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

Key Concepts in International Trade and Globalization

Foundations of Trade

Humans began trading due to a lack of self-sufficiency.

The Spread of Commodities: Sugarcane Example

Inhabitants of New Guinea discovered that sugarcane is sweet and easily cultivated. Due to the increased human appetite for sweets, sugarcane spread geographically:

1. From New Guinea to Southeast Asia.
2. To India.
3. From India, traders took it to China and what is now Iran, and so on.

Trade Agreements and Barriers

GATT (General Agreement on Tariffs and Trade)

An agreement designed to reduce tariffs and other barriers to international trade.

Tariffs

Taxes placed on certain imports or exports, which typically stifle trade.

Quotas

Restrictions on the amount of imports a country may receive.... Continue reading "Essential Concepts of Global Trade and Economic Terminology" »

Financial Soundness

Financial soundness is not at a satisfactory level. It is riskier compared to the previous year. The short-term debt, reflected in the debt-to-equity ratio, is higher than the previous year. For sound financial health, these ratios should have decreased.

Ability to Pay

The company's ability to manage short-term debts and immediate payments is weak. While the cash ratio and average collection days have slightly improved, indicating a favorable cash cycle, the overall ability to pay remains mediocre. The company demonstrates good punctuality but needs to improve its guarantees to enhance its ability to pay.

Profitability

The company's profitability has declined. Both Global ROA and ROE are worse than the previous year, indicating... Continue reading "Financial Health Analysis of a Company: A Comprehensive Review" »

Productivity

Productivity is the measure of output relative to the inputs used to create it.

Productivity Formulas

General Productivity: Quantity of Output / Quantity of Input

Labour Productivity: Output over a Given Period / Number of Employees

Production Methods

Lean Production

Lean production encompasses techniques used to minimize waste and maximize efficiency. This can involve reducing product development time and accelerating time to market.

Kaizen

Kaizen, a Japanese term meaning "continuous improvement", emphasizes eliminating waste to enhance efficiency.

Just-In-Time (JIT)

Just-In-Time (JIT) is a production method that aims to minimize or eliminate the need for finished goods inventory. Supplies arrive precisely when needed for production.

Production

... Continue reading "Production, Costs, and Quality Management" »

What is Logistics?

Is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations.

Benefits of Supply Chains

When a business has an effective supply chain management, it has a CA in its industry that allows you to decrease the inherent risks when you are buying raw materials and selling products or services. The most important supply chain benefits are a higher efficiency rate, a decrease cost effects, increases output, increases your business profit level, boost cooperation lvl, no delays in processes and an enhanced supply chain network.... Continue reading "Logistics: Supply Chain Management and International Transport" »

Elasticity

Elastic demand: A high responsiveness of quantity demanded or supplied to changes in price.

Elasticity: An economics concept that measures the responsiveness of one variable to changes in another variable.

Inelastic demand: A low responsiveness by consumers to price changes.

Necessities vs. Luxuries

Necessities tend to have inelastic demands, whereas luxuries have elastic demands.

Short Run Versus Long Run

Price elasticity of demand is usually lower in the short run, before consumers have much time to react, than in the long run, when they have a greater opportunity to find substitute goods. Thus, demand is more price elastic in the long run than in the short run.

Competitive Dynamics

Goods that can only be produced by one supplier generally... Continue reading "Price Elasticity of Demand and Supply: Formulas and Examples" »

The cash inflows (collections) and outflows (disbursements) are not perfectly synchronized, and some level of cash holdings is necessary to serve as a buffer. Perfect liquidity is the characteristic of cash that allows it to satisfy the transactions motive.

Determining the Target Cash Balance

The target cash balance involves a trade-off between the opportunity costs of holding too much cash (lost interest) and the trading costs of holding too little. If a firm tries to keep its cash holdings too low, it will find itself selling marketable securities more frequently than if the cash balance were higher. The trading costs will tend to fall as the cash balance becomes larger. The opportunity costs of holding cash rise as the cash holdings rise.

Investing

... Continue reading "Corporate Liquidity: Managing Cash & Short-Term Assets" »

International Logistics

International logistics is the process of planning, implementing, and controlling the movement of goods from supplier to customer from one country to another. It describes the activities necessary to get materials to a manufacturing facility, through the manufacturing process, and out through a distribution system to the end user. The goal is to manage a global supply chain at a low cost while providing superior customer service. Firms now typically use electronic data interchange (EDI) via the Internet to coordinate the flow of materials into manufacturing, through manufacturing, and out to customers. This eliminates delays among suppliers, shippers, and the purchasing firm, and reduces paperwork. EDI can also help a... Continue reading "International Logistics, Trade, and Marketing Strategies" »

Loans are contracts where a financial institution provides an agreed amount of money to a company, which undertakes to return it with pre-set interest according to a depreciation plan until total repayment. Credit is a contract where a financial institution opens a credit line for a company, allowing it to access funds up to an agreed limit. Interest is paid only on the amount utilized, and repayment occurs within a specified period.

Bondholders and Shareholders: As an investor, you have two main choices for investing in a company: purchasing its shares or buying its bonds. Shareholders own stock in a company. Both investments offer opportunities to make money, but each carries inherent risks.

Forex refers to the foreign exchange market. Each... Continue reading "Understanding Business Financing: Loans, Credit, Bonds, and Forex" »

… Δ Qd Y1

EY = --------- × ---------

Δ Y Q1

…perfectly (or infinitely) elastic:

the extremely elastic situation of demand or supply where quantity changes by an infinite amount in response to any change in price; horizontal in appearance

perfectly inelastic:

the highly inelastic case of demand in which a percentage change in price, no matter how large, results in zero change in the quantity; thus, the price elasticity of demand is zero; vertical in appearance

(relatively) elastic:

the percentage change in quantity demanded is greater than the percentage change in price; measured price elasticity of demand is greater than one (in absolute value)

(relatively) inelastic:

the percentage change in quantity demanded is less than the percentage... Continue reading "Understanding Elasticity of Demand and Revenue in Economics" »

Incoterms: FAS, FOB, CIP, and CPT

What kind of cargo is used for FAS? Why?

Containers are used for FAS because the goods are carried on board a ship.

Which are the two possible cases of delivery for FCA?

• When the goods have been loaded on the transport designated by the buyer or by a person acting on its behalf.
• When the goods are made available to the seller's carrier transport, without being discharged.

Allocation of Costs and Risk for FAS and FOB

The seller is required to deliver the goods alongside the actual ship on the pier. From that point forward, the buyer bears all costs (loading cost, freight, insurance) and risks. Under FAS terms, the buyer is required to clear the goods for export and pay the cost of loading the goods.

Why is it so important

... Continue reading "Incoterms: FAS, FOB, CIP, CPT Explained" »