Business 09/16

STUDY
PLAY
Debt
Financing provided by a creditor
Current Debt (Short term Liabilities)
Includes borrowed money that must be repaid within the next twelve months
LONG-TERM DEBT
Includes loans from bank, or any other sources that lend money for LONGER THAN 12 MONTHS
OWNERSHIP EQUITY
Money owners INVEST IN A BUSINESS
Collateral
Security Pledged for payment of loan
Debt Financing
The owner(s) borrowing against themselves to finance a business venture. They use some kind of collateral to borrow in their name. Ex: A small business loan from a bank
Equity Financing
Giving up a stake (or small percentage) in the business to finance the busienss. Giving up ownership (or part thereof) for money. You may seek money from a venture capitalist, or another type of loan
If you cant repay the debt yourself, you are personally liable
Financial Risk from financing debt
When you give up a share of your business you are also giving up control/ownership
Voting control through Equity Financing
Personal savings, friends & family, bank loans, gvmt small business association, private equity investors, stock sales
Sources of Financing
Sources of financing
Personal savings, friends & family, bank loans, gvmt small business association, private equity investors, stock sales
As much as you have in collateral. No more than your willing to put up
How much can you borrow?
At your own risk, you puts up your own assets as collateral for a loan
What is your liability when you borrow for your business?
Business plan, tax returns, business flow charts, anything of financial nature
What does a lender want to see from you before they lend you money?
Sole Proprietorship
A business owned by one person, taxed normally, but owner is completely liable for everything. Independant proprietor has title to all business assets and is subject to claims by creditors, Unlimited Liability. Most POPULAR form of start up business.
Partnership
A legal entity formed by 2 or more co-owners to carry on a business for profit. Very easy & cheap to start,/ Partners have unlimited liability.
Agency Power (Partnership)
A business decision made by one partner is BINDING for ALL partners
C Corporation
Ordinary Corporation, a separate legal entity from its owners/stockholders. A corporation chartered under state law- The length of its life is independant of its owners/stockholders. Stockholders have limited liability. They can only lose what they invest.
C Corporation
Has an income tax AND shareholders are taxed when dividends are received
Limited Partnership
A special partnership involving 1 partner & 1 or more LIMITED partners. The general partner remains personally liable for business debts. Limited partners are NOT liable as long as they remain INACTIVE in the business
S CORPORATION
Keeps limited liability of C Corp but is only TAXED ONCE (income tax, same as sole proprietorship) Runs on CALENDAR YEAR, must have LESS THAN 75 STOCKHOLDERS, Non resident, ALIEN stockholders are NOT ALLOWED
Limited Liability Company
Avoids taxation of C Corp, east to set up, very flexible, better tax advantages than S Corp
Customer Accessibility, Business Environment Conditions, Site Availibility & Costs, Resource Availbility, Entrepreneurs personal preference
5 Key factors of Business Location
Manufacturing Equipment
GENERAL PURPOSE EQUIP: Drill, saw, washer, dryer, SPECIAL PURPOSE EQUIP: Something specific to an industry (Embalming table, stretcher, hearse)
Retail Store Equipment
Items such as display racks, storage racks, counters, cash registers,
Office Equipment
Items such as copy machine, computer, printer, phone system, desks
E Commerce
The paperless exchange of business information via the internet
Benefits of E Commerce
1-Small firms can better compete w/ bigger businesses 2-The ability to shorten sales cycle by reducing the time between receiving an order and converting sale to cash all w/o human assistance
B2B Business
(Greater Majority) Businesses that sell products/merch to another business
B2C Business
Business that sells merch/product to final consumer
Auction SIte Models
Web based business offering participants (primarily final consumer) the ability to list products for bidding by potential buyers
Inventory
A firms raw material & products held in anticipation of eventual sale
Ensuring continuous operations Maximizing sales Protecting your assets Optmizing inventory investments
4 objectives of inventory management
4 objectives of inventory management
1.Ensuring Continuous Operations 2.Maximizing Sales 3.Protecting your assets 4.Optmizing Inventory investments
ABC Inventory Analysis
SYSTEM OF CATEGORIZATION which classifies the inventoried items into CATEGORIES based on value (ie: caskets, prayer cards, mass cards, urns)
JUST IN TIME INVENTORY SYSTEM
Attempts to cut inventory carrying costs by REDUCING INVENTORY to an ABSOLUTE MINIMUM, popularized in japan.
Cycle counting system
Scheduling different segments of the inventory for counting at different times a year (simplifies process & causes less chaos
Perpetual Inventory System
Provides an ONGOING current record of inventory items. It may not require a physical count, however, one should still be lperformed to guard against theft & damage.(suitable for Just in Time Inventory System)
Reducing Inventory to free up cash
Ways a small business can help to manage inventory
Monitoring Inventory
Ways a small business can help to manage inventory
Controlling stockpiles
Ways a small business can help to manage inventory