FBLA Terms
. Business Planning & Structure
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Business Plan: A written plan of a company's future and goals, used to convey these goals to potential investors.
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Executive Summary: Key information including mission statement, company info, product overview, growth highlights, current investors, and future plans. Usually written last but appears first in the plan.
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Company Description: Review of the company, the nature of the business and market, how your product serves the market, who specifically is in your target market, and competitive advantages.
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Market Analysis: Industry description, target market information, distinguishing characteristics of customers, size of the primary target market, market share, pricing and gross margin targets, competitive analysis, and regulatory restrictions.
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Organization and Management: Company’s organizational structure, ownership details, profiles of management team, qualifications of the board of directors, and legal structure.
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Service or Product Line: Specific benefits of the product/service, its advantages over the competition, current development stage, product life cycle, patent information, and R&D.
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Marketing and Sales: Market strategy, market penetration, growth strategy, distribution, and communication strategy.
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Funding Request: (Optional) Current and future funding needs and how it will be used.
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Financial Projections: Historical and prospective financial data, and short analysis of financial information.
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Appendix: Credit history, resumes, product pictures, letters of reference, market studies, licenses, permits, and legal documents.
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Types of Businesses:
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Sole Proprietorship: Owned by one person, easy to start but with personal liability.
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Partnership: Two or more people, relatively easy to start, but all owners are personally liable.
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Limited Partnership: Allows for limited liability and limited input for some partners.
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C Corporation: A legal entity, owners have limited liability, can raise capital easily, but with double taxation.
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S Corporation: Limited liability, eliminates double taxation, but with specific restrictions.
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Limited Liability Corporation (LLC): Combines partnership simplicity with corporate tax benefits and limited liability.
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Cooperative: Owned and controlled by members.
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Mission Statement: Explains what the business is about.
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Goals and Objectives: Should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound), with short-term and long-term objectives.
II. Finance & Funding
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Sources of Funding:
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Debt Financing: Borrowing money with an agreement to pay it back with interest.
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Equity Financing: Selling partial ownership in exchange for cash.
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Personal Savings: Using personal funds.
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Friends and Family: Can provide loans or equity, but should be structured legally.
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Credit Cards: Useful for cash flow management, not for long-term financing.
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Bank Loans: Various sizes, easier with assets or guarantors.
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Leasing: For big-ticket items like equipment.
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Angel Investors: Fill the gap between friends/family and venture capitalists.
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Private Lending: Alternative when banks deny loans.
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Grants: Receiving funding from a government agency or organization.
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Crowdfunding: Raising funds online from a large number of people.
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Venture Capitalists: Provide investment support to young companies.
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Financial Statements:
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Balance Sheet: Assets = Liabilities + Equity, a snapshot of the financial picture.
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Assets: Fixed assets (land, buildings, equipment) and current assets (cash, accounts receivable, etc.).
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Liabilities: Assets owed to others (accounts payable, notes payable, etc.).
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Equity: Stocks, earnings, and equity.
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Income Statement: Results of operations during a period; Net Income = Revenue - Expenses.
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Cash Flow Statement: Sources and uses of cash; useful for assessing the ability to pay bills.
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Break-Even Analysis: Determines the point at which revenue equals costs; Break-Even Point = Fixed Costs / (Selling Price - Variable Costs).
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Cash Flow Management is crucial for meeting obligations. Strategies include cash budgeting, forecasting, and monitoring.
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Most startup companies need more capital than they anticipate.
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Personal financial resources are the most common source of funds for entrepreneurs.
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Sale of stocks is not a typical method used by entrepreneurs to finance new business.
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Commercial banks are at the heart of the financial market for small businesses.
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Loans backed by collateral are called secured loans.
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A line of credit is similar to a business loan, but interest is only paid on the amount used.
III. Marketing & Sales
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Marketing Mix: Product, price, place, and promotion.
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Target Market: Specific group of customers the business aims to serve.
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Marketing Strategies:
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Advertising: Paid messages promoting the product.
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Sales Promotions: Short-term incentives for purchase.
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Public Relations: Building a positive image.
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Digital Marketing: Using digital channels.
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Market Penetration: Amount of the total public that the general item encompasses.
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Market Share: Amount of the percentage of market penetration that one company has.
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Market Segmentation: Dividing a group of people by demographics, psychographics, and geography, then launching targeted ads.
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Customer-oriented pricing strategies are focused on target markets and demands.
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A broker represents clients who buy or sell specialized goods or seasonal products.
