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B Survey Unit 2
Second Exam Terms
| Term | Definition |
|---|---|
| Business Ethics | The application of right and wrong, good and bad, in a business setting |
| Cause-Related Marketing | Marketing partnerships between businesses and nonprofit organizations |
| Code of Ethics | A formal, written document that defines the ethical standards of an organization and gives employees the information they need to make ethical decisions across a range of situations |
| Consumerism | A social movement that focuses on four key consumer rights: (1) the right to be safe, (2) the right to be informed, (3) the right to choose, and (4) the right to be heard |
| Corporate Philosophy | All business donations to nonprofit groups, including money, products, and employee time |
| Corporate Responsibility | Business contributions to the community through the actions of the business itself rather than donations of money and time |
| Ethical Dilemma | A decision that involves a conflict of values; every potential course of action has some significant negative consequences |
| Ethics | A set of beliefs about right and wrong, good and bad |
| Green Marketing | Developing and promoting environmentally sound products and practices to gain a competitive edge |
| Social Audit | A systematic evaluation of how well a firm is meeting its ethics and social responsibility goals |
| Social Responsibility | The obligation of a business to contribute to society |
| Stakeholders | Any groups that have a stake—or a personal interest—in the performance and actions of an organization |
| Universal Ethical Standards | Ethical norms that apply to all people across a broad spectrum of situations |
| Whistle-Blowers | Employees who report their employer’s illegal or unethical behavior to either the authorities or the media |
| Acquisition | A corporate restructuring in which one firm buys another |
| Board of Directors | The individuals who are elected by stockholders of a corporation to represent their interests |
| Business Format Franchise | A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor |
| C Corporation | The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders |
| Conglomerate Merger | A combination of two firms that are in unrelated industries |
| Corporate Bylaws | The basic rules governing how a corporation is organized and how it conducts its business |
| Corporation | A form of business ownership in which the business is considered a legal entity that is separate and distinct from its owners |
| Distributorship | A type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it |
| Franchise Agreement | The contractual arrangement between a franchisor and franchisee that spells out the duties and responsibilities of both parties |
| Franchise | A licensing arrangement under which a franchisor allows franchisees to use its name, trademark, products, business methods, and other property in exchange for monetary payments and other considerations |
| Franchisee | The party in a franchise relationship that pays for the right to use resources supplied by the franchisor |
| Franchisor | The business entity in a franchise relationship that allows others to operate its business using resources it supplies in exchange for money and other considerations |
| General Partnership | A partnership in which all partners can take an active role in managing the business and have unlimited liability for any claims against the firm |
| Horizontal Merger | A combination of two firms that are in the same industry |
| Limited Liability Company | A form of business ownership that offers both limited liability to its owners and flexible tax treatment |
| Limited Liability | When owners are not personally liable for claims against their firm. Owners with limited liability may lose their investment in the company, but their other personal assets are protected |
| Limited Liability Partnership | A partnership that includes at least one general partner who actively manages the company and accepts unlimited liability and one limited partner who gives up the right to actively manage the company in exchange for limited liability |
| Merger | A corporate restructuring that occurs when two formerly independent business entities combine to form a new organization |
| Partnerhsip | A voluntary agreement under which two or more people act as co-owners of a business for profit |
| Sole Proprietorship | form of business ownership with a single owner who usually actively manages the company |
| Stockholder | An owner of a corporation |
| Unlimited Liability | When businesses formed as sole proprietorships or business partnerships cannot pay their bills, all or part of the business owner’s personal financial assets, such as cash, bank accounts, investments, or homes, can be seized to pay the business debts |
| Vertical Merger | A combination of firms at different stages in the production of a good or service |
| Accounting Equation | Assets = Liabilities + Owners’ Equity |
| Accounting | A system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization |
| Activity-Based Costing | A technique to assign product costs based on links between activities that drive costs and the production of specific products |
| Assets | Resources owned by a firm |
