Small business management

Accounting

a language of business employed to communicate financial information based upon analyzing, recording, classification, summarization, reporting, and interpretation of financial data.

Accounting Equation

Assets = Liabilities + Owner's Equity

Accounts Payable

an unwritten promise to pay creditors for property, such as merchandise, supplies, or equipment, purchased on credit, or for services received on credit.

Accounts Receivable

an unwritten promise by a customer to pay, at a later date, for goods sold or services rendered.

Accural Accounting

recording in each fiscal period applicable expenses, whether paid or not, and income earned, whether collected or not.

accrued expense

An expense that the business has incurred but has not yet paid.

Accrued income

income actually earned during an accounting period but which will not be received until a future period.

Acquistion

A company that is inherited or bought.

Advertising

the art of making the public aware of the services or commodities that the business has for sale

Age of Accounts Receivable

measures the average time required to collect receivables.

Age Discrimination in Employment Act

Federal legislation that requires employer to treat applicants and employees equally regardless of age.

Age of inventory

measures the average time required to sell inventory

Amortization

the paying off of a debt in regular installments over a period of time

Americans with Disabilities Act

Legislation passed by congress in 1990 to end discrimination against people with disabilities

angle investors

private investors who fund start-up businesses

Assets

property or items of value owned by a business

Bad debts

accounts receivable that are uncollectable

Balance Sheet

a formal financial statement illustrating the assets, liabilities, and owner's equity of a business as of a specific date.

Bona Fide Occupational Qualification (BFOQ)

a necessary (not merely preferred) qualification for performing a job

Book Value

The cost of a fixed asset less accumulated depreciation.

Branding

a method of applying verbal and/or symbolic means to identify a product and/or service.

break-even analysis

a method of determining what sales volume must be reached before total revenue equals total costs

business

An organization that produces or distributes a good or service for profit.

Business Interruption Insurance

an insurance that protects companies during the period necessary to restore property damaged by an insured peril. Coverage pays for lost income and other expenses related to recovery.

business plan

a summary of how a business owner, manager, or entrepreneur intends to organize the business endeavor and implement activities necessary for the venture to succeed.

Business Policies

Fundamental statements that serve as guides to management practice.

C Corporation

an ordinary corporation, taxed by the federal government as a separate legal entity

Cash Basis Accounting

an accounting practice in which revenue is not recognized in the accounting records until received and in which expenses are not recognized until paid

Cash Discounts

discounts from quoted prices as an inducement for prompt payment of invoices

cash flow

the amount of cash a company generates and uses during a period.

Cash Flow Statement

A financial statement that shows the flow of money in and out of the business.

Casuality insurance

insures against the loss and/or damage of property and resulting liabilities

Census of Business

source of market data that explains where certain businesses are located

Census of Housing

source of market data that keeps track of new home sales by region and/or the construction of new houses by region and specific area.

Census of Manufacturing

source of market data that explains where certain manufacturers are located

Census of Population

a source of market data that compiles population statistics with regard to distribution of population by region, area, etc.

Chamber of Commerce

nonprofit organization of local businesses whose purpose is to promote their interests

Civil Rights Act

federal legislation that prohibits discrimination on the basis of race, color, religion, sex, pregnancy, or natural origin.

Closed end credit (Installment credit)

balance of costly goods paid for in small monthly (fractional) payments over a period of time.

competition

the practice of trying to obtain something that is being sought by others under similar circumstances at the same time.

Consumer Credit

a type of credit granted by retailers that is used by individuals or families for satisfaction of their own wants

Controlling (Evaluating)

A management function which compares organizational and individual performance with predetermined standards or expected results.

Copyright

the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same.

Corporation

a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.

Cost of Goods Sold

the total cost of merchandise sold during the period

credit

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

current asset

an asset that is expected to be converted to cash, sold, or consumed during the next 12 months, or within the business's normal operating cycle if longer than a year

Current Liabilities

liabilities due within a short time, usually within a year

Current Ratio

current assets - current liabilities

debt equity

Total Debt/Total Equity

Debit

an amount recorded on the left side of a T account

Demographics

statistical data relating to the population and particular groups within it.

Deprecation

the loss in value of a fixed t due to wear and tear and the passage of time; or, a method of matching the cost of a fixed asset against the revenues that the fixed asset will help produce during its useful life.

Drawing account (owner withdrawals)

a separate owner's equity account in which withdrawals of cash or other assets by the owner for personal use are recorded.

