SEM - Ch. 3 - Review

Income statement shows the company’s assets and liabilities at a specific point in time.

Forecast are expenses that will occur only at the start of the business or infrequently.

Economic risk is caused by customer dishonesty, employee theft, and employee incompetence.

Liable means to be legally responsible.

Risk management involves preventing, reducing, or lessening the negative impacts of risk.

Pure loss risk: incident has no chance of gain.

Speculative risk- investment could cause gain or loss.

Human risk is caused by changes in the business environment.

Contingency planning: the preparation for an unexpected emergency

Venture capital-financing provided to start a company in return for owning part of the company

Return on investment is a calculation for the business’s return as a % of the money invested

Natural risk, such as weather, can’t be avoided

Insurable risk: chances of a loss are predictable and the amount of the loss can be estimated.

Controllable risk: loss that can’t be prevented.

Uncontrollable risk: loss that can be prevented or reduced.

Balance sheet shows all revenues and expenses over a specific period of time.

Capital is a company’s wealth in the form of money or property.

A budget is not a good planning tool.