DECA- Principles of Finance Performance Indicators

Concept of Management

Interlocking functions of creating corporate policy and organizing, planning, controlling, directing and implementing an organization's resources, operations, and structure in order to achieve objectives.

Risk Management

The process of identifying, assessing, prioritize and controlling threats to an

organization's capital, assets, and earning power followed by coordination application to avoid the likelihood of unfortunate events or minimize their impact.

Plan to protect yourself/property and reduce financial loss caused by hazards- loss of income or life due to illness, disability, or unemployment. Liability risks-caused negligence that leads to injury or property damage.

Starts with risk avoidance and risk reduction. Risk assumption- taking responsibility for risk when the possible loss is small. Risk shifting- take financial burden and place somewhere else for a fee (insurance)

Conducting a Risk Assessment

Identify Hazards- Physical, mental, chemical and biological.

Decide Whom May be Harmed and How

Assess Risk and Take Action- Likelihood

Record Findings- Detail hazards noted and Action taken

Review Assessment

Compute an average score for each category and turn into a probability, then plot against potential revenue impact; Risk matrix.

Connections between Company Actions and Results

Consumers/Competition- advertising, pricing, product mix, supply of goods, sales and promotions, product development and improvement, product safety, payment options, distribution

Employees- technology in production and record keeping, managerial ethics, human resources management, production planning and scheduling, risk management, investing

Environment, Global Economy

Influencing consumer behavior, Gaining market share

Legal Issues Affecting Businesses

Minimum wage, Tax obligations, OSHA- workplace safety rules, Employee protection laws- hiring, training, and firing, Truth-in-advertising laws, Antitrust laws, Industry federal regulations, product safety, zoning laws, licensing, public health, benefits and paid leave, protect investors, maintain competition

Wrong Termination, Harassment/Discrimination, Immigration Audits, IP Issues- intellectual property ownership, Unhappy Customers, Equal Opp. Employment, Environmental protection

SEC Securities Exchange Commission- regulates sale of stocks/bonds, investigates deals.

Purchase order is a sales contract- indicates willing to pay in exchange for items. Open order- place order with best fit to supplier.

Basic Torts Relating to Business Enterprises

Business torts are civil wrongs committed by or against an organization. Harm resulting in financial loss done to intangible assets, such as intellectual property or relationships with clients. Tort = Court

Negligence- unlawful and unintentional, careless, failing to adhere to standards, most common; slip/fall, car accidents, medical malpractice

Intentional- unlawful; fraud, defamation, theft

Strict Liability- lawful, but resulted in injury, responsibility on wrongdoer w/out proof, intent doesn't matter; defective products

Wrongful Interference- interfering w/ prospective opportunities, draw customers away, defendant knows about contract and made attempt to cause breach

Unfair Competition- similar to ™ infringement, confusingly similar product, false advertising, sole purpose to run someone out

Disparagement- slander and false statements about another company, trade libel (published)

Computer- damage to hardware or software, negligence

Conversion- personal property taken from owner and given to someone else, does not require intent to permanently deprive

Appropriation- without permission, using another person's name/likeness to benefit; use a celebrity ambassador; commercial exploitation

Conspiracy/Collusion- alliance of 2 or more parties, everyone involved is liable

Intrusion- invading privacy

Duty of Care- expects individuals to exhibit socially responsible behavior by using caution to prevent harm and watching out for one another

Misappropriation- embezzlement, theft of valuables entrusted to someone else

Legal Procedure

Methods/Mechanics of Legal Process: inform-present-fact check-decision

Rules governing all aspects of how a court case is conducted. Applies to both criminal and civil cases. The purpose is to make certain that every case is treated justly and consistently. Prescribes the formal steps to be taken in enforcing legal rights.

Concerned w Due Process- respecting individual's rights; fair and speedy trial, attorney, etc.

Procedural/Substantive Due Process- ensure chance to present evidence before penalty imposed/prevent fundamental (life, liberty, privacy) right removal. Greater chance fair treatment.

Debt-Creditor Relationship

Debtors owe Creditors money.

Voluntary- credit card, mortgage, loans, eating out

Involuntary- child support, judicial decisions, hidden risk to assets that can't be avoided

Both parties suffer if both don't hold up their ends

Essential to economic growth so laws protect both

Agency Relationships

Commercial Law dealing with relationships that involve a person authorized to create legal relations with a third party

Fiduciary relationships- involves trust and confidence

Agent acts on behalf of Principal and is obligated to act in best interest of the Principal b/c they create legal obligations for them

Express- Both sides agree orally or written

Implied- Conduct has intent to create this relationship

Employer//Employee; Principal//Contractor (not controlled by P)

Ratification- confirmation of agent's authority retrospectively

Estoppel- RARE; principal contradicts agent and prevents from acting

Administrative Law

Branch of law that addresses the rules and regulations established by gov't agencies

Executive Branch- regulates Federal Agencies and protects public interest

Legislative Branch- establishes agencies, gives authority

Statutory Control- establishing legislation, limiting, rulemaking, control activities

Political Control- presidential/congressional influence, funding, leaders

Judicial Review- appeals/amends, after harm is done, review actions, "last straw"

Informational Control- required to provide public info, influence decisions, FoIA

AdminProcedAct of 1946- outlines operation of fed. agencies

Types of Business Ownership

A business is a legally recognized organization designed to provide goods and/or services to customers.

Corporations- function independently of their owners. Artificial being, invisible, intangible, and existing only in contemplation of law. Legal rights, duties, and powers, able to sue and be sued. Unlimited lifespans, owners are not liable. Owned by people who own shares in stock (board of directors), split profits.

