Business Terms

Question 1

Accrual Basis Accounting

Answer 1

Recognizes revenue when earned and expenses when billed

-recorded when the agreement is made between the buyer and seller

Question 2

Cash Basis Accounting

Answer 2

Recognizes revenue when received and expenses when paid

-recorded when money in exchanged between the buyer and seller

Question 3

Profit

Answer 3

Measures how your business revenue compares to the costs

Question 4

Cash Flow

Answer 4

The amount of money flowing in and out of your business from operational, investing, financial activities, etc during a specific period of time

Question 5

Assets

Answer 5

Anything of value that your business owns

Question 6

Liabilities

Answer 6

Anything that your business owes

Question 7

FICO Score

Answer 7

Commonly used rating that ranges from 300-850

Question 8

Personal Guarantee

Answer 8

A promise to repay a loan, backed by personal assets

Question 9

Collateral

Answer 9

Is an item of value that pledge as security in exchange for a loan

Question 10

Annual Percentage Rate (APR)

Answer 10

Is the total cost of a loan over one year, including all fees

Question 11

Capital Gain

Answer 11

The difference between a securities purchase price and its selling price, when the difference is positive

Question 12

Common Stock

Answer 12

Securities that represent ownership in a corporation; must be issued by a corporation

Question 13

Custodian

Answer 13

A bank or trust company holds assets, settles all portfolio trades and collects most of the valuation data required to calculate a funds net asset value

Question 14

Asset Allocation

Answer 14

The process of dividing investments among cash, income, and growth buckets to optimize the balance between risk and reward based on investment needs

Question 15

Diversification

Answer 15

The process of owning different investments that tend to perform well at different times in order to reduce the effects of volatility in a portfolio and increase the potential for increasing returns

Question 16

Equity

Answer 16

Is ownership of assets that may have debts or other liabilities attached to them

Question 17

Liquidity

Answer 17

Is a market feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset price

The ability to convert an asset into cash easily and without losing money against the market price

Question 18

Amal Gamation

Answer 18

Is a combination of 2 or more companies to form an entirely new entity

Question 19

Financing

Answer 19

The process of providing funds for business activities, making purchases, or investing

Question 20

Leasing

Answer 20

A contract outlining the terms under which 1 party agrees to rent property owned by another party

Question 21

Credit

Answer 21

The ability of a customer to obtain goods and services before payment, based on the trust that the payment will be made in the future