Intro to business final exam
Terms in this set (149)
List and briefly explain the five areas of business personified.
1) MARK's job is to get the customers to give his company their money. To do this he has to give customers something more valuable than their money and something that is more valuable that anyone else will give their customers for their money
2) Mandy and her minions: can make what mark needs to give to the customers and their challenge is to make things for less than what marks customers are willing to pay him
3) Finley: has the money Mark and Mandy need to get things going. Finley is motivated by that he could own part of the company or he could loan money to them with interest
4) Count Ting: Ting has two abilities to come up with these numbers. A) Managerial accounting: Giving Mark and Mindy the information they need to make good decisions and B) Financial accounting: giving Finley information he needs to make good investment decisions.
5) Eco, The Force: Eco is everywhere imposing his will on everything Mindy, Finley, Mark and his customers do and nobody can escape the control of Eco. Eco is predictable because he has rules if you know his rules you can play these to your advantage. If your not careful then you will get hit with unintended consequences
List the four categories of class you will take in the Langdale college of business
1) General Business Classes
2) Functional areas of business
3) Specific Knowledge
4) Major Classes
List and briefly explain the seven classes everyone must take in the langdale college of businees that are in the five functional areas of business
1) Macroeconomics: Large economic forces that impact a society as a whole
2) Microeconomics: More specific economic forces that impact specific industries, companies, and consumers
3) Financial accounting: Assessing the company to give information to outside investors
4) Managerial accounting: Assessing the company to give information to people making decisions within the company
5) Marketing: studies how companies attract and keep customers
6) Management: Studies how to run the company
7) Finance: Studies how to get money to finance the startup and growth of the company
List the seven specific purpose classes everyone in the Langdale College of Business will take in their sophomore or junior years.
1) Personal Finance
2) The business environment
3) Computers in business
4) Business statistics
5) Global business
6) Career Development
7) Experiential learning
List the seven majors in the Langdale College of Business
1) Economics major
2) Accounting major
3) Marketing major
4) Management major
5) Finance major
6) Healthcare administration major
7) International business major
List the three types of communication skills needed in business.
1) written communication skills
2) conversational communication skills
3) presentation skills
List and briefly explain the three major communication styles
1) Literary style: A literary style is used to communicate ideas in a novel and captivating way, used for entertainment and literature, trying to draw the reader in mentally and emotionally
2) Technical style: A technical style is used to communicate ideas in an accurate and precise manner, used for engineering and sciences, focuses on being exact and informative
3) Business style: A business style is used to help in coordination and execution of business strategies, used in business world, and focuses on efficiency, simplicity, and clairty
List and briefly explain the three elements of the structure of a strong written message in business style
1) Brief introduction: this intro should answer the following question for the reader: "Why should i read this?" and it should provide the context of the communication and clearly state the issue or problem
2) Content of message: The content of the message should answer the following question for the reader: " what do i need to know and consider?". Given in short simple bites that are clear and logical and will contain the meat of the document.
3) Substantive conclusion: The conclusion should answer the following question for the reader: " What do i do with what you have given me?". States what the take-away is from communication and it must very clearly lay out what the reader must do with the information
List the six steps in putting together a written business communication
1) Start by answering the three core writing questions
2) Develop a logical flow of your ideas
3) Keep the sentences simple
4) Craft each paragraph properly
5) Put it into the appropriate business form
6) Proofread it carefully
List and briefly explain the three core writing questions.
1) the reason question: why would the reader want to read what i am writing?
2) The content question: What do i need the reader to know and/or consider?
3) The application question: What specifically do i want the reader to do with what i say?
List and briefly explain the four appropriate business forms of written communication
1) Letters: intended for those outside your organization
2) memos: intended for those inside the organization
3) emails: Informal emails are written like a conversation and formal emails are a hybrid between a memo and a letter
4) Reports: presents information or analysis not addressed to any specific person and make sure you break up reports with headings.
What is success and how does this definition relate to studying success
Success is having fun finding and fulfilling your purpose in life.
List the five basic precepts of life
1) You are where you are in life because of the way you think
2) The way you think couldnt have possibly taken you anywhere else
3) If you want to change where you are, you change the way you think
4) You think the way you do because of what you have fed your mind
5) To change your life, you change what you feed your mind
List and briefly explain the four components of a healthy diet of the mind
1) People we associate with: we tend to become like the people we are around because they feed us info and we tend to adopt their values and behaviors, thus we need people in our lifes who are where we want to be
2) The books we read: Leaders are readers and some types of books we need to read: motivational, people skill, and success books
3) The entertainment we see and hear: advertisements have an effect on our thinking and behavior even though: they are short and we try to avoid them. We should pick our entertainment for how it makes us think and not just how it makes us feel
4) The dialog that goes on in our heads: which dog wins? the one i feed. To accomplish this we cannot kick negative thoughts out of our mind so we must replace them with the thoughts we need
What are the two significant ways that highly successful people's thinking is different?
