AREC 323 part 2

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Author:
hcunning
ID:
290937
Filename:
AREC 323 part 2
Updated:
2014-12-08 16:59:48
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small business management
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Description:
from after midterm (60% of final)
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  1. Glass Ceiling
    political term, "unseen yet unbreakable barrier that keeps minorities and women from rising to the upper rungs of the corporate ladder regardless of their qualifications/achievements"
  2. 5 key factors for business location
    • 1. customer accessibility
    • 2. environmental business conditions
    • 3. resource availability
    • 4. entrepreneur's personal preference¬†
    • 5. site availability and costs
  3. Production defn
    management of production process, conversion of inputs into outputs
  4. Total Quality Management (TQM)
    all-encompassing management approach to providing high-quality products and services
  5. Deming Principles
    • leadership at all levels
    • build quality into product at all stages (TQM)
    • avoid awarding business to suppliers strictly on cost
    • need cross-disiplinary teams
    • continuous training
  6. ISO 9000
    standards governing international certification of a firm's quality management procedures
  7. ISO 14000
    set of generic management standards for responsible environmental management
  8. Partial productivity
  9. Multifactor productivity
  10. multifactor (total) productivity
  11. JIT
    Just in time inventory management
  12. Income statement
    a report showing the profit or loss from a firm's operations over a given period of time
  13. Profits =
    sales-expenses
  14. Is principal debt repayment an expense?
    No, but interest payments are
  15. Cost of Goods Sold (COGS)
    cost or producing or acquiring goods or services to be sold by a firm
  16. Operating Expenses
    consisting of both selling and marketing expenses and administrative expenses
  17. Operating income
    earnings before interest and taxes
  18. Gross profit
    sales less the COGS
  19. Financing Costs
    amount of interest owed to lenders on borrowed $$
  20. Net income available to owners (net income)
    income that may be distributed to owners or reinvested in the company
  21. depreciation
    non-cash, how much of long-term assests was used during the accounting period
  22. current assets
    • (working capital)
    • can be converted to cash w/in the firm's operating cycle
    • - cash, accounts receivable, inventories
  23. fixed assets
    relatively permanent resources intended for the use of the firm
  24. Net fixed assets =
    gross fixed assets - accumulated depreciation
  25. other assets
    • intangible assets¬†
    • - patents, copyrights, goodwill
  26. debt capital
    financing provided by creditor
  27. short-term (current debt)
    accounts payable, accrued expenses, short-term notes
  28. long-term debt
    loans and mortgages from banks/other lenders w/ maturities greater than one year
  29. owner's equity capital
    money that the owners invest in the business
  30. owner's equity =
    owner's investment + (cumulative profits-owners cash withdrawals)
  31. net cash flow
    the difference bw inflow and outflows
  32. net profit
    difference bw revenue and expenses
  33. the growth trap
    a cash shortage resulting from rapid growth
  34. Financial statements
    • income statement
    • balance sheet
    • cash flow
    • proforma vs. financial/historical
  35. liquidity
    does the firm have the capacity to meet its short-term (1yr or less) financial commitments?
  36. profitability
    is the firm producing adequate operating profits on its assets?
  37. measures of liquidity
    current ratio, acid-test ratio, inventory turnover
  38. return
    are the owners (shareholders) receiving an acceptable return on their equity?
  39. stability
    how is the firm financing its assets
  40. solvency
    ability to meet financial obligations (assets>debt, etc)
  41. financial ratios
    restatements of selected income statement and balance sheet data in relative terms
  42. current ratio =
    • higher current ratio means you get more money in current assets from 1$ in current liabilities
  43. acid-test ratio=
    • measure of liquidity excluding inventories
  44. inventory turnover=
    • higher the number, the more money you have sitting in inventories
  45. operating income return on investment (OIROI)=
    • rate of return on the invested capital (from all investors)
  46. Return on assets/investment (ROA/ROI)=
  47. operating profit margin=
    • ratio of operating profits to sales, how well a firm manages its income statement
  48. total asset turnover=
    • ratio of sales to total assets
    • ex. company A generates $3 in sales with $1 in assets and company B generates $2 in sales w/ $1 in assets, then company A is using its assets more efficiently in generating sales
  49. return on equity=
    • rate of return that owners earn on their investment
  50. debt ratio=
  51. debt-equity ratio=
    • aka leverage
  52. times interest earned ratio=
    • shows number of times the firm earns its interest
  53. capital structure
    assets=liability+equity
  54. inflation
    change in buying power of your dollar
  55. positive inflation
    dollar today will buy more than a dollar a year from now
  56. Amortized loan=
  57. Return on equity (ROE)=
    ROI+L(ROI-ROD)
  58. What is franchising?
    a method of doing business in which one person (the franchisor) grants another (the franchisee) certain rights contained in the franchise agreement
  59. Franchisee (tenant)
    an entrepreneur whose power is limited by a contractual agreement w/ a franchisor
  60. Franchisor (landlord)
    the party in the franchise contract that specifies the methods to be followed and the terms to be met by the other party
  61. Franchise agreement/contract
    the legal agreement b/w franchisor and franchisee
  62. Approaches to valuation
    • use balance sheet
    • comparable sales/values
    • multiple of business net cash flow
    • net present value calculation
  63. Present value eqn
  64. Future value eqn

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