Small Business Management: Launching and Growing Entrepreneurial Ventures CHAPTER 16 – Flashcards
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value
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the extent to which a good or service is perceived by a customer as meeting his or her needs or wants, measured by the customer's willingness to pay for it
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credit
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an agreement between a buyer and a seller that allows for delayed payment for a product or service
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average pricing
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an approach in which the 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 or service
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in elastic demand
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demand that does not change significantly when there is a change in the price or a product or service
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break-even analysis
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the examination of cost-revenue relationships and the incorporation of sales forecasts into the analysis
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break-even point
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sales volume at which total sales revenue equals total costs and expenses
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contribution margin
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the difference between the unit selling price and the unit variable costs and expenses
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markup pricing
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an approach based on applying a percentage to a product's cost to obtain its selling price
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penetration pricing strategy
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a technique that sets lower than normal prices to hasten market acceptance of a precept or service or to increase market share
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skimming price strategy
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a technique that sets very high prices for a limited period before reducing them to more competitive levels
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follow-the-leader pricing
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a strategy that uses a particular competitor as a model in setting prices
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variable pricing
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a strategy that sets more than one price for a product or service in order to offer price concessions to certain customers
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price lining strategy
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a technique that sets a range of several distinct merchandise price levels
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adaptive pricing
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a technique that places different values on a product or service for customers with different needs
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Selling on Credit
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type of business, credit policies of competitors, ages and income levels of customers, availability of working capital, and economic conditions are factors that affect
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trade credit
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financing provided by suppliers to client companies
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open charge account
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a line of credit that allows the customer to obtain a product or service 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 specified 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 pre-established limit
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credit card
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an alternative to cash who use provides assurance to a seller that a buyer has a satisfactory credit rating and that payment will be received from the issuing financial institution
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debit card
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an alternative to cash whose use results in an immediate withdrawal from the buyer's bank account to pay for product or services
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types of credit cards
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bank, travel and entertainment, retailer
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credit questions
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Can the buyer pay as promised? Will the buyer pay? If so, when will the buyer pay? If not, can the buyer be forced to pay?
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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 experiences 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 debts to credit sales
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price
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the seller's measure of what he or she is willing to receive in exchange for transferring ownership or use of a product or service is known as
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sales volume, price
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the total sales revenue of a small business is a direct reflection of _____ ______ and _____
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total fixed cost
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Will's business will not be successful unless it charges a price for its product that covers its
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cost of goods sold
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costs incurred by a firm in actual producing a product (e.g., materials, machinery, etc.) are considered to be part of
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prestige pricing
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A pricing tactic whereby a firm sets a high price to convey an image of high quality or uniqueness is known as
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comprehensive break-even analysis
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examining revenue-cost relationships and establishing sales forecasts
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costs, revenue
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Within the framework of a break-even analysis, an examination of ___ and ____ is conducted to determine the quantity at which the product, with an assumed price, will generate enough revenue to start earning a profit.
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selling price
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Markup pricing may be expressed in terms of a percentage of either the ____ or the cost.
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consumer credit
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Credit granted by retailers to final consumers who purchase for personal or family use is referred to as
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revolving
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Credit cards are usually based on a _____ account system.
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down payment
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Installment accounts normally require a
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credit limit
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In a revolving charge account, charged purchases may not exceed the _____.
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character
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the fundamental integrity and honesty that should underlie all human and business relationships; business policies and ethical practices of the firm; C of Credit
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capacity
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ability to conserve assets, and to faithfully and efficiently follow a financial plan; utilize invested capital wisely and capitalize business opportunities; C of Credit
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capital
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consists of the cash and other liquid assets owned by the customer; should have enough of this to underwrite planned operations; C of Credit
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collateral
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designated security given as a pledge for fulfillment of an obligation; secondary source for loan repayment if borrower doesn't repay loan with cash; C of Credit
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conditions
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factors that influence if a business will repay its debts (business cycles, price levels, economic recession, competition, labor problems, fires); C of Credit
