BMIN 1000 – Study Guide: Exam III

What is an organizational chart?

How jobs are formally divided, grouped and coordinated.

What is an organizational chart designed to represent and what type of shape does it have?

• It's designed to represent the relationship among people, like who is accountable for what and who reports to whom.

• It normally has the shape of a pyramid.

What is the definition of Organizational Structure?

• The formal framework that defines how roles, responsibilities, authority, and communication are arranged within an organization to achieve its goals effectively. It outlines who does what, who reports to whom, and how decisions and information flow across different levels and departments.

• What do each of the five components or organizational structure involve?

• Work Specialization

  • AKA Division of Labor

  • Who does what? – Individual Jobs

  • I—I Low to high (Formalized)

• Departmentalization

  • How are jobs grouped

    • What are the different ways firms departmentalize?

      • Functions: purpose

      • Product

      • Geography: physical location

      • Type of customers

• Chain of Command

  • Unbroken line of authority from bottom, to top of the organization

    • Ex: military and banks 

• Span of Control

  • At each level, how many people does each employee oversee 

• Centralization v Decentralization

  • Where decisions get made

  • Centralization: a management structure where decision making power is concentrated at the top level, with senior leaders making key strategic and operational decisions.

  • Decentralization: the practice of distributing decision making authority throughout and organization, rather than keeping it concentrated at the top.

centralization

• a management structure where decision making power is concentrated at the top level, with senior leaders making key strategic and operational decisions

Decentralization

the practice of distributing decision making authority throughout and organization, rather than keeping it concentrated at the top.

Organizational Designs

• Simple Structure

  • Seen in small company start ups/ small companies – “Line organization

    • What are the attributes of a line organization?

      • One owner/ few employees

      • Low work specialization

      • Low departmentalization

• Bureaucratic Structure

  • Outdated (no cost effective)

    • Many levels of management

    • Work specialization/deparmentalization are high

    • Benefit – standardized products and services

• Functional Structure

  • Departmentalization by function → apply to whole company

  • Companies leverage expertise

• Divisional Structure

  • S.B.U’s (Strategic Business Units)

    • Seen in companies with multiple products 

    • Based off products, customers, services (all interchangeable)

• Matrix Organization

  • Combination of areas of expertise with geographic focus

    • Promotes flexibility + expertise/efficiency

      • RE: Chain of Command

• Virtual Organization

  • Newest

  • Temporary

  • Boundless structure

    • Its cost effective

• What is benchmarking and why is it important as it relates to the Virtual Organizational Design?

• Comparing an organization's practices, processes and products against the world's best. 

• What are core competencies? What should they be used for?

• Those functions that the organizations can do as well as or better than any other organization in the world.

Operations management

• The process of planning, designing, executing and controlling the production of goods and services, also includes managing the supply chain, inventory and quality control.

Production management

• The process of managing the creation of finished goods and services, using land, labor, capital (money), entrepreneurship and knowledge.

• What are the four major goals firms must consider when addressing their Operations Management efforts, and what does each involve?

• Create value via products

• Reduce time to get your products to your customers (reduced cycle time)

• Maximize efficiency (ex., finding lower cost, but just as good material, sustainable manufacture process, and so on)

• Further company innovation

• production process

• Everything involved in bringing an idea from concept to execution AKA the process of turning inputs- raw materials, time, effort, capital, etc into outputs/finished products

process manufacturing

• physically or chemically changing raw material inputs

assembly process

•  putting together component parts to make finished products

• Computer Aided Design/Manufacturing

• The use of computers in the design of products

• Flexible Manufacturing

• Designing machines to do multiple tasks so they can produce a variety of products,, highly versatile technology

Lean Manufacturing

• The production of goods using less of everything compared to mass production,, reducing costs/minimizing waste

• Mass Customization

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

• Robotics

24/7 work

• 3D Printing

• Prototyping product innovation

• What is Operations Management Planning?

• Helps solve many of the problems in the service and manufacturing sectors. 