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A retailer sells products to the ultimate consumer.
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Mass marketing was a 1960s strategy used by large companies to encourage people to buy their products.
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The most important part of a marketing plan is identifying user benefits.
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Entrepreneurs should base their market assessments, production schedules, inventory policies, and personnel decisions on sales forecasts.
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Creating an image for a product in the customer's mind is called positioning.
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Penetration pricing starts with a low introductory price to build a customer base.
IV. Management & Operations
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Management skills: A prospective team member should be prepared to recruit high-quality people.
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Job Analysis: Systematic collection and recording of information about jobs in the organization.
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Hiring process:
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Screening job applicants.
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Complete a job application.
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Interviews.
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Training:
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Lectures: Efficient for training a large number of employees.
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On-The-Job-Training: Best for training few employees on job details.
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Incentive-pay programs: May include bonuses.
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Task Statement should include the outcomes or results of the job.
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Employee recruitment through help-wanted ads typically gets a large number of responses but many are unqualified.
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The most valuable assets in a business are the employees.
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Supervisors work directly with employees who perform daily tasks.
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A job description is a written statement of the tasks and responsibilities of a position.
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Workflow planning benefits from an organizational chart and documented job descriptions.
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Core competencies help a business develop key operational areas.
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Strategy is a roadmap to fulfill a company's mission and goals.
V. Legal & Regulatory Environment
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Government Regulations/Laws:
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Sherman Law: Against monopolies.
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Clayton Law: No tying products.
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Robinson Patman Act: Against price discrimination.
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Wheeler Lea: Against deceptive and false advertising.
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Fair Labor Standards Act: Minimum Wage.
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Safety and Health Act of 1970: Safe work environments.
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Employee Retirement Income Security Act: Retirement and health plan benefits.
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Immigration and Nationality Act: Only US citizens and those with work visas can work.
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Government Agencies:
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FDA: Ensures safety of food and drugs.
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FCC: Regulates broadcast signals.
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FTC: Protects consumers from unfair practices.
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CPSC: Regulates products not covered by others.
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Small Business Administration (SBA): Provides loans to small businesses through partnering banks.
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The Sherman Antitrust Act was enacted to increase competition by regulating monopolies.
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Businesses must have a license to conduct business in many states, which needs to be renewed regularly.
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Zoning laws control what a business can sell and where it can operate.
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Respondent Superior makes a business responsible for actions of employees within their scope of employment.
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The Occupational Safety and Health Act (OSHA) sets workplace safety standards.
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Workers Compensation Insurance covers job-related injuries.
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The Equal Pay Act requires equal pay for men and women doing equal work.
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The Age Discrimination in Employment Act of 1967 promotes employment for people over 40 based on ability.
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The Family Medical Leave Act of 1993 requires businesses with more than 50 employees to provide up to 3 months of unpaid leave.
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The Consumer Credit Protection Act requires disclosure of credit requirements and rates to loan applicants.
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A patent is the grant of the exclusive right to make, use, import, sell, and offer a new product or process.
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A trademark is a word, letter, or symbol associated with a specific company or product.
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A trade secret is confidential information a business keeps private.
VI. Taxes
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Types of Business Taxation Forms Required:
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Sole Proprietorships: Reported by owners on Form 1040.
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General Partnership: Reported by owners on Form 1065 and 1040.
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Limited Liability Corporation (LLC): Reported by owners on Form 1065 and 1040.
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C Corporation: Corporate tax paid + any possible dividend tax (double taxation) Form 1120 and 1040.
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S Corporation: Reported by owner Form 1120S and 1040.
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Income tax in the US is a progressive tax.
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Businesses must pay sales taxes to local and state governments monthly.
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Payroll income taxes must be paid quarterly by the employer.
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Both employers and employees must pay FICA or social security taxes.
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Capital gains tax discourages business activity.
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Corporations are chartered under state laws.
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S corporations are taxed as partnerships.
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LLCs have pass-through tax treatment.
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When stock is transferred to an individual in exchange for services, it is considered taxable income.
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Unemployment taxes are paid by business employers.
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The Federal Employer Identification Number identifies the business for tax purposes.
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Sales taxes are collected by the business but are not an expense.
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Double taxation occurs when a taxpayer reports and pays taxes on dividends received from a corporation.
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Skimming is an unethical practice involving failure to report all income on tax returns.
VII. Ethics and Social Responsibility
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Ethics: The study of moral choice and values, choosing between right and wrong.
