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chapters 20/21
Mr. Hurdle's Chapters 20 and 21 Marketing/Merchandising Test
| Question | Answer |
|---|---|
| Acquiring and Financing a Business | Buying Into An Existing Business, Buying an Existing Business, Establishing a New Business, and Sources of Capital |
| Buying Into An Existing Business | existing customer base, name recognition, a) partnership, b) buying into a business by buying stock, c) tremendously easier transition if business is already operating |
| Buying An Existing Business | a) Records are available (You won't have to guess), b) You can check the market to determine fair cost, c) Transition should be very smooth |
| Establishing a New Business | will lose money 1st year, will break even 2nd year if a good business, will make a profit the 3rd yr, a) You may set it up the way you want to, b) You must have enough capital for at least 2 yrs w/o profit, c) You must have a reserve fund |
| Sources of Capital | 1) Personal Savings, 2) Bank Loans, 3) Partnerships, 4) Corporate Financing |
| Selecting a Business Location | 1) Current Population Trends, 2) The Community Economy, 3) REtail Competition, 4) Community Services and Laws, 5) Is there a central shopping District, 6) Fringes of a central shopping district, 7) Secondary shopping districts, 8) Shopping Centers/Malls |
| The Community Economy | a) family income, b) breakdown of income brackets, c) unemployment rates, d) whether people own or rent homes, e) are the people professionals or not |
| Retail Competition | a) What kinds of stores? b) How many stores? |
| Community Services and Laws | a) Accounting Services, b) Banking Services, c) Advertising Services, d) Credit Information Services, e) Building Laws, f) Zoning Laws |
| Fringes of a Central Shopping District | a) Rent is lower, b) typically specialty stores |
| Secondary Shopping Districts | usually much cheapter, but you are limiting your number of customers |
| Renting | usually on a monthly basis with X amount of dollars a month. They can remove you at any time and raise the cost at any time. Very little protection against eviction or price being changed |
| Lease | usually one to ten years with the option to renew. Can't raise price or evict you. *All leases should be put in writing for your protection, read thoroughly, and signed by both parties |
| Forms of Leases | 1) Flat Amount Lease, 2) Straight Percentage Lease, 3) Percentage Lease with a Guaranteed Minimum |
| Flat Amount Lease | Ex: $500/month for 3 years |
| Straight Percentage Lease | Amount varies with profit or volume. Ex: 5% of sales or 15% of profit, percent of volume |
| Percentage lease with a Guaranteed Minimum | Ex: $500/month or 5% of sales-whichever is higher |
| Income Statement | statement that indicates how well a business is doing over a period of time: Monthly, Quarterly, Yearly, Bi-Yearly |
| revenue | the money received from the sale of products and serves |
| The Role of Marketing in Financial Planning | Target Markets, Marketing Mix |
| Managing Marketing Costs | Long-Term Expenses, Short-Term Expenses |
| Financing Marketing Activities | Capital Expenses, Inventory Expenses, Operating Expenses |
| Capital expenses | long-term investments in land, buildings, and equipment |
| Inventory Expenses | usually financed by short-term loans from financial institutions or through credit extended by the seller |
| Inventory | the assortment and quantities of products the company maintains for sale to customers |
| Operating Expenses | costs of the day-to-day activities of marketing. Includes: salaries and wages, materials and supplies, advertising and special promotions, and customer services |
| Planning Tools | Forecasts, Budgets |
| Financial forecasts | numerical predictions of future performance related to revenue and expenses |
| Budgets | detailed projections of financial performance for a specific time period, usually a year or less |
| Operating Tools | Financial statements: Income statement, Balance sheet |
| Financial statements | detailed summaries of the specific financial performance for a business or a part of the business |
| Income statement | reports on the amount and source of revenue and the amount and type of expenses for a specific period of time to determine if the business earned a profit or loss on its operations |
| Balance sheet | describes the type and amount of assets, liabilities, and capital ina business on a specific date |
| Using Financial Tools | Developing Forecasts and Budgets, Gathering Information for Financial Statements |
| Analyzing Financial Information | Using Financial Information, Increasing Revenues, Controlling Costs |
| Effects of Marketing on Revenue | Sales of Products and Services, After-Sale Revenue, Credit and Interest, |
| Credit and Interest | Credit Cards, Unpaid Credit, Regulation |
| Equal Credit Opportunity Law | prevents companies from discriminating among the people to whom they offer credit |
| Truth-in-Lending Act | specifies the type of information businesses must provide to credit customers |
| Fair Credit Reporting Act | regulates the use of the credit information that businesses gather about individual customers |
| Fair Debt Collection Practices Act | controls methods companies use to collect money owed by customers |
| Expenses Associated with the Marketing Mix | Product Expenses, Distribution Expenses, Price Expenses, Promotion Expenses |
| Starting A Business | The American Dream, Entrepreneurship Opportunities in Marketing |
| entrepreneur | someone who takes the risk to start a new business |
| Entrepreneurship | the process of planning, creating, and managing a new business |
| The Importance of Entrepreneurship | Economic Role,Personal Benefits |
| Characteristics of Entrepreneurs | 1) focused and goal oriented, 2) risk takers, 3) want to achieve, 4) independent, 5) have a high level of self-confidence, 6) creative |
| Preparing for Entrepreneurship | Academic Preparation, Using Technology, Business Skills |
| Academic Preparation | Communication Skills, Math Skills, Scientific skills |
| Business Opportunities in Marketing | Promotion, Selling, Distribution, Pricing, Finance, Marketing-Information Management, Product/Service Management |
| Identifying Business Ownership Opportunities | 1) Identify a Target Market, 2) Study the Competition, 3) Develop a Unique Offering |
| The Ownership Decision | Proprietorship,Partnership, Corporation |
| Proprietorship | a business owned and managed by one person |
| Advantages of Proprietorships | 1) owner of business is boss and can make all decisions, 2) receives all profits of business, 3) owner can make decisions without consulting others and so can act quickly when needed, 4) forming one is relatively easy |
| Disadvantages of Proprietorships | 1) greater chance that business will fail due to lack of planning and managements skills, 2) one person may not have needed money and may not be able to borrow adequate funds, 3) requires owner to assume great deal of risk |
| Partnership | owned and operated by two or more people who share in the decision-making and profitability of the company |
| partnership agreement | a legal document that specifies the responsibilities and financial relationships of the partners |
| Advantages of Partnerships | 1) more people available to manage the business, 2) usually more money available and banks more likely to loan money |
| Disadvantages of Partnerships | 1) Disagreements can occur on important decisions so it may take time to discuss issues and agree on the best solution, 2) all partners responsible for any actions and decisions made by another partner. If money is owed, each partner is liable for debt |
| corporation | a business owned by people who purchase stock in the company |
| charter | a legal document allowing the corporation to operate as if it were a person. Business can borrow money, enter into contracts, and is liable for its decisions and actions |
| Advantages of Corporations | 1) losses suffered by business in case of failure are limited to amount of investment, 2) life of it does not depend on any one owner |
| Disadvantages of Corporations | 1) face more rules and regulations and watched more carefully by states in which they operate and must file regular reports, 2) no one individual has to take responsibility for business operations and decisions, 3) usually are taxed at a higher rate |
| The Business Plan | purpose of business, Descriptions of business' customers & important needs, Major business activities to be completed, Resources needed, Sources of financing & amt, type of competition, Financial req. & profit projections |
| business plan | a written document prepared to guide the development and operation of a new business |
| Using the Business Plan | Prospective Partners & Stockholders, Bankers and Investors, Employees of the Business, Other Business People |
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