small business management final exam terms

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