FBLA Entrepreneurship 2025

What is a partnership?

A business formed by two or more people, sharing responsibilities and profits.

What is an LLC (Limited Liability Corporation)?

A business structure that combines the simplicity of a partnership and the liability protection of a corporation.

What is a code of ethics?

A set of guidelines for ethical behavior in a business.

What is market penetration?

The percentage of the total public that uses a specific product.

What distinguishes market share from market penetration?

Market share is the percentage of the total market held by a specific company.

What is the difference between a C Corporation and an S Corporation?

A C Corporation is subject to double taxation while an S Corporation avoids double taxation.

What are patents?

Legal protections that grant exclusive rights to inventors for 20 years from the application date.

What defines a traditional economy?

An economic system based on history and rituals, typically found in small communities.

What is GDP?

The monetary value of all finished goods and services produced within a country's borders in a specific time period.

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FBLA Entrepreneurship Study Guide

Initial Capital and Credit

Portions of this from: http://entrepreneurs.about.com/od/financing/a/startupfunding.htm

Fundamentally, there are two types of business financing:

● Debt financing - You borrow the money and agree to pay it back in a particular time frame

at a set interest rate. You owe the money whether your venture succeeds or not. Bank

loans are what most people typically think of as debt financing, but we will explore many

other options below.

● Equity financing - You sell partial ownership of your company in exchange for cash. The

investors assume all (or most) of the risk--if the company fails, they lose their money. But if

it succeeds, they typically make much greater return on their investment than interest

rates. In other words, equity financing is far more expensive if your company is successful,

but far less expensive if it isn't.

Friends and family - Still your best source for both loans and equity deals. They are typically less

stringent regarding your credit and their expected return on investment. One caveat: structure the

deal with the same legal rigor you would with anyone else or it may create problems down the road

when you look for additional financing. Prepare a business plan and formal documents--you'll both

feel better, and it's good practice for later.

Credit cards - a great tool for cash flow management, assuming you use them just for that and not for

long-term financing. Keep one or two cards with no balance on it and pay it off every month to give

yourself a 30 to 60 day float with no interest. And the low introductory rates on some cards make

them some of the cheapest money around. Managed well, they're extremely effective; managed

poorly, they're extremely expensive.

Bank loans - They come in all shapes and sizes, from micro loans of a few hundred dollars, typically

offered by local community banks, to six-figure loans by major national banks. These are much easier

to obtain when backed by assets (home equity or an IRA) or third-party guarantors (e.g.,

government-sponsored SBA loans or a cosigner). If you obtain a line of credit rather than a

fixed-amount loan, you don't start paying interest until you actually spend the money.

Leasing - the way to go if you need big-ticket items such as equipment, vehicles, or even computers.

Your supplier will help you explore this.

Angel investors - They fill the gap between friends and family and venture capitalists, who now rarely

even look at investments below $1 million. Enlist a savvy financial adviser to structure the deal.

Private lending - represents a viable alternative when the bank says "no". Private lenders are looking

for the same information and will conduct similar due diligence as the banks, but they typically

specialize in an industry and are more willing to take on higher-risk loans if they see the potential.

Financial Statements

Balance Sheet:

● Assets=Liabilities+Equity

● Assets are fixed assets: land, buildings, equipment

● and current assets: cash, accounts receivable, marketable securities, notes receivable, and

inventory

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● Liabilities are assets owed to others: accounts payable, notes payable, interest payable, wages

payable, taxes payable

● Equity: stocks, earnings, equity

● “snapshot” of economic picture

● Reports the resources of the entity, useful for evaluating ability of company to meet

long-term obligations, comparative balance sheets very useful from one time to a later time.

● change in the equity is essentially income

Income Statement:

● results of entity’s operations during a period of time

● Net Income=Revenue-Expenses

● Revenue are inflows

● Expenses are outflows

Cash Flow Statement:

● company may be profitable but lose cash, this is where cash flow statement comes in, useful

in ability to pay bills, encompasses a time period

● analysis of all transactions in business, where it got cash and how cash was used

● Sources of cash, uses of cash, change in cash balance

● operating activities, investing activities, financing activities

● Info comes from beginning and ending balance sheets and income statement

● improve cash flow statement by decreasing accounts receivable, increasing revenue,

decreasing expenses

Government Regulations/Laws

Laws:

● Sherman Law is against monopolies

● Clayton Law is no tying products one another, forcing people to buy one thing with another

● Robinson Patman Act is against price discrimination on customers

● Wheeler Lea is against deceptive advertising and false advertising

● Fair Labor Standards Act - Minimum Wage

● Safety and Health Act of 1970 - provide safe and sanitary work environments

● Employee Retirement Income Security Act-receive retirement plan and health plan benefits

● Immigration and Nationality Act-only US citizens and individuals with work visas can work,

business must keep I-9 file on hand

Regulations:

● Government regulates advertising: must be truthful and not misleading, back up claims made,

fair to competitors and consumers

● Government regulates employment and labor: protect minimum wage, benefits, safety and

health compliance, working conditions, equal opportunity employment, privacy regulations

● Government regulates environment

● Government regulates privacy

● FDA ensures safety of food and drugs

● FCC regulates broadcast signals (TV and Radio)

● FTC protects consumers from unfair practices

● CPSC regulates everything that is not regulated by others (not food and drugs etc.), created by

Consumer Product Safety Act in 1972

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Small Business Administration is government agency, give loans made through partnering banks to

startups and small businesses, helps small business start + grow