Earnings Valuation Approach

values the asset based upon what revenue can be earned upon it in the future

earnings before Interest, taxation, depreciation, and amortization (EBITDA)

A firm's 17 profits after subtracting cost of goods sold and cash operating expenses, but before 18 subtracting interest expense, taxes, depreciation, and amortization.

Economic Base

the manufacturing and service activities performed by the basic sector of a city's labor force; functions of a city performed to satisfy demands external to the city itself and, in that performance, earning income to support the urban population

Economic Order Quantity (EOQ)

the optimal order size to minimize the sum of ordering, carrying, and stockout costs

employee

a worker who is hired to perform a job

employment application

a record of statements made at the time the applicant first seeks employment

Entrepreneur

A person who organizes, manages, and takes on the risks of a business.

Environmental Protection Agency (EPA)

an independent federal agency established to coordinate programs aimed at reducing pollution and protecting the environment

Equal Employment Opportunity Act

The absence of employment discrimination based on race, color, religion, sex, or national origin.

Equal Pay Act

made it illegal for employers to pay female workers less than men for the same job

Expenses

the costs of operating a business

Factoring

a method to obtain cash for business operations before payments are received from customers by selling off accounts receivable to a third party

Fair Labor Standards Act (Wage and Hour Law)

federal legislation which outlaws discriminatory practices in pay; requires employers to pay a minimum wage to employees, and to pay a minimum of one and one-half times the regular rate for any hours beyond forty worked in a week.

Family and Medical Leave Act (FMLA)

U.S act that provides employees with up to 12 weeks of unpaid leave to care for family members or because of a serious health condition of the employee.

Federal Insurance Contributions Act (FICA)

Federal law that requires workers and their employers to contribute to Social Security and Medicare

Federal Unemployment Tax Act (FUTA)

Law that requires employers to pay unemployment taxes to the federal government.

Fixed asset (capital)

long-term capital that is invested in the small business; also, funds invested in such long-term assets as: land, building, machinery, furniture, fixtures, other equipment, not to be converted to cash within one year.

fixed expenses

Expenses that do not change from month to month, such as auto insurance or rent.

General Journal

a book of original entry in which business transactions are recorded in chronological order

General Ledger

A ledger that contains all asset, liability, stockholders' equity, revenue, and expense accounts.

Goodwill

An intangible asset such as the name of a funeral home; also an intangible asset which enables business to earn a profit in excess of the normal rate of profit earned by other businesses of the same kind.

Gross pay (gross earnings)

income before any deductions have been made.

Gross Profit (Gross Margin)

net sales minus cost of goods sold

Human resource management (personnel management)

process of acquiring, training, developing, motivating and appraising a sufficient quantity of qualified employees to perform necessary activities; developing activities and an organizational climate conducive to maximum efficiency and worker satisfaction.

Immigration Reform Act

Federal legislation requiring employers to check job applicants' papers to be sure they are either U.S. citizens or aliens authorized to work in the U.S.

Income statement (profit and loss statement; statement of operations; operating statement)

a formal financial statement which presents the income, expenses, and resulting net profit or net loss for a given period.

income tax

A tax on people's earnings

Independent Contractor

any person who agrees to perform a service for a fee and who is not subject to the control of those for whom the service is performed

innovation

An improvement of an existing technological product, system, or method of doing something.

insurance

protection against possible financial loss

intangible assets

long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value

interest

A sum paid or charged for the use of money or for borrowing money

Inventory (merchandise)

those goods or stock of goods which are held for resale at a profit

Inventory Turnover

cost of goods sold/average inventory

invoice

A form describing the goods or services sold, the quantity, and the price

Job Analysis

the process of getting detailed information about jobs

job description

a written description of the basic tasks, duties, and responsibilities required of an employee holding a particular job

job specification

describes the minimum qualifications a person must have to perform the job successfully

Key person life insurance

life insurance that protects a firm against losses due to the death of a key employee

Leading (Actuating, Directing)

the process of guiding and/or supervising the activities of an organization to achieve plans and objectives.

Liabilities

Amounts owed to creditors

Limited Liability Company (LLC)

a form of business ownership that offers both limited liability to its owners and flexible tax treatment

Liquidation value approach

the anticipated value of an asset that would be realized in case of liquidation of the business

Long-term liabilities (fixed liabilities)

liabilities that are not due and payable within one year

Management

the process used to accomplish organizational goals through planning, organizing, leading, and controlling people and other organizational resources

manufacturing business

buys raw materials, uses labor and machinery to transform them into finished products, and sells the finished products to individuals or other businesses