• Facility Location

• Proximity to customers

• Associated labor costs: best talent for associated experience 

• Government incentives: tax, zoning, modifications, land

• Access to transportation

• Access to natural resources

• Facility Layout

• Focus: efficiency

• The physical arrangement of resources (including people) in the production process

• Materials Requirement Planning/Enterprise Resource Planning

• Finance, manufacturing, HR, Customer Service

• Finance, manufacturing, HR, Customer Service

• Finding best raw materials for best price

• Inventory Control

• Just in time inventory

• Where, when (availability), how much

• Quality Control/TQM

• Total Quality Management

  • Six sigma

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

  • Producing defects

  • Reduced cycle times

  • Different green/sustainability

  • Legal compliance

  • Competitive edge

• Data

• Raw, unanalyzed and unorganized facts and figures

• Information

• Processed, organized and analyzed data

  • Aids in managerial decision making

  • Crucial in today's data-driven economy

Database

• An electronic storage system for information

  • Healthcare systems, ecommerce platforms, social media, hospitality booking

• Information Technology

• How businesses use technology to conduct business more effectively and efficiently 

• Business Intelligence/Analytics

• Software that helps analyze raw data and drive insights

  • Because tech is dynamic (Moore's law), it requires constant updates

• What are the five types of information companies manage and seek to protect?

• Business process info

  • Purchases

  • Supply chain management

• Physical observation info

  • GPS

• Biological data

  • Face ID

  • Fingerprint

• Public data

  • Social media

• Personal preference data

  • User ratings

  • Purchase history

  • Preferred communication channels

• What purpose does Data Analytics play in business?

• The process of collecting, organizing, analyzing & storing large sets of data (Big Data) in order to identify patterns and other information that is most useful to the business now and for making future decisions.

• What is Big Data and why is it important in business today?

• Large sets of data, they're important because it helps to identify patterns and other information that is most useful to the business now and for making future decisions.

• Intranet 

• A company wide network, closed to public access, that uses internet-type technology (databases within a company)

Extranet

• A semi private network that uses internet technology and allows more than one company to access the same info or allows people on different servers to collaborate (networks between companies)

• Virtual Private Networks (VPN)

• A private data network that creates source connections, or “tunnels,” over regular internet lines. (Private pathway)

What is Artificial Intelligence (A/I)?

• A term to describe machines programmed to think, work and react like humans.

machine learning

• Training devices and software to perform a task and improve its capabilities by feeding it data and information so it can “learn” over time.

• LANs

• Local area network

  • In one building

• WANs

• Wide area network

  • Geographically dispersed 

Cloud Computing & benefits

• A form of visualization in which a company's data and applications are stored at offsite data centers that are accessed over the internet “the cloud” (Computing via the internet)

  • Increased reach

  • Better security

  • Less expensive

• How does Information Technology impact Human Resources?

• Impacts human resources, security threats, privacy concerns and stability

• Impacts human resources, security threats, privacy concerns and stability

• Viruses

• Hackers

• Fishing

  • Send a link to access your info

• Ransomware 

  • Takes control  of your data and wont give info until you pay them

• Cyber terrorism

  • Disable aspects of national/country 

    • Ex – 911

• What parting insights/recommendations were provided in class about using IT effectively?

• Use a password manager

• Why is it important for students and businesspeople to know the basics of accounting?

• It helps predict future financial performance → investment worthy, helps track cashflow, track current/ongoing performance (financial health), legal requirement

accounting

• The recording, classifying, summarizing and interpreting of financial transactions and events, to provide management and other parties the info they need to make educated and good decisions.

• Bookkeepers

• Track financial transactions – via ledger

• Accountants 

• Interpretation of transactions/make recommendations

Balance Sheet

• Financial statement that reports a firm's financial condition at a specific time and is composed of three major accounts: assets, liabilities and owners equity.

• What does the equation ‘A = L + OE’ stand for?

• Assets = Liability + Owners Equity

Types of Assets

• Current  (1 YR or less)

  • cash , inventory, accounts receivable

• Long term

  • Property plant equipment P.P.E

Types of Liabilities

• Current

  • Expenses

    • Utilities, salary, work comp

  • Accounts payable

  • Loans

• Long term

  • Lease, mortgage, loans

liquidity

• The ease with which an asset can be converted into cash

Income Statement

• The firms profit after costs, expenses and taxes; it summarizes all of the resources that have left the firm, expenses and the resulting net income/profit or net loss

• What two categories make up owner’s equity, and what does each represent?

