Entrepreneurship Chapter 2 test

Marketing

The process of promoting, selling, and distributing a product or service.

Purpose of Marketing

Understand and meet customer needs to drive sales and business success.

Importance of Marketing

If marketing fails, other business functions (like production) may also fail.

The Marketing Concept

A business philosophy that prioritizes customer needs, company goals, and profits.

Market Share

The percentage of total sales in a market held by one company.

Target Markets

A specific group of consumers a business aims to serve.

Segmentation Criteria

Geographic, demographic, psychographic, and behavioral factors used to identify target markets.

Market Identification

Goal: Determine the most profitable group to target.

Customer Profile

A detailed description of a typical customer in a segment. This includes demographics, behaviors, preferences and buying patterns

Marketing Research

The process of gathering, analyzing, and interpreting information about a market.

Primary Data

First-hand data collected through surveys, interviews, and field trials.

Secondary Data

Existing data such as reports and articles.

SWOT Analysis

A framework for identifying strengths, weaknesses, opportunities, and threats.

Business to Business (B2B)

A business that sells directly to other businesses.

Business to Consumer (B2C)

A business that sells directly to consumers.

Limited Liability Company (LLC)

A type of business ownership that combines elements of a corporation and a partnership.

Sole Proprietorship

A business owned and operated by a single individual.

S-corporation

A corporation that requires its owners to file their profits and losses on their personal tax returns.

Partnership

A business owned by two or more individuals.

Accounting

The process of recording, summarizing, and analyzing financial transactions.

Accounts Payable

Money a business owes (liabilities).

Accounts Receivable

Money owed to the business (assets).

owners equity=

assests-liabilities

assets=

liabilities +owner's equity

liabilities=

assets-owner's equity

Ethics in Accounting

Trust and credibility through accurate reporting and fraud prevention.

Budgeting Basics

Control spending, reduce stress, and build financial confidence.

Types of Budgets

Start-up budget, sales forecast, operating budget, cash budget.

start-up budget

Initial capital needed to launch.

sales forecast

Expected revenue from sales.

operating budget

Expected income vs. expenses.

cash budget

Tracks cash inflows and outflows.

payroll

List of employees and their compensation. examples: wages, tax benefits and deductions

balance sheet

Snapshot of assets, liabilities, and equity at a specific time.

income statement

Revenue and expenses over a period (profit/loss).

cash flow statement

Tracks where money is coming from and going.

Capital Structure

How a business finances its operations and growth.

bootstraping

Using personal savings, skills, or bartering.

crowdfunding

Raising small amounts from many people (e.g., Kickstarter).

debt financing

Borrowing money (e.g., loans, credit lines).

Pros: Maintain ownership.

Cons: Must repay with interest

equity financing

Selling ownership (stock) in exchange for capital.

Pros: No repayment required.

Cons: Lose some control.

creditor

lendor

debtor

borrower

closed end credit

Fixed terms (e.g., car loan).

open ended credit

Revolving (e.g., credit card).

secured loan

Requires collateral (e.g., house, car).

unsecured loan

no collateral

down payment purpose

Reduces loan amount and risk.

5 C's of Creditworthiness

Character, capacity, capital, collateral, conditions.

character

Credit history and reliability.

capacity

Ability to repay (income, job stability).

capital

Assets and savings.

collateral

Assets pledged for the loan.

conditions

Loan terms and economic environment.

Credit Report

History of credit use, payments, and debt.

FICO Score

A credit score ranging from 300 to 850, indicating creditworthiness.

300-559

very bad

560-649

bad

650-699

fair

700-749

good

750-850

excellent

Economic Utilities

Time, place, form, possession, and information utilities that enhance product value.

Scarcity

Limited resources versus unlimited wants.

Opportunity Cost

The value of the next best alternative given up.

traditional economic system

Based on customs (e.g., bartering).

centrally planned economic system

Government controls all production.

market economic system

Driven by supply and demand.

mixed economic system

Combines government and private enterprise (e.g., U.S.).

Law of Supply:

Higher price = more supply

Law of Demand:

Lower price = more demand.

Equilibrium

Price where supply meets demand.

GDP

Total value of goods/services in a year.

inflation

Rising prices, reduced purchasing power.

interest rates

Cost of borrowing money.

unemployment rate

% of people without jobs.

productivity

Output per worker.

law of diminishing returns

More input does not always equal more output.

monopoly

One company dominates.

oligopoly

Few companies dominate.

monopolistic competition

Many sellers, slightly different products.

perfect competition

Many sellers, identical products.

globalization

Expanding business internationally.

macroeconomics

the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

macroeconomic Indicators

GDP, Inflation, Interest Rates, Unemployment Rate, Productivity, Law of Diminishing Returns

Geographic

Location-based (e.g., coastal cities for surfboards).

demographic

Age, gender, income, education.

psychographic

Lifestyle, values, interests.

behavioral factors

Buying habits, brand loyalty, usage rate.