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Code of Ethics: The level of ethical behavior demanded by an individual, business, or culture.
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Responsibilities to Customers: Be respectful, honest, avoid misleading, handle disputes fairly.
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Responsibilities to Suppliers: Be fair, honest, respectful, give adequate time to fill orders.
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Responsibilities to Creditors/Investors: Use money carefully, be honest about losses.
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Social Responsibility: Obligation to have a positive effect on society. The most important level of social responsibility is economic.
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Philanthropic is the highest level of the pyramid of social responsibility.
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Utilitarianism deals with the consequences of one's actions.
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The stockholder model assumes the company's only important ethical obligation is to make money for investors.
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The stakeholder model assumes a company has legal and ethical responsibilities to everyone affected by the business.
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Moral development is the process of growing more ethically mature.
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Volunteer service is one measure of a company's social responsibility.
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Environmental protection is a legal obligation that a company may try to satisfy by going green.
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"Caveat venditor" means let the seller beware.
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The Better Business Bureau provides customers information about local companies.
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Green marketing consists of activities to satisfy customer needs without harming the environment.
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Ethical principles are general statements of how people should act.
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The standard of ethics refers to social expectations of moral behavior.
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The egoism principle states the right thing to do is what best serves one's own long-term interests.
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Bait and switch is advertising a low-price product while intentionally stocking a limited number in hopes of selling more expensive items.
VIII. Risk Management & Insurance
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Risk Assessment includes identifying potential risks and designing a plan to cover those risks.
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Basic strategies for dealing with risk include avoiding, minimizing, transferring, and accepting.
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Human risk includes credit card fraud.
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Insurance is a strategy for transferring risk.
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Liability insurance covers a company's legal responsibility for the harm it may cause.
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Property insurance covers the cost to repair an office building if damaged by fire.
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Uncontrollable risks are not affected by human actions.
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Speculative risk offers a chance to gain or lose from an event.
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An insurance agent may not earn a greater commission for less claims on policies sold.
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Most credit cards are considered unsecured loans.
IX. Additional Key Terms
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Innovation: The ability to develop new ideas.
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Creativity The ability to develop new ideas.
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Brainstorming: A process where a small group produces many imaginative ideas.
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GAAP: Generally Accepted Accounting Principles.
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Cash Budget: Allows a firm to plan short-term cash needs.
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Common-Sized Financial Statement: Depicted in percentages for each item.
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Core Competencies: Aid a business in developing key operational areas.
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Strategy: A road map to fulfill a company's mission.
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Five C's of Credit: Character, Capacity, Capital, Collateral, Conditions.
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Primary Data: Collected directly by the researcher.
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Secondary Data: Collected by someone else, such as census reports.
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Benefit: What a customer gains from a product or service.
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Holding/Carrying Costs: A component of inventory cost.
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Joint Venture: Formed by two or more businesses for a specific project.
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Franchising: Offers territorial protection.
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The internationalization of American franchise systems is a major trend in franchising.
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Arbitration: When a third party imposes a settlement in labor negotiations.
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Acquisition: Taking ownership of another business.
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Advertising: Attracting public attention to a product.
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Angel Investors: Individuals backing emerging ventures.
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Appraisal: A formal estimate of value.
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Barter: Direct exchange of merchandise and/or services between businesses.
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Business Incubator: Provides workspace, coaching, and support services to entrepreneurs and early-stage businesses.
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Business Valuation: Estimate of the worth of a business.
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Consumer Direct Marketing: A form of network marketing.
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Copyright: Protection for published and unpublished works.
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Corporation: A body granted a charter recognizing it as a separate legal entity.
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Downline: Collection of people signed up underneath an individual in a Multi-Level Marketing business.
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Due Diligence: Inquiry process of obtaining sufficient and accurate disclosure.
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General Partnership: Each partner shares in the administration, profits, and losses.
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Entrepreneurship: A person who organizes, operates, and assumes the risk for a business venture.
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Home Based Business: Business whose primary office is in the owner's home.
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Independent Contractor: Someone who offers their services to the public.
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Intrapreneur: Someone who takes on entrepreneur-like ventures within a large corporate environment.
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Limited Liability Company (LLC): A legal entity that is not taxable itself and shields personal assets from debt like a corporation.
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Limited Partnership: Day-to-day operations are controlled by general partners and funded by limited partners who are responsible for losses based on their investment.
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Line of Credit: Similar to a business loan, except the borrower only pays interest on the amount actually used.