Business Administration: Operations, Accounting, Finance, and Money

Vocabulary flashcards covering production and operations management, financial accounting and statements, financial institutions and money supply, and cash flow analysis.

Production

The creation of goods using the factors of production: land, labor, materials, capital, entrepreneurship, and knowledge.

Production Management

All the activities managers engage in to help firms create goods.

Operations Management

A specialized area in management that converts or transforms resources into goods and services, including inventory management, quality control, production scheduling, and follow-up services.

Process Manufacturing

The part of the production process that physically or chemically changes raw materials.

Assembly Process

The part of the production process that puts together individual components to create a finished product.

Continuous Process

A production process characterized by long production runs that turn out finished goods continuously over time.

Intermittent Process

A production process characterized by short production runs where the producer frequently adjusts machines to make different products.

Computer-Aided Design (CAD)

The use of computers in the design of products.

Computer-Aided Manufacturing (CAM)

The use of computers in the manufacturing and production of products.

Computer-Integrated Manufacturing (CIM)

The uniting of computer-aided design with computer-aided manufacturing, which can cut up to $80\%$ of the time required to program machines to make parts.

Mass Customization

Tailoring products to meet the specific needs of a large number of individual customers.

Assembly Line Layout

A physical layout in manufacturing where workers do only a few specific tasks at a time along a sequential line.

Modular Layout

A plant layout where teams of workers produce more complex units of a final product at dedicated workstations.

Fixed-Position Layout

A layout option that allows workers and equipment to congregate around the product being built, which remains stationary.

Just-in-Time (JiT) Inventory Control

A production process in which a minimum of inventory is kept and parts, supplies, and other needs are delivered just in time to go directly on the assembly line.

Six Sigma Quality

A quality measure and control methodology that permits a maximum of only $3.4\text{ defects per million opportunities}$.

Lean Manufacturing

The production of goods using fewer resources than mass production, requiring $\frac{1}{2}$ the human effort, $\frac{1}{3}$ the engineering effort, $\frac{1}{2}$ the floor space, $90\%$ less inventory, and resulting in half the product defects.

Program Evaluation and Review Technique (PERT)

A method for analyzing the tasks involved in completing a given project, sequencing them, and estimating the total time required.

Critical Path

The sequence of tasks within a PERT network that takes the longest time to complete.

Gantt Chart

A bar graph showing production projects, schedules, and current completion status over time.

Accounting

The recording, classifying, summarizing, and interpreting of financial events and transactions in an organization to provide interested parties with needed financial information.

Managerial Accounting

The branch of accounting that provides information and analysis to managers inside the organization to assist in operational decision making, budgeting, and tax liability minimization.

Financial Accounting

The branch of accounting that generates financial information and analysis primarily for external stakeholders, such as creditors, investors, unions, and the government.

Annual Report

A yearly document issued by a firm describing its financial condition, operational progress, and future expectations.

Fundamental Accounting Equation

The foundational equality of the balance sheet stating that $\text{Assets} = \text{Liabilities} + \text{Owners' Equity}$.

Balance Sheet

A financial statement that offers a snapshot in time of a company's financial standing, reporting its assets, liabilities, and owners' equity.

Current Assets

Economic resources that can or will be converted into cash within one year, including cash, accounts receivable, and inventory.

Accounts Receivable

The dollar amount owed to a business by its customers who have purchased goods or services on credit.

Inventory

The value of merchandise or goods that have been acquired or produced for sale to customers and are still on hand.

Fixed Assets

Assets with long-term utility or value, such as land, buildings, and plant equipment, that are used in business operations.

Accumulated Depreciation

A contra-asset account representing the cumulative dollar value of plant and equipment that has been used up or worn out over time while operating the business.

Current Liabilities

Short-term debt obligations and contracts that must be paid back within one year.

Accounts Payable

The total dollar amount a company owes to suppliers for materials, inventory, or services purchased on credit.

Long-Term Liabilities

Loans and debt contracts that are scheduled to be repaid over a time frame exceeding one year.

