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Budget Surplus Overage that occurs when revenue is higher than expenses over a given period of time Budget Deficit Shortfall that occurs when expenses are higher than revenue over a given period of time. Federal Deposit Insurance Corporation (FDIC) A federal agency that insure deposits in banks and thrift institutions for up to 250,000 per customer per bank. Pure Market A market structure with many competitors selling virtually identical products. (Barriers to entry are quite low) Monopolistic A market structure in which many companies sell products that are differentiated. (Barrier to entry is low) Oligopoly A market structure with only a handful of competitors selling products that can be similar or different. (Barriers to enter are typically high) Monopoly A market structure with one producer completely dominating the industry, leaving no room for any significant competitors. (Barriers to entry then to be virtually insurmountable) Privatization The process of converting government owned businesses to private ownership. GDP The total value of all final goods and services produced within a nations physical boundaries over a given period of time. Business Cycle The periodic contraction and expansion that occur over time in virtually every economy. Contraction A period of economic downturn, marked by rising unemployment and falling business production. Recession Economic downturn marked by a decrease in the GDP for two consecutive quarters. Consumer Price Index (CPI) A measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month. PPI (Producer Price Index) A measure of inflation that evaluates the change over time in the weighted-average wholesale prices. Productivity
Relation between the output of goods and services and the in put (resources needed) Non-profit a company with a tax-exempt status because of the services that it provides, services are not conducted to make a profit Factors of production Land, Labor, Capital, Technology, Entrepreneurship, and Knowledge Speed to Market the rate at which a new product moves from conception to commercialization Demographics Measurable characteristics of a population, pop size, age, gender, and race GATT (General Agreement on Tariffs and Trade) An international trade agreement that has taken bold steps to lower tariffs and promote free trade worldwide. Opportunity Cost The opportunity of giving up the 2nd best choice when making a decision. Absolute Advantage Benefit a country has in a given industry, can produce more a product comparative advantage Benefits a country has in a given industry if it can make products at a lower opportunity cost then other countries. Foreign outsourcing contracting with foreign suppliers to produce products, usually at a fraction of the cost of domestic production Joint Ventures Two or more companies join forces, share resources, risks, and profits Partnership A voluntary agreement under which two or more people act as co-owners of a business. Infrastructure a country's physical facilities that support economic activity World Trade Organization (WTO) a permanent global institution to promote international trade and to settle international trade disputes Which of the following is a difference between limited liability companies (LLCs) and corporations? a. LLCs are subject to fewer reporting requirements than corporations. a Happta is a corporation with tax-exempt status. It has members but cannot have stockholders. Given this information, Happta is most likely a(n): a. S corporation. c Which of the following is a difference between a C corporation and an S corporation? a.The members of a C corporation have limited liability, whereas the members of an S corporation have unlimited liability. b Norman owns a large number of shares in a telecommunications corporation. Despite that, he does not have the right to vote in a meeting held specifically to elect the CEO of the company. In this scenario, Norman is most likely a _____. a. common stockholder d Green Haven is an organization whose earnings are exempt from federal and state income taxes. Individuals who contribute money to the organization can avail the benefit of tax deduction. However, the organization is barred from distributing dividends to its members. Given this information, Green Haven is most likely a(n): a. C corporation. b Which of the following is one of the reasons why many people prefer a sole proprietorship? a. Pride of ownership a Which of the following is an advantage of a C corporation? a. It is free from double taxation. b The owners of limited liability companies (LLCs) are called members because: a. they share the same interests in the firm as common stockholders. b Scoopjoe, an ice cream brand in Wisconsin, has ten other outlets in Illinois, Michigan, and Ohio. As part of the agreement between Scoopjoe's main outlet and the other outlets, the former not only supplies raw materials to the latter but also provides help with site selection, training of staff, and finance. The given scenario exemplifies a: a. conglomerate merger. b The owner of a sole proprietorship must share any after-tax profits with the company's shareholders. T or F False
There is no limit on the number of partners who can participate in a general partnership. T or F True A corporation is a voluntary agreement under which two people act as co-owners of a business for profit. T or F False Lois wants to start an art gallery. However, because of lack of adequate funds, she decides to borrow money from a bank. The bank is hesitant to give money to Lois because it cannot verify whether her business would be able to earn enough profit to repay the borrowed amount within the stipulated period. However, after a thorough research, the bank grants her the money. In the given scenario, Lois uses _____ to fund her business. a. crowdfunding d
