BUSN 101 KEY TERMS

what is the traditional purpose of a business?

to maximize the value of the firm to its owners

*ANOTHER WAY TO THINK ABOUT IT? --> to maximize shareholder's wealth

***So... what is the best way to do this? --> by increasing profits

stakeholder

anyone involved with or affected by an organization --> shareholders, customers, community members, employees, suppliers, etc.

shareholder

owns a share of a company's stock; could be an individual, a company, or an institution (financial, educational, medical, etc.)

***common stock shareholder: has the right to vote on major decisions made by the company; hopes the stock value will increase and/or the company will pay a dividend

dividend

distribution of a company's earnings to shareholders

profit

the difference between the amount earned and the amount spent in buying, operating, or producing something

*(revenue - expenses)

enterprise resource planning (ERP) systems

a computerized resource-planning system that incorporates information about the firm's suppliers and customers with its internally generated data

operations

the design, execution, and control of operations that convert resources into desired goods and services and implement a company's business strategy

just-in-time inventory management

an inventory management system that receives goods from suppliers at the exact time they are needed, reducing storage costs

cost of goods sold (COGS)

expenses directly related to the buying or producing of a firm's goods or services

share price

the price of a single share of a company's stock

business

an organization that strives for a profit by providing goods and services desired by its customers

goods

tangible items manufactured by businesses

*EX: Laptops

services

intangible offerings of businesses that can't be held, touched, or stored

*EX: physicians, lawyers, hair stylists, car washes, and airlines all provided services

business-to-business (B2B)

selling products and services between two businesses, rather than to a consumer

business-to-consumer (B2C)

selling products and services directly to a consumer (the end user)

revenue

the dollar amount of a firm's sales plus any other income it received from sources such as interest, dividends, and rents

*what you earn from selling goods and services

expense

what it costs you to operate your business

what are the functional areas of business

a) accounting

b) finance

c) management

d) management information systems

e) marketing

f) supply chain management

*no matter what major you choose, it is important that you understand all of the functions of business and how they relate to one another!

cross-functional teams

groups of people that belong to different functional/expertise domains

value proposition

the unique benefit that a company provides customers who buy their goods or services

what are information systems?

systems that allow users to leverage technology, information, and people to further organizational goals

information technology

the equipment and techniques used to manage and process information

data

raw, unorganized facts that can be moved and stored

information

data that has been processed, interpreted, organized, structured, or presented in a way that makes it meaningful or useful

spreadsheet

a computer application that enables a user to save, sort, and manage data in an arranged set of rows and columns

*allows for the entry, calculation, and storage of data in rows and columns

database

an organized collection of data stored and accessed electronically

database management system

software that allows you to quickly and easily enter, store, organize, select, and retrieve data in a database; tracks the data and allows users to query the database for the information they need

cloud-computing

the delivery of computing services over the internet, allowing for flexible, on-demand access to resources such as software and data storage

information security

the processes and tools designed and deployed to protect sensitive business information from modification, disruption, destruction, and inspection

network segmentation

architectural design of a network to manage security and access

cybersecurity

the practice of protecting systems, networks, and programs from digital attacks

*attacks are typically aimed at accessing, changing, or destroying sensitive information, extorting money from users, or interrupting normal business operations

what is supply chain management?

the process of smoothing transitions along the supply chain so that the firm can satisfy its customers with quality products and services; focuses on developing tight bonds with suppliers

*bringing things in, putting things together, and sending things out

logistics

the coordination across the supply chain involving the flow of goods, services, people, facilities, or supplies

supply chain

the entire sequence of securing inputs, producing goods, and delivering goods to customers

***INCLUDES:

- raw materials

- supplier

- manufacturer

- distributor

- retailer

- customer

procurement

the action of obtaining equipment or supplies for a business

inputs

natural resources, raw materials, human resources, and capital

inventory management

the determination of how much of each type of inventory a firm will keep on hand and the ordering, receiving, storing, and tracking of inventory

production

the creation of products and services by turning inputs (natural resources, raw materials, human resources, capital) into outputs (goods and services)

outputs

goods and services

supply chain sustainability

the management of environmental, social, and economic impacts, and the encouragement of good governance practices, throughout the life cycles of goods and services

what is accounting?

the process of collecting, sorting, classifying, summarizing, reporting, and analyzing financial activities

financial accounting

focuses on preparing external financial reports that are used by outsiders such as lenders, suppliers, investors, and government agencies to assess the financial strength of a business

managerial accounting

provides financial information that managers inside the organization can use to evaluate and make decisions about current and future operations

auditing

the process of reviewing the records used to prepare financial statements and issuing a formal auditor's opinion indicating whether the statements have been prepared in accordance with GAAP (the generally accepted accounting principles)

tax

strategizing reductions in tax obligations aligned with IRS regulations and preparing required documentation

certified public accountant (CPA)

an accountant who has completed an approved bachelor's degree program, passed a test prepared by the American Institute of CPAs (AICPA), and met state requirements

*only a CPA can issue an auditor's opinion on a firm's financial statements

balance sheet

a financial statement that summarizes a firm's financial position at a specific point in time

