BUA167 Exam 2 Study Guide: Introduction to Business and Economics

Comprehensive vocabulary flashcards covering marketing fundamentals, consumer behavior, product strategy, the BCG Matrix, accounting concepts, financial calculations, financial markets, and central banking from the BUA167 Exam 2 Study Guide.

Marketing

The process of identifying customer needs, creating and communicating value, delivering products or services, and building customer relationships.

Customer value

The benefits a buyer perceives relative to the costs of obtaining a product or service.

Target market

The specific group of customers a business seeks to serve.

Demographics

Measurable population characteristics, including age, income, education, occupation, family size, and geographic location.

Consumer behavior

How individuals or households decide what, why, when, where, and how much to purchase.

Learning (Consumer Behavior)

A psychological influence where past experiences affect later choices, such as returning to a café after receiving good service.

Perception (Consumer Behavior)

A psychological influence involving the interpretation of brands, advertising, and quality, such as viewing a premium cup as higher quality.

Motivation (Consumer Behavior)

Needs or desires that prompt a purchase, such as buying coffee to stay alert.

Attitude (Consumer Behavior)

Favorable or unfavorable beliefs about a product, such as avoiding a brand after a bad experience.

Self-concept

A psychological influence where purchases reflect personal identity, such as choosing a brand that fits one’s image.

Reference groups

Friends, family, peers, or influencers who impact buying choices, such as buying shoes favored by classmates.

Culture (Consumer Behavior)

Shared values, traditions, and norms that shape consumer behavior, such as preferences shaped by family food customs.

Social class

Income, education, and occupation patterns that lead to different preferences for premium and budget products.

Problem recognition

The first stage of the consumer buying decision process, centered on the question: What need or problem has arisen?

Information search

The second stage of the consumer buying decision process, centered on the question: What options and information are available?

Evaluation of alternatives

The third stage of the consumer buying decision process, centered on the question: How do the available options compare?

Purchase decision

The fourth stage of the consumer buying decision process, centered on the question: Which option will be purchased?

Postpurchase evaluation

The fifth stage of the consumer buying decision process, centered on the question: Was the buyer satisfied, and would they buy again?

Marketing strategy

A planned approach to reach target customers and achieve marketing objectives.

Core competency

An activity or capability that a firm performs particularly well.

Sustainable competitive advantage

A customer-valued advantage that competitors find difficult to imitate or replace.

Undifferentiated marketing

A broadly similar marketing approach directed toward an entire market.

Niche marketing

Serving a small, clearly defined segment with specialized needs, such as products designed for competitive trail runners.

First-mover strategy

Entering a market early with a new product or approach, where early recognition may help, but later entrants can learn from mistakes.

Positioning

The place a business wants its brand to occupy in customers’ minds relative to competitors.

BCG Matrix

A strategic portfolio planning tool that categorizes business units or products by relative market share and market growth.

Star (BCG Matrix)

A product category characterized by high market growth and high relative share; managerial action is to invest to support growth and maintain leadership.

Cash Cow (BCG Matrix)

A product category characterized by low market growth and high relative share; managerial action is to maintain and use generated cash to fund other activities.

Question Mark (BCG Matrix)

A product category characterized by high market growth and low relative share; managerial action is to decide whether investment could increase share.

Dog (BCG Matrix)

A product category characterized by low market growth and low relative share; managerial action is to evaluate repositioning, maintaining, selling, or discontinuing.

Screening (New Product Development)

The second step of new product development, consisting of removing ideas that do not meet company objectives or feasibility requirements.

Concept testing

Obtaining reactions to a proposed product concept before full development.

Business analysis

Assessing expected demand, costs, revenues, and financial viability of a proposed new product.

Market testing

Trying a product with a limited market or simulated buyers before a full commercial launch.

Commercialization

Introducing a new product to the broader marketplace.

Product mix

The full collection of products offered by a business.

Product width

The number of distinct product lines a business offers.

Product depth

The number of variations offered within a single product line.

Brand equity

The additional value associated with brand recognition and customer perceptions.

Standardization

Using essentially the same product approach across different markets.

Adaptation

Modifying products to fit the specific needs of different markets.

Accounting

Recording, organizing, summarizing, and reporting an organization’s financial activity for decision-making.

Accounting information system (AIS)

A system that collects, processes, and reports accounting information.

Accounting ethics

Accurate, honest, and fair financial reporting, under which the deliberate misstatement of revenue or expenses is considered unethical.

