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Elements of A Good Accounting System
- • Make comparisons about performance.
- • Generate reports, tax documents & financialstatements.
- • Accurately account for all resources.
- • Minimize theft and fraud.
- • Do all the above at low cost.
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Are budget or accounting figures always exact?
No
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What is the difference between anaccountant and a CPA?
- – Cost
- – Guaranteed Acceptable Accounting Principles
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Considerations of Accounting
- • Budgets should be considered as planningtools for businesses. Helps to set goals.
- • Cash budgets are a critical way we have tocontrol our business
- .• Through budgets and accounting we reduceeverything to dollar terms thus they arecomparable.-
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Cash vs. Accrual Systems
- • Cash– Report revenues only when actually receivedand expenditures when actually made.
- • Accrual– Payments and debits recognized when acommitment is made - not the transaction.
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Why are income statements important
– Show if you have earned a profit
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What do income statement consist of?
- Sales revenue
- -Operating expenses
- – Cost of goods sold
- = Operating profit
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Why are balance sheets important?
Shows the financial health of the firm at anygiven moment.
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Why is it called a balance sheet?
- – Because assets always equal equities
- – On the left side, what the business has on theright who owns it.
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Why are Cash Budgets important??
- • Important because they measure cash flow.
- • It helps answer the vital question: Will be able to pay our bills on time.
- • It shows when cash will come in and when it needs to go out
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What is depreciation?
- – Non-cash expense
- – Takes the cost of a long term asset andincrementally reduces it to show its declining value.
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What is a return on sales?
Is a measure of operating efficiency. For every dollar in sales what is the profit?
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What is Return on Investment (ROI)
A measure of financial efficiency. What profit are you getting from the entire investment
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What are the 4 costs of doing business?
- • Fixed costs
- • Variable Costs
- • Mixed costs
- • Break-even analysis
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What are Ratios: Debt, Liquidity &Profitability for?
- • To assess the same firm/profit center overtime
- • To compare different firms/profit centers
- • The value and use of any ratio dependsupon your needs and objectives
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What are the debt ratios?
- • Debt to equity
- • Maturities of long term debt
- • Fixed-charge coverage
- • Degree of financial leverage
- • Cash flow to total debt
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What the the liquidity ratios?
- • Current ratio How many times firm cancover liabilities with current assets
- • Quick or acid test
- Using most liquid assets
- • Inventory turn over by unit of time
- • Accounts receivable turnover by unit of time
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What are the profitability ratios?
- • Net profit margin after tax
- • Net profit margin before tax
- • Earnings per share
- • Return on equity after tax
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What are the advanatages of consumer credit
- • More likely to become repeat customers
- • May purchase things they wouldn’t haveotherwise
- • Tent to overspend
- • Pay less attention to price
- • Easier to sell them things
- • Purchase items of higher quality
- • Appeals to those not wanting to carry cash
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What are the disadvantages of customer credit?
- • Tie up money in accounts receivable
- • Credit refusal may cause ill will
- • Credit customers tend to return more items
- • More bookkeeping needed
- • Some just won’t pay
- • Sometimes competition forces us into it
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Why is size important in choosing a facility?
- Too small and efficiency will suffer
- Larger than needed and the cost will be too high - money wasted.
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What are the four factors in considering your space needs?
- customer movement
- – inventory & storage
- – work areas & offices
- – displays & restrooms
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Why is appearance important in the building?
The physical appearance gives customers their first impression. Very important for retail establishments
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Negatives of buidling a building for your business.
- – high fixed expense
- – hassle of construction
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What are the positives of bulding a new building for your business?
- +perfect building
- +create ideal image for customers
- +latest design
- +most efficient
- +may have no other available choice
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What the negatives of buying a building?
- – settling for something less than ideal
- – cost of remodeling/codes must be added
- – the area may decline
- – like building, cuts down on your mobility
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What are the positives of buying a building?
- +may be good investment (appreciation)
- +can do what you want with building
- +like building, favorable tax deductions
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What are the negatives of leasing a building?
- – limitations in remodeling
- – additions become property of owner
- – if successful expect rent hikes
- – lease may not be renewed
- – owner may be reluctant to fix things
- – cost, prime space on Green $15.25/sq’/yr
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What are the positives of leasing a business?
- +no large initial cash outlay
- +mobility not a problem
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Why are storefronts important?
Sends message (image) to customers.
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What are the three basic styles of storefronts?
- – straight
- – angled
- – arcade
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Why is signage important?
- Good medium for mobile society
- Always on the job & cost efficient
- Easy to use, control and change
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What elements should your signage include?
