Notes, summaries, assignments, exams, and exercises for Economics for University

Essential Definitions in Economics

Economics

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Scarcity

All economic questions arise because we are unable to satisfy all our wants.

Marginalism

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

Sunk Costs

Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.

Efficient Market

A market in which profit opportunities are eliminated almost instantaneously.

Opportunity Cost

The process of choosing a good or service over another. The item that you don't pick is the opportunity cost.

Specialization

When an individual or...

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.

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...

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

Company: Balance Sheet as of January 31, 2010

Company: Profit and Loss Statement

January

Operating Leverage Evolution Analysis

Initial Data and Key Ratios

The following data pertains to the company's sales income and operating profit for the years 2007, 2008, and 2009, along with a calculated operating leverage effect ratio:

• Sales Income:
  • 2007: €1,050,600
  • 2008: €881,900
  • 2009: €900,000
• Operating Profit (Result. Explotación):
  • 2007: €49,050
  • 2008: €77,515
  • 2009: €19,075
• Operating Leverage Effect Ratio (Change in Op. Profit / Change in Sales):
  • 2007: N/A (Base year)
  • 2008 (vs 2007): -0.17
  • 2009 (vs 2008): -3.23

Based on these initial data, it is observed that the increase in profit was less than proportional to the increase in sales, and in some cases, profit decreased despite sales changes.

Operating Leverage Effect Calculations (Initial

Supply Chain Risk Management

Supply Chain Risk Management (SCRM) is the process of identifying, assessing, and mitigating risks that can disrupt supply chain operations.

Categories of Supply Chain Risks

• Demand Risks: Uncertain or fluctuating customer demand, forecasting errors, and promotional spikes.
• Supply Risks: Supplier failure, shortages, quality issues, and price fluctuations.
• Operational Risks: Machine breakdowns, labor strikes, and capacity limitations.
• Transportation & Logistics Risks: Delays, accidents, port congestion, and fuel price increases.
• Financial Risks: Currency fluctuations, credit issues, and global economic instability.
• Environmental Risks: Natural disasters, pandemics, and climate issues.
• Information Risks: Data loss, cyberattacks,

Macroindicators

Goods and services – GDP, Labor – Unemployment, Capital – Inflation.

Mercantilism

Based on the principle that the world's wealth was static, nations attempted to accumulate the largest possible share of that wealth by maximizing their exports and by limiting their imports via tariffs.

WTO

International institution that oversees global trade rules among nations.

HeckscherOhlin Model

Evaluates the equilibrium of trade between two countries with varying specialties and natural resources.

Leontief Paradox

Capital-abundant countries export labor-intensive goods and labor-abundant countries export capital-intensive goods.

GDP

Monetary value of all finished goods and services made within a country during a specific period.

Inflation

Rate...

Key Financial Ratios and Formulas

Understanding key financial ratios is crucial for assessing a company's performance and financial health. Below are common ratios and their formulas:

Accounts Receivable Turnover Ratio

Accounts Receivable Turnover = Sales & Service Revenue / Accounts Receivable Balance

Accounts Receivable Turnover in Days

Accounts Receivable Turnover in Days = 365 / Accounts Receivable Turnover

Inventory Turnover Ratio

Inventory Turnover = Cost of Goods Sold (CGS) / Inventory Balance

Inventory Turnover in Days

Inventory Turnover in Days = 365 / Inventory Turnover

Current Ratio

Current Ratio = Current Assets (CA) / Current Liabilities (CL)

Quick Ratio (Acid-Test Ratio)

Quick Ratio = (Current Assets - Inventory - Prepaid Expenses) / Current