They are optimistic and they accept responsibility
Explain and discuss the difference between pessimism and optimism
Pessimism sees what is and assumes that this is the way it will always be and Optimism sees reality before it arrives. Optimism is the rood of all success and pessimist are the most unrealistic people because they just think they are being realistic
Explain and discuss the difference between ability and potential
Ability is what we can accomplish with who we are, while Potential is what we can accomplish with who we could become. Our potential is always greater than our ability.
What are the two great potentials in life?
1) Potential to grow
2) Creative potential
List and briefly explain the four keys to being optimistic
1) We must be able to see what can be: Things that were thought to be impossible many years ago are commonplace today
2) We must not let problems intimidate us: problems and opportunities are Siamese twins and if we want big opportunities, we must welcome big challenges
3) We must be willing to get our hopes up: Hope is healthy and motivating.
4) We must beware of those who would crush our hopes and dreams: nothing is easier to find than a person who will tell us we cannot do something and if someone is negative, we must not share our dreams and hopes with them.
In terms of responsibility, what are the two types of people?
1) those who make excuses
2) Those who make things happen
Explain how you can tell if you are making an excuse
Ask yourself, "Has anyone ever come from further behind than me to accomplish what i want to accomplish?" and if so, then i have an excuse, not a legitimate reason
List and briefly explain the two reasons why people make excuses.
1) consequences: they want to exempt the consequences of our failures except the world reacts to results not reasons
2) Feelings: we want to make ourselves feel better about our failures
What are the two action keys to success?
List and briefly describe the two groundbreaking books on success discussed in class as they relate to taking action
1) In search of Excellence: a book on business success and it is said the foundation for success is a "bias for action"
2) The 7 habits of highly effective people: a book on personal success and the first habit of successful people is that they are "proactive"
Explain the difference between perseverance and stubbornness.
1) Stubbornness: Doing the same thing over and over, regardless of the consequences
2) Perseverance: sticking with a goal until we achieve it
List and briefly explain the two perseverance stories discussed in class
1) The parable of SPLAT: success is on the other side of splat. Splat tests us to see what we will settle for and it refines us. Lots of good things are still on the other side of splat.
2) Quitting just short: R.U. Darby and his uncle spent all their money and a few years digging for gold, eventually they gave up and went home. they quit just three feet from gold
List the three things we must do to persevere
1) Expect problems
2) Stay focused on the goal
3) Keep moving forward
An action orientation requires that we do three things. What are those three things?
1) conquer fear
2) overcome failure
3) Face criticism
What conquers fear?
Action conquers fear
What are the three myths that people hold about failure?
1) successful people dont fail
2) smart people dont fail
3) talented people dont fail
List and briefly explain the five ways that people deal with failure
1) Internalize it: we think "i failed therefore i am a failure" in reality, failure is an event not a person
2) Externalize it: We think," i failed but it wasnt my fault", in reality good excuses dont change the outcome
3) Trivialize it: We think, "i failed but it doesn't really matter", in reality life treats us differently if we win or lose
4) Catastrophize it: we think, " i failed so the world will end". in reality, failures can burry us or carry us; its up to us
5) Analyze it: We think, "I failed so now i have the experience to start over with greater wisdom and understanding", in reality, we're right.
List and briefly explain the three things presented in class we should do when we RECEIVE criticism
1) consider the source: Consider the critics expertise and motives
2) Be careful what criticism you listen to : ignore destructive criticism about your goals and invite constructive criticism about how to achieve your goals
3) Seek advice not approval: Accept advice only if it fits your situation and avoid following advice simply because the critic wants you to
List and briefly explain the two things presented in class we should do when we GIVE criticism
1) Approach it with humility: When we really want to criticize someone, we probably should not and when we do not want to say something but we think we should, we may need to say something
2) Be careful where you criticize: criticize in private ad praise in public
What were the four reasons given in class as to why to study business?
1) It is where the money is
2) It gives you a very useful way of thinking
3) It is a great default option for the undecided
4) It is interesting
List and briefly explain the four keys presented in class for thriving in the Langdale College of Business
1) Know the expectations of each class: The class syllabus is the professors contract with the students and don't miss the first day
2) Know where you stand in all your classes all semester long: The observation principle: The act of observing something changes it
3) Stay ahead of your work: Late assignments will not be accepted and the end of the semester can be brutal
4) Become active in outside organizations: Employers like this and it helps you develop skills that you need in business
What were the two importantrules to know which can affect your graduation
1) Five withdrawal rule
2) The activity requirment
List and briefly explain the four things presented in class to develop in order to develop your career
1) Develop your skills: analytic, people, and communication skills
2) Develop your professional persona: Persona, constantly be working on your resume, be careful what you do with social media, and follow proper e-tiquette
3) Develop experience: look for jobs and internships that will give you a future and not just a paycheck
4) Develop a network: Learn to network because your net worth is determined by your network
In class, we stated that your time is managed to the extent to which something is happening. What is it?
