MGMT 1 Final

What is accounting?

The process of measuring and summarizing business activities, interpreting financial information, and communicating results to management and other decision makers

What is the difference between managerial accounting and financial accounting?

Managerial accounting provides information for internal users; financial accounting is for external reporting.

What does the income statement show?

Sales and expenses over a period of time, revealing how much a firm made or lost in that period.

What does the balance sheet reflect?

A firm’s financial position at a specific point in time, including assets, liabilities, and owner’s equity.

What is the basic balance sheet equation?

Assets – liabilities = owner’s equity.

What is breakeven analysis?

A technique to determine the level of sales needed to break even (no profit or loss).

What is ratio analysis used for?

Assessing a company’s performance and financial condition over time and comparing it to other companies or the industry.

What are the main categories of financial ratios?

Profitability ratios, liquidity ratios, debt ratios, and efficiency/effectiveness ratios.

What is a sole proprietorship?

A business owned by one person; it makes up about 72% of all U.S. businesses.

What are advantages of a sole proprietorship?

Complete owner control, easy and inexpensive to form, and owner keeps all profits.

What are disadvantages of a sole proprietorship?

Unlimited liability, full responsibility for talent and financing, and business ends if the owner dies.

What is a general partnership?

A business jointly owned by two or more people; about 10% of U.S. businesses.

Advantages of a general partnership?

More resources/talent from multiple partners, and the business can continue after a partner’s death.

Disadvantages of a general partnership?

Partnership disputes, unlimited liability, and shared profits.

What is a limited partnership?

A partnership with one general partner who runs the business and is fully liable, and limited partners whose involvement and losses are limited to their investment.

What is a corporation?

legal entity separate from its owners (shareholders), who invest by buying stock; governed by a Board of Directors elected by shareholders.

What are advantages of a corporation?

Limited liability, easier access to financing, and unlimited life.

What are disadvantages of a corporation?

The agency problem, double taxation, and high incorporation costs/regulations.

What is a limited-liability company (LLC)?

A business structure combining partnership-style tax treatment with corporation-style liability protection.

What is a not-for-profit corporation?

An organization formed to serve a public purpose rather than seek financial gain; receives favorable tax treatment.

What is a merger?

The combination of two companies to form a new company.

What is an acquisition?

The purchase of one company by another, without creating a new company.The purchase of one company by another, without creating a new company.

What is a hostile takeover?

An acquisition completed even though the target company’s management and Board of Directors oppose it.

What does operations management oversee?

The process of transforming resources into goods and services

What decisions are made during production planning?

How goods will be produced, where production will occur, and how facilities will be laid out.

What are the three basic production process methods?

Make-to-order, mass production, and mass customization.

What factors are considered in site selection for manufacturing?

Shipping cost minimization, supply of skilled workers, good community environment, low-cost resources, and a favorable business climate.

What is just-in-time (JIT) production?

n inventory method where materials arrive exactly when needed for production.

What is material requirements planning (MRP)?

software tool used to determine a company’s material needs.

What does a Gantt chart help managers do?

Determine the status and timeline of project tasks.

What does a PERT chart show?

Activities, time required, and the critical path — the longest sequence of tasks.

What makes service firms different from manufacturing firms?

hey provide intangible, often customized services that are bought and consumed simultaneously.

Why is estimating capacity for service businesses difficult?

Services cannot be stored for later use.

What is total quality management (TQM)?

A set of principles focused on consistently delivering high-quality goods and services.

Why do companies outsource

To save money through lower-cost, specialized labor domestically or abroad.

What are efficiency and effectiveness in management?

Efficiency = achieving goals with minimal resources.
Effectiveness = achieving goals accurately.

What are the four functions of the management process?

Planning, organizing, leading, and controlling.

What is strategic planning?

The process of establishing an overall course of action for a business.

What comes first in the planning process?

Identifying purpose, creating a mission statement, and defining core values

What is a SWOT analysis?

A tool that assesses strengths, weaknesses, opportunities, and threats.

What are goals and objectives?

Performance targets that guide company actions.

What are tactical and operational plans?

Plans that implement objectives set during strategic planning.

What is an autocratic leadership style?

A style where the manager makes decisions without input and expects instructions to be followed.

What is a democratic leadership style?

A style where the manager seeks input from subordinates before making decisions.

