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

Equity and Shares Fundamentals

Venture Capital and Initial Public Offerings (IPOs)

Key Formulas and Metrics

• Venture Capital (VC) Calculation: VC = X / V
• Operating Income (OI): OI = s * [1 - percentage of VC²]
• Payoff Monitoring: (Percentage × Cash Flow if Monitor) - Cost of Monitoring
• Cost of Underpricing: Shares Issued × (True Stock Value Pre-IPO - Actual IPO Price)
• Valuation Scenarios:
  • UT + I if P < Value of the Firm
  • UT if P > Value of the Firm
• Value of Right: True Value of Stock - Strike Price

Earnings Per Share (EPS) Calculations

Rights Issues and Adjustment Factors

• Theoretical Ex-Rights Price (Pₓ): Pₓ = ((P₀ × N₀) + Pᵣ) / (N₀ + 1)
  (Note: Pᵣ is not included in Bonus Issues)
• Adjustment Factor: Pₓ / P₀

Corporate Payout Policy

Dividend

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

Perfect Competition: Meaning and Definition

A perfectly competitive market is one with a large number of buyers and sellers, all trading a homogeneous product without artificial restrictions, and possessing complete market knowledge.

In other words, a market is considered perfect when all potential buyers and sellers are immediately aware of transaction prices. Under these conditions, the price of the commodity tends to equalize across the market.

As Mrs. Joan Robinson stated, "Perfect competition prevails when the demand for the output of each producer is perfectly elastic."

According to Boulding, "A perfectly competitive market may be defined as a large number of buyers and sellers all engaged in the purchase and sale of identically similar commodities,... Continue reading "Perfect Competition: Definition, Characteristics, and Examples" »

The Costs and Benefits of Home Ownership

The recent financial crisis forced a critical reevaluation of home ownership. This analysis addresses three key questions:

• What are the costs and benefits of owning a house?
• How has the recent financial crisis affected the net dollar value of home ownership?
• What regulations should policymakers implement following the crisis?

The Impact of the 2008 Housing Crisis

During the recent financial crisis, homeowners found themselves in a very tough situation. After the housing bubble popped, house prices fell severely. Even though the market has recuperated somewhat since 2008, the net value of owning a house has not been the same since the crisis.

Many homeowners experienced negative equity, meaning the remaining... Continue reading "Financial Impact of the Housing Crisis on Home Equity and Regulation" »

Types of Negotiation

• Distributive Negotiation: Parties compete to determine a fixed sum of value. The focus is on who will claim the most value (win-lose scenario).
• Integrative Negotiation: Parties integrate their interests into an agreement, aiming for a mutually beneficial outcome (win-win scenario).
• Multi-Phase Negotiation: Negotiation takes place over several sessions or phases.
• Multiparty Negotiation: At least two negotiators in each group, and there can be more than two groups involved.

Distributive Negotiation

Getting the Other Side on the Table

1. Offer Incentives: Such as money, time, service, or support.
2. Put a Price on the Status Quo: Highlight the costs or disadvantages of not negotiating.
3. Enlist Support: Use allies to facilitate communication.