Your time is managed to the extent to which your current activities are consistent with where you want to be at some point in the future
List and briefly explain the five key time management principles presented in class
1) Perception principle: It is later than you think
2) Principle of the excluded Alternative: to say yes to something is to say no to something else
3) NYCNO principle: The power of planning comes from the process and not the plan
4) Process principle: Master the process and the results will take care of themselves
5) System principle: any system is better than no system
List and briefly explain the three most important financial lessons to learn early in life
1) The power of saving: short term savings expect the unexpected and long term savings have the miracle of compound interest
2) the dangers of debt: 2 most dangerous types of debt are credit card debt and student loans
3) The importance of your credit score: it determines whether or not you can get a loan, determines the interest rate you pay for a loan, and it is used for purposes not directly related to borrowing money
List and briefly explain the two great books discussed in class which give a perspective on becoming wealthy.
1) Rich Dad, Poor Dad: Active income: employee or self-employed
Passive income: investments and business ownership
2) The millionaire next door: most people who look rich are not rich but most people who are rich do not look rich
Everyone needs to understand marketing. List and briefly explain the three entities presented in class who need to understand marketing
1) Inside business: To acquire revenue which is the lifeblood of the company
2) Outside business: To connect with stakeholders
3) As an Individual: To achieve personal goals through helping others achieve what they want
List and briefly explain the two orientations which businesses may adopt. (make sure to indicate which operation should and should not be adopted)
1) Product orientations: make customers want what we have
2) Customer orientation: make sure we have what customers want
List and briefly explain the two parts to reaching the right customer groups
1) Market segmentation: Dividing the whole market into homogeneous subgroups
2) Target marketing: Selecting one or more subgroups and developing a marketing plan to best reach the selected group regardless of appeal to people outside of the groups.
List and briefly explain the four elements of the marketing mix
Product: the bundle of benefits that a marketer offers to the marketplace
Promotion: communicating with the customers through both impersonal and personal means
Price: What the customers give in return for the benefits they receive
Distribution (place): getting the product to customers when they want it
To understand consumer motivation, we must understand that consumers only buy two things.
1) Solutions to problems
2) Good feelings
What are the three types of consumer decision processing?
1) Information based decision making
2) emotion based decision making
3) convenience based decision making
List the four external influences on consumer decision processing.
In marketing research, compiling useful information about customers has two components to it. List them
1) Gathering market data
2) Marketing analytics
Explain why the right story is important to effective marketing
People will willingly give us their money if we give them the right reason to do so and a good story can make a lot of money while a bad story will lost a lot of money
People will not give us their money unless we give them a product that is more valuable than two things. What two things must our product be more valuable than?
1) A product that is more valuable than their money
2) A product that is more valuable than what competitors are offering
Products evolve in three ways. List and briefly explain each.
1) Through the industry: product life cycle
introduction, growth, maturity, decline
2) Through consumers: diffusion of innovation
innovators, early adopters, early majority, late majority, laggards
3) Through the company: product management
new product development, brand management, product deletion
Our product goal is to create brand equity. What is brand equity? Why is a relationship better than a sale?
1) Brand equity: how much a brand is worth to the company that owns it
2) A relationship is better than a sale because a sale is a one-time source of revenue while a relationship is a long-term stream of revenue
List the three components of brand equity
1) Brand awareness/recognition
2) Brand perceptions
3) Brand loyalty
List and briefly explain the three keys to an effective promotional message
1) Sell benefits not features
features are aspects of a product that the buyer can see but benefits are the positive solutions and or feelings the product gives
2) Lead with your ear not your mouth
Buyers will tell us why they would buy our product but we cant hear them if we do all the talking
3) Focus your message
The more you say the less the buyer will listen so say the least amount possible to get the desired results
Our promotional medium can take one of 4 forms. List each
1) In person: personal selling
2) In the media: advertising
3) On the internet: e-marketing
4) through others: publicity and word-of-mouth
List and briefly explain the two aspects of marketing distribution
1) Channels of distribution: companies that help businesses connect with their consumers (Wholesalers sell to Retailers which then sell to the final consumer/customer)
2) Physical distribution: Activities involved in getting the product to consumers when they want it (Transportation, storage, supply chain management)
List and briefly explain the three reasons why we need channels of distribution
1) Utility creation
For a product to be of any use to the customer, it must have four utilities (form, place, time, possession) Channels create three of the four (place, time, and possession
economic specialization creates greater effectiveness and (channel members are specialists in distributing products)
3) Transactional efficiencies
Introducing middlemen can dramatically decrease the number of transactions
List and briefly, explain the six factors to consider when setting a price
1) Economic considerations: cost and revenue
2) Competition consideration: Where do we want to be relative to our competition (above, at, or below market) will we engage in Price-matching
3) Psychological considerations: price/ quality considerations and odd/even pricing ($.99 versus $1.00)
4) Product line considerations: Complementary products ( selling one product increases the sale of another) and competing products (Selling one product decreases the sale of another)
5) Introductory pricing considerations: skim pricing (starting out high with the intention of lowering the price) and penetration pricing (low price with the intention of raising the price)
6) Legal considerations: price fixing (competitors cannot collaborate when setting prices) and predatory pricing (cannot sell below cost to eliminate competition
What were the six careers in marketing that we discussed in class?
