business and society

what constitutes economic thinking

thinking that considers oppurtinity costs, scarce resources

what make economic decisions

decision with scarce resources and alternative uses

is studying at wu an economic decision

yes, because there are opportunity costs of studying somewhere else

do decisions have economic aspects?

• usually you have to invest something to get something back

  • time, effort, money

  • resources are scarce, that is why all of us need to economize

• adress the question of opportunity cost

risk

potential loss and threat also a potential gain

how do people understand risk

people overestimate some risk, underestimate other risks

what does it mean to understand risk

we should understand the probability of winning and losing, and the conscequences

sources of risk

• professional life-jobs

• personal life-partners

• project failures, investments

risk managment(5)

• risk treatment

  • avoid the risk

  • reduce

  • share

  • retention

avoid the risk

(elemininate)

reduce

(optimize)

share

(transfer, insure)

retention

(accept and budget)

• economic challanges

  • personal life

• choosing educational path

• budgeting

• time management

• saving and investing

economic challanges: societal scale

• housing prices

• overcrowded job market

• spiked energy prices

• jobs replaced by ai

• migration caused by environmental issues

how to prepare for economic challanges general

making provisions for the future

how do business prepare for the future

they have to make provisions for the future

prerequisite to making provisions

the businesses make profit

saving vs investing

savings are just money put aside, investing should include growth

is saving more dangerous than investing

in a way no, because we wont lose the money, we can lose purchasing power

what is saving good for

• financial emergencies

• savings goals

what happened to savings during pandemic

people lost because of fear and inflation

investing

• increasing the amount of over time

• long-term growth of money and assets

what is needed to invest

a financial service provider is needed

types of investment

• shares

• bonds

• mutual funds

• real estate

• commodities

what are shares for company

way to raise financial funds for the company

what are shares for investor

• hopes to sell it for a higher price—decided by supply and demand

• either sell the stock or collect the dividends

how do dividends work

dividends rely on potential profits and on the decision of the board

bonds

money is lent to a company(corporate bonds) or government(treasury bond)

what is bond good for company

used to borrow money for a particular period of time

how can bond be bought

the bond can be bought straight from the company or from the market later on

supply and demand changes based on the interest rate in saving accounts

how is bond owner paid

• a percentage is paid out every year

  • the percentages can vary

what determines price of bond

rising or falling interest rates

how much is bold sold and bought for

100%

difference between bond and share

• bonds are usually paid out first over shares

what is mutual funds(ETFs)

exchange traded fund

what is mutual funds(ETFs)

• takes funds of many investors

• invests in a large fund of diverse securities or other values

  • different shares, bonds, commodities

benefits of etfs

diversification of risk

what types of funds are there

passive and active funds

actively managed funds

manager looks over the risks

passive funds

• consist of stocks and bonds, but due to the diversification, the risk is lover

• you can buy parts of the funds—shares

what happens when investing regulary

when investing regulary, the difference between prices at point of buying is not as important

distributing means(fund)

shares are sold, they distribute the money among the investors

accumulating means(fund):

earnings are automatically reinvested

exchange traded fund choice of companies

for exampe based on an index(comprises a large number of securities(shares))

what is benefit of index fund concerning choice of companies

index chooses automatically the most important companies based on location, industry)—no fund manager

etfs vs actively managed funds(price)

etfs have lower fees because they don’t require a paid manager

what is compound interest

the longer i can wait the better

when should you start compound interest

the sooner the better

what happens if proceeds are reinvested

they will compound and the growth rate will increase

is debt worth it

the risk of debt is worth it if the proceeds are invested(education, growing asset)

should you take on debt for consumption purposes

never a good idea

how do 0% loans work

• the purchase is financed by a foreign bank—often for a fee(not interest)

• if a payment is missed, they will charge a large fee(large interest)

• the companies offer a free credit and rely on failing debtors

• it’s better to avoid credit contracts

what is a business

entity that produces goods or services, not for itself, but for its customers

how does business operate

combines factors of production

factors of production

• labor

• land

• capital(machinery, financial resources)

• entreprenourship

• knowledge and technology

main functions of business

finance

accounting

marketing

procurement

managment

hrm

operations managment

stakeholder managment

business: finance

financing all of operations(loans)

accounting

registering of incomming money and outgoing

marketing

(make sure that the customers know about the products)

objectives of marketing

create and maintain advantage over competitors

• creating, communicating delivering offerings to the customers

• make the product distinguished from the competitors

• creating a unique product, which is valuable for its customers

market measures

market volume

market potential

sales volume

sales potential

market volume

sales volume of all firms in market

market pontential

market volume + potential customers

sales volume

sales volume of one firm

sales potential

sales volume+potential gains from competitors and share in the increase of market potential

procurement

getting all of the factors

managment

managing all of processes

hrm

takes care of the workers

operations managment

managing operations

stake holder managment

makes sure that the business doesnt effect others negatively

challenges of business

market oriented business model and strategy

liquidity

cashflow

cost and risk

profitability

qualified personell

social responsibility

sustainibility

market oriented business model and strategy

how to put plan in practice

what happens to products that arent sold

wont be offered

why do people buy overpriced goods

they offer the value of convinience

liquidity and sufficient financial resources

enough funds to fund the company

internet bubble

good ideas, bad market strategy—market not big enough

why did companies in internet bubble fail

lack of funds, market wasnt big enough

what to watch out for if rapid growth

interest is low, loans are cheap

why do quickly growing companies fail

expand quickly

rising inflation

central banks will raise interest

business cant repay its debts

how to measure liquidity

working capital

what is working capital

current assets minus current liabilities

what are current assets

money, or assets that can be sold quickly

what can influence liquidity

payment of dividends

what does cashflow measure

money coming and going throughout the year

does financing come to cashflow

no

causes of cashflow problems

overtrading

too many fixed assets

stockpiling

not enough credit

overtrading

too much volume of production

stockpiling

not selling stocks to use the money

how to improve cashflow

turn short term loans into long term loans

sell and lease assets

offer discounts

delay payments

how to delay payments

negotiate with creditsr

what to consider when financing

cost

use of funds

financial situation

status and size

cost

interest payments

use of funds

xapital is funded by long term loans

expenditure is covered by short term loans

financial situattion

if a company has many loans it wont get more

status and size

some small companies will have trouble getting more funding

what to consider costs:

energy costs

labour cost

what are risks of business

competition can suddenly change

how can competititon change

bilateral agreements can influence conditions for worker transfer

how to deal with risk

budgeting

accepting

avoiding