*will ALWAYS balance as shown with the accounting equation (Assets = Liabilities + Shareholder's Equity)

assets

things of value owned by a firm

liabilities

what a firm owes to its creditors

*also known as debts

shareholder's equity

the total amount of investments in the firm minus any liabilities

*also called net worth

income statement

a financial statement that summarizes a firm's revenues and expenses and shows its total profit (or loss) over a period of time

gross profit

(revenues - COGS)

other expenses

expenses that do not stem from the operations of your business

*EX: utilities, rent

earnings per share (EPS)

the ratio of net profit to the number of common stock outstanding

*measures the number of dollars earned by each share of stock

what is finance?

a field that deals with the allocation of assets and liabilities over time under conditions of certainty and uncertainty

financial management

the art and science of managing a firm's money so that it can meet its goals

financial planning

preparing the financial plan, which projects revenues, expenditures, and financing needs over a given period

investment (spending money now to make money later)

investing the firm's funds in projects and securities that provide high returns in relation to their risks

financing (raising money)

obtaining funding for the firm's operations and investments and seeking the best balance between debt and equity

debt

a form of business financing consisting of borrowed funds that must be repaid with interest over a stated time period

equity

funds raised through the sale of ownership

(stock) in the business

*a form of business financing

commercial banks

profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services

investment banking

helps companies raise long-term financing

*these are firms that act as intermediaries; they buy securities from corporations and governments and then resell them to the public

real estate

a specialized branch of finance that deals with the financing and investment structures used by developers, investors, and owners to acquire, develop, and maintain real estate properties primarily in the commercial and residential sectors

common stock

a security that represents an ownership interest in a corporation

dividends

payments to stockholders from a corporation's profits

public company

a company with shares of stock traded in the public, typically on a stock exchange

private company

a company without publicly traded stock

initial public offering (IPO)

a company's initial sale of stock to the public

ticker symbol

a unique abbreviation used to identify the shares of a publicly traded company

interest

a fixed amount of money paid by the borrower (for a bond, loan, or mortgage) to the lender (or bondholder) on a regular schedule

what is marketing?

creating, communicating, and delivering value

marketing mix (AKA 4Ps)

1) product

2) price

3) promotion

4) place (distribution)

*NOTE that some textbooks discuss more, optional "Ps". Your textbook names a fifth "P" as being people

product

goods, services, and ideas

place

the method of getting the product from the supplier to the customer

*includes a myriad of important tasks, such as: transportation, location, supply chain management (managing each entity that deals with the product on its route to the buyer), online presence, inventory, and atmospherics (how the office, store, or even the website looks)

price

something given in exchange for a product; can be monetary or nonmonetary

*additional names include rent, fees, charges, etc.

promotion

methods for informing and influencing the customer to buy the product

***promotional mix includes:

- traditional advertising

- sales promotion

- public relations

- personal selling

- social media

- e-commerce

market segmentation

the process of separating, identifying, and evaluating the layers of a market in order to determine a target market for your firm to operate within

target market

the specific group of consumers toward which a firm could direct its marketing efforts

*often divided into segments so that marketing strategies can be directed toward a more specific target

what is management?

the process of guiding the development, maintenance, and allocation of resources to attain organizational goals

human resource management (HR/HRM)

involves coordinating, managing, and allocating human capital (employees) in ways that move an organization's goals forward

entrepreneurship

understanding when there is an opening in the marketplace that no other provider is meeting and knowing how to go after this new opportunity at the right time

entrepreneur

an individual or a small group of partners who embark on an original path to create a new business

management consulting

focuses on helping organizations operate effectively through an outside perspective on problem-solving, best practices, and strategy to help companies improve their performance

four primary functions of managers

1) planning

2) organizing

3) leading

4) controlling

planning

the process of deciding what needs to be done to achieve organizational objectives; identifying when and how it will be done; and determining who should do it

strategic planning

the process of creating long-range (one to five years), broad goals for the organization and determining what resources will be needed to accomplish those goals

tactical planning

the process of beginning to implement a strategic plan by addressing issues of coordination and allocating resources to different parts of the organization

contingency plans

plans that identify alternative courses of action for very unusual or crisis situations

operational plans

the process of creating specific standards, methods, policies, and procedures that are used in specific functional areas of the organization

organizing

the process of coordinating and allocating resources to carry out an organization's plans

leading (leadership)

the process of guiding and motivating others toward the achievement of organizational goals

controlling

the process of assessing the organization's progress toward accomplishing its goals

*includes monitoring the implementation of a plan and correcting deviations from the plan

corporate culture

the set of attitudes, values, and standards that distinguishes one organization from another

vision statement

a short description of an organization's aspirations and the wider impact it aims to create

*prominent focus on the "why?" or the meaning behind a company's actions

mission statement

used by a company to explain, in simple and concise terms, its purpose(s) for being (existing)

*prominent focus on the "what?" and the "how?" a company is going to accomplish their vision

values (AKA core values)

the beliefs and behaviors that a company considers non-negotiable

*the guiding principles for how people in the organization show up and treat each other, and how the company will ultimately succeed

effectiveness

the ability to produce the desired result or good

efficiency

using the least amount of resources to accomplish the organization's goals

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