5) Marketing research and analytics
List the three basic levels in the managament hierarchy
1) Top management: President, CEO, and Senior Vice Presidents
2) Front Line management: Those who directly supervise the workers
3) Middle management: Everyone in between
List and briefly, explain the four primary management responsibilities.
1) Planning: Figuring out where to go and how to get there
2) Leading: Directing and motivating people to achieve organizational goals
3) Organizing: Determining a structure for both individual jobs and the overall organization
4) Controlling: monitoring performance and making adjustments if needed
Planning happens at four levels. List and briefly explain each
1) Strategic planning: Setting the long-term direction of the organization (longer than a year)
2) Tactical planning: Short term planning on how to implement the strategic plan
3) Operational planning: Planning that occurs at the departmental level
4) Contingency planning: Planning for different possibilities of what might happen
Most planning involves some form of SWOT analysis. What are the four components of a SWOT analysis
1) Strengths: internal / good
2) Weaknesses: internal / bad
3) Opportunities: external / good
4) Threats: external / bad
In Jim Collins' bus analogy, what are the three things that business leaders need to do before they start driving the bus?
1) Get the right people on the bus
2) Get the wrong people off the bus
3) Get the right people in the right seats on the bus
What motivates employees? List and briefly explain the four theories discussed in class.
1) Maslow's Hierarchy of Needs (From most basic to higher order needs: Physiological, Safety, Social, Esteem, Self-actualization) When the lower level (more basic) needs are satisfied, they move on to work on their higher order needs
2) THEORY X: people do not want to work, coercion, and threats must be used to get results. / THEORY Y: Work is a natural part of life much like play or rest and given the right environement, people will produce results on their own without having to be prodded ot do so
3) Expectancy Theory: Workers believe effort -> performance -> reward and if any of the links are broken motivation diminishes
4) Equity Theory: If people feel as if they are being treated fairly they will stay motivated and if they have perceptions of inequity motivation falls
List and briefly explain the five basic principles involved in organizing a business which were discussed in class
1) Organizational chart: a graphical representation of who reports to who
2) Centralization: the extent to which the decision making is made by the corporate headquarters
3) Span of control: how many people does the average manager supervise
4) Line vs Staff positions: Line positions in the chain of command that directly lead to the production of products. Staff positions which support those who produce the company's products but aren't directly involved in the production process
5) Leadership style: Autocratic: managers make the decisions with minimal input from workers, democratic: managers get everyone involved in coming to a consensus, free reign: People are given autonomy to make their own decisions
List the three key steps in controlling
1) Set performance standards
2) Measure actual performance against the standards
3) Take corrective action if necessary
Define human resource management (HR)
Is the management function responsible for maintaining a properly staffed organization
List and briefly explain the six aspects of the employment process that human resource (HR) managers and the human resource (HR) department oversee.
1) Recruitment: Getting a pool of qualified candidates for open positions
2) Selection: Choosing the "best" employee among qualified candidates (Skill/match, motivation, people skills, proper attitude)
3) Training: Overseeing the initial and ongoing skill needs of employees
4) Evaluation: Overseeing the process by which mangers assess the performance of those below them and provide feedback for improvement
5) Compensation: Ensure that employees get their proper salary, wages, and benefits.
6) Separation: Ensuring an orderly transition of a person's status from employee to non-employee
List and briefly explain the seven legal issues in human resource (HR) management discussed in class
1) Discrimination: Employers must ensure employees are not discriminated against in hiring, pay, or evaluation on the basis of race, national origin, gender, religion, age
2) Safety: employees must have the safest work environment possible within which to work, OSHA is the federal agency, employees injured on the job must be properly investigated and reported
3)Pay: All minimum wage laws must be obeyed
4) Family leave: Family and Medical Leave Act (FMLA) and department of labor is in charge of FMLA
5) Healthcare: There are laws which require employers to provide healthcare coverage (insurance) for their employees with different laws for 50 or less employees companies
6) Disability accommodation: The americans with disabilities act set forth requirements to protect workers with disabilities. must make reasonable accommodations for employees with disabilities
7) Sexual harassment: HR must ensure that sexual harassment is not happening in the workplace. (unwelcome sexual advances, requests for sexual favors, other verbal or physical conduct of a sexual nature)
List and briefly explain the two non-typical arrangments companies may have with their workers which were presented in class.
1) Telecommuting: occurs when employees work from home
2) Independent Contractors: Having people other than employees complete work on a contract basis (frees employers from all of the regulations associated with employment laws and gives them flexibility to choose.
