GAAP- generally accepted accounting
principles established to allow all
businesses to use the same system of
recording and reporting financial
information
Financial Reports- statements or
documents that summarize the results of
a business operation and provide a
picture of its financial position
Accounting Period- a block of time,
such as a month, a quarter, or a year,
covered by an accounting report
Fiscal Year- the accounting period of
time that begins and ends in months
other than the calendar year
Assets- anything of value that a
business owns, such as cash, equipment,
or a building
Fixed Assets- any items that will be
held by a business for more than one
year, such as equipment, trucks, or
buildings
Owner’s Equity- the worth of a for daily business operations and
business
Chart of Accounts- the list of accounts
a business uses in its operation
Credits- additions to the right side of an
account that decrease the balance for all
assets and expense accounts and
increase the balance for all liability and
revenue accounts
Accrual Basis- an accounting system in
which income is recorded when it is
earned, and expenses are recorded when
they are paid
Journalizing- the process of recording
business transactions, usually on a daily
basis as they occur
General Journal- an all-purpose journal
that is used to record all types of
business transaction
Posting- the process of transferring
amounts from the general journal to
accounts in the general ledger
Good financial management is essential
to sound business management.
Accounting provides the vital financial
information owners need to make sound
business decisions.
Income Statement- a report of the
revenue, expenses, and net income or
loss for the accounting period
Balance Sheet- a report of the final
balances of all asset, liability, and
owner’s equity accounts at the end of an
accounting period
Cash Flow- the amount of cash
available to a business at any given time
Statement of cash flows- a report of
how much cash a business took in and
where the cash went
Comparative financial statement- a
financial statement with financial data
from two accounting periods used as an
analysis tool by a business owner
Ratio Analysis- the comparison of two
or more amounts on a financial
statement and the evaluation of the
relationship between these two amounts
Working capital- the capital available
to a business to carry out its daily
operations
Policy- a statement of goals, purposes,
and principles that serves as a guideline
supports the company’s goals and
objectives
-
Steps in Strategic Management
 Analyze internal and external
environment
 Define strategic intent and mission
 Formulate strategies
 Implement the strategies
 Assess strategic outcomes
Political- taxation, policy, privatization
Economic- interest and inflation rates
Socio-Cultural- demographics
Technological- new product potential
Legal- employment/company law
Environmental- climate change, water
resources
5 FORCES FRAMEWORK
 Potential Entrants- few entrants,
more profit
 Buyer- greater power, less profit
 Substitutes- ez 2 substitute less
profit 2 supplie
 Suppliers- high power, less
advantage 2 buye
 Competitive Rivalry- greater, lower
profit
Development- few competitors
Growth- additional competitors, fight 4
share, undiff
Shake out- many price-cutting for
volume
Maturity- fight to maintain share
Decline- exit of some competitors
Primary- extract raw materials from
natural resources -mining, fishing,
farming
Secondary- manufacturing
Tertiary- provides service
-transportation, tourism
Quarternary- new technology mobile
phone, researches
Socio-Economic Factors
 Demographics
 Economics
 Public Resources
 Infrastructure
 Land of Use
 Relocation

Consumer Behavior-
Total Product- combined production of
several units of a given input
Marginal Product- additional output
produced by an additional unit of input
Average Product- average contribution
per unit of input
Law of Diminishing Marginal
Returns- additional output starts to
diminish at a certain point