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Terms in this set (61)
- "Snapshot" ; Estimates the firm's worth on a given date; built on the accounting equation
- "Moving picture" Compares the firm's expenses against its revenue over a period of time to show its net income (or loss)
Statement of Cash Flows
- Shows the change in the firm's working capital over a period of time by listing the sources and uses of funds.
: cash, accounts receivable (what someone owes you) , inventory, supplies, prepaid insurance, etc...Must add everything up
land, buildings, equipment, transportation, etc...
: accounts payable(what you owe, the credit that you're paying), accrued wages/salaries payable, accrued taxes payable, etc...
Long Term Liabilities
Mortgage, note payable.
- tell whether or not a small business will be able to meet its maturing obligations as they come due.
- measure the financing provided by the firm's owners against that supplied by its creditors.
A gauge of the depth of the company's debt
- evaluate a firm's overall performance and show how effectively it is putting its resources to work.
- measure how efficiently a firm is operating; offer information about a firm's "bottom line."
- measures solvency by showing the firm's ability to pay current liabilities out of current assets.
- shows the extent to which a firm's most liquid assets cover its current liabilities.
- assets that a firm can convert into cash immediately if needed-excludes inventory.
Debt to Net Worth Ratio
- compares what a business "owes" to "what it is worth."
- measures the percentage of total assets financed by creditors rather than owners.
is the earnings before interest and taxes
Times Interest Earned
- measures the firm's ability to make the interest payments on its debt.
Average Collection Period Ratio
- tells the average number of days required to collect accounts receivable.
Average Inventory Turnover Ratio
- tells the average number of times a firm's inventory is "turned over" or sold out during the accounting period.
Average Payable Period Ratio
- tells the average number of days required to pay accounts payable.
Net Sales to Total Assets Ratio
- measures a firm's ability to generate sales given its asset base.
Net Profit on Sales Ratio
- measures a firm's profit per dollar of sales revenue.
Net Profit to Assets Ratio
- tells how much profit a company generates for each dollar of assets that it owns.
Net Profit to Equity Ratio
- measures an owner's rate of return on the investment in the business.
- the level of operation at which a business neither earns a profit nor incurs a loss.
Cash flow measures
a company's liquidity and its ability to pay it bills.
Cash flow statement
demonstrates how a firm uses its cash.
Cash flow analysis
is required for proper cash management!
The "Big Three" of Cash Management:
cash conversion cycle
The length of time required to convert inventory and accounts payable into sales and accounts receivable and finally back into cash.
- the process of forecasting, collecting, disbursing, investing, and planning for the cash a company needs to operate smoothly.
Any form of wealth employed to produce more wealth
Lenders of first resort for small businesses
Average micro-business loan = $_________
Average small business loan = $___________
Study: _____ of entrepreneurs receive bank loans to start their businesses.
Home Equity Loans
-pledging home as a collateral
- traditional loan
Lines of Credit
- short-term loan that provides capital for day-to-day operations
- often used by retailers (ex. bank finances an inventory of automobiles and holds the titles as collateral; the borrower pays interest and pays off the rest when the cars are sold).
- a loan that imposes restrictions on the business decisions an entrepreneur makes when it comes to the company's operations.
Initial public offering (IPO)
- when a company raises capital by selling shares of its stock to the public for the first time.
Businesses can borrow money by pledging as collateral otherwise idle assets - accounts receivable, inventory, and others.
- the percentage of an asset's value that a lender will lend.
Discounting accounts receivable
- AR as a collateral
- inventory as a collateral
Purchase order financing
- small companies that receive orders from large customers can use those purchase orders as a collateral for loans.
is the process of influencing and inspiring others to work to achieve a common goal and then giving them the power and the freedom to achieve it.
important to conduct in order to understand who/what to look for on the job market
- a written statement of the duties, responsibilities, reporting relationships, working conditions, and materials and equipment used in a job.
- a written statement of the qualifications and characteristics needed for a job, stated in terms such as education, skills, and experience.
Breaks work down into its simplest form and standardizes each task.
Job enlargement (horizontal job loading):
Adds more tasks to a job to broaden its scope.
Cross-trains workers so they can move from one job in a company to others, giving them a greater number and variety of tasks to perform. Often used with a skill-based pay system.
Job enrichment (vertical job loading):
Builds motivators into a job by increasing the planning, decision making, organizing and controlling functions (traditional managerial tasks).
Five core characteristics:
An arrangement under which employees build their work schedules around a set of "core hours" - such as 11 a.m. to 2 p.m. - but have flexibility about when they start and stop work.
A work arrangement in which two or more people share a single full-time job.
A work arrangement in which employees work at a place other than the traditional office, such as a satellite branch closer to their homes or, in some cases, at home.
An arrangement in which employees have employees working from their homes use modern communications equipment to hook up to their workplaces.
Recommended textbook explanations
Accounting, with MyAccountingLab
Charles T. Horngren, M Suzanne Oliver
Charles T. Horngren, Srikant M. Datar
Corporate Finance (The Mcgraw-Hill/Irwin Series in Finance, Insurance, and Real Estate)
Bradford D. Jordan, Randolph W. Westerfield, Stephen A. Ross
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