Define management information systems (MIS)
An area of study within business schools which focuses on how technology is used by businesses and other organizations
Define information technology (IT)
Is the unit within a typical organization that is charged with the responsibility of overseeing the computing and other information needs of the organization (needs such as hardware, software, connectivity, and security)
List and briefly describe the three types of hardware where computing happens according to the model presented in class
1) Clients: End user devices that interface directly with the user (Computer devices, Peripheral devices: printers, scanners, ect., and Internet Things (Iot): consumer IoT and Enterprise IoT
2) Servers: Hardware that makes computing resources available across many client devices, servers store date and software, widely available across the internet
3) Routers: Hardware that transfers data between and among clients and servers, interface one computer with another
List and briefly explain the two broad categories of software
1) Application software: Software designed to allow users to tell the computer what they want it to do
2) Systems software: Software that makes the hardware of the computer available to be used by application software (IOS, Windows, Linux)
List and briefly explain the three major categories of application software widely used by businesses
1) Productivity software (MS Office): Software that is typically used in an office environment. (Word processing, email and contact management, spreadsheets, databases)
2) Creative software (Adobe Creative Cloud): Software used in the creation of marketing and other communications (Mass media and Graphic/Web Design)
3) Analytic software: Software used to extract and analyze data (Statistical analysis software packages and subscription databases)
List and briefly explain the three connectivity choices businesses face when deciding where to place and/or utilize hardware resources.
1) Device computing: storing data and using software directly on the device that the user is using
2) Cloud computing: Using hardware connected to the internet and software residing on that hardware.
3) Fog computing (on the edge): A solution to overcome the problems with computing and yet maintain connectivity
List and briefly explain the three specific technology opportunities evolving in business
1) RFID: RFID stands for radio frequency identification. Objects can be identified through RFID chips or tags attached to or implanted in objects. Two types of RFID Passive and active
2) Payment Gateways: "merchant accounts" enable companies to accept credit cards and "payment gateways" are services that handle merchant accounts on the internet. Companies don't want to be in charge of credit card info.
3) Social Media:.refers to places where people congregate on the internet. Social media can be an inexpensive, organic (grows on its own) way of communicating with customers and prospects
What is operations management?
Managing the activities involved in the production and distribution process in an effective and efficient manner
What four things do successful quality initiatives have in common?
1) They have means for measuring quality which are objective
2) they set very specific quality goals
3) They look at the processes that create defects and not just the defects by themselves
4) They require a team approach to improving quality
What is the Critical Path Method (CPM) used for?
Critical Path Method (CPM) is used to speed up processes by shortening the slowest (critical) path
Inventories can be one of the biggest expenses companies have. List the four things that make inventory costs high.
1) money tied up in inventory
2) warehousing costs
3) insurance costs
4) inventory loss (damage and theft)
When it comes to inventory, businesses want to avoid three things. What are these three things?
1) excess inventories
2) production slowdowns because of missing materials and/or parts needed on the factory line
3) "backorders" where the companies do not have the products in stock when customers order them
Define Just in Time (JIT) production
is a process initiative that seeks to perfectly coordinate the production process with the demand for the product thus minimizing the need for inventory
Define supply chain management.
is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.
List the three things that firms try to achieve through supply chain management (SCM).
1) minimize costs and "suboptimization"
2) ensure products arrive when needed
3) control for inventory loss or wast
List and briefly explain the two main ways that money has value
1) exchange value: it is a convenient way to buy and sell things
2) storage value: it is a way of storing wealth
What is meant by the time value of money
The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity
List and briefly explain the two things you can do with money to keep it from sitting empty
1) you can rent it out: you would loan it out, buy bonds, put it into an interest bearing deposit account. you still own it but your letting others use it and you get paid to do so. there is a contract saying how long they have to use the money before they have to give it back
2) You can sell it: you give it to someone else for part ownership in their business (equity). you no longer own the money but when the business makes money part of the profits are yours. counting on stream of money to be more than the amount you gave away and you can get money back by selling ownership to others
List and briefly explain the two important factors to consider when deciding how to make money on our money
1) need for liquidity: How quickly you can convert whatever you have back into cash and a liquid asset is an asset that can be quickly turned into cash. Financial markets increase the liquidity of equities
2) Tolerance for risk:
Return: how much money you get back in return for letting someone else use your money
Risk/return tradeoff: You will need higher expectations of returns to take on greater risks (safety tends to return less money while risks tend to return more money)
List the three reasons a business may need money from finley
1) start new ventures
2) fund growth
3) manage cash flow
List and briefly explain the two ways to get access to someone else's money that is in storage
1) you can rent it (debt financing)
2) you can give them part of your business for the money (equity financing)
What were the four important considerations presented in class on how to best get access to "other people's money" (OPM)
1) will someone be willing to give you the money you need and under what terms
2) how much will it cost you to use
3) How much will they control you
4) How much can you borrow before risking being over-leveraged
In finance, what does "leverage" mean?
to use debt financing (as opposed to equity financing)
Borrowing money to acquire assets works if two things happen. what are those two things?
