BA Quiz 2 Studying

Profit Maximization

A pricing objective where the firm must decide whether this means setting a high price.

Market Share

A pricing objective where the firm must decide whether this means setting a low price.

Selling Price Formula

Selling Price = Selling Costs + Profit.

Markup Percentage

Calculated as (Markup / Sales Price) X 100%. The markup must cover all selling costs and generate enough profit to cover other direct and indirect costs.

Break-Even Point (Units)

The number of unit sales at which total revenue equals total costs, resulting in neither profit nor loss. Formula: Fixed Costs / (Selling Price per unit − Variable Cost per unit).

Mixed Costs (Semi-variable)

Costs that have both fixed and variable components, making separation complex (e.g., a utility bill with a fixed base charge plus a variable usage charge).

Step Costs

Costs that remain fixed up to a certain point but increase in steps once a specific activity level is reached (e.g., hiring additional staff).

Cost Allocation

The challenging process of assigning indirect costs (like administrative overhead or support services) that are not directly attributable to a specific unit of production.

Price Discrimination

The practice of charging different prices to different customers for the same product or service, where the price differences are not justified by corresponding differences in cost.

Goal of Price Discrimination

To capture consumer surplus and maximize a firm's revenue by aligning prices more closely with individual consumers' willingness to pay.

Illegal Discriminatory Pricing

Price discrimination can become illegal if it violates antitrust laws, consumer protection regulations, or anti-discrimination laws. Examples include price fixing, predatory pricing, and price gouging.

Marketing (AMA Definition)

Activities, a set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Customer Decision Criteria

Customers decide whether to buy by assessing Comparative Benefits vs. Costs, weighing benefits (features, emotional appeal) against costs (price, time, effort).

Value (Marketing)

The perceived benefits and the costs associated with the item; helps benchmark a customer's Willingness to Pay (WTP).

The 5 P's of Marketing

Product, Price, Place, Promotion, and People (People refers to everyone involved in the creation, sale, and customer experience).

Distribution Channels (Place)

The paths through which products travel from the manufacturer to the end consumer (direct sales, wholesalers, retailers, online platforms).

Market Coverage Strategies

Strategies that determine how widely a product is available: Intensive (available everywhere), Selective (specific locations), or Exclusive distribution (limited to certain retailers).

Branding

The process of creating a unique identity through elements like name, logo, design, and messaging to differentiate the product and build recognition, trust, and emotional connection.

High Brand Equity

Customers recognize, prefer, and trust the brand, often resulting in increased sales, loyalty, and the ability to charge premium prices.

Components of Brand Equity

Brand Awareness, Perceived Quality, Brand Loyalty, and Brand Associations.

Brand Positioning

The unique space a brand occupies in the minds of consumers relative to competitors.

Segmentation, Targeting, Positioning (STP)

A model that divides the market into distinct segments, targets specific customer groups with tailored campaigns, and positions the product accordingly.

Social Proof

The idea that people make decisions based on the actions and opinions of others.

5 Stages of Consumer Decision Making

Recognition of Need, Information Search, Evaluation of Alternatives, Purchase Decision, and Post-Purchase Evaluation.

Accounting

A comprehensive system for collecting, analyzing, and communicating financial information to a firm's internal and external stakeholders.

Financial Accounting

Focuses on External information; required for public companies and must be audited.

Managerial Accounting

Focuses on Internal information; is not publicly available.

Accounting Equation

Assets = Liabilities + Equity.

Asset

A present right of the entity to an economic benefit.

Liability

A present obligation of an entity to transfer an economic benefit.

Equity

The residual interest in the assets of an entity that remains after deducting its liabilities.

Balance Sheet

A financial statement that provides a snapshot of financial condition at a specific point in time; summarizes assets, liabilities, and equity (also called Statement of Financial Position).

Income Statement

A financial statement that summarizes revenues, expenses, and profits/losses over a specific period (also called P&L, Statement of Earnings, or Statement of Performance).

Statement of Cash Flows

Provides a detailed breakdown of cash inflows and outflows over a specific period, highlighting the company's ability to generate cash and maintain liquidity.

Double Entry Bookkeeping

The system that links financial statements both internally and across statements.

Gross Profit Margin

Measures the percentage of revenue that exceeds COGS. Formula: (Gross Profit / Revenue) × 100.

Net Profit Margin

Indicates the percentage of revenue remaining after all expenses, taxes, and interest. Formula: (Net Income / Revenue) × 100.