Asset

A business-controlled resource expected to provide future economic benefit, such as cash, inventory, or equipment.

Liability

An amount owed to an outside party, such as a supplier invoice or bank loan.

Owner’s equity

The owner’s residual interest in a business after liabilities are subtracted from assets.

Accounting equation

$$\text{Assets} = \text{Liabilities} + \text{Owner's Equity}$$

Accounts receivable

Amounts that customers owe to the business.

Accounts payable

Amounts that the business owes to suppliers.

Inventory

Goods or materials held for sale or used in production.

Revenue

Income earned from selling goods or services.

Expense

A cost recognized in operating a business.

Cost of goods sold (COGS)

The direct cost of goods or ingredients sold.

Gross profit

Sales revenue minus cost of goods sold (COGS).

Net income

Revenue minus COGS and other recognized expenses (under the simplified course case).

Double-entry accounting

An accounting system where every transaction is recorded with equal total debits and credits.

Income statement

A principal financial statement that reports revenue, COGS, operating expenses, and net income over a period.

Balance sheet

A principal financial statement that reports assets, liabilities, and owner’s equity at a specific date.

Statement of cash flows

A principal financial statement that reports cash from operating, investing, and financing activities over a period.

Depreciation

The allocation of the cost of a long-lived asset over its useful life.

Fixed cost

A cost that remains approximately constant in total within a relevant range of activity, such as monthly rent, insurance, or an equipment lease.

Variable cost

A cost that changes in total as output or sales volume changes, such as milk, coffee beans, and disposable cups per latte.

Contribution margin

Selling price per unit minus variable cost per unit; the amount available to cover fixed costs and contribute toward profit.

Break-even units formula

$$\text{Break-even units} = \frac{\text{Fixed costs}}{\text{Contribution margin per unit}}$$

Gross profit margin

A financial metric calculated as: $\left(\frac{\text{Gross profit}}{\text{Revenue}}\right) \times 100\%$

Net profit margin

A financial metric calculated as: $\left(\frac{\text{Net income}}{\text{Revenue}}\right) \times 100\%$

Financial system

The network of institutions, markets, and instruments that channels funds between savers and borrowers.

Financial instrument

A contract representing a financial asset and a corresponding liability or ownership claim.

Money market instrument

A short-term debt instrument that generally matures within one year.

Capital market instrument

A longer-term security, such as a stock or a bond.

Primary market

A financial market in which newly issued securities are first sold to investors.

Secondary market

A financial market in which investors trade securities that have already been issued.

Organized exchange

A formal marketplace for securities trading that operates under established rules.

Over-the-counter (OTC) market

Decentralized trading of securities conducted through dealers rather than on a central exchange.

Financial intermediation

The channeling of funds from savers to borrowers through financial institutions.

Deposit insurance

Protection provided for eligible deposits up to specified limits if an insured bank fails.

Moral hazard

Greater risk-taking behavior that occurs when another party bears some of the potential losses.

Money

An asset generally accepted in payment for goods, services, and debts.

Medium of exchange

A fundamental function of money that facilitates purchases and sales.

Unit of account

A function of money that provides a common measure for comparing prices.

Store of value

A function of money that allows it to retain purchasing power for later use, although inflation can reduce it.

Standard of deferred payment

A function of money that specifies obligations to be paid in the future.

Commodity money

Money whose value is derived directly from the physical material from which it is made.

Fiat money

Money that is valued through government designation and public acceptance rather than intrinsic commodity content.

Currency risk

The possibility of financial loss arising from fluctuations in exchange rates.

Central bank

A public institution that conducts monetary policy and supports financial-system stability.

Monetary policy

Actions taken by a central bank to influence interest rates, money supply, and credit conditions.

Open market operations

Central-bank purchases or sales of securities to influence bank reserves and short-term interest rates.

Federal funds rate

The interest rate charged on overnight lending of reserve balances between eligible depository institutions.

Bank reserves

Cash and balances that commercial banks hold at the central bank.

Depository institution

A financial institution, such as a commercial bank or credit union, that accepts deposits.

Credit union

A member-owned financial cooperative that offers deposit and lending services.

Nondepository institution

A financial firm that does not primarily finance its operations through customer deposits.

Credit risk

The risk that a borrower or counterparty will not meet their financial obligation.

Risk premium

The additional expected return required by investors for taking on greater risk.

Capital risk

The risk that financial losses will erode an institution’s capital and threaten its solvency.