware of an willing to consider as a solution to a purchase problem.
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cognitive dissonance
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the anxiety that occurs when a customer has second thoughts immediately following a purchase
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needs
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the starting points for all behavior
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perception
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the individual processes that give meaning to the stimuli confronting consumers
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perpetual categorization
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the process of grouping similar things so as to manage huge quantities of incoming stimuli
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motivations
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forces that organize and give direction to the tension caused by unsatisfied needs
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attitude
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an enduring opinion based on knowledge, feeling, and behavioral tendency
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culture
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behavioral patterns and values that characterize a group of consumers in a target market
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social classes
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divisions within a society having different levels of social prestige
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reference groups
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groups that an individual allows to influence his or her behavior
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opinion leader
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a group member who plays a key communications role
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price
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the specification of what a seller requires in exchange for transferring ownership or use of a p/s
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credit
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an agreement between a buyer and a seller that provides for delayed payment of a p/s
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total cost
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sum of cost of goods offered, selling expense and overhead cost
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total variable cost
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costs that very with the quantity of the product sold
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total fixed cost
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costs that remain the same as the quantity of the products sold varies
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average pricing
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an approach in which total cost for a given period is divided by the quantity sold in that period to set a price
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elasticity of demand
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the degree to which a change in price affects the quantity demanded
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elastic demand
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demand that changes significantly when there is a change in the price of a product
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inelastic demand
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demand that does not change significantly when there is a change in the price of a product
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prestige pricing
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setting a high price to convey an image of high quality or uniqueness
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break-even point
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sale volume a which total sales revenue equals total cost
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markup pricing
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applying a percentage to a products cost to obtain its selling price
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penetration pricing strategy
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setting lower than normal prices to hasten market acceptance of a product to increase market share
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skimming price strategy
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setting very high prices for a limited period before reducing them to more competitive levels
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follow the leader pricing strategy
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using a particular as a model in setting pricing
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variable pricing strrategy
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setting more than one price for a product in order to offer prices concessions to certain customers
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dynamic pricing strategy
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charging more than the standard price when the customers profile suggests that the higher price will be accepted
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price lining strategy
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setting a range of several distinct merchandise price levels
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consumer credit
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financing granted by retailers to individuals who purchase for personal or family use
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trade credit
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financing provided by a supplier of inventory to a given company
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open charge account
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line of credit that allows the customer to obtain a product at the time of purchase with payment due when billed
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installment account
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a line of credit that requires a down payment with the balance paid over a specific period of time
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revolving charge account
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a line of credit on which the customer may charge purchases at any time, up to a preestablished limit
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trade-credit agencies
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privately owned organizations that collect credit information on businesses
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credit bureaus
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privately owned organizations that summarize a number of firms credit experience with particular individuals
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aging schedule
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a categorization of accounts receivable based on the length of time they have been outstanding
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bad-debt ratio
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the ratio of bad debt to credit sales