1) The asset appreciates (increase) in value
2) The income produced from the asset covers the interest and debt repayment obligation
List and briefly explain the two things that can make being leveraged become risky
1) the interest and debt repayment obligation is greater than the income earned bu the asset
2) the asset depreciates (decreases) in value faster than the debt is repaid
What is the most basic measure of how well an investment is doing? Explain what this measure is and how it is calculated. What is the relationship between this measure and the risk/return trade-off?
1)The most basic measure of how well an investment is doing is called the Return on investment (ROI)
2) ROI refers to the amount of money you make (return) on an investment as a percentage of the money you have invested
2.5) Return on investment = (Net profit/Total investment) x 100
investors expect a higher ROI for riskier investments
List and briefly explain the two purposes of ratio analysis
1) to see if a company is healthy
2) to see how well a company is performing
List and briefly explain the four specific types of assets that financial securities can represent
1) stocks: ownership positions of a company
2) bonds: "loanership" positions in various types of institutions
3) options: promised positions to buy stocks and/or bonds
4) mutual funds: shared ownership in stocks and/or bonds
List the three reasons why markets are crucial to our economy
1) Businesses need access to money to get started, grow, and manage their cash flow
2) People who have money prefer assets that are liquid
3) Financial markets allow ownership and loanership positions to be liquid
Explain what a share of a stock represents. Give an example. What happens when you buy and sell shares of a stock
1) A share represents your share of the ownership of the company
2) if a company has 100 shares and you own 1 of them then your share of the company is 1%
3) when you buy a share of a stock, you are buying part of the company
4) When you sell a share of stock, you are selling part of the company
List and briefly explain the two main types of stocks
1) common stock (most common type of stocks):
A) receives a share of the profits through dividends B) the dividends are not guaranteed but are determined by other obligations for the firms resources and the need of the firm to retain cash for other purposes
C) holders of common stock have a say in how the company is run: they vote on the board of directors who oversees the operations of the company and the weight of their vote is determined by how many shares of common stock they own
2) Preferred stock: receives a guaranteed dividend in perpetuity
A) preferred stock has a "preferred" position to common stock in two ways: their dividens must be paid before common stock holders can receive a dividend and if the company goes out of business, they will recive their invested money back before the common stock holders get theirs (also usually doesnt come with voting rights
Stocks tend to be the most liquid of all securities. explain why.
Stocks for a given company are completely "fungible"
A) one share of apple common stock is the exact same as all other shares of apple common stock
B) Thus all shares of common stock for a given company are completely interchangeable
List and briefly explain the two ways stocks are exchanged.
1) stock exchange: A) stocks of larger, more established companies trade through centralized trading locations B) stock prices are made available moment by moment
2) Over-the-counter: A) smaller, less establish companies are traded through a decentralized network of dealerships B) prices are only made public after the exchange has been finalized
Briefly explain why there is not a centralized bond exchange. how are bonds traded?
1) Bonds are less fungible than stocks and thus there is not a centralized bond exchange
2) Bonds are traded through a network of dealers
List and briefly explain the two factors that determine the price of a bond
1) current interest rates (affects the whole bond market): average interest rates across the economy go up and down, when interest rates go up, bond prices go down, and when interest rates go down, bond prices go up
2) Financial position of the entity owing the money (affects individual bonds): entities are rated on their ability to repay their debt, as these ratings go up their bond prices go up and when the ratings go down there bond prices go down
What are options? What are the two types of options and what do they give us the option to do? who should engage in options trading and what kind of money should be invested in options trading?
1) options give someone the right but not the obligation to buy or sell a stock for a particular price at some specified date in the future
2) The two types of options: A) calls: the option to bu and B) put: the option to sell
3) Dealing with options is extremely complicated and risky: only sophisticated investors should invest into options and only with money that can be risked
What are mutual funds and how do they operate?
1) Mutual funds are where a group of people pool their money and buy a portfolio of stocks
2) How mutual funds operate are A) they are developed by financial companies and B) they are managed by professional fund managers
What are the three advantages of mutual funds?
1) An informed professional is making the buying and selling decisions
2) Your risk is diversified across a broad portfolio of stocks
3) There are an abundant of mutual funds so you can find one that meets your ivestment
What are the three disadvantages of mutual funds?
1) You cannot buy and sell individual stocks when it is to your tax advantage to do so
2) Larger mutual funds have a harder time moving in and out of the market than do individual investors
3) There are management fees associated with the funds
What are the two reasons why proper oversight in needed in financial markets?
1) For people to continue investing in the financial markets, trust needs to be high
2) With so much money floating around in the financial markets, the potential for fraud is high
What is the U.S. governmental body that oversees financial securities and the financial markets?
The securities and exchange commission (SEC)
List the three groups discussed in class who need accounting.
1) Owners/ Investors
2) Managers/ Marketers
3) Government agencies
List and briefly explain the three main areas of accounting.