Sole Proprietorship- responsibility for debt, one person, all profit but all risk. Easy to set up, require business license. Taxes combined w individual's.

Merger- absorption of one business into another company

Partnership- two or more people, split profits, mutual interest. Both owners pay taxes on their share, equally liable. Limited Partnerships are costly and complicated. General partner solicits investments from limited partners.

LLC- members, limited liability, no shares of stock, costly. Protects personal assets, still pay taxes.

Nonprofit - uses revenue for charity or social goal. Public or Private Grant money. Not taxed often.

Franchise - chain of suppliers providing goods/services

Cooperative/Joint Venture - run/managed by employees. "Democratic" organization of equals. State laws govern.

Apply Written Directions to Achieve Tasks

Read to understand all of the written instructions all the way through at least once.

Reread to comprehend what the instructions tell you to do.

Ask any questions you still have. Follow the written instructions.

Perform each step of the instructions in the exact order written.

Keep the instructions with you as you follow them.

Analyze Company Resources to Ascertain Policies and Procedures.

Training information, company manuals, work mentors, and supervisors provide these.

Policies identify general rules (pay, days off, promotions/raises). Made in advance by management to assist employees decision making. General and relate to overall vision. Describe whom the rules apply to and why they exist.

Procedures provide more detailed step-by-step plans of how to carry out. Identify very specific employee actions like emergency.

The more input, the more people will feel "ownership" about the process and adhere to the manual.

Company policies should be read thoroughly for complete understanding.

Effective Verbal Communication

Tailor to Audience

Appropriate tone and intonation

Clear and concise phrasing

Proper Pacing

Use visual aids to supplement message

Supporting with research and statistics helps to increase your credibility and chances of effectively communicating.

Interpersonal- talking with friends and having a family meeting. Important aspects include what you say and the atmosphere you're in, especially when making a first impression.

Public speaking- formal version, speaking to a group of people. The purpose for public speaking can vary from sharing information to persuasion.

Make Oral Presentations

Know purposes- greet, inform, request, persuade, propose; Know audience- beliefs, values, interests? What they already know/need to know? Expectation; Know subject/organize your thoughts. Relate subject to the audience

Topical order- arranging related to subcategories ie pros/cons. Spatial- arranged according to physical space/geography like layouts.

Be clear, brief, and direct. Speak at an appropriate volume and speed. Use inflection and tone of your voice to stress key ideas, repeat them with different phrasing

Make emotional contact with your audience, and make eye contact. Posture and body language that match your message.

Avoid nonwords- uh and um. Project enthusiasm and a positive attitude

Keep presentations as focused and relevant as possible; engage audience by asking for feedback; use visual aides such as power points and boards

Follow Oral Directions

Maintain eye contact with the speaker. Listen carefully and execute steps as presented.

Repeat keywords in your head, listen actively with internal monologue.

Paraphrase directions into more comfortable language to increase likelihood of retaining the information.

Review all steps given.

Ask for clarification if you don't understand something or feel that you have forgotten part of the instructions to avoid potential missteps or mistakes.

Complete described task. Move through mentally prepared list of steps to complete the process as outlined in orally presented directions.

Appropriate Graphic Aids

Make the data stand out on the page/support purpose of the document clearly/strongly; Organize systematically

Graphics must be visible, not too detailed that it pulls away from the text; Help reader grasp ideas

Pie chart- illustrate as parts of a whole. Table- rows and columns. Bar graph- values across categories. Line graphs- info over time. Pictures- depending on purpose, realistic representation. 3D model ideal format to show audience of what something will look like once constructed. Flow chart- progression, decision making, outcomes

Effective Written Communication

Knowing your audience, knowing your purpose organizes thoughts, and knowing your subject. State clearly with active language.

Inform, confirm, inquire, answer, or persuade.

Requires that you have in-depth knowledge of the subject and how to relate what you know to the intended audience. Visual elements should enhance.

Letters- formal methods, outside the business.

E-mail- informal method used to reach those inside or outside the company.

Memos- replaced by e-mail, more formal way to communicate within a company.

Business reports are for lengthy topics, typically for internal use or for stockholders.

Company publications may be used internally (for company policies) or externally (for marketing purposes)

Appropriate Formats for Professional Writing

Charts are graphics to summarize numerical data. Narrative writing is usually most appropriate to provide example to clarify. Formal email is not for urgent important matters.

Advertisements, emails, snail mail, manual writing, recommendations, proposals, papers, summaries, memo, business letters

Memo: short documents that normally communicate basic info, such as deadlines within an individual office or company, can be informal, keep as record

Business Letters: formal documents, external audience, can be used to apply for jobs or deliver information, should be constructed in standard letter format: date, address, salutation, body, closing, direct, concise =

Business plan: Define the work of an individual business or how it will operate, can also be a tool to request funding

Business proposal: documents that present an idea or service as a solution for an identified problem, define problem and explain proposed solution

Executive Summary

Also called abstract/synopsis

Summarizes key points of a report to the reader at the beginning. Used when report is long and/or technical so don't have to read the entire report.

The format of an executive summary should match main report.

An executive summary is typically a one-page document, 1/10th rule. Line spacing and headings may be different, usually not numbered in sequence with the body of the report

Reader decides whether to read further. Background info.

Written after writing body of report. Avoids jargon, technical language, abbreviations, and slang. Accurate and error free.

Strong hook, Explains what the company does, Core strengths, Bullet points, Concise, End with sense of urgency

Data Visualization Techniques

Saves time

Increasing use of data for decision

Potential to give new meaning

Reveals hidden trends & information which otherwise would go unnoticed

Help users see patterns and relationships in large amounts of data that would be difficult to discern if data were presented as tractional lists of text

Infographic, dashboard, summary reports, Gannt, scorecard, chart, heat-map, dynamic model output, or tables are easy to read and organize information in a systematic manner.

