Intro to Entrepreneurship Final Exam Vocab Terms

This for Dr. Bat’s Intro to Entrepreneurship class at Oklahoma State University. These are just the vocabulary terms for the final exam. Questions that might be on the exam are on another knowt on my account.

What is a 10-K?

A report that is similar to the annual report, except that is contains more detailed information about the company’s business

What is an accounts receivable?

The money owed to a firm by its customers

What is a assumptions sheet?

An explanation in a new firm’s business plan of the sources of the numbers for its financial forecast and the assumptions used to generate them

What is a balance sheet?

A snapshot of a company’s assets, liabilities, and owners’ equity at a specific point in time

What is a break-even point?

The poin at which total revenue received equals total costs associated with the output

What are budgets?

Itemized forecasts of a company’s income, expenses, and capital needs that are also important tools for financial planning and control

What is the constant ratio method of forecasting?

A forecasting approach using the percent of sales method in which expense items on a firm’s income statement are expected to grow at the same rate as sales

What is cost of sales?

All the direct costs associated with producing or delivering a product or service, including the material costs and direct labor costs (also cost of goods sold)

What is current assets?

Cash plus items that are readily convertible to cash, such as accounts receivable, inventories, and marketable securities

What is current liabilities?

Obligations that are payable within a year, including accounts payable, accrued expenses, and the current portion of long-term debt

What is current ratio?

A ratio that equals the firm’s current assets divided by its

What is debt-to-equity ratio?

A ratio calculated by dividing the firm’s long term debt by its shareholders’ equity

What is efficiency?

How productively a firm utilizes its assets relative to its rate of return

What is financial management?

The process of raising money and managing a company’s finances in a way that achieves the highest rate of return

What are financial ratios?

Ratios showing the relationships between items on a firm’s financial statements that are used to discern whether a firm is meeting its financial objectives and how it stacks up against industry peers

What are fixed assets?

Assets used over time frame, such as real estate, buildings, equipment, and furniture

What are forecasts?

Estimates of a firm’s future income and expenses, cased on its past performance, its current circumstances, and it s future plans

What are historical finanicial statements?

Financial statements that reflect past performance and are usually prepared on a quarterly and annual basis

What is a income statement?

A financial statement that reflects the results of the operations f a firm over a specified period of time: prepared on a monthly, quarterly, or annual basis

What is inventory?

A company’s merchandise, raw materials, and products waiting to be sold

What are investing activities?

Activities that include the purchase, sale, or investment in fixed assets, such as real estate and buildings

What is liquidity?

The ability to sell a business or other asset quickly at a price that is close to its market value: also, a company’s ability to meet its short-term financial obligations

What are long-term liabilities?

Notes or loans that are repayable beyond one year, including liabilities associated with purchasing real estate, buildings, and equipment

What are net sales?

Total sales minus allowances for returned goods and discounts

What are operating activities?

Activities that affect net income (or loss), depreciation, and changes in current assets and current liabilities other that cash and short term debt

What are operating expenses?

Marketing, administrative costs, and other expenses not directly related to producing a product or service

What are other assets?

Miscellaneous assets including accumulated goodwill

What is owner’s equity?

The equity in the business by its owner(s) plus the accumulated earnings retained by the business after paying dividends

What is percentage-of-sales method?

A method of expressing each enterprise item as a percent of sales

What is price-of-earnings or P/E ratio?

A simple ratio that measures the price of a company’s stock against its earnings

What is a pro forma balance sheet?

Provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time

What is a pro forma balance sheet?

Provides a firm a sense of how its activities will affect its ability to meet its short-term liabilities and how its finances will evolve over time

A financial statement that shows the projected results of the operations of a firm over a specific period

What is a pro forma statement of cash flows?

A financial statement that shows the projected fow of cash into and out of a company for a specific period

What is a profit margin?

A measure of a firm’s return on sales that is computed by dividing net income by average net sales

What is profitability?

The ability to earn a profit

What is working capital?

A firm’s current assets minus its current liabilities

What is a advisory board?

A panel of experts who are asked by a firm’s managers to provide counsel and advice on an ongoing basis; unlike a board of directors, an advisory board possesses no legal responsibilities for the firm and gives non-binding advice

What is a Board of Directors?

A panel of individuals who are elected by a corporation’s shareholders to oversee the management of the firm

What is a consultant?

An individual who gives professionals or expert advice. ( fall into to categories (paid and non profit or low pay through government)

What is an employee?

Someone who works for a business, at the business’ location or virtually, utilizing the business’ tools and equipment and according to the business’ policies and procedures

What is a freelancer?

A person who is in business for themselves, works on their own time with their own tools and equipment, and performs services for a number of different clients

What is a founding team?

A team of individuals chosen to start a new venture. A firm with this team has an advantage over firms started by an individual because a team brings more talent, resources, ideas, and professional contacts to a new venture than does a sole entrepreneur

What is heterogeneous?

A team who individual members are diverse in terms of their abilities and experiences

What is homogenous?

A team whose individual members’ experiences and areas of expertise are very similar to one another

What is a inside director?

A person on a firm’s board of directors who is also an officer of the firm

What is an intern?

A person who works for a business as an apprentice or trainee for the purpose of obtaining practical experience

What is liability of newness?

Situation that often causes new firms to falter because the people who start firms can’t adjust quickly enough to their new roles, and because the firm lacks “track record” with customers and suppliers

What is networking?

Building and maintaining relationships with people whose interests are similar or whose relationship could bring advantages to a firm

What is a new-venture team?

The group of founders, key employees, and advisors that move a new venture from an idea to a fully functioning firm

What is a outside director?

Someone on a firm’s board of directors who is not employed by the firm

What is prior entrepreneurial experience?