- Message should be visible, simple &clear
- Readable from where the audience is
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What interior problems are reported by employees?
- – poor lighting
- – lack of privacy
- – excessive noise
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What was the tax reform act of 1986
- $120 billion swap from individual to business
- – Increased complexity of tax code - again
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When is record keeping important?
If you are going to have any hope of not payingtoo much taxes an excellent record keepingsystem is mandatory.
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Records must be:
- Permanent
- Accurate
- Complete
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Can you backtrack your expenses?
No
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What are some things to keep track of?
- Cash receipts (gross income)
- Deductible business expenses
- Depreciation allowance.
- Self-employment taxes - what you take
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What are partners liable for in taxes?
Partners are liable for their share of thebusiness income regardless of whether ornot they received any of it personally
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What is the cost of goods
- what they cost to make or buy
- a little more difficult to measure for manufactoring
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What are some of the expenses assoiated with starting a business?
- These expenses are considered capitalexpenditures and must be deducted over 60mos. or more.
- Include: market research, location analysis,consulting and training
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What are the 4 tests with salaries and wages?
- Ordinary and necessary (related to thebusiness)
- Reasonable (compared to similar businesses)
- Services rendered (actually performed)
- Paid in current year
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What are wages associated with depreciation?
- Item must be employed by the business orused to produce income.
- Its useful life is determinable and longer than1 year.
- It must wear out or become obsolete.
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What are 4 tests that are associted with bed debts?
- Legal obligation (debtor-creditor relationship)
- Must actually incur a loss.
- Must make a reasonable attempt to recoverloss.
- Partial loss is OK for IRS.
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What are some expenses associated with travel?
- Ordinary and necessary
- Not extravagant - reasonable for your position.
- Can cover meals, lodging, transp. laundry, phone.
- You may deduct US travel that mixes business andpleasure
- Keep accurate records: receipts, documentdeparture & return times, purpose of trip, itinerary
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What are some expenses associated with transportation?
- If used only for business then everything isdeductible: gas, repairs, ins., interest, loan etc.
- If mixed use you must break out costs.
- Again, record keeping is very important. It isadvisable to keep a log book
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What are some expenses with meals?
- Not lavish & directly related to business.
- Must have substantial business decision; before,during or after. Only 80% deductible
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What are some expenses associated with entertainment?
- More than a general expectation of earning incomeor some other benefit.
- During this time you did engage in business
- Main purpose was business transaction.
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What are some expenses associated with gifts?
- Cannot exceed $25 and be deductible
- Under $4 & with the company name fully deductible
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Same some taxes that you pay? 5
- Income tax
- Social Security
- Self-employment tax
- optional retirement programs
- unemployment tax
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Name 4 other taxes that you pay
- State and city income taxes
- Property tax
- Import Duties
- Excise tax on specific products
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What is the goal of tax accounting?
The goal of tax accounting is to recognize operating expenses ASAP and postponesales revenues a long as possible
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In a small business enviroment Because of close relationship the entrepreneur can better observe employees to:
- give them more responsibility, train, reward
- be supportive when things are tough
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Problem in Managing Staff:
- Discipline is problem in fam atmosphere
- Boss can expect too much
- Boss can be too busy to listen to problems
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How should you define your organization?
- in terms of skills not on individuals
- be sure to include yourself
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What is the benefit of writing job desciptions?
They can help you focus on staff needs and skills
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What 6 features should a job description include?
- Title
- Job Statement
- Major and Minor Duties
- Relationships
- Skills and Training Needed
- Salary and Other Compensation
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What are the positives of hiring within?
- + Know their work habits
- + Low cost of recruiting
- + Transition to new job can be smooth
- + Can motivate others to work hard
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What are the negatives of hiring within?
- May cause inbreeding- lack of fresh ideas
- Complacency - too easy
- New hire must be qualified to avoid resentment
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What are advantages of hiring people from competitors?
- + Employee already has skills - no training
- + Has inside knowledge of competition
- + May bring new ideas
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What are some negatives of hiring from competitors?
- – The competition may do it to you
- – Starts an upward bidding spiral for employees
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What are the advantages of hiring from an outside source?
- May be the only source
- Surprizing source of new talent
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What are some negatives of hiring from an outside source?
- may not have exact match in skills
- more training needed (time and money)
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What are some ways you can go about hiring new employees?
- ask current and former employess
- state and private employement agencies
- newspapers and trade publications
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What are 6 things that determine that salary that you pay?