Service Orientation through Communication

Enable business environments to easily build communications into their business processes, enabling more streamlined collaboration among people within the business."

Restate question, eye-contact, greets promptly and courteously, pay attention to issue at hand, determine needs, listen carefully, empathize

Offer relevant information, Summarize to check for understanding, Exceed expectations, Follow through

Nod, positive helpful attitude with customers. Gesture and facial expressions reflect business attitude, willing to help

Ability/Desire to anticipate and recognize needs before articulated. Establish a dialogue, provide satisfaction and availability

Foster Positive Consumer Relationships

Treat customers well in order to receive:

Word of mouth (referrals)

Online reviews

Repeat business

Good reputation

Increased profit

Believing that your customers- deserve the best, are your employers, deserve your attention, have the right to expect things, and have important problems

Brand Promise

A business's agreement with customers that it will consistently meet their expectations and deliver on its brand characteristics and values.

A recognizable statement of enduring, consistent, relevant, and distinctive benefits valued by customers.

Product or company can be easily identified, builds loyalty and recognition, what your company stands for

Attracts the right employees/consumers who fit in with your corporate culture

Unique Value & Consistency=Trust=Loyalty=Strong Relationships=Profit

Customer Relationship Management (CRM)

Strategies/Technologies/Processes/Policies to manage and analyze customer interactions and feedback to improve sales or marketing methods to meet/exceed the expected standards and increase revenue.

Build, develop, maintain, and maximize the long-term value of customer relationships

Link customer satisfaction to other business goals; Customers often choose the business that offers better customer service.

Goals: better relationships with existing customers; customer loyalty; attract new customers; Gather and track information for business decisions; competitive advantage; long-term communication

Collect customer info & draw conclusions about needs and wants/predict the loyalty and value in the future

Service management after sales- maintenance, warranties

Complaint management- resolve problems, communicate issues to organization

Customer Buying Behavior- Variety-Seeking: routine items, desire to try diff. Things; Risk-Taking: expensive items from unfamiliar business; Status-Oriented: desire to have best quality/trendiness; Brand-Insisted: only buy from certain brand

Database marketing- process of creating and maintaining customer lists: face-to-face sales, direct mail responses, phone or e-mail purchases, service requests, website visits, or they can be purchased from a third party.

Satisfaction surveys, often giving a customer a reward while sharing demographic and purchase information with the company.

Technology in Customer Relationship Management

CRM cannot survive without technology- social media on the rise for 2-way

Technology caters the needs of the customers

Allows company to understands customer needs

Compare customer data easily; Track sales and trends or create goals/reports

Databases help collect data and make it organized

Makes communication faster for inquiries and complaints

Create views or dashboard of important information at a glance

Internet enables, low operating costs with high reward

Operational- support to front office business processes such as sales personnel, marketing and service staff

Analytical- evaluates the necessary customer data for a wide variety of reasons

Economic Goods/Services/Resources

Goods are tangible, whereas services are not.

Resources are the goods and services available to individuals and businesses that produce valuable consumer products.

Economics and Economic Activities

Economics- study of social science of meeting unlimited want and examining behavioral patterns/choices in regards to money based on environment, social, political, personal, and psychological factors.

Purpose is to gain understanding/analysis of processes governing production, distribution, and consumption of goods/services.

Activities- attract consumers of the target market and generate more cash flow. Production- creation; Distribution- availability; Consumption- usage. Manufacture, Buy, Sell, Invest, Transport. Resources determine activity.

Goal is to increase profits.

Economic Utilities created by Businesses

Utility: added value of a product

Form- created by design of product/ability to meet needs

Place- having product where customer wants it, convenience

Time-availability when it's wanted

Possession- benefits of owning/using

Want satisfying power, Dependent on customer's wants and needs.

Function of Prices in Market

Price is the value in money placed on a good or service, how much it costs per unit/time period.

Can affect value that customers places on an item. Helps establish a company's or product's image. Gives a competitive edge. Part of the business' end goal of making a profit.

Acts as a signal for shortages and surpluses, help us to respond to changing market conditions. Determines a forecast quantity supplied and demanded=businesses determine how to reach equilibrium. Determines how much of a demand there will be for products

Role of Business in Society

Backbone of society- makes/distributes goods and services we use each day, Job is to satisfy unlimited human wants

Employment for millions of people. Wages paid to employees are used in economy to purchase. Profits earned are used to compensate owners and investors, Taxes support government spending on the needs of society.

Ethically responsible for contributing to community and spreading good practices and setting high standards

Meet the needs of diverse communities of people and improves the quality of life

Types of Business Activities

Generating ideas- businesses must remain competitive with others. Must raise capital to finance operations.

Employing and training human resources; Buy and sell goods and services; Marketing provide/distribute products with enhanced appeal

Maintain records to track performance and make decisions.

Operations improve quality and efficiency, manufacturing; Finance is security and records transactions to make recommendations for reports with banks/gov.

HR, CS, MK, Sales, Budget, Accounting; Planning, Brainstorming, Strategizing, Studying, Networking

Productivity

Quantitative and Qualitative measure of efficiency, converting inputs to outputs.

Productivity low = Inflation, More Resources, Less money, Decreased value of money

The output per worker hour that is measured over a set period of time, such as a week, month, or year.

