Business 121 Exam
What are the four Ps of marketing?
Product, Placement, Promotion, and Pricing
Product Life Cycle...
Introduction, Growth, Maturity, and Decline.
What is an income statement?
A financial report that shows an organization's profitability over a period of time.
What is a balance sheet?
A snapshot of an organization's financial position at a given moment.
What is equity?
The difference between a firm's assets and its liabilities.
What is liability?
Debts, accounts payable, etc.
What is a statement of cash flow?
Shows the cash receipts and the cash payments of a business during a period of time.
List the four types of ratios...
Profitability, Activity, Liquidity, and Leverage/Debt Utilization
What is the financial system?
The mechanism by which money flows from savers to users.
List the five types of bonds...
Secured, Unsecured, Convertible, Callable, and Redeemable.
Debt advantages include...
Ownership retention, tax benefits, predictability, temporary, lower cost in long term.
Debt disadvantages include...
Requires repayment, credit risk, may require collateral, not as flexible, increased financial risk.
Equity advantages include...
No repayment, access to other resources, risk sharing, growth opportunities, credit enhancement.
Equity disadvantages include...
Dilution of ownership, dividend payments, long process to secure, higher cost in longer term, potential conflict.
Bonds are...
They represent debt, principle is repaid at maturity, you must pay interest, interest is a tax-deductible expense and bondholders have no say in company decisions.
Stocks/Shares are...
They represent ownership, no principle is repaid, may pay dividends, dividends are not a tax-deductible expense, shareholders may have some say in company decisions.
What is capital investment analysis?
It is deciding when to invest in fixed assets.
Long term sources of funding include...
Bonds, stocks (retained earnings)
Assets include..
Cash and marketable securities, accounts receivable, and inventory.
Short-term liabilities include...
Accounts payable, short-term loans.
What is financial management?
Financial management is the function of planning, obtaining, and managing the company's funds to accomplish its objectives as effectively and efficiently as possible.
What is a redeemable bond?
A redeemable bond can be redeemed early by bondholders/investors, it usually offers a lower interest rate because the corporation is risking that investors will redeem early if market interest rates increase.
What is a callable bond?
A callable bond can be redeemed early by the corporation, they usualy offer a higher interest rate because investors are risking that the corporation will redeem early if market interest rates decline.
What is a convertible bond?
A convertible bond gives the option to convert to common shares.
What is an unsecured bond?
An unsecured bond has a higher level of risk and is backed only by the firm's reputation.
What is a secured bond?
A secured bond is the least risky, it is backed by specific assets, an example would be government bonds.
What is speculation?
Speculation is the hope of making a large profit, within a short time, often based on hot tips and market fluctuations.
What is investment?
Investment is the expectation of real earnings and dividends, usually for the longer term, based on systematic research.
Investment Principles include...
Form clear-cut investment goals and then be patient.
Know your investment limits.
Evaluate risk and return.
Make sure to prioritize diversity.
Seek good counsel.
Investment motives include...
Income, growth, safety or preservation, and liquidity.
How do you calculate Break-Even Analysis?
To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.