BBI Exam Review (extras)

schoolstudycanada's version from 2017-06-26 02:14

Chapter 1 and 2

Question Answer
What determines what we buy?- Income and price
- status
- trends
- values
- promotion
What is Capital?Money needed to establish and operate a business
Breaking evenSame as equilibrium
Equilibrium pointSupply and Demand are equal

Chapter 3

Question Answer
Unlimited liabilityIf corporation fails tax collectors take all assets
Partnership agreementcontains name, location, nature, owners, capital contributed
What is meant by "limited" company?corporation that limits the liability taken by shareholders
What is meant by company charter?Document which holds name, purpose, capital contributed, location and names of members of corporation
Who are the owners in a corporation? (2)Shareholders, bond holders
How are cooperatives similar to corporation?- Run by board of directors
- Give out dividends/patronage refunds
How are cooperatives different from corporations?- Cooperatives are easy to set up.
- Corporations are timely and costly to set up
Who is a franchisor?Parent company
Who is a franchisee?Buys license from franchisor
What is a "small business"?independently owned and operated company that is limited in size and in revenue

Chapter 4

Question Answer
Senioritythe length of time that an individual has served in a job or worked for an organization
Sanctionspenalty for disobeying law or rule

Chapter 5

Question Answer
EntrepreneurPerson who owns and operates a business

Chapter 6

Question Answer
Discretionary incomeMoney after taxes and expenses have been payed
Disposable incomeMoney after taxes, before expenses
JingleShort, catchy song used in advertisements
SloganMemorable phrase used in marketing
TrademarkBrand names with legal protection
UPCUniversal product code

Chapter 9

Question Answer
Definition of market (3)- offer a product or service
- group of people with similar needs & wants
- place where goods & services are sold
4 Channels of distributionexpand from other document
Purpose of packagingprotect, preserve, promote
Shelf allowanceAmount product owner pays to store to have space for their product
Cooling off periodNumber of days which must elapse after a stop-of-work
Caveat emptorLatin for "Let the buyer beware"
Advertisinguse of media to attract customers
Promotion- publicity
- advertising
Publicityunpaid use of media to get message to consumers

Chapter 10

Question Answer
What are the functions of money?- Medium of exchange
- Standard of value
- Standard of future payment
What are sources of income?- Job
- Allowance
- Gifts
- Trading
What are payroll deductions?amounts withheld from an employee's pay check
What is take-home pay?amount after all deductions have been made on pay check
BudgetingPlan for spending and saving
Budgeting purpose- Organize financial res
- Set & realize goals
- decide in advance how money is used
How to set realistic budgeting goals- short term and long term goals-
- start regular savings plan so budget is realistic
- establish time frame
- long term goals- save minimum amount every month
How to prepare budget- Calculate income
- calculate expenses
- Review budget
How to calculate simple interestamount * interest rate * length
How to calculate compound interest- original investment * (1 + interest rate) ^ length
- O( 1 + I )^L
Rule of 72- 72/interest rate (Not in decimal format) = years to double investment
- 72/years to double = interest rate needed
BarterTrade one good/services for another without money
Moneysomething acceptable in exchange for goods and services
Wampumold aboriginal-canadian currency
Legal tenderBombast-style word for money
Impulse buyingBuy goods that are uneeded
Regular fixed expensesOccur regularly and cannot be adjusted
Regular flexible expensesDiffer each month
Debt financingRaise money by offering bonds
Equity financingRaise capital by selling stock

Chapter 11

Question Answer
Why to people save?Emergency, short and long-term goals, security
Common forms of investmentCSB, Bonds, Stocks, Mutual funds, Real estate, Collectibles
CSB"Canada Savings Bonds"
Bonds- when company needs to raise money
- when company raises capital via selling ownership its called creating securities
- Bond is a promise to repay borrowed money plus interest on a future date
Stock- Become part-owner of a company
- price depends on supply and demand
Mutual funds- A pool of money which is set up an managed by an investment company to buy and sell shares of other corporations.
- designed for people who lack skills in stock market.
- Ex: money market, growth, real estate
Mutual funds fee's- Research market conditions
- Research market place
Mutual funds advantagesRisk is spread over many stocks
Mutual funds disadvantagesNot protected by CDIC; no guarantee against loss
Real estateRefers to land and everything attached to it
Real estate disadvantagesPayment for mortgage, tax, insurance, utilities
CollectiblesCollecting any goods.
- acts as hobby
- e.g.: antiques, trading cards, stamps
Collectibles advantagesActs as hobby
Collectibles disadvantages- No interest rate or dividends
- No return until goods are sold
Common stocks- Owners have one vote at AGM
- If company makes profit, they will receive their share of profits after bondholders and preferred shareholders
Preferred Stocks- Receive fixed dividend every year
- No vote at AGM
- Less risk
Rate of returnThe gain or loss on an investment over a specified time period
PrincipalSum of money that has been borrowed, not including interest
YieldIncome return on investment
LiquiditySpeed which an asset can be sold in the market
RRSP"Registered retirement savings plan"
- Yearly contributions deducted from income tax
RRSP advantages- allows to defer paying tax on part of income
- retirement income less (tax rate lower)
RRSP disadvantages- Limit to yearly contributions
- Tax must be paid upon withdrawl
RESP"Registered Educational Savings Plan"
- Tax-sheltered investment plan designed to help finance children's post-secondary education
RESP advantages- Investment income earned on contributions grows tax free
- Student pays no tax when funds withdrawn
- federal government will contribute grant of 20% on first $2000
RESP disadvantages- yearly contributions
- tax upon withdrawal (if not student)
Market valueValue on stock market
Maturity dateDate on which a bond has to be paid back by a company
face valueDollar value stated on a security
Blue chip- Business for longtime
- Less risky
- More expensive to buy
- Good investment record
- steady gains over long term
Growth companies- new (need to raise capital)
- greater risk
- called "penny stocks" if shares are less than $1
Bull marketStock prices rising
Bear marketStock prices falling
Bid priceHighest price anyone is willing to pay to buy a stock
Ask priceLowest price seller is willing to sell stock at

