BA 161 Midterm Practice

Profit

What's left after all the bills are paid.

Measures of unemployment

1. Not looking for a job but want one have looked within the past 12 months

2. People who want a full time job but settle for part time

Owners

Primary role is to invest money in the business. Polish business ideas and bring together resources

Functional Areas of Business (5)

Management, Operations, Marketing, Finance, Accounting.

Operations

Converting inputs (labor, materials, money, information, and so forth) into outputs (intangible or tangible).

Marketing

Identify customers' needs (i.e. market research) and design products to meet those needs.

Finance

Involves planning for, obtaining, and managing a company's funds.

Management

Involves planning for, organizing, leading, and controlling a company's resources so that it can achieve its goals

Accounting

Measure, summarize and communicate financial and managerial information and advise other managers on financial matters.

Stakeholder

Those with a legitimate interest in the success or failure of the business and the policies it adopts.

External Factors

Such as economy, government, consumer trends, technological developments, public pressure

Economics

The study of the production, distribution, and consumption of goods and services.

Factors of production

Resources used to produce something

Resources

The inputs used to produce outputs (goods and services).

Goods

Materials that satisfy human wants and provide utility.

Services

Consumed at the point of sale (food, dentists, etc.)

Planned System

The government exerts control over the allocation and distribution of all or some goods and services.

Socialism

Industries that provide essential services, such as utilities, banking and health care, may be government owned.

Free Market System (Capitalism)

The economic system in which most businesses are owned and operated by individuals.

Private Property Rights

Business owners can expect to own their land, building, machines, etc., and keep the majority of their profits, except for taxes.

Mixed Market Economy

Relies on both markets and the government to allocate resources.

Privatization

Convert businesses previously owned by the government to private ownership.

Nationalization

Taking control of industries, such as oil and media.

Perfect Competition

Many small companies sell identical products. The price is determined by supply and demand.

Four Types of Competition:

Perfect, Monopolistic, Oligopoly, Monopoly

Supply

The quantity of a product that sellers are willing to sell at various prices.

Demand

The quantity of a product that buyers are willing to purchase at various prices.

Shortage

Don't produce enough of a product to satisfy demand.

Surplus

Sellers supply more of a product than buyers are willing to purchase.

Budget Surplus

If the Govt. takes in more money (thru taxes) than it spends on goods and services

Budget Deficit

If the Govt. spends more than it takes in (thru taxes) from goods and services

Monopoly Competition

There is only one seller in the market.

Oligopoly Competition

Few Sellers, since cost to enter is HIGH and each seller supplies a large portion of all the products sold in the marketplace.

Monopolistic Competition

Still have many sellers, don't sell identical products (differentiated AKA Coke & Pepsi: Both soda, not the same)

Differentiated Products

Products that differ somewhat, or are perceived to differ, even though they serve a similar purpose

Business Cycle

The economic ups and downs resulting from expansion and contraction. Usually three to five years.

Consumer Price Index

Measure inflation rate by determining price changes of a hypothetical basket of goods, such as food, housing, clothing, etc. bought by a typical household.

Inflation

When the overall price level goes up

Deflation

When the overall price level goes down (rare)

Financial Accountants

Prepare financial statements to help others, both inside and outside the organization, access the financial strength of the company.

Managerial Accountants

Prepare information, such as reports on the cost of materials used in the production process, for internal use only.

Economic System

The means by which a society (households, businesses and government) make decisions about allocating resources to produce products and about distributing this products.

Leading economic indicators

Indicators that predict the status of the economy three to twelve months into the future

Economic indicator

Statistic that provides valuable information about the economy

Lagging economic indicators

Statistics that report the status of the economy a few months in the past

Laissez-Faire

Leaving things alone.

Two categories of Monopolies:

Natural and Legal

Natural Monopoly

Include public utilities, such as electricity and gas stations. They are regulated and cannot control their own prices. Required to serve all customers

Legal Monopoly

Arises when a company receives a patent giving it exclusive use of an invented product or process, usually for around 20 years

GDP (Gross Domestic Product)

The market value of all goods and services produced by the economy in a given year, produced domestically (In the USA).