Business Models

Business Model: conceptual structure that supports product or company explaining operations, financial plan, and goals.

eCommerce- upgradation of traditional brick and mortar, sells online

Bricks-and-Clicks- online and offline presence, order online and pick up in store, flexible, Target

Nickel-and-Dime- cost sensitive, low prices, Dollar Store

Freemium- common on Internet, offer basic services for free and charge extra for premium add-ons

Hidden Revenue- Google/Facebook, free apps, monetize data

One-for-one- TOMS, buy one give one, part of story

Razor/Blade & Inverse- Accessories are more expensive

Cash Conversion- Amazon, low profit margin, partners finance business, short term liquidity

Peer-to-Peer- AirBnB, company is middle man

Multi-sided- LinkedIn, invisible middle man, services for both sides

Affiliate- feature other products, use your own traffic to help them

Organized Labor and Business

Labor union- group of workers joined for common purpose (higher wages, benefits, improved working conditions) Increase their bargaining power with management when organized.

Industrial- workers in same industry OR Craft/Trade- workers with similar skills. AFL-CIO is federation for nearly all labor unions

Contracts created through negotiation process called collective bargaining involving union officials and company representatives.

When can't agree, pressure strategies- strikes, picketing, boycotts (members) lockouts, injunctions, and strikebreakers (management).

Workers gain individual dignity, fair treatment, protection, and fringe benefits. Pay union dues, support union decisions, and face hardships during strikes. Businesses have security regarding wages, benefits, and working conditions, union assists in recruiting and training employees. Increased costs in wages and benefits, limited control in personnel matters, and loss of production in the event of a strike.

Factors the Affect Business Environment

Research industry and understand the surrounding economy. Consider trends and patterns of change like sales growth or government regulation. Understanding competition helps plan a strategy of success. Barriers to entry in an industry may exist, such as a dominant competitor, economies of scale, and customer brand loyalty. Also threats from substitute products, supply sources, and technology.

Analyze demographics of your business environment, number of companies, annual revenues, and average number of workers employed. Assess the competition by looking at market share and analyzing position of your company relative to others

Political- uncertainty due to changes in gov't environment.

Mergers/resignations/line changes, strengths/weaknesses (competencies), goals, values affect internally. Macro trends, economic dynamics and competition affect externally.

Clients and Suppliers, Technology, Laws, Government Activities, Market/Social/Economic Trends

Organizational Design of Business

Step-by-step methodology which identifies dysfunctional aspects of work flow, procedures, structures and systems, realigns them to fit current business realities/goals and then develops plans to implement the new changes.

Divisional- segment operations by type of item or markets served

Functional- particular area of expertise or department: finance, marketing, sales

Matrix- share resources; skills of employees shared for projects based on needs, dynamic

Flatarchy- addresses Functional failings, few management layers, open communication, no boss to report to

Bureaucratic- inflexible, large similar to gov't

Global Environment of Business

Rely on resources outside U.S. to remain competitive. Overall economy is reliant on a global marketplace. Foreign trade provides goods that would otherwise be unavailable or too costly and consumers help support businesses in the U.S. by buying goods made here.

Geography, demographics, culture, economic development, technology, and political or legal concerns. Trade barriers- quotas, tariffs, embargoes, are formal political actions that can affect international trade. Informal barriers can be found due to cultural differences.

Licensing- company allows another to market its products for royalties.

Wholly owned subsidiary- establishing/purchasing a facility in foreign country

Multinational firm- operates worldwide scale, organized under laws of home nation

Organizations in Today's Market

Be willing to change

Do what others are doing well, better

Organizations have specialists who research and analyze trends to make recommendations for relevancy to teams based on findings

SWOT Analysis, Environmental Scans to identify improvement areas

Economic Systems

Economic system- way a nation provides for the needs and wants. Defines how a country will uses resources to produce and distribute goods and services.

Traditional based on the cultural or religious traditions used for generations. Mostly small, developing nations use this type of economy today.

Market-no government involvement, marketplace determines what, how, and for whom goods will be produced.

Command- nation's government makes all decisions. Controls factors of production in this system, socialism

No country, however, is a purely traditional, market, or command economy. There are always influences that make it somewhat mixed

Participants- consumers, producers, gov't in every system.

Producers- make; Gov't- laws; markets- arrangement of buying and selling; economic- both; bartering- trading/exchanging.

Small Business on Market Economies

Raising compensation to push inflation

Outlook is good, able to compete

Consumer has equal opportunity to choose

Market economies are unregulated = infinite opportunity to startup and make profit/societal contributions.

Diversified market of goods offered, provides jobs, stimulates demand, creates competitions, provides income and tax revenue.

Private Enterprise

Private enterprise system- what will be provided, how, and by whom; answered by individuals and businesses, government is limited.

Individuals and organizations own and control the economic resources, including natural, human, and capital goods used to produce goods and services. Businesses are free to choose what they wish to produce, how to produce them, and what price they will charge

Free to own, use, buy, and sell private property; Competition exists and is encouraged by government; Businesses motivated by the ability to make and maintain a profit, set own goal/choose what kind of work they would like to do

Factors Affecting Business Risk

Risk is the possibility of incurring a loss that may impair a business' ability to provide returns on investments

Economic- result in a financial loss

Pure- chance of loss but no opportunity for gain; Speculative offers chance to gain or lose.

Some risks are controllable, insurable, avoidable, transferable, or assumed.

Human- caused by humans; Economic- poor market conditions; Natural- disasters

Rate/State of market growth; Sensitivity to economy; Intensity of competitors

Sales Variability, Per Unit price variability, Input Cost, Government Regulation

Desirable Personality Traits

Persistence, creativity, responsibility, confidence, and enthusiasm.

Inquisitive, goal-oriented, independent, a risk taker, and action-oriented.

Communication, math, problem solving, technology, decision making, organizing, teamwork, social, and basic business skills.