• Contributed capital

  • initial/ongoing money

• Retained earnings

  • The accumulated earnings from a firms profitable operations that were reinvested in the business and not paid out to stockholders in dividends 

Statement of Cash Flows

• Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments and financing.

• What are the three categories that make up the Statement of Cash Flows?

• Operating activities

  • Financial performance = profit

• Investing activities

  • purchase/sale of long term assets

• Financing activities (fundraising)

  • Stock – cash in

  • Taking loans – cash out

Finance

• The aspect of business that oversees the process of acquiring and managing money

• Financial management

• How a firm manages resources to help it meet its goals

• What two categories make up owner’s equity, and what does each represent?

• Contributed capital

  • initial/ongoing money

• Retained earnings

  • The accumulated earnings from a firms profitable operations that were reinvested in the business and not paid out to stockholders in dividends 

• What are the three steps involved in the financial planning process? What does each involve?

• Forecast financial needs

  • A prediction or estimate of future (financial) events, often based upon some form of data analysis

    • Short term → revenue, cash flow, expenses (within 1 YR)

    • Long term → revenues, costs (5-10 YRS)

• Develop budgets to meet needs

  • Financial plan based upon money coming in and money coming out

    • Capital budgets: major assets – property, plant, and equipment

    • Cash budgets

    • Operating (master) budget: everything

• Create controls to monitor performance

  • 3 causes (financial) as to why companies fail

    • Poor expense control

    • Undercapitalization (not enough $$)

    • Poor cash management

forecast

• A prediction or estimate of future (financial) events, often based upon some form of data analysis

• What is included in short-term and long-term forecasts?

• Short term → revenue, cash flow, expenses (within 1 YR)

• Long term → revenues, costs (5-10 YRS)

• What is included in a capital budget, cash budget, and an operating budget?

• Capital budgets: major assets – property, plant, and equipment

• Cash budgets

• Operating (master) budget: everything

financial control

• A process in which a firm periodically compares its actual revenues, costs and expenses within its budgets

• What are the three main reasons companies fail financially?

• Poor expense control

• Undercapitalization (not enough $$)

• Poor cash management

What are the four areas/categories for which companies need money? What does each involve?

• Day-to-day expenses

  • Salaries, utilities, supplies, daily expenses

• Credit expenditures

  • Paying off credit based purchases

• Acquiring inventory

• Capital expenditures

  • new plant, properties, capacity (ex: new machines)

• Debt based financing

• Funds raised through various forms of borrowing that must be repaid

  • Loans, credit cards, bonds

Equity based financing

• Money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital)

• What are the five forms of short-term financing? How does each work and what are the attributes of each.

• Trade credit (debt)

  • Terms: amount owed/repayment period

  • 2/10, NET/30: if I pay within 10 days, get 2% discount/// if not, pay in full amount within 30 days

• Friends, family & fools: small investments up to 25k (Equity)

• Commercial bank loans (debt)

  • Collateral

  • Secured loan: backed by a personal guarantee

• Factoring AKA selling your accounts receivable

  • Discount

  • Poor financial management

• Credit cards (debt)

• What are the five forms of long-term financing? How does each work and what are the attributes of each.

• Long term loans (debt)

  • Mortgage, rental

• Bonds (debt)

  • Formal I.O.U: amount borrowed + interest

• Stock (equity)

  • Fractional percentage of ownership in a company

• Retained earnings (equity)

  • Organic growth

• Angel or venture capital financing:

  • Selling ownership to outside professional investing entities

    • Angel: $10-250K

    • Venture: $2mil-5mil

Money

• Anything people accept as a form of payment for goods and services

Barter

• The trading of goods and services in exchange for other goods and services

• The money supply

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

Inflation

In increase in prices

Deflation

• A decrease in prices

• Dollar Value

• What purchasing power the American dollar has relative to other international currencies, at a point in time

• What is the Federal Reserve (AKA The Fed)? How does it work? What is it responsible for in the American banking system?