Which of the following is an advantage of starting a business from scratch? a.Relationships with customers, suppliers, and other stakeholders are already established. c Which of the following is an intimidating obstacle that small businesses face? a. Lack of personal customer service d Who among the following people is most likely to become a necessity entrepreneur? a. A person who avoids challenges and financial risks d T he Small Business Administration (SBA) supports the _____, which provides free, comprehensive counseling for small businesses from qualified volunteers. a. Center for Strategic and International Studies c Which of the following statements is true of buying an established business? a. The chance of first-year failure is zero. b According to the U.S. Small Business Administration (SBA), to officially count as "small," _____. a.the average revenue of a business should range from $0.75 million to $28.5 million a Michael is a middle-aged professional who lost his job five months ago when his former employer downsized. He has actively been looking for work ever since but has not been able to find a job that utilizes his abilities or offers an income similar to his previous position. He is beginning to realize that the only way for him to survive his current situation is to start his own business. In this scenario, Michael will most likely become a(n) _____. a. angel investor c Which of the following is an appealing benefit that entrepreneurs enjoy? a. The ability to set their own hours a Which of the following statements is true of necessity entrepreneurship in high-income countries? a.Necessity entrepreneurship is a major contributor to the nation's economy. d In the context of small businesses and the economy of a country, entrepreneurship rates are significantly lower in countries where it is hard to get fired. T or F True Small businesses generate 50% of total employment in American inner cities. T or F False Term loans issued by commercial banks are popularly used by financial institutions and large corporations because they typically carry lower interest rates than commercial paper. T or F False The main advantage of financial leverage is that: a.it magnifies the financial return on the investment of stockholders when times are good. a _____ refers to financing that arises during the natural course of business without the need for special arrangements. a. Debt financing d Which of the following is a popular cash equivalent? a. A capital asset c _____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement. a. Commercial paper c Unlike a line of credit, in a revolving credit agreement: a. a bank provides funds for no more than 90 days. b Miranti Nex, an automobile company, plans to invest in developing a hybrid car. It refrains from using loans from other firms and instead uses its own monetary resources to fund the project. Which of the following sources of long-term funds is being used by Miranti Nex in the given scenario? a. Corporate bonds d Tobit Financing offers short-term financing plans to other companies. It buys the accounts of other companies at a discount and collects the full amount from the customers of those companies. Which of the following short-term financing options is being provided by Tobit Financing in this scenario? a. Trade credit d Firms buy commercial paper as part of their portfolio of cash equivalents because: a. it is a safe way to earn some interest. a When a company takes out a bank loan, or issues and sells corporate bonds, it is relying on _____. a. equity financing b As a current asset, firms use cash for _____. a. capital budgeting b The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the purchase of new machinery that would double the production. In the given scenario, the management is in the process of planning the _____ of the company. a. marketing budget d Betty ' s job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____. a. internal auditor a Which of the following is true of government accountants in the United States? a.They perform a narrow set of accounting functions solely for federal government agencies. b The three kinds of basic financial statements that are prepared in financial accounting are: a.
comfort letter, master budget, and credit statement. b Sebastian is an employee at Plowell Inc. His duties include preparing reports and analyzing company data. He also appraises financial performances and verifies the accuracy and validity of the company's internal records. In this scenario, Sebastian's role is that of a _____ in the organization. a. certified fraud examiner b _____ provide analysis and prepare reports and financial statements for their organization. a. Government accountants d Balance sheets usually classify assets into at least two major categories: current assets and property, plant, and equipment assets. T or F True The Securities and Exchange Commission (SEC) bans publicly traded corporations from making comparative financial statements. T or F False Exchange-traded funds (ETFs) allow investors to buy ownership in a market basket of many different securities. T or F True Passed during the early twenty-first century, the Sarbanes-Oxley Act included provisions to ensure that external auditors offered fair, unbiased opinions when they examined a company's financial statements. T or F True Private placements are usually more time consuming and complex than public offerings. T or F False An online food delivery service goes out of business owing to stiff competition. The company has long overdue taxes because of which its stockholders do not receive the proceeds of the company after its dissolution. In this case, the company is not able to fulfill the _____ of its stockholders. a. prima facie right c Which of the following is the main reason for private placements being less expensive than public offerings? a.In private placements,
issuers of stocks can quote a high price to the limited number of investors and get high returns.