Emotional Intelligence

Perceive, express, understand, and regulate emotions.

Foster self-understanding to recognize the impact of personal feelings on others.

Develop personal traits to foster career advancement.

Apply ethics to demonstrate trustworthiness in working with others and problem solving techniques to obtain solutions to issues/questions.

Exhibit techniques to manage emotional reactions to people and situations.

Identify with others' feelings, needs and concerns to enhance interpersonal relations.

Use communication skills to foster open, honest communications, influence others' point of view.

Manage stressful situations to minimize negative workplace situations and internal/external business relationships to foster positive interactions

Implement teamwork techniques to accomplish goals.

Employ leadership skills to achieve objectives.

Ethics

Principles use by an individual in making decisions

Basic values and moral principles that guide behavior

Honesty, respect, and equity.

Maintaining confidentiality and having respect for company property.

Listening to others with an open mind and responding with courtesy and tact.

Utilitarian, morally right, most good for most people PR

Build a reputation of honesty, balance company and stakeholder needs

Retain employees, customer loyalty, avoid lawsuits.

Reasons for Ethical Dilemmas

More than one choice available

Different values and beliefs of decision makers

No clear right or wrong, lack of integrity/resources, or ignorance

Choice from alternatives, conflicting values, Impacts stakeholders

Pressure to please all, cutting corners, negotiation

Effective Communication

Communication- exchanging messages between a sender and receiver. Must be prepared to read for meaning, speak properly, and write effectively.

Channels or media- avenues a message delivered on. Medium depends on nature/importance of the message.

Effective listening- identify purpose of speaker, give feedback, and evaluate speaker's message.

Communication Barriers- physical distance, position from speaker, verbal with vague or unclear language.

Non-verbal cues- tone of voice, emphasis, and body language communicate as much as actual words

Conflict-Resolution

Allowing each party to define the problem from their point of view.

Allow each to suggest a solution

Evaluate options so each can explain what they can and cannot accept.

To overcome the differences, parties to a problem may have to think creatively and compromise.

Done best when solutions allow each side of a dispute to save face and create the least amount of ill will. Sometimes, parties in a dispute may have to seek mediation or arbitration from an independent third party.

Consensus-Building Skills

Consensus- decision each member of a group agrees on.

Critical component of teamwork and negotiation. Allow all members to state opinions. Requires flexibility and compromise.

Allowing team members to be involved in setting and achieving the team's goals is important and results in increased loyalty and a stronger team spirit.

Leads to extra motivation and sense of ownership

Ethical Behavior

Behavior that conforms to society's accepted principles of right and wrong

Ensure highest standards of conduct are observed in a company's relationships with everyone who is affected by its activities

Lawful and does not harm some while benefiting others

Many businesses develop a statement of core values that guide the ethical decisions and actions of the company

Commitment to ethics should be clear

Do what is right, legal, and beneficial

Uphold company values/brand promise

Avoid questionable/embarrassing practices

Make good decisions, Respect

Political Impacts on Organization

Company's culture affects the way it is organized.

Formal culture: strict chain of command, several levels of management, job titles are important as indicators of status, making changes can be complicated and time consuming.

Informal culture: Encouraged to make their own decisions, job titles are not as important as creativity and teamwork

Forms of Financial Exchange

Cash- Ready Money, Checks, Coins/Notes. Sale is an exchange.

Credit- Receive goods, or services now with promise to pay in future. Helpful for major purchases, often for common, less expensive items, too. Issued by bank to make such purchases. Can be electronic.

Debit- Variation of credit. Bank card in place of cash authorizes seller to withdraw funds directly from the consumer's bank account at the time of sale.

Electronic Funds Transfer- EFT, Electronic exchange, transfer of money. Sending bank records via network, ATM, online

Direct Deposit- funds straight to account

Layaway- removing merch from stock, on hold until customer pays

On-Approval- agreement permitting customer to take product home for further consideration before paying

Cash on Delivery (COD)- pay after goods are delivered

Secured- guaranteed by claiming assets (mortgage, utility bill)

Unsecured- no collateral

Revolving- approved for set amount (credit card) minimum fluctuate monthly

Installment- set money for set time, fixed payments

Types of Currency

Currency- medium of money

Paper Money- banknotes, cash, coins, checks, "liquid"

Banknotes- bills, promissory note from bank, intended to circulate $$

Government Bonds- gov't raising capital by investing/borrowing, debt instrument, savings

Treasury Notes- debt obligation from gov't, 1-7yr maturation

Check- authorizes transfer of money from bank account to person

Stocks- share entitling holder to fixed dividend, equity investment, own corporation

Bonds- long term lending agreement, IOU, loan money to gov't for promise of pay back w interest

Mutual Funds- investment program, professionally managed, stocks/bonds

Functions of Money

Medium of Exchange- widely accepted for goods and services

Measure- system of units by means of which a quantity is accounted for and expressed

Store of Value- tradeable commodity, currency, or capital; can be stored for future use

Vehicle to pay for purchases, save for security, and build wealth with investments. In addition to personal and business purchases, money is used to pay for government services through taxes.

Sources of Income

Wages/Salaries- Compensation for work, fixed and regular

Interest- Fee rate charged by lender for use of borrowed money

Rent- Payment for space and property

Dividends- Payment to shareholders from organization's earnings (taxable)

Transfer Payments- Money paid by gov't to citizens (welfare, disability, SS)

Time Value of Money

Idea that current money available is worth more than that same amount in the future due to potential earning capacity (interest-% of principal amt./dividends-shares)

Compounding- Finding future value of original deposit. Increases in value faster and faster over time. (Principal*Interest Rate)+Interest

Importance of Credit

Obtain products or money in exchange for a promise to pay later. Buy materials and supplies from other businesses. By extending credit, provide purchasing incentive to customers, thus enhancing their sales revenue and supporting the overall economy.

