IMPORTED - BA 101 Midterm 2

production

The creation of goods using land, labor, capital, entrepreneurship and knowledge (the factors of production)

production management

All the activities managers do to help firms create goods.

operations management

A specialized area in management that converts or transforms resources into goods and services. Which includes:

Inventory management

Quality control

Production scheduling

Follow-up services

production process inputs

land, labor, capital, entrepreneurship, knowledge

production process production control

planning, routing, scheduling, dispatching, follow-up

production process outputs

goods, services, ideas

process manufacuring

The part of production that physically or chemically changes materials.

assembly process

The part of the production process that puts together components.

continuous process

Long production runs turn out finished goods over time.

intermittent process

Production runs are short and the producer adjusts machines frequently to make different products.

computer-aided design (CAD)

The use of computers in the design of products.

Computer-aided manufacturing (CAM)

The use of computers in the manufacturing of products.

Computer-integrated manufacturing (CIM)

The uniting of computer-aided design with computer-aided manufacturing. It is expensive ... but it cuts as much as 80% of the time needed to program machines to make parts.

lean manufacturing

Using fewer resources compared to mass production.

Compared to others, it:

Take half the human effort.

Have half the defects in finished products.

Require one-third the engineering effort.

Use half the floor space.

Carry 90% less inventory.

mass customization

Tailoring products to meet the needs of a large number of individual customers.

facility layout

The physical arrangement of resources, including people, to most efficiently produce goods and provide services.

Depends on the processes performed:

Service: Help customers find products

Manufacturing: Improve efficiency

assembly line layout

Workers do only a few tasks at a time.

modular layout

Teams of workers produce more complex units of the final product.

fixed-position layout

Allows workers to congregate around the product.

process layout

Similar equipment and functions are grouped together.

purchasing

The function that searches for high-quality material resources, finds the best suppliers and negotiates the best price for goods and services.

quality

Consistently producing what the customer wants while reducing errors before and after delivery.

six sigma quality

A quality measure that allows only 3.4 defects per million opportunities.

six sigma process

the process of defining->measuring->analyzing->improving->controlling

Program Evaluation and Review Technique (PERT)

A method for analyzing the tasks involved in completing a given project and estimating the time needed. It includes Analyzing and sequencing tasks

Estimating the time needed to complete each task

Drawing a network illustrating the first two steps

Identifying the critical path

critical path

the sequence of tasks that takes the longest time to complete.

gant chart

A bar graph that shows what projects are being worked on and how much has been completed.

accounting

Recording, classifying, summarizing and interpreting of financial events and transactions in an organization to provide interested parties needed financial information.

accounting profession

analyze source documents->record transactions in journals->transfer journal entries to ledger->take a trial balance->prepare financial statements->analyze financial statement

marginal accounting

Provides information and analysis to managers inside the organization to assist them in decision making.

It is involved with:

Costs of production

Costs of marketing

Preparation and control of budgets

Minimizing tax liabilities

Financial accounting

Financial information and analyses are generated for people primarily outside the organization. Outside users are interested in these questions:

Is the organization profitable?

Is it able to pay its bills?

How much debt does it owe?

annual report

A yearly statement of the financial condition, progress, and expectations of the firm.

assets

= Liabilities + Owners Equity

The value of the stuff the organization controls

profit

Revenue - Expense =

financial statements

A summary of all the financial transactions that have occurred over a particular period. Which include:

Balance sheet

Income statement

Statement of cash flows

liabilities

The debt claims against the stuff

owner's equity

The owners' claims (what they actually own) of the stuff

balance sheet

document includes Assets

Loans

Retained Earnings

Owners Equity

Inventory (value)

Plant & Equipment

Accounts Receivable

Accounts Payable

income statement

The story of transactions over a specific time period includes:

Sales (or Revenue)

Fixed Costs

contribution margin

Cost of Goods Sold (or COGS)

Depreciation

Expenses - Interest and Taxes

revenue transactions

transactions between businesses and its customers

expense transactions

transactions between business and it supplies such as resources people and capital

net income or net loss

the difference between revenue and expense

variable costs

(Cost of Goods Sold: COGS) The more you make, the greater the cost

Labor used to make product or service

Material to make product or service

Cost of keeping inventory

fixed costs

(Operating Expense) The cost of being in business that month

Selling expenses

Administrative expenses, also includes depreciation, selling, general and administration, R&D, marketing

contribution margin

sales-variable cost

the amount of money left after you pay for the products you sell

it is a measure of the efficiency of your production process

Net margin

contribution margin - Total Period

Earnings Before Interest & Taxes (EDIT)