d Cartman owns convertible securities in OctoCore Corp. If the conversion ratio for the convertible securities is 37, it means that: a. Cartman can liquidate each convertible security that he owns for $37. c Exchange-traded funds and mutual funds account for: a. financial diversifications. a Jonathan is a common stockholder in an information technology firm. Owing to his right to a residual claim on assets, he is entitled to receive a share in the proceeds of the company that is proportionate to his ownership if the company: a. issues new stocks. d Which of the following is true of stock exchanges? a. Each exchange establishes its own requirements for the securities
it lists. a In the context of the deregulation during the 1980s and 1990s, critics argued that laws such as the Glass-Steagall Act and the Securities Exchange Act represented an onerous government intrusion into the financial sector that: a. resulted in the Great Depression. d In the context of stock indices, which of the following is a difference between the Dow Jones Industrial Average (DJIA) and the Standard & Poor's 500 ( S&P 500) ? a. Unlike the DJIA, the S&P 500 is the most widely followed stock index. c Which of the following statements is true of open-end mutual funds? a. Their shares are traded like stocks. d the five key components of the business environment Economic, competitive, technological, social, and global environments Common Market a group of countries that have reduced or even eliminated tariffs, allowing for the free flow of goods among the member nations. (ex. EU) What did NAFTA turn in to? USMCA ethical dilemma a decision that involves a conflict of values; every potential course of action has some significant negative consequences (ex. lie to keep someone from dying or allow them to die) Deontological Ethics Deontological ethics holds that at least some acts are morally obligatory regardless of their consequences for human welfare. Teleological Ethics Ethics based on the consequences. From a teleological standpoint, stealing, for example, would be deemed right or wrong depending on the consequences. Sole Proprietorship a business owned and managed by a single individual, majority of companies are sole proprietorship, earnings are treated as the owners income, and the same goes for debt. Advantages Disadvantages Partnership a voluntary agreement under which two or more people act as co-owners of a business for profit. Advantages Disadvantages Corporation (C-Corp) a form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners. Advantages Disadvantages Articles of Incorporation The document filed with a state government to establish the existence of a new corporation. corporate bylaws The basic rules governing how a corporation is organized and how it conducts its business. Acquisition A corporate restructuring in which one firm buys another Merger A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization. Franchise A licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations. Advantages Disadvantages Angel Investors Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership. Venture Capital Firms Companies that invest in start-up businesses with high growth potential in exchange for a share of ownership. Business Plan A formal written document that describes a business concept, outlines core business objectives, and details strategies and timelines for achieving those objectives. Financial Accounting •Branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders GAAP (Generally accepted accounting principles) Set of accounting standards used in the preparation of financial statements (the language of accounting) Balance Sheet Reports the financial position of a firm by identifying and reporting the value of the firm's: Income Statement •Reports revenues, expenses, and net income that resulted from a firm's operations over an accounting period Horizontal Analysis Analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends. Budgeting A management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period. Managerial Accounting The branch of accounting that provides reports and analysis to managers to help them make informed business decisions. Debt Capital Funds raised through various forms of borrowing that must be repaid Equity Capital Money raised through the sale of ownership in the firm that does not have to be repaid, Includes retained earnings. (Stock Certificate) Common Stock vs. Preferred Stock Preferred Common Retained Earnings The part of a firm's net income that it reinvests. What banks want to know 1. How much money do you want to borrow? Corporate Bonds promissory notes issued by firms when they borrow money Bonds vs. Stocks Bonds (Debt Financing) Stock (Equity Financing) Financial Capital The funds a firm uses to acquire its assets and finance its operations. Finance The functional area of business that is concerned with finding the best sources and uses of financial capital. Trade Credit Spontaneous financing granted by sellers when they deliver goods and services to customers without requiring immediate payment. Line of credit A financial arrangement between a firm and a bank in which the bank pre-approves credit up to a specified limit, provided that the firm maintains an acceptable credit rating T-Bills Short-term marketable IOUs issued by the U.S. federal government. Certificate of Deposit An interest-earning time deposit that requires the funds to remain deposited for a fixed term. Withdrawal of the funds before the therm expires results in a financial penalty. Depository Institutions financial intermediaries that obtain funds by accepting checking and savings deposits from individuals, businesses, and other institutions and then lending those funds to borrowers Credit unions, Commercial banks, Savings and loan associations IPO (initial public offering) The first time a company sells shares of its stock to the public. Stock Exchange A place where shares in corporations are bought and sold through an organized system. Stock Index A statistic that tracks how the prices of a specific set of stocks have changed. |
Firms buy commercial paper as part of their portfolio of cash equivalents because Quizlet
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