Notes, summaries, assignments, exams, and problems for Economics

Business & Financial Terminology

Core Business & Financial Concepts

• Overheads: Gastos generales (General expenses)
• Operating Profit: Beneficio de explotación (Profit from operations)
• Reduced by 50% / Halved: Reducido a la mitad
• Budgets: A plan of how to spend an amount for a period of time.
• Huge Conglomerate: A large business organization comprising several companies.
• Running Up (a debt/bill): Contraer una deuda (To incur a debt or bill).
• Joint Venture: A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
• Subsidiary: A company controlled by a parent company.
• Parent Company: A company that owns enough voting stock in another firm to control its management and operations.

Business Functions and Logistics

• Core Functions: Administration, Human Resources (HR), Technology, Procurement
• Logistics & Operations: Inbound Logistics, Operations, Sales, Service, Outbound Logistics

Key Information Systems

Enterprise Resource Planning (ERP)

• Integrated system covering: Sales, Production, Finance, HR
• Characteristics: Complex, Costly

Supply Chain Management (SCM)

• Manages: Supply, Production, Distribution
• Covers: Inbound Logistics, Manufacturing, Outbound Logistics
• Focus: Inventory Cost reduction
• Related Concepts: Key Performance Indicators (KPI) for efficiency, Just-In-Time (JIT)

Customer Relationship Management (CRM)

• Types: Operational, Analytical, Collaborative
• Process: Capture customer data, Analysis, Change business processes
• Goals:

Harmful Tax Competition

Countries try to attract as much wealth as possible to their jurisdiction to increase total revenue without increasing the tax burden on each unit of wealth. When they attract wealth, states find that some types are more responsive than others to tax incentives. Some types of wealth are relatively insensitive to them, while others are very sensitive. Following this idea, states concentrate their attraction efforts on those types of wealth that are more sensitive to tax incentives because they have more mobility.

Tax competition is harmful when a state attracts wealth, and it causes harm to other states that is bigger than the benefit it obtains.

Perspectives of Analysis of Harmful Tax Effects

1. Economic Efficiency: Resources

According to IAS 2, stocks are defined as assets: held for sale in the normal course of operation; in production ahead of a sale; or in the form of materials or supplies to be consumed in the production process or supply of services.

Cost of acquisition is understood as the value of the canceled invoice net of VAT.

IAS 2 defines these valuation methods: FIFO (First-In, First-Out) and PPP (Weighted Average Price).

Determining net realizable value should be based on the most reliable information available.

To consider an item as property, plant, and equipment (PPE), it must meet these criteria: it is acquired for sale, use in production, supply of goods and services, rental to others, or for administrative purposes, and is expected to be used for...

Corporate Culture

Corporate culture identifies how a company behaves and adapts to change. It's a style of thinking, living, and acting, projecting the corporate image externally.

Corporate image is how a company is perceived. Through this, users recognize the image, the products, and the company's character and values. It's the image personality pattern. This image includes:

• Logo
• Style Guide
• Design and Decoration
• Company Uniforms

Marketing

Marketing is the set of activities a company performs to satisfy consumer needs, always considering the financial aspect.

Market Study

A market study is a research process to obtain informed data about factors that affect the company. These variables are:

• Controllable non-competition environment (economic, political,

Monetary Policy Instruments and Central Bank Functions

Central banks in a modern economy have several key functions:

• Issuance of Legal Money: The creation of banknotes.
• State Banker: Providing treasury services and managing government debt.
• Bank of Banks: Custody of liquid reserves and lending to financial institutions.

The Bank of Spain, as a delegation of the ECB, lends to commercial banks to implement monetary policy and address liquidity issues.

• Supervision of the financial system, including intervention in poorly managed institutions.
• Management of foreign exchange reserves and gold.
• Central risk information and balances, assessing client loan history.

The European System of Central Banks (ESCB)

With the creation of the Economic and Monetary Union...

The Buying Decision Process: Stages

These are the operating phases involved in a new buying situation. In repurchase scenarios, whether modified or direct, some of these stages are reduced or omitted.

1. Identification of the Problem

Someone within the company becomes aware of a problem or need that can be met by purchasing a good or service. This realization occurs through internal or external stimuli.

2. General Need Description

This stage involves describing the general characteristics, required quantity, and timing of the need.

3. Product Specification

The buying organization decides and specifies the optimal technical features of the product. Sometimes, a team is assigned to conduct a value analysis, carefully studying the most important components...

Understanding Demand and Supply

A shift in the demand curve signifies a change in the quantity demanded at any given price. This is visually represented by a shift of the demand curve to a new position, resulting in a new demand curve.

Movements Along the Demand Curve

A movement along the demand curve represents a change in the quantity demanded of a good as a result of a change in its price.

Shifts in the Demand Curve

• A rightward shift reflects an increase in the quantity demanded at any price level.
• A leftward shift reflects a decrease in the quantity demanded at any price level.

Supply Curve Dynamics

A shift in the supply curve represents a variation in the quantity supplied at any given price. This is reflected in a shift of the supply curve to...

Indirect Costs of Production: Understanding Overhead

The third element in production costs is commonly referred to as manufacturing overhead. As the name implies, manufacturing overhead costs are those not directly tied to the production of a specific product. However, they are crucial contributors to the overall cost of production, encompassing elements like indirect labor and indirect materials.

Variable Manufacturing Overhead Costs (Estimated or Default)

These costs change in direct proportion to the level of production. The higher the total units produced, the higher the total variable manufacturing overhead costs. Examples include indirect labor, indirect materials, and accelerated depreciation.

Fixed Indirect Manufacturing Costs (Real or

Risk Mitigation in Purchase/Sale Transactions

• Goods in Transit Insurance: Risk-based coverage for transport means, company, goods, packaging, etc.
• Default Risk Protection:
  • Assessment based on client risk and country.
  • Financial solutions like non-recourse factoring.
  • In Spain, collaboration with ECESB (Spanish export credit company).
• Non-Delivery Risk Mitigation for Paid Documentary Credits.
• Currency Exchange Risk Management.

Documentary Letter of Credit

• The Letter of Credit (L/C) offers the most secure payment method for exporters, albeit at a higher cost for importers.
• A bank, at the importer's request, commits to pay the exporter upon presentation of compliant documents.
• Assures importers of goods delivery as per payment and exporters of payment recovery.