small business management

Question 1

functions of management

Answer 1

• planning
• organizing
• leading
• controlling/evaluating

Question 2

manufacturing

Answer 2

business or company that makes or manufacturers a product

Question 3

merchandising

Answer 3

company that buys products from another business and sells it to its customer

Question 4

service

Answer 4

business that provides a particular service to its customers

Question 5

service-merchandising

Answer 5

provides products and services

Question 6

small business

Answer 6

a business that is independently owned and operated and is not dominant in its field operation

Question 7

quantitative small business

Answer 7

• # of employees 25-300
• average annual revenue = less than 6 million

Question 8

qualitative small business

Answer 8

• actively managed by its owners
• highly personalized
• largely local in its area of operation
• largely dependent on internal sources of capital to finance its growth
• nota major force in their industry

Question 9

entrepreneur

Answer 9

one who organizes, manages, and assumes the risk or a business firm or venture (seeking wealth, not just in one business)

Question 10

sole proprietorship

Answer 10

an individual conducting a business as an individual and sole owner. the owner is held personally responsible for all those of the employees

Question 11

advantages of sole proprietorship

Answer 11

• ease of starting
• low cost of organization
• freedom of management
• profit incentive

Question 12

disadvantages of sole proprietorship

Answer 12

• unlimited risk
• limited size
• limited life
• limited management ability

Question 13

partnership (general)

Answer 13

• an association of 2 or more persons who conduct business as co owners. personally liable for the obligations of the business

Question 14

partnership (limited)

Answer 14

general partners and partners with limited interest (money or experience). put up capital, have a limited interest in the profits, and their liability is limited to the amount of their capital

Question 15

advantages of partnerships

Answer 15

• combined management, talent, and capital
• ease of formation
• efficiency of labor

Question 16

disadvantages of partnership

Answer 16

• lack of continuity
• decisions binding on both parties
• unlimited liability
• frozen assets

Question 17

C corporations

Answer 17

legal entities established under law

Question 18

advantages of C corps

Answer 18

• continuity of existence
• ease of ownership
• limited liability
• large financial capability

Question 19

disadvantages of C corps

Answer 19

• legal restrictions on activities
• separation of ownership/control
• lack of personal interest
  double taxation of earnings

Question 20

S corporation

Answer 20

special type of corporation that has the protection of limited liability and elects to have a pass of income and losses like the treatment of a partnership

Question 21

advantages of S corp

Answer 21

• independent legal entity
• only shareholder taxed

Question 22

disadvantages of S corp

Answer 22

• if not properly structured can be taxed as a C corp
• limited shareholders
• must have limited life

Question 23

limited liability corporation (LLC)

Answer 23

taxed like a partnership, but shields liability like a corp

Question 24

advantages of LLC

Answer 24

• limited personal liability
• flexibility of partnership
• no significant requirements
• members report taxes

Question 25

disadvantages of LLC

Answer 25

- if not properly structured can be taxed as C corp - must have limited life

Question 26

you should have these things before starting business

Answer 26

- sales tax ID # - state and local required permits and licenses - federal employer identification number (EIN) - build a team of advisors - open a business checking account - arrange for a business phone line to be installed

Question 27

capital - circulating

Answer 27

money for day to day operations

Question 28

capital - working

Answer 28

difference between current assets (less than 1 year) and current liabilities

Question 29

capital - fixed capital

Answer 29

long term capital invested in the business

Question 30

capital - sources of fund

Answer 30

- personal, equity capital - debt equity - trade credit - venture capitalist

Question 31

valuation

Answer 31

estimate the worth or price of a company

Question 32

book value

Answer 32

the cost of a __ asset less accumulated depreciation

Question 33

liquidation value

Answer 33

the anticipated value of an asset that would be realized in case of liquidation of the business

Question 34

replacement value

Answer 34

an insurance concept in which the fair market price to purchase similar products in similar condition is used to settle claims (difficult to determine at any given time)

Question 35

market value

Answer 35

an approach used in business valuation which determines value based upon previous sales of similar business

Question 36

goodwill

Answer 36

an intangible asset such as the name of a funeral home; also an intangible asset which enables a business to earn a profit in excess of an normal rate of profit earned by businesses of the same kind

Question 37

copyrights

Answer 37

the registered right of creator to reproduce, publish, and sell the work which is the product of the intelligence and skill of that person

Question 38

patent

Answer 38

the registered right of an inventor to make, use, and sell and invention

Question 39

trademarks

Answer 39

distinct name, sign, or symbol that the federal government grants exclusive rights to use for specific time

Question 40

cash

Answer 40

money from private sources or personal assets used for purchase

Question 41

owner finance

Answer 41

usually 10% down, then payments go to former owner, rather than financial institution

Question 42

third part financing

Answer 42

bank, financial institution or private party finance the operation

Question 43

cash flow

Answer 43

must meet business expenses, owners draw, and all payments from the earnings of the business. done with a cash flow projection

Question 44

fixed expenses

Answer 44

a cost that, for a given period and range of activity called the "relevant range", does not change in total, but becomes progressively smaller on the per unit basis as volume increases

Question 45

variable expenses

Answer 45

a cost which is uniform per unit but fluctuates in total in direct proportion to change in the related activity or volume