Useful for large purchases, Enables possession utility (temporary use of someone else's money)

Measure of Financial Trustworthiness: Credit Score- numerical expression based on analysis of a person's credit files from bureaus; Lenders- evaluate potential risk when loaning, determine who qualifies for loan, at what interest rate & at what credit limit

Legal Responsibilities Associated with Financial Exchange

Operate within boundaries set by the various commissions and agencies at every level of the government

Honestly (no fraud), Confidentiality, Set to maintain balance and the greater good of the society

Uniform Commercial Code (UCC)/court may find that a sale/contract is unconscionable, or grossly unfair to one party or another. In such a case, the contract may be voided or limited.

Capacity to pay; rules and regulations to govern acceptable conduct in exchanges

Systematic Behavior

Accomplishing interconnected tasks sequentially or simultaneously, whichever is most efficient.

Plan out approach, Be productive, Organized and Orderly, Methodical

Increases employee focus, efficiency and productivity, which will result in an increase in profits

Ascertain Employees in Meeting Organizational Goals

Organizational goals are strategic objectives that a company's management establishes to outline expected outcomes and guide employees' efforts.

Employees must follow company policy, procedure, and protocol and accomplish all expected tasks in a timely manner.

Rights of Workers

US Federal Law- Regular, reasonable pay, a safe work environment, no discrimination, appropriate training, opportunities for raises and advancement, and safe tools.

Able to make complaints.

Fair Labor Standards Act (minimum wage), child labor laws, Family/Medical Leave Act, Employment Retirement Income Security Act, whistleblower laws. Federal Privacy Act, the Drug-Free Workplace, and the Employee Polygraph Protection act.

Social Security, unemployment, and workers' compensation laws. Equal Employment Opportunity Commission- fair and equitable treatment of employees regarding hiring, firing, and promotions.

Health and Safety regulations, Protect from Sexual Harassment

Tentative Occupational Interest

Individual's perception of a favorable career that is set to change

Take career interest assessment/career exploration course to identify interests, Meet with Career Advisor to create plan

Develop tentative career goals and make a strategic plan to achieve those goals, Attend Job & Internship Fairs

Taxes

Taxes are payments you make to the government for services they provide. Based on idea that everyone should contribute fair share, tax laws should be clear/simple, and system should be flexible.

Tax dollars spent on public education and libraries, military defense and law enforcement, transportation costs, and fire protection to name a few.

Income- percentage of earnings paid to IRS

Property- percentage of loan paid to IRS, main source of govt $, value of land

Estate/Inheritance- on wealth, post mortem

Excise- seller pays percentage of revenue

Sales- % of commodity price when buying nonessentials, businesses collect tax and give to govt at set intervals

Payroll- withheld by employer

Social Security/FICA- benefits after retirement

Factors Affecting Business Profit

Profit is the monetary return a business' owner receives for taking the risk of investing in the business. Profit= Income-Expenses

Gross profit- money left over after the cost of goods is subtracted from income from sales.

Net profit- money left over after operating expenses are subtracted from gross profit.

Demand for the good/service, expenses, prices, the (global) economy, competition, and chance. To increase profit- increase worker efficiency, increase sales, decrease expenses, vertical integration (expand new market), horizontal integration (expand various brands).

Changes in sales, Economic health, Market stability, Natural factors

Government and Business

Always try to influence and persuade each other in many ways for various matters

Government- Protect business property, enforce contracts and settle disagreements through the courts, and collect taxes on the products business sell. Enacts and enforces laws to prohibit certain behaviors, control business activities, and require certain standards (control monopolies, safety standards, regulate prices)

Provide public goods, Improve public welfare, Protect public health, Stabilize the economy, Protect specific businesses or industries, Conserve the environment, Protect consumers, Preserve competition, and Regulate workplace conditions. Agencies monitor (Food and Drug Administration (FDA) and the Federal Trade Commission (FTC)).

Law of Diminishing Returns

Change in output resulting from hiring another worker is called the marginal product.

Diminishing returns is experienced when the number of workers being utilized causes output to increase at a decreasing rate. Utilizing too many workers may actually cause production to decrease

More procrastination, Only a certain amount of money to get out of it

Keep in mind to avoid wasting resources and low return rates

Gross Domestic Product

Output of goods/services produced by labor/property located in a country. Qualitative measure of a productivity in dollars

Nominal GDP- price levels in which GDP was measured; Real GDP- nominal GDP adjusted for changes in prices.

Add private business spending, private investment, net exports, government spending, and personal spending, trade surplus, expanding inventories. Subtract trade deficit, net imports, and shrinking inventories.

GNProduct is total dollar value of goods/services produced by a nation, including those produced outside of its own territory by its own citizens.

Inflation Impacts on Business

Inflation- rising prices, indicate stability of economy, decreases value of money and makes assets less valuable

Low: 1-5% considered good because it indicates a stable economy.

Higher levels harmful, rising prices=spend less=slows overall economy. May cause wages to increase beyond what businesses can afford=layoffs/downsizing.

Borrowing money becomes more expensive, Repaying debt is easier

Impact of Unemployment

Unemployment is inefficient, wastes human resources.

Leads to inequality- least experience lose jobs first (minorities and young)

Unemployed are discouraged about themselves and their abilities, give up search for work.

Higher unemployment rate=greater chances of an economic slowdown. More people working,= more spending money, paying taxes= help grow economy

Frictional- always present, occurs when workers transition (college, child, career change to work).

Structural- low demand for job skills, often due to technology advancements/need for new skills.