Owners' Equity

The value of the owners' claims against the assets of the business, comprised of direct investments (common stock/paid-in capital) and retained earnings.

Retained Earnings

The cumulative accumulated profits that the owners or board choose to reinvest back into the company rather than distribute to stockholders.

Income Statement

A financial statement showing the story of financial transactions over a specific period, detailing revenues, expenses, and net profit or loss.

Variable Costs (COGS)

Costs of goods sold that increase directly as production volume increases, including direct labor, direct materials, and inventory carrying costs.

Contribution Margin

The dollar value remaining after variable costs are subtracted from sales ($\text{Sales} - \text{Variable Costs}$), measuring the efficiency of the production process.

Fixed Costs (Operating Expenses)

Operating expenses incurred from staying in business during a specific period, including depreciation and selling, general, and administrative (SG&A) costs.

Net Margin (EBIT)

Earnings Before Interest and Taxes, representing the net operational margin calculated as contribution margin minus total fixed costs.

Net Profit

The bottom-line financial gain (or loss) of a firm, calculated as total revenue minus total expenses including variable costs, fixed costs, interest, and taxes.

Leverage

The use of borrowed funds (debt) to finance assets and company growth.

Debt to Equity Ratio

A leverage ratio that evaluates risk by comparing total debt to total owners' equity ($\frac{\text{Total Debt}}{\text{Total Owners' Equity}}$), with a ratio greater than $2.0$ generally considered risky.

Money

Anything that people generally accept as payment for goods and services.

Barter

The direct trading of goods and services for other goods and services without an exchange of currency.

Inflation

An economic condition where general prices increase, described as too much money chasing too few goods.

Deflation

A general decrease in price levels caused by a surplus of goods and services relative to the money supply.

Money Supply

The amount of money made available by the Federal Reserve Bank for people to purchase goods and services.

Federal Reserve's Dual Mandate

The statutory requirement directing the Federal Reserve to maintain maximum employment while keeping prices stable by controlling inflation.

Reserve Requirement

The percentage of commercial banks' checking and savings deposits that must be physically kept in the bank or deposited with the Federal Reserve.

Open-Market Operations

The monetary policy tool involving the buying and selling of United States government bonds by the Federal Reserve to regulate the money supply.

Discount Rate

The interest rate that the Federal Reserve charges member banks for short-term loans.

Cash Flow Statement

A financial statement reporting the movement of cash into and out of a firm over a given period, reconciling net profit back to cash.

Operating Activities (Cash Flow)

Cash flow transactions directly related to running the business and working capital, including revenues, inventory changes, accounts receivable, and accounts payable.

Investing Activities (Cash Flow)

Cash flow transactions involving the purchase, improvement, or sale of long-term assets such as plant and equipment.

Financing Activities (Cash Flow)

Cash flow transactions involving capital acquisition and repayment, such as issuing or retiring debt, selling or repurchasing common stock, and paying dividends.

Cash Flow Circle (Operating Circle)

The ongoing operational cycle in which cash is turned into inventory, inventory is turned into sales and accounts receivable, and receivables are collected back into cash.

Bond

A long-term corporate or governmental debt contract in which an issuer borrows money and promises to repay the face value at maturity with specified periodic interest.

Bond Price and Interest Rate Relationship

The inverse market relationship where bond prices fall when interest rates rise, and bond prices rise when interest rates fall.

Dilution of Ownership

A reduction in the percentage ownership of existing shareholders caused by the issuance of additional shares of common stock to new investors.

Primary Securities Market

The market where corporations sell newly issued securities (stocks or bonds) for the first time to investment bankers and underwriters.

Secondary Securities Market

The public market where investors trade previously issued stocks and bonds among themselves, such as on the NYSE or AMEX.

Dividend

A cash payment distributed to stockholders out of a corporation's net profits.

Current Ratio

A liquidity ratio measuring a firm's ability to cover short-term debts, calculated as $\frac{\text{Current Assets}}{\text{Current Liabilities}}$.

Time Value of Money

The core financial principle stating that a sum of money is worth more now than the same sum in the future due to its prospective earning and compounding potential.