Chapter 11: Financing the Business | Quizlet

Debt

Is an obligation, such as a loan or bond that is paid back with interest.

Equity

Is providing a portion of the business in exchange for financing.

Financial Intermediary

Banks bring different parties together, such as savers and borrowers.

Collateral

Which is an asset of value, used to secure a loan.

Line of Credit

Which is a loan that the business can use at some time in the future.

Small Business Administration

SBA.gov

Commercial Paper

Financing option for a single day or up to 9 months.

Bond

Financing option for 9 months to 30 years.

Partners

Is someone who invests their money into the business and takes responsibility for managing and running a company.

Angel Investing

Is funding that is a providing by investors to a start-up earlier than other investors would.

Stock

Represents ownership of part of a business.

Ventura Capital

Is funding that comes from another company, such as a venture capital firm.

Financial Management

A part of financial management is to ensure that the proper amount of funding is obtained at the lowest cost to the business.

Net Present Value (NPV)

Is a method of bringing cash that happens in the future, such as revenues 12 years from now or an expense 10 years from now, and making them equivalent to the present value of today's money.

Liquidity

Is a measure of the current assets that are available to meet a business' current liabilities, which are due in less than a year.

Drivers

Are typically internal actions that the business takes to increase its revenues.

Daggers

Are typically something that is out of the direct control of the business.

Break-Even Analysis

Will find the quantity of sales that are needed so that revenues are greater than the expenses.

Break-Even Point (Qbep)

The point where the total cost of the investment is equal to the total revenues.

Total Revenue Formula

TR = Q * R

Total Cost Formula

TC = FC + Q * VC

Qbep Formula

Qbep = FC/(R - VC)

Snowball Debt

Is what happens when debt begins to increase.

Investing for Retirement Strategies

Time Value of Money, Risk vs. Reward, Stock Markets, and Asset Allocation

Compounding Interest

Is the interest on a deposit or loan based on the initial principal and the accumulated interest from earlier periods.

Bull Markets

A stock investment that is more often going up in value.

Bear Market

A stock investment that is more often loosing value.

Asset Allocation

Is the selection of different investment types to balance risk, such as stocks, bonds, real estate, and many others.