1) Financial accounting: assessing the company's performance and position for owners, investors, and creditors
2) Managerial accounting: assessing the company's operations in order to make strategic and operational decisions
3) Tax accounting: Assessing how much money will be owed to the government
List and briefly explain the two things ting is trying to discover through financial accounting
1) Following the movement of the money: Where is the money coming from and where is it going?
2) Assessing the worth of the company: What does the company own and what does it owe
List and briefly explain the three components to the simplified model of normal business operatins
1) Revenue: money that comes in from customers
2) Expenses: money that goes out to run the business
3) Net Income: revenue minus expenses
What is the simplified income statement?
Revenue - Expenses = Net income
List and briefly explain the two complications to the simplified model of normal business operations presented in class.
1) Time period matching: When do you count something as revenue or expenses
2) Value changing: How do you account for something gaining or losing value in the normal business operations
List and briefly explain the three components to the simplified model of a company's worth.
1) assets: Resources owned by a firm
2) Liabilities: claims that outsiders have on a firm
3) Owner's equity: how much has been invested or reinvested into the firm
What is the simplified balance sheet?
Assets = Liabilities - Owner's Equity
The actual worth of the company is simply what someone is willing to pay to buy it. Explain why this may be different from owner's equity on the balance sheet.
1) owner;s equity on the books can be quite different from total market capitalization
2) The balance sheet doesn't directly reflect brand equity
What were the two additional financial statements presented in class?
1) Cash flow statement: reflects the increase or decrease in cash ( and cash equivalents) over the accounting period
2) Pro forma statements: gives a different perspective on the traditional financial statements
What is the goal of managerial accounting?
The goal is to help the company become more profitable
List and briefly explain the three characteristics of managerial accounting presented in class?
1) Internal purpose: It is more for the people inside the company than those outside
2) Flexible: its rules are more flexible than the rules of financial accounting
3) Cost focused: much of managerial accounting is deciding how much something costs
Assigning costs can be complicated. List and briefly explain the three ways of looking at costs which were presented in class.
1) based on whether they actually occurred: Out of pocket costs and opportunity costs
2) Based on whether they vary with production: Fixed and variable costs
3) Based on whether they can be tied to a specific objective: direct and indirect costs
List and briefly explain the four reasons to study economics which were presented in class
1) is answers the "why" question
2) It helps avoid "unintended consequences"
3) it sharpens analytic skills
4) it provides a useful way of thinking
Economics is studied at two levels. list and briefly explain the two branches of economics. Your answer should include the types of questions that are addressed in each
1) Macroeconomics: studying economics at a society-wide level:
A) what makes economies expand and flourish?
B) What makes economies experience recessions or depressions?
C) What causes fluctuations in prices, interest rates, employment levels
2) Microeconomics: studying economics at the industry, company, or consumer level:
A) How are prices of specific products set
B) What determines the flow of resources in an out of industries?
C) What determines how companies and consumers make economic decisions?
List and briefly explain the four indicators of macroeconomic performance which were presented in class
1) Gross Domestic Product (GDP)
3) Business cycle
4) Price levels
List and briefly explain the three major schools of thought in macroeconomics
1) Classical ("laissez faire") economics
2) Keynesian economics: Two approaches to managing an economy
3) Managed economics
What do you need to know to pass micro-economics?
How to read a graph
What is the core concpet in micro-economics? Explain this concept
Supply and demand
List and briefly explain the four levels of economic competition
1) Pure competition
2) Monopolistic competition
List and briefly explain the lure for Mark, Mandy, Ting, and Finley of doing business globally
1) Mark sees huge markets: 7 billion world pop vs 320 million U.S. pop and 80 trillion GWP vs 18 trillion GDP
2) Mandy sees supply-chain advantages: Diversity of suppliers and products supplied and facilties can be placed in the most politicaly friendly areas
3) Ting sees huge cost savings: production costs are much less for products that are labor intensive and dont require a highly skilled workforce. Inventories can be stocked with globally lowest cost alternative
4) Finley sees broader investment opportunities: access to a much broader capital base with more opporunities for investment. Along with diversification of investments
List and briefly explain the three challenges of doing business globally where were presented in class
1) Sociocultural differences: A) language barriers B) social customs C) hostility towards outsiders
2) Economic differences: A) levels of economic development B) distribution challenges C) currency exchange issues
3) Political and legal differences: A) how developed is their legal system B) What trade barries exist?
List and briefly explain the five ways to get involved in global business which were presented in class
1) Exporting: producing products locally and selling them in other countries
2) outsourcing and importing: A) setting up production facilities in other countries B) setting up contract manufacturing agreements in other countries C) purchasing products manufactured in other countries
3) Licensing and franchising: selling the rights to manufacture and/or sell products in other countries
4) joint ventures: partnering with companies in other countries to manufacture and/or distribute products
5) foreign direct investments: developing whole business units in other countries
List and briefly explain the three trade restrictions on global free trade which were discussed in class
1) Tariffs: a tax or duty on goods imported into a country
2) Quotas: a limit on the amount of a good that can be imported
3) Embargo: a ban on trade with a particular country
Global free trade is regulated by two things. list and briefly explain each
1) General agreement trade and tariffs (GATT): A set of guidelines regulating world trade
2) World trade organization (WTO): An intergovernmental organization that addresses world trade issues within the framework of GATT
What were the two trade blocks mentioned in class?
