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business management unit 1 AOS 1
Terms in this set (12)
What is the personal motivation of going into business?
Profit, independence, market or social need- chose from article
what is goal setting and why is it important
It is important to set goals before starting a business because without a goal a business has no clearly defined purpose and nothing to aspire to. Goals provide a business with direction and help to measure results. Setting goals can also help the business owner develop ideas for a business as they consider the goals new ideas may emerge. To set goals a business owner may use SMART goals. Specific, measurable, attainable, relevant and time bound. There are lots of different types of goals such as financial goals, social goals and personal goals.
What are some Personal characteristic of entrepreneurs (this person) that make her successful?
hardworking (explain what you mean) willing to take risks, persistent, determined
What is market research and what are the benefits of conducting it. What are the different types of market research?
Market research can clearly identify whether there is a genuine gap in the market, if there are sufficient customers for the new business and whether the type of good or service already exists. The different types of market research include Surveys, Interviews, Focus groups and Observation.
two contributions business' make to the economy?
jobs, taxes-helps community, export income, contribute to wellbeing, boost economic growth.
The business provided employment which, helps employees live their lives comfortably, gives them money to spend which stimulates the economy. Their business also pays taxes which helps the community to improve schools, roads, parks and better the community.
One strategy a businessperson can use to protect their idea?
Trademark, patent, copyright.
Trademark: This is a right granted over a letter, word, phrase, number, sound, smell, shape, logo, picture or aspect of packaging that a business will use to represent its products and services.
What are some sources of inspiration?
Gap in market, improvement of existing product, new invention
Where can a businessperson seek assistance if they are starting their own business?
Government grants and investment in research and development, business mentorships, local council grants for new businesses, school-based programs in entrepreneurship, regional business start-up hubs.
a person who is willing to seize opportunities to start and operate a business, and is prepared to take risks in the hope of making a profit.
either creating a new good, service or process, or significantly improving an existing one
what a business expects to achieve over a set period of time
a process of systematically collecting, recording and analysing information concerning a specific market
Which of the following bonds has the most price risk? Explain your answer. a. 7-year bonds with a 5% coupon. b. 1-year bonds with a 12% coupon. c. 3-year bonds with a 5% coupon. d. 15-year zero coupon bonds. e. 15-year bonds with a 10% coupon.
The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by$8,500 per year. If the machine is not replaced, it can be sold for $15,000 at the end of its useful life. A new machine can be purchased for$170,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $40,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life; so the applicable depreciation rates are 33%, 45%, 15%, and 7%. The old machine can be sold today for$55,000. The firm’s tax rate is 40%. The appropriate WACC is 9%. a. If the new machine is purchased, what is the amount of the initial cash flow at Year 0? b. What are the incremental cash flows that will occur at the end of Years 1 through 5? c. What is the NPV of this project? Should Darlington replace the old machine? Explain.
Investors generally can make one vote for each share of stock they hold. TIAA-CREF is the largest institutional shareholder in the United States; therefore, it holds many shares and has more votes than any other organization. Traditionally, this fund has acted as a passive investor, just going along with management. However, in 1993, it mailed a notice to all 1,500 companies whose stocks it held that henceforth it planned to actively intervene if, in its opinion, management was not performing well. Its goal was to improve corporate performance to boost the prices of the stocks it held. It also wanted to encourage corporate boards to appoint a majority of independent (outside) directors; and it stated that it would vote against any directors of firms that “don’t have an effective, independent board that can challenge the CEO.” In the past, TIAA-CREF responded to poor performance by “voting with its feet,” which means selling stocks that were not doing well. However, by 1993, that position had become difficult to maintain for two reasons. First, the fund invested a large part of its assets in “index funds,” which hold stocks in accordancewith their percentage value in the broad stock market. Furthermore, TIAA-CREF owns such large blocks of stocks in many companies that if it tried to sell out, doing so would severely depress the prices of those stocks. Thus, TIAACREF it tried to sell out, doing so would severely depress the prices of those stocks. Thus, TIAACREF. a. Is TIAA-CREF an ordinary shareholder? Explain. b. Due to its asset size, TIAA-CREF owns many shares in a number of companies. The fund’s management plans to vote those shares. However, TIAA-CREF is owned by many thousands of investors. Should the fund’s managers vote its shares, or should it pass those votes, on a pro rata basis, back to its own shareholders? Explain.
Your parents will retire in 19 years. They currently have $350,000 saved, and they think they will need$800,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don’t save any additional funds?
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