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

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.

Cash Flows and Dividends

1. Norris Company Dividends: Norris Company declared cash dividends of $60,000, payable as follows: $20,000 at the beginning of the year and $25,000 at the end of the year. (Calculation: $60,000 + $20,000 = $80,000; $80,000 - $25,000 = $55,000)

2. Indirect Method Cash Flow Statement: On the statement of cash flows prepared by the indirect method, the amortization of premium or discount on bonds payable is added back to net income.

8. Cash Receipts from Issuance: Cash receipts received from the issuance of stock are classified as financing activities.

11. Ten-Year Bond Issuance: A ten-year bond issued at par for $250,000 cash is classified as a financing activity.

17. Inflow of Cash: Issuance of long-term debt represents... Continue reading "Accounting Principles and Financial Statement Analysis" »

Core Financial Definitions

• Opportunity Cost: The difference in return between an investment one makes and another that one chose not to make.
• Risk: The possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential for a higher return.
• CAPM: A financial risk model used by analysts in their valuation process (Expected Return = Risk-Free Rate + Specific Stock Beta × Equity Risk Premium).
• DCF: Techniques used by investment bankers for merger and acquisition analysis, Wall Street traders to value all types of debt obligations, and Wall Street analysts to value stock.
• Free Cash Flow to the Firm (FCFF): The

Decision Trees: Excellent tools for choosing between courses of action. They help form a balanced picture of risks and rewards for each option.

Capital Markets: Markets where governments or companies raise money (capital) to fund operations and long-term investments. Selling bonds and stocks are two ways to generate capital.

Primary vs. Secondary Markets:

In the primary market, securities are first issued to investors through an initial public offering (IPO). Investment banks assist with IPOs by guaranteeing a minimum price before selling to the public.

The secondary market—where people buy and sell previously issued securities—includes stock exchanges, bond markets, and other entities that trade financial instruments. Securities trade based... Continue reading "Financial Markets: Capital, Money, and Investment Banking" »

Human Resource Management (HRM)

Core Functions of HRM

Staffing

The staffing process ensures an organization has the right number of employees with the appropriate skills in the right jobs at the right time. It involves:

• Job analysis: Determining the skills, duties, and knowledge required for jobs.
• Human resource planning
• Recruitment: Attracting qualified candidates.
• Selection: Choosing the best candidate for the position.

Performance Management

Performance management is a goal-oriented process that maximizes employee, team, and organizational productivity.

Human Resource Development

This function encompasses:

• Training and development
• Career planning and development
• Organization development
• Performance management and appraisal

Compensation

Compensation provides... Continue reading "Human Resource Management: Essential Functions and Practices" »

TOPIC 7: INTRODUCTION TO OPTIONS AND FUTURES

1. INTRODUCTION TO DERIVATIVES

Definition: financial instrument whose payoffs and values are derived from / depend on something else. Goals:

• To illustrate the economic function/application of derivatives
• Understand how derivative markets are organized
• Be aware of the main derivative markets

Risk: The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment.

Types:Market risk: Change in the value of an asset due to changes in exchange rates, interest rates, inflation rates, bond prices, equity prices, or commodity pricesCredit risk: The other party fails to meet the agreed conditions (payments and dates). Example:... Continue reading "Introduction to Derivatives: Types, Risks, and Markets" »

Why is the Purchasing Activity Becoming More Important to Global Firms?

Over the past three decades, increasing global competition has caused a dramatic increase in the outsourcing of materials. Firms are demanding the best value for all components used in finished products. Parts that were produced in-house as a matter of corporate policy are now being purchased from suppliers around the world. For a typical manufacturing firm, the share of finished product cost that is represented by purchased parts (as opposed to in-house) can range from 40-60%. As a result, purchasing is becoming a key success factor, and the current movement towards even greater international trade will only increase its importance.

What are the Tasks and Goals of Purchasing?

Product: Core Marketing Mix Element

A product is a good or service that satisfies a need. Without a defined product, it's impossible to effectively implement strategies for price, distribution, or promotion.

Key Elements of a Product

• Product Attributes

  These are the specific characteristics of a product, such as its color, quality, size, and design.

• Brand Identity

  A brand is a name, term, symbol, or design (or a combination of these) that identifies a company's product and differentiates it from competitors.

  • Unique Brand: A single brand used for all of a company's products.
  • Multiple Branding: Several distinct brands for different product lines or market segments.
  • Private Label: Products manufactured by one company but sold under another company's brand

1. Volatility of Returns

- Small company stocks

2. Christine's Return

P0= $42.40, P1= $38.20, Divd= 1.4%

- [(38.20-42.4)/42.4] + 0.014 = -8.51%

3. Scott's Annual Return

200 shares, P0= $48, n= 4 months, dividend= $0.22

HPR= -0.120

- Annual return= (1-0.120417)^(12/4)-1 = -31.95%

4. Annualized Return

Annual returns: 15%, 12%, -18%, 2%, 37%, n=5

- Standard deviation= 20.03%

5. Stock Return Range

Stock return= 14.6%, standard deviation= 19.2%, two-thirds of the time?

- -4.6% to 33.8%

6. Forecasting Returns

Historical dollar-weighted... If you want to forecast, the best:

- Arithmetic average return

7. Jeanette's Future Value

Investment= $12,000, n=4, arithmetic average= 8.72%, geometric average= 8.43%

- FV= 12,000(1+0.0843)^4 = $16,587

8. Black Stone's Geometric Average

CNPC Strategic Planning for Mozambique Natural Gas

According to Porter’s Five Forces, the degree of competition in an industry depends on five fundamental competitive forces. Determining the totality of these forces generates the industry's ultimate profit potential, measured by long-term returns on invested capital. However, not all companies operating in the industry have the same potential for return. Corporations differ in their potential for profit insofar as they are more or less apt to manage the ensemble of forces that characterise the industry. When a market presents an agent that orders all industries along a supply chain, the introduction of competition is hampered. In the case of the Mozambique natural gas industry, CNPC has shown... Continue reading "CNPC Strategy and Competitive Analysis in Mozambique Gas" »