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

Debt and Equity Financing

Debt financing: This is when you borrow money from a bank or a financial institution, such as through bonds.

Equity financing: This is when you offer a portion of your company, such as stocks, in exchange for capital. You don't have to pay the money back, but you give up a portion of ownership.

• Bonds: Less risky with lower returns. The return of your money plus interest is guaranteed. Bonds are issued by companies, governments, etc. They are fixed-income securities, with the issuer being the borrower.
• Stocks: More risky with potentially higher returns. However, you assume the risk of the company not being successful.

Equity

• Additional paid-in capital: Capital that shareholders have contributed to the company above the nominal

Ricardian Model

Unit Labour Req.  Pears(Ib).  Oranges(Ib)

Home                  4h (aLp).         3h (aLo)

Foreign.              6h (aLp*).        1h (alp*)

Absolute Advantage - country takes less time to produce goods?

Home -> pears // Foreign -> oranges

Comparative Advantage - lower opportunity cost 

- Home has a C.Adv in pears production as its opp. cost of pears production is lower than foreign country - will specialize in pears

PPF (grafico) - (aLp · Qp) + (aLo · Qo) <= L

4Qp + 3Qo <= L (Qp = 300 & Qo=400)

Maximum home pears production is 300 and oranges 400

Slope = opp. cost - the opp. cost of pear is how many pounds of oranges Home must stop producing in order to make one more pound of pear

Absence of

*SPECIAL JOURNALS: Journals that have amount columns for recording debits and credits to specific general ledger accounts.

*SALES JOURNAL: A special journal used to record only the sale of merchandise on account.

*FOOTING: A column total written in small penciled figures.

*CASH RECEIPTS JOURNAL: A special journal used to record all transactions in which cash is received.

*SCHEDULE OF ACCOUNTS RECEIVABLE: A list of each charge customer, the balance in the customer's account, and the total amount due from all accounts.

*PURCHASES JOURNAL: A special journal used to record all transactions in which items are bought on account.

*CASH PAYMENTS JOURNAL: A special journal used to record all transactions in which cash is paid out or decreased.

*SCHEDULE OF

International Pricing Policies

• Pricing Policy Variables: Country, product type, competitive conditions, and active marketing efforts all influence pricing.
• Objectives: Pricing serves as an active marketing instrument and a static element in business decisions. Greater control often leads to greater achievement, and the complexity of the process increases with the number of countries involved.

Gray Markets and Price Differences

• Gray Markets: Price differences between markets, exceeding transportation costs, create opportunities for gray markets.
• Illicit Distribution: Importers buy products and sell them to distributors illegally. Exclusive distribution is used to maintain retail margins and quality image.

Pricing Methods

• Full-Cost Pricing: Each unit

Name three DHS Program Offices

-Office of Child Development and Early Learning (OCDEL); Office of Children, Youth and Families (OCYF); Office of Developmental Programs. (ODP)

Describe what NAS stands for and one change they recommended (Book)

National Academy of Sciences: the need to adjust for cost across geographic regions

Define what SNAP stands for and describe what it provides

-Supplemental Nutrition Assistance Program: Provides nutrition benefits to people in need so they can afford to purchase food.

List two effects of poverty as discussed in Power Point

-Negative effects on wellbeing of children, Homelessness, Illness, Poor Academic achievement.

US and Britain underwent a study between 1992 and 2003 regarding “stayers” of poverty. Approximately

Operating Leverage

The degree of operating leverage measures how sensitive a firm is to its fixed costs. It increases as fixed costs rise and variable costs fall. Operating leverage magnifies the effect of cyclicality on beta. That is, a firm with a given sales cyclicality will increase its beta if fixed costs replace variable costs in its production process.

Financial Leverage and Beta

Financial leverage is the sensitivity to a firm's fixed costs of financing.

The equity beta will always be greater than the asset beta with financial leverage: the equity beta of a levered firm will always be greater than the equity beta of an otherwise identical all-equity firm.

Extensions of the Basic Model

The Firm vs. the Project

Any project's cost of capital depends... Continue reading "Understanding Operating and Financial Leverage in Business Valuation" »

Key Business & Finance Terms

1. Bargain

Something that is of very good quality but relatively inexpensive.

2. Change

The money that someone gives back to you when you pay more than something actually costs.

3. Currency

The system or type of money that a country uses.

4. Discount

Something you buy that costs much less than normal.

5. Entrepreneur

Someone who starts a new business or arranges business deals in order to make money, often in a way that involves financial risks.

6. Fair Trade

The activity of making, buying, and selling goods in a way that is morally right.

7. Loan

An amount of money that you borrow from a bank, etc.

8. Mortgage

A legal arrangement by which you borrow money from a bank or similar organization in order to buy a house, and pay... Continue reading "Key Business and Finance Terms Defined" »

The work of the Human Resources department

We all know that recruitment and selection is one of the tasks that the HR department fulfills. The other tasks will be discussed below:

• Recruitment and selection: Involves selecting and attracting the best workers.

Wages and salaries: Must be enough to motivate or attract workers.
Industrial relations: There must be effective communication between departments.
Training programmes: Must meet the training needs of employees and accomplish business objectives.
Health and safety: Must do things according to the law.
Redundancy and dismissal: Must obey all laws when firing workers.

Recruitment and selection

Workers are needed when a business starts up, expands or an existing employee leaves. Businesses use the... Continue reading "Human Resources Department: Recruitment and Selection" »

Dimensions of Corporate Social Responsibility

Philanthropic (Good Citizen)

Ethical (Be Ethical, Right from Wrong)

Legal (Obey the Law)

Economic (Be Profitable)

5 Barriers to Sustainable Consumer Behavior

• Lack of Awareness & Knowledge
• Negative Perceptions
• Distrust
• High Prices
• Low Availability

Measuring Brand Equity

Contributes to positive perceptions of product quality

Qualitative (Free Association/Projective Techniques)

Quantitative (Brand Recognition Research/Brand Recall)

4 Dimensions of BrandAsset Valuator

Differentiation (Brand's Point of Difference)

Relevance (Brand Relates to You)

Esteem (How Well Regarded the Brand Is)

Knowledge (Understanding of the Brand)

Role of Social Media in Branding

• Brand Advocates/Sharing Info/Seeing Discounts/Customer Services
• Allows

Porter’s Five Forces

1. How is a rivalry between competitors?

The need to understand who is direct competitors are right Now. Not always companies that sell the same product compete directly. Although Working with chocolates, the Cacao Show and Copenhagen, for example, do not Focus on the same target audience. In this context, it is necessary to Understand some points: who are the direct competitors (and how to be better Than them)? How companies are grouped (if there are large groups already formed There may be more power to negotiate with suppliers); their brands are already Consolidated and are admired/respected (is it always good to understand why) ?; What are the competitive advantages of competitors (do they have lower costs, Achieve... Continue reading "strategy" »