Chapter 12

Question Answer
What doth the Bank of Canada do?sets prime lending rate
Financial institutions- Trust company
- Caisses populaires
- Credit unions
Parts of a chequepayee, drawee, drawer, amount, date
PayeePerson/Business to whom a cheque is written
DraweeFinancial institution on which a cheque is drawn
DrawerPerson/business from whose account the cheque amount will be taken
CreditPrivilege of using someone else's money for a period of time
Credit advantages- instant money
- convenient (replaces cash and cheque)
- for emergencies
- savings (take advantages of sales)
- Establish credit rating
- Purchase record helps in budgeting
- If stolen just cancel card
Credit disadvantages- Items cost more
- Impulse buying increases
- Addicted to buying
- Financial difficulties easier to achieve
CreditorPerson/Business that grants a loan of sells on credit
DebtorPerson/Business that buys on credit or receives a loan
Three C's of credit- Character (will you repay debt?)
- Capital (what if you don't repay debt)
- Capacity (can you repay debt)
3C's of credit - Character- Have you used credit before?
- Do you pay bills on time?
- Good credit report?
- Provide character references?
- How long living at current residence?
3C's of credit - Capital- What property do you own that secures loan?
- Do you have savings account?
- Do you have investments to use as collateral?
3C's of credit - Capacity- Steady job
- Salary
- Other existing loans
- Current living expenses
- Current debts
- How many dependants
20/10 Rule for debt loadNever borrow more than 20% of your yearly net income
Bank rateBank interest rate
Branch bankingEvery Schedule I bank is connected to thousands of bank branches across Canada
Bank act- Outlines rules and regulations banks follow
- minimum on deposit
- mergers
- procedures for opening new banks
- what banks can and cannot do
- must submit regular reports to federal Minister of Finance (a.t.m. Bill Morneau)
Chartered banks- All banks in Canada receive from bank
- Charter allows them to operate
Schedule I bankowned by Canadian shareholders
Schedule II bank- foreign-owned
- shares not available to public
- limited number of branches and assets
Chequing accountAccount with cheque-writing privileges
ABM/ATMComputer terminal that allows customers to deposit, withdraw and transfer funds
Canceled chequeCheque that has been cashed and paid by bank
Bank statementMonthly accounting of all transactions that have occurred in a depositors account
Current accountBank account for business use only
NsF checkCheque issued for more money than depositor has in his/her account
- Causes bounce check

Post datedIssuing a cheque with a future date on it
Stop paymentRequest by depositor (drawer) to not pay a particular cheque
Cheque endorsementSignature of payee on back of cheque which recognizes that payment has been received
Blank endorsementsignature of payee
Restrictive endorsementRestricts use of cheque according to instructions
Certified cheque- Cheque guaranteed by bank
- Bank removes amount of cheque from depositors account then stamps cheque as "Certified"
Safety deposit box- Rented annually from bank, used to safely keep variables
Money-Ordersguaranteed form of payment
Loansmany types offered by banks
Credit cards- offered by financial institution to purchase goods or services on account
Over-draft protectiontemporary loan by bank to cover a cheque written for more than is in depositors account
Line of creditForm of borrowing that allows access to max-out credit
Cheque clearing systemFinancial institution settle balances between banks
Travellers chequeaccepted world-wide
Holddelay on a cheque being cashed; initiated by drawer
Debit cardsimilar to credit card, but is limited to how much money was deposited into it
Reconciliationchecking bank records against personal records to ensure they agree
Night depositcash/cheque given to bank after hours (via deposit box at side of building)
Direct depositDeposit money at bank
Pre-authorized bill-statementRegular pre-authorized withdrawal from a bank account to pay bills
Telephone paymentcustomer receive and pay bills via cell phone and pager
Wireless online paymentreceive and pay bills via internet

Chapter 8

Question Answer
What is a balance sheet?Snapshot of business performance by gathering its assets and liabilities
AssetsItems a business owns that is of monetary value
LiabilitiesDebts of a business
Owners equityAssets - liabilities; A-L = OE
Accounts receivableAmount company can potentially get
Accounts PayableAmount company has to pay to another company
What is an Income StatementShows profitability of a business over a period of time
What is Net Income/Profit?Gross Profit - operating expenses. If negative, then called Net Loss
What is COGSBeginning inventory + purchases - Ending inventory
What is Gross Profit?Total revenue - COGS