- • Overall job climate
- • What the competition pays, inc. benefits
- • Prevailing union rates
- • Minimum wage
- • Local cost of living
- • Workman’s comp & other required costs
- • Your ability to pay.
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Why are preformace appraisals so important
- To give rewards where they are mostneeded.
- • Show where training is needed
- • Shows that you care
- .• Justifies future personnel actions
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Name the three types of e-business
- up
- down
- across
- value chains
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what is the UP type of e business
- between you and a parent company or supplier B2B
- this is the biggest sector of e-business
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what is the DOWN type of e-business
between you and your customers B2C
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What is the ACROSS type of e-business
between you and similar firms or competition B2B
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Name some types of e-business: direct marketing
- retail dot com
- retail/traditional
- copperatives= one site many vendors
- auctions
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Name 5 advantages of retail/traditional e-business approach
- • It is theirs to loose.
- • They already have the customers.
- • They have brand identity (logo &trademarks)
- • They already know the market
- • They already know the distribution channelsand suppliers.
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What is the importance of website design for a e-business
- Can make or break an e-business
- information architecture
- attractive, consistent and easy to use
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what are some customer expectations of an website
- good webpages
- discount prices
- security
- ease of use
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Name 3 ways of communicating with customers through website
- display mechanism
- registration system
- transaction order processing mechanism
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what is display mechanism in regards to communication with customers
showing your goods in a positive way
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same three types of website management
- vendor hosted
- vendor hosted with software required
- in house hosting
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name some marketing strategies of e-businesses
- market share
- adversting and data mining
- oneline testimonials and ratings
- interactive sites
- accept ebiz returns are stores
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name some ways e-business' can be personalized/customer service focused
- Help and search functions.
- • Online one-to-one text based chats.
- • Internet telephony.
- • Automated response to email.
- • To retain customers and increase spending.
- • Reduce expensive labor costs
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Name some security issues that go along with e-businesses
- collecting data on consumers
- selling customer data
- financial security
- digital signature
- intrusive push technology
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Name some trends in e-business
- shopping bots and price comparison services
- cost of good e-business may rival traditional stores
- future built on credibility
- interactivity vs. shovel aproach
- innovators often left customers dissatisfied
- traditonal retailers adopting eCommerce cautiously
- P2P transactions on the rise
- Customization
- Personalization
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name some miscallenous issues that have to do with e-business
- maintenance costs
- push technology and pop up windows
- software that blocks advertising
- hackers
- stickiness and click through
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Online auctions are_____
- micro business opportunities
- very easy to start
- often more work
- potential for unlimited growth
- consumer behavior- auction fever
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what is the old dot com business model
- based on assumption the web was the new way sales were going to be made
- advertise revenue a key factor
- as effectiveness drops agrgressiveness rises
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what is the new business model for dot com business
- growth in direct email advertisitng
- sponsorship of webpages
- quick adjustment and cancellation of ads
- use web to inform not direct sales
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Name the five elements of a purchasing plan
- quality
- quantity
- price
- time
- vendor/supplier analysis
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what is the concept of title ownership
- indentification
- risl of loss
- receiving merchandise
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what is involved in inventory management
- inventory control systems
- physical inventory count
- just in time
- jobbers
- slow moving inventory
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how much money does shoplifting cost for business
cost businesses over 20 billion a year
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what are the 5 profiles of shoplifters
- juveniles
- impulse shoplifters
- vagrants, alcoholics and addicts
- kelptos
- professionals
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how can you detect shoplifters?
- they work alone or in groups
- when few staff are around
- linger in one area for a long time
- refuse help of sales people
- frequently look around
- have thier own ways of concealing goods
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how can you deteer shoplifters
- learn to look
- train employees
- install mechanical devices
- set up the store layout a specific way
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what do you do when catching a shoplifter
- do not have physical contact
- call police
- if possible approach outside the store
- don't accuse people of stealing
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what percentage of employees steal from the company?
30 %
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why is employee theft such a big problem?
- no security
- too trusting
- don't want to admit it
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how can you avoid employee theft
- what the workaholic
- watch the disgruntled employee
- show a high moral standard
- run a tight ship and watch catch control
- look at facility and security
- hire honest people
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Your business is an extension of ___
you
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Name four responsibilites is the basis of strategic planning
- economic responsibility
- legal obligations
- ethical responsibilty
- philanthrophy
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the only reason to act unethically in small business is ______
short term financil gain
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name some ethical issues are:
- enviromental
- health
- persons with diabilites
- ism and other biases
- cheating on taxes
- misrepresenting a product or service
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