Cyclical- change in economic and business cycle. GDP declines=unemployment up

Interest Rate Fluctuations

Interest rate= percentage figure to calculate interest.

Affected by gov't policy and business cycle. Business expand when rates are low bc less expensive to borrow. Production increases bc consumers make large purchases.

When decrease, business may adjust credit policies rather than selling policies.

Spending, Inflation negative correlation

Recession has positive correlation

Business Cycle Impact

Series of recurring changes in economic activity.

Expansion- economy is flourishing. Good time to start up or expand due to increased output of goods/services, investments

Recession- economic slowdown lasting at least two quarters. Reduced output, consumers have less to spend, withdraw investments. Prolonged recession is called a depression.

Trough- low point, marks beginning of the transition from recession/depression to recovery when signs of economic growth are near.

Recovery- demand increases and businesses hire and supply more goods

Peak and Contraction

Determinants of Exchange Rates

Exchange rate- value of one currency in terms of another, established on foreign exchange market.

Determined by supply and demand for that currency, impacted by foreign trade, inflation rates, interest rate, public debt, political stability, recessions, speculation, difference in value of a country's imports and exports

ie: importing more goods exporting, convert more dollars to other currencies. Demand for other currencies increases and the exchange rate for U.S. dollars increases.

Skills to Enhance Career Progression

Research

Flexibility

Leadership

Prioritizing

Interpersonal

Emotional intelligent, Technology, Communication, Leadership, Creativity, Innovation

Productivity, Efficiency and Effectiveness

Corporate ladder is competitive, employees should possess strong negotiation skills, conflict management skills

Resources that contribute to professional development

Trade journals

Periodicals

Professional/Trade Associations

Classes/Seminars

Trade shows

Mentors

Employee Role in Expense Control

Be more productive and decrease expenses for the company

Minimize Travel Costs

Control Energy Costs

Avoid Wasting Office Supplies

Take Care of Equipment

Avoid personal work/company resources while on job

Be on lookout for shoplifting/employee theft

Work efficiently following procedures

Overhead Costs

Expenses that must be paid on an on-going basis to keep their business running, not including the cost of materials, labor, or third-party expenses.

Ex. Rent, utilities, insurance

Quality Control Measures

Methods and activities that organizations use to ensure excellence and conformance to standards

Protect against financial loss and accidents

Guarantees, Expiration Dates

Strive to produce the most innovative products as efficiently as possible, considering situations that may affect.

Inspect product, Observe workers, Receive feedback, Mandate certificates and degrees

Output, Errors, Effect on consumer

Purchasing

Organizational Buyer- person who purchases goods for business purposes

New task purchase-purchase is made for the first time

Modified rebuy- buyer has experience buying the good or service but some aspect of the purchase has changed

Straight rebuy- buyer routinely orders the goods or services from the same vendor(s) as past.

Locally, regionally, domestically, or internationally.

Need redible/dependable supplier that will negotiate terms of pricing, discount, delivery

Data Security

Ensuring that data is correct, safe and cannot be read or changed by those who have no right to access it

Encryption Software

Management

Protection

Secured through update and refresh often. Anti-malware and firewalls.

Change passwords bi-monthly, Manage who can access.

Backup data each day.

Company Intangibles

Can be protected through patents, trademarks, and copyrights

Trade secrets are also protected by law and specific company policy, often by contractual agreement with employees.

Brand Recognition

Intellectual Property

Controlling Debt

Lower fixed expenses

Cut out the extras

Budget

Transfer High-Interest Balances

Pay off Highest Rates

Personal Net Worth

Measure of financial health

List assets (money, investments, car, home, property), estimate value. List liabilities (mortgage, loan, debt), add outstanding balances. Subtract liabilities from assets.

Tax Liabilities

Money owed to the government or IRS

Tax liability is the total amount of taxes owed. Effective planning can reduce your tax liability, thus paying your fair share while taking advantage of tax benefits.

Types include income, Social Security, sales, wealth and property taxes, and user fees.

Understand the current tax laws and how they affect you and your financial goals. Maintain complete and accurate tax records. Learn/understand the types of taxes and how to make sound financial decisions, keeping taxes in mind.

Calculated by applying tax rate to taxable events (income, sale) base. Legal claim on assets- foreclosure, impose lien

Pay Stub

Starts with name, address, and social security number. Lists current pay period, current and year-to-date (total of all withholdings from Jan 1 to Present) ) earnings, taxes, and deductions.

Current earnings may be described with hourly rate, the number of hours worked, and your gross earnings (hourly rate x number of hours worked).

Deductions- union dues, money withheld for fringe benefits. Taxes may be withheld from your gross pay include Federal, State, Local, FICA (Social Security), and insurance.

Net pay is your gross earnings minus taxes and deductions. Gross pay is total. May include bonus, commision, or overtime.

Calculate the Cost of Credit

Paying off cards with interest or unexpected costs. Annual fees, Late fee, advances, Overdue Interest, Overdraft Protection

Purchase amount, APR, Planned monthly payment

Discount% / (1-Discount%) * (360/(Allowed payment days - Discount days)

Apply for Consumer Loans

Must be 18, need SSN, reside in market area. Monthly income info, current employer info, balance/payment for other loans (store cards, credit)

Determine what type you need (personal, mortgage, auto, line of credit, credit-builder)

Fill out application, Provide collateral, assets, purpose

Types of Investments

Common Stock- unit of ownership that entities the owner to voting privileges in business. Advantage of receiving cash dividends. Owners share in the success of the company.

Corporate Bond- corporation's written pledge to repay a specific amount of money, plus interest. Government Bond- written pledge of a government or municipality to repay a specific amount of money, plus interest. Buy a bond = lending money to a corporation or government entity for a period of time.