Prior start up experience; (This experience has been found to be one of the most consistent predictors of future entrepreneurial performance)

What is relevant industry experience?

Experience in the same industry as an entrepreneur’s current venture that includes a network of industry contacts and an understanding of the subtleties of the industry

What is signaling?

The act of high-quality individual agreeing to serve on a company’s board of directors, indicating that the individual believes that the company has the potential to be successful

What is a skills profile?

A chart that depicts the most important skills that are needed and where skills gaps exist

What is a virtual assistant?

A freelancer who provides administrative, technical, or creative assistance to clients remotely from a home office

What is 7(A) Loan Guaranty Program?

The main Small Business Administration (SBA) program available to small businesses operating through private sector lenders providing loans that are guaranteed by SBA (loan guarantees reserved for small businesses that are unable to secure financing through normal lending channels)

What is a accredited investor?

A person who is permitted to invest in high-risk investments such as business start-ups

What is bootstrapping?

Using creativity, ingenuity, or any means possible to obtain resources other than borrowing money or raising capital from traditional sources

What is burn rate?

The rate at which a company is spending its capital until it reaches profitability

What are business angles?

Individuals who invest their personal capital directly in new ventures

What is carry?

The percentage of the profits the venture capitalists receive

What is corporate venture capital?

A type of capital similar to traditional venture capital, except that the money comes from corporations that invest in new ventures related to their areas of interest

What is crowdfunding?

A method of funding in which people pool their money and other resources, usually via the Internet, to support efforts initiated by other people or organizations

What is debt financing?

Getting a loan (most common sources of debt financing are commercial banks and the Small Business Administration’s (SBA’s) guaranteed loan program)

What is due diligence?

The process of investigating the merits of a potential venture and verifying the key chains made in the business plan

What is a elevator speech (or pitch)?

A brief, carefully constructed statement that outlines the merits of a business opportunity

What is equity-based crowdfunding?

This type of funding helps businesses raise money by tapping individuals who provide funding in exchange for equity in the business

What is equity financing?

A means of raising money by exchanging partial ownership of a firm, usually in the form of stock, for funding

What is factoring?

A financial transaction whereby a business sells its accounts receivable to a third party, called a factor, at a discount in exchange for cash

What is final prospectus?

Documents issued by the investment bank after the Securities and Exchange Commission (SEC) has approved the offering that sets a date and issuing price for the offering

What is follow-on funding?

Additional funding for a firm following the initial investment made by investors

What are general partners?

The venture capitalists who manage a venture capital fund

What is a Initial Public Offering (IPO)?

The first sale of a company’s stock to the public and an important milestone for a firm for four reasons: it is a way to raise equity capital; it raises a firm’s public. Profile; it is a liquidity event; and it creates another form of currency (company stock) that can be used to grow the company

What is a investment bank?

A financial institution that acts as an underwriter or agent for a firm issuing securities

What is a lease?

A written agreement in which the owner of a piece of property allows an individual or business to use the property for a specified period of time in exchange for regular payments

What are limited partners?

participants in a partnership, such as a venture capital fund, which have limited liability, meaning that they are only liable up to the amount of their investment and have no management authority

What is line of credit?

A borrowing “cap” is established and borrowers can use the credit at their discretion; requires periodic interest payments

What is a liquidity event?

An occurrence such as a new venture going public, finding a buyer, or being acquired by another company that converts some or all of a company’s stock into cash

What are peer-to-peer lenders?

A category of financial transactions which occur directly between individuals or “peers”

What are preliminary prospectus?

A document issued by an investment bank that describes the potential offering to the general public while the SEC is conducting an investigation of the offering (also red-herring)

What is private placement?

A variation of the IPO in which there is a direct sale of an issue of securities to a large institutional investor

What is a promissory note?

A document that details the terms of a loan agreement

What is rewards-based crowdfunding?

This type of funding allowed entrepreneurs to raise money in exchange for some type of amenity or reward

What is a road show?

A whirlwind tour taken by the top management team of a firm wanting to go public (consists of meeting key cities where firm presents its business plan to groups of investors)

What are rounds?

Stages of subsequent investments made in a firm by investors

What is Sarbanes-Oxley Act?

A federal law that was passed in response to corporate accounting scandals involving prominent corporations

What is a SBA Guaranteed Loan Program?

An important source of funding for small businesses in general in which approximately 50 percent of the 9,000 banks of the United States participate

What is the SBIR Program?

Small business innovation research (SBIR) competitive program that provides over $1 billion per year to small businesses for early stage and development projects

What is secondary market offering?

Any later public issuance of shares after the initial public offering

What is a single-purpose loan?

One common type of loan in which a specific amount of money is borrowed that must be repaid in a fixed amount of time with interest

What is the STTR Program?

A government grant program, similar to the SBIR program, which requires the participation of a research organization, such as a research university or a federal laboratory

What is sweat equity?

The value of time and effort that a founder puts into a new firm

What is vendor credit?

A form of credit in which a vendor extends credit to a business in order to allow he business to buy it products and/or services up front but defer payment until later

What is venture capital?

The money that is invested by venture capital firms in start-ups and small businesses with exceptional growth potential

What are venture-leasing firms?

Firms that act as brokers, bringing the parties involved in a lease together (EX: firms acquainted with the producers of specialized equipment match these producers with new ventures that are in need of the equipment)

What is yield rate?

The percentage of investment opportunities that are brought to the attention of angel investors that result in an investment

What is advertising?

Making people aware of a product or service in hopes of persuading them to buy it

What is a brand?

The set of attributes-positive Orr negative-that people associate with a company

What is brand equity?

The set of assets and liabilities that is linked to a brand and enables it to raise a firm’s valuation