What is a free-rein leadership style?

A style where the manager offers minimal guidance and lets employees make decisions.

What is a transactional leadership style?

A style where managers use authority based on rank, set expectations, and intervene when mistakes happen.

What is a transformational leadership style?

A style where managers mentor, develop, and motivate employees to achieve organizational goals.

What are the five steps of the control process?

1. Establish standards

2. Measure performance

3. Compare performance to standards and identify deviations

4. Determine reasons for deviations

5. Take corrective action

What do managers do during the organizing phase?

Coordinate planned activities among individuals or units and allocate necessary resources.

What are the three levels of management?

• Top managers: responsible for overall performance.

• Middle managers: report to top managers and oversee lower-level managers.

• First-line managers: supervise employees and ensure work is done correctly and on time.

What is an organizational structure

An arrangement of people within an organization designed to achieve company goals.

What is specialization in management?

Dividing necessary tasks into specific jobs.

What is departmentalization?

Grouping specialized jobs into units.

What is a functional organizational structure?

A structure where people with similar skills or tasks are grouped together.

What is a divisional organizational structure?

A structure made of self-contained units based on product, customer, process, or geographic division.

What is an organization chart?

A diagram showing the interrelationships and hierarchy of positions within the organization.

What is the chain of command?

The authority relationships among people at different organizational levels.

What is span of control?

The number of subordinates reporting to a manager.

Difference between wide vs. narrow span of control?

• Wide span: few layers; each manager oversees many subordinates.

• Narrow span: more layers; each manager oversees fewer subordinates.

What does it mean to be entrepreneurial?

Engaging in a proactive process of overcoming constraints to create value in new ways, usually through a business.

Who can be entrepreneurs?

Single founders or co-founders who are part of a founding team.

When does entrepreneurship typically occur in an organization’s lifecycle?

Most often in the startup phase and later in the rebirth stage when uncertainty is high.

What is uncertainty?

A knowledge problem where you cannot know which action will lead to the desired outcome.

How is risk different from uncertainty?

Risk can be assigned a probability; uncertainty cannot.

What is complexity in entrepreneurship?

A knowledge problem caused by many variables and their interactions affecting outcomes.

What is ambiguity?

When the entrepreneur lacks clarity about what is important or what might happen.

What is equivocality?

When multiple meanings or interpretations exist about what is important or possible, and the entrepreneur must choose among them.

Why do these knowledge problems matter?

They surface as entrepreneurs try to create value for customers.

What are some ways new businesses differ?

Funding (bootstrapping, debt, external investment), goals (profit, social/environmental, lifestyle), and industry context (health, digital, corporate entrepreneurship).

What are the two main types of external investors?

Angel investors (invest their own money) and venture capitalists (invest other people’s money and expect high returns).

What is an entrepreneurial ecosystem?

A community or network of people, spaces, and resources that interact around the creation of new ventures.

What are coworking spaces?

Open work areas for entrepreneurs and professionals, available for free or through paid memberships.

What are incubators?

Offices with shared areas and support services rented below market rates to selected startup companies.

What are accelerators?

Investment programs that offer funding, space, services, and mentoring to selected startups in exchange for equity and investor access on demo day.

What is the main goal of the startup process?

To reduce uncertainty about the customer and their problems to create a unique, desirable, and sustainably profitable solution.

What might entrepreneurs need to build to reduce uncertainty and test solutions?

A prototype.

What is customer acquisition cost (CAC)?

The cost of acquiring one customer.

What is customer lifetime value (LTV)?

The total value a customer is expected to bring over their entire relationship with the business.

What else must entrepreneurs understand to build a sustainable business?

How to recruit the right talent to create, capture, and deliver value.

What is a FICO score?

A measure of creditworthiness ranging from 300–850 (average is 680–719).

How do you maintain a satisfactory credit score?

Pay bills on time, borrow only when necessary, and pay in full when you do borrow

What expense-cutting method do 81% of financial planners recommend?

Eating out less.

What is personal finance?

Applying financial principles to your own monetary decisions.

What is financial planning?

The ongoing process of managing your personal finances to meet your goals, which change across life stages.

What is the time value of money?

The idea that a dollar today is worth more than a dollar in the future because it can earn interest.

What is compound interest?

Interest earned on both the initial amount and on previously earned interest — a powerful tool for building wealth.