BA 101 midterm 2

production

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

Production Management

All the activities managers engage in to help firms create goods

Operations Management

A specialized area in management that converts or transforms resources into goods and services

operations management includes:

Inventory management

Quality control

Production scheduling

Follow-up services

Types of Production Operations

Process Manufacturing, Assembly Process

process manufacturing

The part of production that physically or chemically changes materials

assembly process

The part of production that puts together components

Key Product Processes

Production processes are either continuous or intermittent

Continuous Processes

Long production runs turn out finished goods over time

Intermittent Processes

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

Technology & Manufacturing

Computer-Aided Design (CAD), Computer-Aided Manufacturing (CAM)

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)

Uniting of computer-aided design with computer-aided manufacturing, it is expensive but cuts up to 80% of time.

Mass Customization

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

Technology

Robotics allows manufacturing to occur 24 hours/day, Sensors can detect problems immediately

Changes made quickly, Nanomanufacturing can manipulate material on molecular level

Operations Management help solve

Leverage ratios

evaluates a firms debt

debt to equity ratio

total debt/total owners equity

debt to equity ratio

compares amount you owe to the amount you own, lower ratio the less you owe

debt to equity leverage

measuring the ratio against past performance and firms operating in same industry can establish a potential risk and how debt/equity is used.

operations management helps solve problems:

Facility location, Facility layout, Materials requirement planning, Purchasing, Inventory control, Quality control

what is money?

Barter, money, interest

barter

the direct trading of goods and services

money

anything people generally accept as payment for goods and services

intrest

the cost of borrowing money, expressed as a % of principal amount.

disadvantages of bartering

doesn’t determine value

standards for a useful form of money

portability, divisibility, stability, durability, uniqueness

global exchange of money; weak

weak= falling dollar value. amount of foreign goods + services you can buy with $1 DECREASES

global exchange of money; strong

strong= rising dollar value. amount of foreign goods + services you can buy with $1 INCREASES

Facility Layout

Physical arrangement of resources, including people, to most efficiently produce goods and provide services

Layout depends on processes performed

Service:  Help customers find products

Manufacturing:  Improve efficiency

Impact of falling $

US tourism increases, overseas demand for US product rise, US firms increases profits in foreign markets favorable exchange rate. weaker $= more foreign output

impact of rising $

US tourism decreases, US product demand decreases, Foreign exchange with US decreases profits, big problem when importing basics like food and energy.

Layout Options

Modular Layout, Assembly Line Layout, Fixed-Position Layout

Modular Layout

Teams produce more complex units of final product

Assembly Line Layout

Workers do only a few tasks at a time

Fixed-Position Layout

Allows workers to congregate around product

Purchasing

searches for high-quality material resources

  finds the best suppliers

  negotiates best price for goods and services

Inflation

too much money chasing too few goods

deflation

prices decrease due to a surplus of goods and services relative to money

Inventory Control; Just-in-Time (JiT) Inventory Control

Production process in which a minimum of inventory is kept and parts, supplies, and other needs are delivered just in time to go on the assembly line.

Accounting

Recording Classifying, Summarizing, Interpreting of financial events and transactions

in an organization to provide interested parties needed financial info

who makes use of a firm’s accounting information?

Interested parties

employees

owners

creditors

unions

investors

government

Accounting Progression

1. analyze source documents

2. record transactions in journals

3. transfer journal entries to ledger

4. take a trial balance

5. prepare financial statements (balance sheet, income sheet, cash flows)

6. analyze financial statements

Two Types of Accounting

Managerial

Financial

Managerial Accounting

Provides information and analysis to managers inside the organization to assist them in decision making. They are Involved with:

Costs of production

Costs of marketing

Preparation and control of budgets

Minimizing tax liabilities

Financial Accounting

Financial information and analysis generated primarily for people outside the organization. They ask the questions

Annual Report

Yearly statement of the financial condition, progress, and expectations of the firm

balance sheet equation

Assets = Liabilities + Owner Equity

Income Statement equation

Revenue – Expense = Profit

financial statements

Summary of all the financial transactions that have occurred over a

particular period (balance sheet, income statement, cash flow)

Balance Sheet

Assets, Liabilities, Owners’ Equity

assets

The value of the stuff the firm controls

liabilities

The debt claims against the stuff

owners equity

Owners’ claims (what they actually own) of the stuff

Balance Sheet Information

Assets

Loans

Retained Earnings

Owners’ Equity

Inventory (value)

Plant & Equipment

Accounts Receivable

Accounts Payable

Income Statement

Story of transactions over a specific time period

Revenue transactions

Business and its customers

Expense transactions

Business and its suppliers – such as resources, people,

and capital

Net income is also profit (loss)

Difference between revenue and expense

Variable Costs (COGS)

COGS The more you make, the greater the cost

Fixed Costs (Operating Expense)

Cost of being in business that month

Selling expenses

Administrative expenses

revenue equation

#of units sold x price

contribution margin

cm= sales-variable costs

Net Margin (EBIT)

contribution margin – Total Period

Earnings Before Interest & Taxes

Income Statement Information

Sales (Revenue)

Cost of goods sold (COGS)

Contribution margin

Fixed costs

Depreciation

Expenses – Interest and Taxes

Cash Flow Statement

Movement of cash in and out of a firm over period of time

How much cash is available for use in a given period of time

Reconciles net profit back to cash

balance sheet tells the story of

working capital

investing

financing

Business Activities

Operating, Investing, Financing

Operating: Using the money you have

Create goods and create transactions

Change goods into dollars (at a profit)

Investing: What do you do with the money?

Acquire assets (stuff) to run a firm

Renting $ to others (who earn higher return)

Financing: Where do you get money?

Funds to start and grow a firm (debt/equity/retained earnings)

Debt Financing

Borrow money from a financial institution bank, savings and loan, etc. Borrow money from the market bonds

Bonds

Form of long term debt for a firm

Like a home mortgage for an individual

Risk

Rated by Standard & Poors or Moody

Return

Degree of risk and interest rate

equity financing

a way to bring cash into a business by where you take on new owners

Securities Markets

Primary Markets, Secondary Markets

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

Book Value

Owners’ equity / Number of shares

Earnings Per Share

Net income / Number of shares

Dividend

Cash payment to owners from profits

Yield

Dividend / Price

Current ratio

current assets/ current liabilities

Quick/Acid Ratio

current assents - inventories / current libalities