Economic Goals:

growth, high employment, price stability

Prosperity

The economy expands, unemployment is low, income rises, and consumers buy more products.

Price Stability

When the average of the prices for goods

and services either doesn't change

or changes very little

Recession

GDP decreases, unemployment rises, and people have less money to spend, business revenues decline.

Globalization of Business

No national economy produces all the goods and services that its people need. Therefore, we have importers and exporters.

Importing

Buy goods and services from other countries.

Exporting

Sell products to other nations.

Comparative Advantage

When a country can produce a product at a lower opportunity cost compared to another nation.

Opportunity Cost

The products that a country must forego making in order to produce something else

Absolute Advantage

It's the only source of a particular product or it can make more a product using fewer resources than other countries.

Balance of Trade

Subtracting the value of a country's imports from the value of its exports

Trade Surplus

The amount by which the value of a country's exports exceeds the cost of its imports.

Trade Deficit

Buy far more goods from the rest of the world than we sell overseas (USA)

Multinational Corporation

Corporate organization that owns or controls production of goods or services in two or more countries other than their home country

Balance of Payments

The difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out

Licensing Agreements

Allows a company to sell the products of a producer or to use its intellectual property in exchange for what is known as royalty fees

International Contract Manufacturing

Many U.S. companies manufacture their products in countries where labor costs are lower

Franchises

A company grants a foreign company the right to use its brand name and to sell its products or services

Joint Venture

Alliances where the partners fund a separate entity (perhaps a partnership or a corporation) to manage their joint operation

Strategic Alliance

An agreement between 2 companies (or a company/nation) to pool resources to achieve business goals that benefit both partners

Foreign Direct Investment (FDI)

Establishment of business operations on foreign soil - the building of factories, sales offices, etc to serve local markets in a nation other than the company's home country (most expensive)

Foreign Subsidiary

An independent company owned by a foreign firm (called the parent). Gives the parent company full access to local markets but also exempts it from any laws or regulations that may hamper the activities of foreign firms

Quotas

Imposes limits on the quantity of a good that can be imported over a period of time

Embargo

An extreme form of quota, which, for economic or political reasons, bans the import or export of certain goods to or from a specific country

International Monetary Fund

Loans money to countries with troubled economies

Subsidies

The government payments that you give to the farmers to help offset some of their costs of production

Protectionism

Protect domestic industries by reducing foreign competition

Tariff

Taxes on imports

Dumping

The practice of selling exported goods below the price that producers would normally charge in their home markets (and often the cost of producing the goods)

North American Free Trade Association

Agreement among the governments of US, Canada and Mexico to open their borders to unrestricted trade

Two ways to provide financial assistance to developing countries:

International Monetary Fund, World Bank

World Bank

Important source of economic assistance for poor and developing countries

Supply curve is positive or negative?

Positive

Demand curve is positive or negative?

Negative

Explain demand curve (P & Q)

As P goes up, Q goes down. As P goes down, Q goes up

Explain supply curve (P & S)

As P goes up, S goes up. As P goes down, S goes down

P is _ axis

Y

Q is _ axis

X

Determinants of Supply (cause shift to left, decreasing)

Input prices, technology, number of sellers, production expectation

Determinants of Demand (cause shift to right, increasing)

Income, Prices of related goods, number of buyers, consumer expectation

Culture Difference Examples

Language, concept of time, company structure, values, communication

Two legal systems:

Accounting laws, corruption

Equilibrium.

When supply and demand curves meet.

Entreprenuer

Those who take the risks and reap the rewards associated with starting a new business enterprise

Sole Proprietorship

A business owned by a single person.

Advantages of Sole Proprietorship:

No paperwork, easy, full control, tax through taxation

Disadvantages of Sole Proprietorship:

unlimited liability, dies when you are gone