• Central U.S bank – oversees all other banks

• Non governmental agency

  • 12 locations – run by a board of governors

  • Buy and sell foreign currency

  • Lend money to other banks  – discount rate (rate at which other banks borrow $ from the fed)

  • Regulate credit

• What is the Discount Rate and what purpose does it serve?

• rate at which other banks borrow $ from the fed

• Attributes of Commercial banks

• For profit

  • Low interest

• Protected by FDIC - $250,000

• Savings acct: earn interest

• Certificates of deposit

  • Set duration

    • Longer term → higher interest

• $ exchange

• Attributes of Savings and Loan institutions

• Commercial bank mortgages

• For profit

• Attributes of Credit unions

• Non profit

• Must be a member

• Electronic Funds Transfer

• A computerized system that electronically performs financial transactions such as making purchases, paying bills, and receiving paychecks

• Debit Cards

• An electronic finds transfer took that services the same function as checks: it withdraws funds from a checking account

• Online Banking

• All types of transactions through phone/computer

• Direct Deposit

• Credit made directly to a savings or checking account in place of a paycheck

• What is Financial Independence and why is it important when planning for retirement?

• Having enough money saved so that you can withdraw from it in small increments to support your desired lifestyle. It's important because you'll need your money to last 20-30 years.

• What is the Power of Compounding Interest and why is it important in retirement planning?

• By investing early you earn money through interest dividends and other things and if you reinvest the number gets bigger and bigger

• Why is having a long investment window important when managing investment-based risk?

• Because if you fail early on,  you'll have a lot of time to make up for that

• What are the five types of retirement accounts discussed in class?

• Employer sponsored plans

  • 401K, 401A, 403B

• Pensions

  • Individuals have a small amount taken out and managed by the company and invested, then pays it out in increments or as a lump sum during retirement.

• Individual Retirement Accounts (IRAs)

  • Traditional

  • Roth

• Social security 

  • With each paycheck the federal government holds and sets aside a certain amount in your name

    • Paid out when you retire 

• Individual brokerage/investment accounts

  • Not formal but still used to generate income and savings for retirement

    • Same logic as other accounts

    • Fidelity, vanguard, Schawb, etc

• What are the different types of employer-sponsored retirement accounts?

• 401K, 401A, 403B

• What is an ‘employer match?’

• The company will match a certain amount that you put in 

  • EX: for every dollar, up to 5% of your gross paycheck, your employer will put in $0.50

• What are the major differences between a Traditional IRA and a ROTH Ira?

• Traditional 

  • Money is put in on a pre tax basis– before taxes are taken out. It earns money and when withdrawn, it is taxed at the individual's tax rate at the time of the withdrawal

• ROTH

  • Post tax meaning it comes out of your pocked after you had paid a tax on it, it is not taxed when withdrawn

• What are each of the four different types of investments one can use for retirement and how do they work?

• Stocks

  • A percentage of ownership in a company, with the hope that performs well and the price share increases over time

    • When you sell the stock, if that amount is higher than what you bought it for, the profits (number of shares x change in value) is yours to keep as profits

  • These usually tend to be riskier

• Mutual Funds

  • Collections of different stocks, often that have a similar interest or intent 

    • It is desired to increase over time to generate profits you can keep

• Bonds

  • The equivalent of granting a fixed loan to a borrower, with a set repayment date, on top of principal and promised interest

    • These can be risky, due to the threat of potential non payment by the borrower

• Cash Accounts

  • Like a bank, you can put your money in what is called a money market account – in essence, as savings account that offers a slightly higher interest rate than those of commercial banks

    • These are very safe

    • However, they usually don't have the same earning potential as stocks or bonds

• What are the two major steps involved when getting started on a retirement plan?

• Calculating retirement needs

• Creating a retirement plan

• What are the six common mistakes people make when planning for retirement?

• Not starting early

• Not investing regularly

• Underestimating your future costs

• Not calculating your anticipated length of retirement accurately

• Not researching investments before masking them

• Not diversifying your investments