| Balance Sheet | A financial statement that reports the financial position of a firm by identifying and reporting the value of the firm’s assets, liabilities, and owners’ equity |
| Budgeting | A management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period |
| Cost | The value of what is given up in exchange for something |
| Direct Cost | Costs that are incurred directly as the result of some specific cost object |
| Expenses | Resources that are used up as the result of business operations |
| FASB | The private board that establishes the generally accepted accounting principles used in the practice of financial accounting |
| Financial Accounting | The branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders |
| Fixed Costs | Costs that remain the same when the level of production changes within some relevant range |
| GAAP | A set of accounting standards that is used in the preparation of financial statements |
| Horizontal Analysis | Analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends |
| Implicit Cost | The opportunity cost that arises when a firm uses owner-supplied resources |
| Income Statement | The financial statement that reports the revenues, expenses, and net income that resulted from a firm’s operations over an accounting period |
| Indirect Costs | Costs that are the result of a firm’s general operations and are not directly tied to any specific cost object |
| Liabilities | Claims that outsiders have against a firm’s assets |
| Managerial Accounting | The branch of accounting that provides reports and analysis to managers to help them make informed business decisions |
| Master Budget | A presentation of an organization’s operational and financial budgets that represents the firm’s overall plan of action for a specified time period |
| Net Income | The difference between the revenue a firm earns and the expenses it incurs in a given time period |
| Operating Budgets | Budgets that communicate an organization’s sales and production goals and the resources needed to achieve these goals |
| Out-Of-Pocket Cost | A cost that involves the payment of money or other resources |
| Owner's Equity | The claims a firm’s owners have against their company’s assets |
| Revenue | Increases in a firm’s assets that result from the sale of goods, provision of services, or other activities intended to earn income |
| Statement of Cash Flows | The financial statement that identifies a firm’s sources and uses of cash in a given accounting period |
| Variable Costs | Costs that vary directly with the level of production |
| Asset Management Ratios | Financial ratios that measure how effectively a firm is using its assets to generate revenues or cash |
| Capital Budgeting | The process a firm uses to evaluate long-term investment proposals |
| Capital Structure | The mix of equity and debt financing a firm uses to meet its permanent financing needs |
| Cash Budget | A detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash |
| Cash Equivalents | Safe and highly liquid assets that many firms list with their cash holdings on their balance sheet |
| Covenant | A restriction lenders impose on borrowers as a condition of providing long-term debt financing |
| Debt Financing | Funds provided by lenders |
| Equity Financing | Funds provided by the owners of a company |
| Finance | The functional area of business that is concerned with finding the best sources and uses of financial capital |
| Financial Capital | The funds a firm uses to acquire its assets and finance its operations |
| Financial Leverage | The use of debt in a firm’s capital structure |
| Financial Ratio Analysis | Computing ratios that compare values of key accounts listed on a firm’s financial statements |
| Leverage Ratios | Ratios that measure the extent to which a firm relies on debt financing in its capital structure |
| Line of Credit | A financial arrangement between a firm and a bank in which the bank preapproves credit up to a specified limit, provided that the firm maintains an acceptable credit rating |
| Liquid Asset | An asset that can quickly be converted into cash with little risk of loss |
| Liquidity Ratios | Financial ratios that measure the ability of a firm to obtain the cash it needs to pay its short-term debt obligations as they come due |
| Money Market Mutual Funds | A mutual fund that pools funds from many investors and uses these funds to purchase very safe, highly liquid securities |
| Net Present Value | The sum of the present values of expected future cash flows from an investment, minus the cost of that investment |
| Present Value | The amount of money that, if invested today at a given rate of interest, would grow to become some future amount in a specified number of time periods |
| Profitability Ratios | Ratios that measure the rate of return a firm is earning on various measures of investment |
| Retained Earnings | The part of a firm’s net income it reinvests |
| Risk | The degree of uncertainty regarding the outcome of a decision |
| Risk-Return Trade-Off | The observation that financial opportunities that offer high rates of return are generally riskier than opportunities that offer lower rates of return |
| Time Value of Money | The principle that a dollar received today is worth more than a dollar received in the future |
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