Lesson 2: Business Formation
This is a legally structured business that limits the personal liability of its owners.
What is a corporation?
This document shows a company's profit or loss by subtracting expenses from revenue.
What is the income statement/net income?
This is insurance that covers losses from events like fires, natural disasters or theft that disrupt business operations.
What is business interruption insurance?
This is the annual interest paid by the issuer of a bond, expressed as a percentage of the bond's face value.
What is the coupon rate?
This is a retirement plan where payouts are based on the amount of contributions made by the employee and/or employer.
What is a defined contribution plan?
This person founds and operates a new business venture and assumes the risk involved.
Who is an entrepreneur?
These are assets like cash, accounts receivable and inventory that are expected to be converted to cash within 12 months.
What are current assets?
This type of insurance protects a company against claims of injuries caused by its products.
What is product liability insurance?
This is the final maturity date when the issuer of a bond must repay the principal amount borrowed.
What is the maturity date?
This type of health insurance plan limits coverage to providers within its network.
What is a health maintenance organization (HMO)?
This is the final stage when a business's owners decide to sell or close down operations.
What is cessation?
This liability represents debts and obligations that must be paid within the next 12 months.
What are current liabilities?
This is a situation where there is potential for loss but no opportunity for gain, which is the only insurable risk.
What is pure risk?
These are bonds that pay a fixed interest rate to the holder every year until maturity.
What are coupon bonds?
This is pay an employee receives while not working due to a company-approved holiday.
What is holiday pay?
This is a type of business owned and operated by a single individual.
What is a sole proprietorship?
This corporate officer oversees financial reporting, risk management and record keeping for the firm.
What is the chief financial officer (CFO)?
This type of insurance covers legal costs and settlements from lawsuits against the company.
What is general liability insurance?
This is the initial dollar amount promised to be paid to the bond holder at maturity.
What is the face value?
This insurance provides income if an employee cannot work due to an illness or injury.
What is disability insurance?
This is an entry-level job requiring little or no prior experience in that role.
What is an entry-level position?
This statement reports on a company's sources and uses of cash over a period of time.
What is the cash flow statement?
This bond covers losses from employee dishonesty or fraudulent behavior.
What is a fidelity bond?
These are unsecured bonds that can only be issued by highly creditworthy companies.
What are debenture bonds?
These are benefits like 401(k) contributions that are deducted from pay before taxes.
What are pretax benefits?