net profit

profit net income earnings return bottom line of an income statement

retained earning

the company "reinvests" the income

dividend

profit given to the stockholders

income

profit given to partners or sole proprietor

cash flow statement

Shows movement of cash in and out of an organization over a given period of time

Shows how much cash is available for use during a given period of time

Reconciles net profit back to cash

finance

Where do you get money? Funds to start and grow a business (debt/equity/retained earnings)

investment

What do you do with money? Acquire assets (stuff) to run a business renting $ to others (who earn higher return)

operations

Using the money you have. Create goods & create transactions: change goods into dollars (at a profit)

opportunity recognition

Identify an opportunity in the market

Develop a strategy for serving customers

Acquire resources / commitments

short term investment

Accounts receivable

Inventory

New product development

long term investment

Equipment (automation)

Facilities (additional capacity)

Buy other companies

bank loan

Make application

Determines whether to make loan or not based on the risk of the loan

The higher the risk, the higher the interest rate...

It is a contract - The terms of the contract don't change

bond

is a form of long term debt for a corporation.

similar an individual would have a mortgage for a home - about two-thirds of American homeowners have a mortgages.

equity financing

way to bring cash into the business is through equity financing.

Rather than borrowing funds, it involves taking on new owners

This can dilute the ownership of previous stockholders and can be a negative!

primary markets

Firm sells new issues of security (stock or bonds) publicly for the first time to: investment bankers (underwriters)

secondary markets

Subsequent owners trade previously issued shares of stock and bonds

NYSE, AMEX, London, Jakarta

current ratio

Current Assets/Current Liabilities

acid ratio

Current Assets - Inventories/ Current Liabilities

total debt to total assets ratio

total debt/ total assets

working capital

current assets - current liabilities

leverage ratio

evaluates a company's debt levels. One of the most common is the debt-to-equity ratio.

debt-to-equity ratio

Total Debt/ Total Owner's Equity

leverage

measures the amount of debt versus the amount of equity owned in an asset.

It compares the amount you owe to the amount you own.

The lower the score, the less you owe. A high debt/equity ratio generally indicates that a company has been aggressive in financing its growth with debt.

This can result in volatile earnings as a result of the additional interest expense.

Typically, a D/E ratio greater than 2.0 indicates a risky scenario for an investor, however this guides varies by industry.

return on equity

Net Income / Owners' Equity

money

Anything people generally accept as payment for goods and services. useful because it is:

Portability

Divisibility

Stability

Durability

Uniqueness

barter

The direct trading of goods or services for other goods or services.

money supply

The amount of money the Federal Reserve Bank makes available for people to buy goods and services.

M1

Money that can be accessed quickly and easily (coins, paper money, checks ...)

M2

Money that can be accessed quickly and easily plus money that may take a little more time to obtain (savings accounts, money market accounts ...referred to as "Near Money")

M3

big deposits like institutional money market funds.

inflation

is sometimes called "too much money chasing too few goods."

decline

prices go down because of a surplus of goods and services compared to money.

falling dollar value

The amount of goods and services you can buy with a dollar decreases.

rising dollar value

The amount of goods and services you can buy with a dollar increases. leads to increased tourism, overseas demand for US products, and a favorable exchange rate

parts of the federal reserve

Board of governors

Federal Open Market Committee (FOMC)

Twelve Federal Reserve banks

Three advisory councils

Member banks of the system

reserve requirement

Percentage of commercial banks' checking and savings accounts that must be physically kept in the bank.

open-market operations

Buying and selling of U.S. government bonds by the Fed with the goal of regulating the money supply.

discount rate

Interest rate that the Fed charges for loans to member banks.

Federal Reserve Act of 1913

all federally chartered banks had to join the Federal Reserve.

The Great Depression

The stock market crash led to bank failures in the early 1930s.

In 1933 and 1935, Congress passed legislation to strengthen the banking system, including the establishment of federal deposit insurance.

Federal Deposit Insurance Corporation (FDIC)

An independent agency of the U.S. government that insures bank deposits up to $250,000.

commercial bank

A profit-seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and uses those funds to make loans.

Has two types of customers:

Depositors

Borrowers

Demand deposit

A checking account; money can be withdrawn anytime on demand from the depositor.

time deposit

A savings account; a bank can require prior notice before the owner withdraws money.

certificate of deposit

A savings account that earns interest, to be delivered on the certificate's maturity date.

saving and loan association

A financial institution that accepts both savings and checking deposits and provides home mortgage loans.

credit union

Nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members. Are exempt from federal income taxes.

RFID chip

allows consumers to pay for products with just a wave of a hand. But they're also easier for hackers to access,