part 3

Question 1

what is owner’s equity

Answer 1

The portion of a company’s assets that belongs to the owners after obligations to all creditors have been met

Question 2

what are retained earnings?

Answer 2

The portion of owners equity earned by the company but not distributed to its owners in the form of dividends

Question 3

what is the income statement?

Answer 3

statement of performance and tracks revenues and expenses

Question 4

what are revenues?

Answer 4

sales, the outflow of goods and services, consumers will often pay cash for revenues, cash becomes an asset

Question 5

what are expenses?

Answer 5

how much did we use up, an inflow of goods and services that will not benefit us in the future, consumed by firm/company

Question 6

what is the formula for gross margin(gross profit)

Answer 6

gross margin/profit = sales - cost of goods sold

Question 7

what are current or short-term assets/liabilities?

Answer 7

assets or liabilities are going to be resolved in less than a year

Question 8

what are fixed or long-term assets?

Answer 8

Assets or Liabilities that are going to be resolved in longer than a year

Question 9

what are operating expenses?

Answer 9

marketing, salaries, other expenses to run the business

Question 10

what is the formula for operating income?

Answer 10

gross profit - operating expenses = operating income

Question 11

what is operating income?

Answer 11

earnings before interest, depreciation, taxes, and amortization

Question 12

what is depreciation?

Answer 12

the reduction in the value of an asset

Question 13

what is the formula for net income?

Answer 13

revenues - expenses = net income

Question 14

what is accrual accounting?

Answer 14

revenue is recorded when a sale is made, expenses are recorded when they occur

Question 15

what is cash basis accounting?

Answer 15

a sale is recorded when cash is transferred

Question 16

what is the statement of cash flows?

Answer 16

shows what happened to the cash

Question 17

what are operating activities?

Answer 17

general operations of the business

Question 18

what are investing activities?

Answer 18

buying and selling of long-term assets

Question 19

what are financing activities?

Answer 19

The raising of debt or equity funds or the payments of cash related to the issuance or repayment of these funds

Question 20

What is the earnings per share ratio?

Answer 20

A measure of a firm’s profitability for each share of outstanding stock,
net income/average number of shares

Question 21

what is the debt-to-equity ratio?

Answer 21

A measure of the extent to which a business is financed by debt as opposed to invested capital,
total liabilities/total equity

Question 22

what is the profit margin ratio?

Answer 22

the ratio between net income after taxes and net sales,

net income/net sales, we want it high

Question 23

what is the return on equity ratio?

Answer 23

the ratio between net income after taxes and total owners’ equity, Net Income/Total Owners’ Equity

Question 24

what is the current ratio?

Answer 24

A measure of a firm’s short-term liquidity, CA/CL, we want it to be greater than or equal to one

Question 25

what is the quick ratio?

Answer 25

A measure of a firm’s short-term liquidity, | (Cash + Marketable Securities + Receivables) / Current Liabilities

Question 26

what is the inventory turnover ratio?

Answer 26

A measure of the time a company takes to turn its inventory into sales, COGS/average value of inventory

Question 27

what is the debt-to-asset ratio?

Answer 27

A measure of a firm’s ability to carry long-term debt, | TL/TA

Question 28

What is the health ratio?

Answer 28

total debt/total asset, we want it to be less than one

Question 29

what is the wholesale price?

Answer 29

price from manufacturer

Question 30

what is the retail price?

Answer 30

the price you see in the store

Question 31

what is MSRP?

Answer 31

manufacturer suggested retail price

Question 32

what are some things that could impact price?

Answer 32

COGS(variable cost, varies based on production), market demand, operating costs(fixed cost, independent of production), marketing strategies, profit margin, competition, or government regulations

Question 33

What is competition based pricing?

Answer 33

Setting a price based on competitors’ pricing

Question 34

What is skimming?

Answer 34

Introducing a product with a high price then lowering the price over time

Question 35

What is penetration pricing?

Answer 35

Offering new products at low prices in the hopes of achieving high sales volume

Question 36

What is odd-even pricing?

Answer 36

Setting the price at an odd number so consumers perceive a lower price (e.g., $19.95)

Question 37

What is demand-oriented pricing?

Answer 37

Set prices based on consumer demand

Question 38

What are tangible assets?

Answer 38

products and goods

Question 39

What are intangible assets?

Answer 39

services and ideas

Question 40

what is break even analysis?

Answer 40

minimum quantity needed to cover all costs given a price

Question 41

what is the formula for profit?

Answer 41

total revenue-total costs=profit

Question 42

what is the formula for total revenue?

Answer 42

average price x quantity sold = total revenue

Question 43

what is the formula for total costs?

Answer 43

fixed costs + (variable costs x units sold) = total costs

Question 44

What are fixed costs?

Answer 44

costs that will not change no matter how much money you make, (equipment, building you purchased, property tax)

Question 45

What are variable costs?

Answer 45

elements that go into a product(rubber to make a bike or income tax)

Question 46

what is the break even point?

Answer 46

the number of units sold to have 0 profit

Question 47

what is the formula for the break even point?

Answer 47

fixed costs / (price - variable cost per unit) = break even point

Question 48

what is price elasticity?

Answer 48

the sensitivity of the demand relative to the price

Question 49

When is a product elastic?

Answer 49

when total revenue/demand falls when the price rises

Question 50

when is a product inelastic?

Answer 50

when total revenue/demand is unchanged/rises when price rises

Question 51

what are the steps of the life cycle change of a product?

Answer 51

1. Introduction 2. Growth 3. Maturity 4. Decline

Question 52

What are the steps of product development?

Answer 52

1. Idea generator 2. Idea screen 3. Business analysis 4. Prototype 5. Testing marketing 6. Commercialization

Question 53

what is business analysis?

Answer 53

Product lines(different styles of mountain bikes) and product mixes(mountain bikes, road bikes, beach bikes, and accessories)

Question 54

What are the steps of brand loyalty?

Answer 54

1. Brand awareness 2. Brand preference 3. Brand insistence