1) North American Free Trade Agreement (NAFTA)
2) European Union (EU)
Explain the nature of purpose of ehtics
1) Ethics: the study of morality, what is good or bad
2) The purpose of studying ethics is to come up with normative standards which prescribe what people should or should not do
What were the two motivations for business ethics presented in class
1) Because it is profitable
2) Because it is right
List and briefly explain the four possible bases for ethical decision making
1) Law of the jungle: ignoring right and wrong and simply focusing on personal gain through power and cunning. power: might makes right and cunning: outwitting others for selfish gain
2) Emotion: What feels right or wrong determines what is right or wrong
3) Social Contract: I will not do that which causes you harm and in return you will not do that which causes me harm
4) Authority: making ethical decisions based on a higher authority (god, holy writings, or a person)
Any groups that have a stake (personal interest) in the performance and actions of an organization
List four business stakeholders and their stakeholder interests in business
1) employees: they want a safe work environment, reward commensurate to their contribution, and to be treated with respect
2) Consumers: want safe products, products that do what they are supposed to do, and have accurate information
3) Investors: want responsible stewardship and full and accurate disclosure of relevant information
4) community: wants to avoid harming the environment and support of the philanthropic efforts of the community
List and briefly explain the three considerations in deciding on the best legal form for your business which were presented in class
1) Taxation: Double taxation with one tax on the corporations profits and the other tax on the dividends that the owners will get
2) Owners liability: Two types of liability: A) Full liability where the owner is personally liable for the debts of the company and B) Limited liabilty: the owners are shielded from the liabilities of the company (can still be liable if they engaged in fraud or negligent and dont persoanlly secured the debt
3) Transfer of ownership: some business forms make it easy for a person to buy part of a company from one of the current owners while some make it more difficult. Some forms make it so easy that ownership becomes a liquid asset
List and briefly explain the four major legal forms of a business which were presented in class
1) Sole proprietorship: One person owns the company, the company is simply seen as an extension of the individual ( profits are taxed as ordinary income and the individual is personally liable for all company debts), and they are easy to establish
2) General partnership: business is owned by two or more people, profits are taxed as ordinary income, and all partners are personally liable for the company debt
3) C Corporation: The business is an entity separate form the owners, owners are not liable for company debt, The corporation is taxed as a separate entity, and all profits are paid out to the owners (dividends are taxed at capital gains rate)
4) Limited Liability Company (LLC): The income from an LLC is taxed as ordinary income, The partners of the LLC are not personally liable for the debts of the LLC, and the nature of LLC's differ form state to state
List and briefly explain the two motivations for owning your own business
1) Entrepreneurship: Some people are driven by the challenges and risks of starting something new "entrepreneurs". Entrepreneurship means starting a business and can be a motivation on its own. Some entrepreneurs have build huge companies.
2) Working for yourself: Most people would rather work for themselves than somebody else and that is the driving force behind most small business ownership. Most small business owners are satisfied once the business is up and going and arent driven to start other new ventures thus not all small business owners wouldnt be considered entrepreneurs.
List and briefly explain the four things you need to do to start a business
1) Figure out how you will get customers (MARK): your not in business until you have business. select your target market and make sure you have a way to reach them through promotion and distribution and that you have a competitive advantage within the target market.
2) Make sure you deliver on your promises (MANDY): Marketplace is brutal on companies that dont deliever on promises. Make sure that you can produce the quality of product or service for customers at a price they are willling to pay.
3) Make sure you have the funds you need to get the company going (Finely): It takes money to make money. Most of the time you have to start small and self-fund the operations. Start saving so that you can own your own business one day
4) Dream big while facing reality: keep your eyes on the money (TING) A) making money is like building in the sand with a toothpick and losing money is like pouring money on the sand. B) Work with rather than against the laws of economics (ECO): ignorance is a disaster with business. People who know how to work the laws of ecnomics thrive while the people who ignore the laws economics die.
List and briefly explain the three marching orders that were given at the very end of the last lecture
1) Take your next step in your business education seriously: Your next big step is to learn accounting and economics, these will help you face realities of the business world regardless of what your major is
2) Make sure you get an education and not just a degree: Employers will quickly figure out whether or not you have the skills they hired you for. If you dont develop the skills they want you will lose your job and be in a difficult spot to develop these skills later in life
3) Always be a student of success: Remember, success is one door with two locks. Learn form others. Life is too short to learn it all from scratch. Improve yourself daily through reading, that way you easily acquire what others have struggled hard to obtain
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