Current Ratio (Liquidity)

Indicates a company's ability to cover its short-term liabilities with short-term assets. Formula: Current Assets / Current Liabilities.

Debt to Equity Ratio (Solvency)

Compares total liabilities to shareholders' equity, reflecting the degree to which debt finances the company. Formula: Total Liabilities / Shareholders' Equity.

Inventory Turnover (Efficiency)

Measures how efficiently a company manages its inventory. Formula: Cost of Goods Sold / Average Inventory.

Business Law

The set of rules governing a business's operations, conduct, and structure, aiming to ensure fair and transparent operations.

Contract

Forms the foundation of business law.

Core Elements of a Contract

Offer and Acceptance, Consideration, Intention to Create Legal Relations, and Capacity.

Constitutional Law

A source of business law (e.g., the Commerce Clause, granting Congress power to regulate commerce among states).

Statutory Law

Federal laws (securities trading, bankruptcy) and state laws (e.g., Uniform Commercial Code - UCC) that govern commercial transactions.

Administrative Law

Laws handled by agencies at the federal and state level.

Business Ethics

The discipline of applied ethics to business; the study of what is right, good, and moral.

Normative Ethics

Refers to 'how ought we do things'.

Descriptive Ethics

Refers to 'how are things done' (describing actions).

Ethical Decision Framework

Includes questions about legal obligations, avoiding liability, and ethical issues raised with respect to affected stakeholder groups.

Large Language Model (LLM)

A massive statistical prediction machine (a highly complex autocomplete engine) that does NOT think like a human but generates text by predicting the most statistically probable next word (token).

LLM 'Large' Components

Training Data (Trillions of words, allows Generalization); Parameters (Billions/Trillions, allows Fluency & Context); Architecture (The Transformer, allows Deep Focus).

Factual Hallucination

LLM weakness where it makes up facts, citations, or data from scratch with high confidence due to its predictive nature, not grounded in reality.

Data Quality / 'Gaslight' Effect

LLM weakness where the model misrepresents reality because its training data is flawed, old, misleading, contradictory, or contaminated.

Bias and Systemic Risk

LLM weakness where inherited human and societal prejudices embedded in the training data cause the model to mirror discriminatory patterns.

VAST Framework (V)

Versatile: Perform many tasks without re-training (e.g., drafting emails, generating code).

VAST Framework (A)

Analysis: Extract key data, sentiment, or entities (e.g., sifting customer reviews).

VAST Framework (S)

Synthesis: Consolidate and summarize large documents (e.g., 150-page policy into a 1-page summary).

VAST Framework (T)

Transformation: Reformat or adjust style/tone (e.g., rewriting technical specifications into marketing copy).

AI Guiding Component 1 (Role)

Role (Persona) / The 'Who': Defines WHO the model should ************* (e.g., 'act as a seasoned career coach').

AI Guiding Component 2 (Context)

Context / The 'What' (Background): Provides relevant background information (e.g., Your major, the job title, company name).

AI Guiding Component 3 (Task)

Task / The 'Action': Specifies the core action or goal (e.g., 'Draft a cold outreach email').

AI Guiding Component 4 (Format)

Format / The 'How' (output): Determines the desired structure or length (e.g., 'Keep it under 150 words').

Retrieval-Augmented Generation (RAG)

A system that 'cages the LLM' by providing it with a highly curated, internal Knowledge Base (the 'Cage') before it generates a response, controlling the data it accesses.

RAG Advantage: Data Integrity

Forces the LLM to 'ground' its answer in specific data, resulting in verifiable and auditable output, thereby reducing hallucination.

Prohibited Knowledge Base Problem

The challenge where crucial proprietary standards (like ISO 9001/45001) explicitly forbid using their text to train or feed an AI system.

Gemini Deep Research

A Gemini tool with a limit of 5 reports per month. It generates a research plan that should be reviewed and edited before execution.

Gemini Guided Learning

A tool analogous to a targeted Q&A session with the professor, used to quickly grasp a new concept or develop a specific skill through conversation.

Notebook LM

A personal RAG system where the user can upload up to 50 files as sources; the LLM in this system can only 'see' what is included in those uploaded sources.

Accounts Receivable Turnover

A ratio used in financial statement analysis to help interpret a company's performance and understand what is going on with the business. Formula: Net Credit Sales / Average Accounts Receivable

Return on Assets (ROA)

A calculation used in financial statement analysis (part of the process of examining financial statements) to interpret a company's financial health and performance. Formula: Net Income / Average Total Assets × 100.