Mutual Funds- investments of pooled money to buy stock, bonds, and/or other securities. Investments are selected by professional managers who work for an investment company. Expertise is beneficial to inexperienced investors.

Real estate- own property that increases in value so you can sell it at a profit or receive rental income

Security- tradeable asset of any kind

Dividends- volatile,not guaranteed, high potential for returns

Hedge Funds- aggressively managed portfolio with advanced strategies to generate high returns

Reconcile a Bank Statement

Bank statement- document showing activity on account over previous month, including beginning/ending balance and all inflows and outflows

Bank account reconciliation- account for the differences between the bank statement and your records (checkbook register). May differ because written checks have not yet cleared the bank, or deposited money into account after the bank statement was prepared. Report errors to bank.

Start by comparing the checks you have written with those listed on the bank statement. List any outstanding checks on the reconciliation form. Subtract total amount of outstanding checks from the ending balance on the statement. Add recent deposits not on the statement to the reconciliation form. Subtract any fees and add any interest as found on your bank statement to your reconciliation form.

Identity Theft

Fraudulent acquisition and use of a person's private identifying information, usually for financial gain.

Cautious with sensitive information and documents, including your social security number, checking and bank account numbers. Shred before throwing them out. Beware of phishing.

Be sure the cards are always returned to you after purchase. Keep a record of your card numbers in a place separate from your cards. Look over your bank and credit card statements carefully when you receive them for mistakes and unknown charges or withdrawals.

Preparing Taxes

Use a company to do it

Gather income statements and receipts

Fill out forms

Estate Planning

preparing a plan for transferring property during one's lifetime and at one's death

Financial Service Providers

Commercial Bank- institution offering full range of financial services, such as checking, savings, and lending. Dictated by Central bank (federal reserve) that conducts policy and regulation.

Savings/Loan Association- specializes in savings accounts and mortgage loans, but now offers a wide range of services.

Mutual Savings Bank- savings accounts and mortgages.

Credit Unions- non-profit institutions that are owned by its members. Common bond of members such as employment with the same company. Full range of services.

Non-deposit financial institutions- life insurance, investment, finance, and mortgage companies. Specialize in respective industry

Investment Banks/Mutual Funds- raise capital through issuance of securities. Don't take deposits. Pool money to access broader securities market. Brokerage involves buying and selling securities.

Financial Aid companies- higher interest rates loans to individuals and businesses that cannot borrow elsewhere, often due to credit problems.

Insurance- transfer risk of loss to protect against death, disability, accidents, and damage

Informal: moneylenders, family, pawnbrokers

Formal: banks, firms

Semi: credit union, govt agency

Selecting a Financial Service Provider

Highest rate of return, Low or no fees, Borrow money when needed at favorable interest rate.

Institution is insured through the FDIC. Convenient locations. Services that meet your needs.

Fee structure, experience, advising style, references, performance measures.

Type of Investment strategy, Level of Involvement, How to pay

Insurance

Contract between party and company to cover/manage/transfer risks. Estimate probability of loss due to risk and determine a rate to charge for the policy, called a premium.

Can be purchased to cover full replacement cost, automatic increase protection, and business interruption. Protects against damages for which a business or individual may be liable

Accounting

Recording, summarizing, and reporting financial information. Process determined by the size, type, and complexity of a business. Also consider types of decisions that will be made when designing an accounting system. Info- purchases, sales, expenses, and payroll.

Records show changes and current account balance of each asset, liability, and owner's equity account.

Cash method- income and expenses are recorded at the time the money changes hands.

Accrual- records transactions at the time they occur even if no money changes hands at that time.

Double-Entry accounting- debit and credit of a transaction.

Account- Record summarizing information relevant to a single item in the accounting equation. With every action, at least two accounts will change. Group is called ledger.

Ethics in Accounting

The AICPA Code of Professional Co- must keep accurate, honest, and complete record of transactions. Audits carried out by an independent party. Confidentiality must be maintained (clients' personal and company information)

Avoid conflicts of interest between employees and customers. Due care. Be educated about insider trading as an unethical practice.

Refrain from misrepresenting facts to achieve short-term goals contrary to a business' long-term objectives.

Internal auditors review and improve the company's operations. Strict standards to ensure the business sticks to its agreements, designs plans to protect assets, and makes the best use of resources

Can't be biased. SEC can punish legally, lose license

Integrity, Lost credibility, Competence

Technology in Accounting

Software to record and report their business transactions.

Even with automated system, need to collect and keep source documents and business transactions must separate into its debit and credit parts.

Reduces the time, effort, and cost of record-keeping while improving clerical accuracy

Collect lots of data, Few mechanical errors, Process and Analyze details, Depict patterns

Cash Flow Statement

Monthly plan that tracks when you anticipate that cash will come into a business and when you expect to pay out cash.

Determines whether have enough money to pay your bills on time.

Use to secure a business loan (most lenders request at least a first-year cash flow statement)

Itemizes cash you started with, projected cash expenditures are, how and when you plan to receive cash. Shows when you will need to seek out additional funds or when you will have additional cash remaining.

Balance Sheet

Summary of assets, liabilities, and owners' equity.

Assets- monetary value owned, classified as current or fixed. Current asset is cash or anything that can be converted into cash in a year. Fixed asset is something used over a period of time to operate your business, like property and equipment.

Liabilities- amounts owed and classified as current or long-term. Current liability is debt must be paid back during upcoming year. Long-term liability is debt due after 12 months' time.

Owners' equity (net worth)- amount of ownership interest in the business. Difference between assets and liabilities equals the owners' equity