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

1. Sunk Costs

Costs that do not vary according to different decisions

• Eg. A student buys a book for $50 and can sell it for $20. Sunk costs amount for $30
• Eg. Market research, R&D (frequent in IT sector)

Managerial decision-making:

1. Ignore sunk costs and consider only avoidable costs to be very careful before committing to costs that will become sunk, since such commitments cannot be reversed
2. Exploit investments in sunk costs as a way to strategically influence the behavior of competitors

- Major entry barrier because they increase the cost of exit

Relationship between fixed and sunk costs: - sunk costs are the amount of fixed costs that cannot be recouped

2. Incremental Costs

Change in costs between undertaking a course of action and not undertaking... Continue reading "Cost Concepts and Pricing Behavior" »

Globalization: A Shift Towards a More Integrated World Economy

Globalization of Markets

• National markets merge into a single global market.
• Trade barriers are reduced or eliminated.
• Tastes and preferences converge.
• Firms promote the trend by offering the same products worldwide.

Globalization of Production

• Goods and services are sourced from locations around the globe.
• Firms take advantage of national differences in the cost and quality of factors of production (land, labor, capital).

Benefits of Globalization

• Lower prices for goods and services
• Greater economic growth
• Higher consumer income
• More jobs

Critics of Globalization

• Job losses
• Environmental degradation
• Cultural imperialism of global media and multinational enterprises (MNEs)

Factors Driving Globalization

• Declining

Floating Exchange Rate: When a country allows its exchange rate to be determined by currency markets, the exchange rate is said to be floating.

Effects of Fiscal Policy (Floating Rate)

Government Spending Increase (G↑) or Taxes Decrease (↓T) => IS* shifts right (↑) => exchange rate appreciation (e appreciation) => crowds out Net Exports (NX) => no effect on Aggregate Demand (AD) (When the economy is open, capital immediately flows inwards)

Effects of Monetary Policy (Floating Rate)

Money Supply Increase (M↑) => LM* shifts right (↑) => Output (Y) increases (↑), interest rate (r) decreases (↓) => exchange rate depreciation (e depreciation) => Demand (D) increases (↑) for foreign exchange => Net Exports (... Continue reading "Fixed vs. Floating Exchange Rates: Policy Effects" »

1. Is the DuPont Key Figure System the Only Accepted System With No Disadvantages?

False

While widely recognized, the DuPont system doesn't account for liquidity, a factor often considered more critical than profitability. Focusing solely on profitability as a single objective is a shared limitation of many analytical tools.

2. What's an Advisable Approach to Developing Charts for Reports?

Consider these steps:

1. Statement: Define the message you want to convey.
2. Comparison: Determine the basis for comparison (e.g., time periods, categories).
3. Chart: Select a chart type that best visually represents the data and comparison.

3. What Are the Four Perspectives of the Balanced Scorecard? Explain One Briefly.

The Balanced Scorecard encompasses:

1. Financial: Focuses

Consolidated Financial Statements

When Consolidated Financial Statements Cannot Be Compiled

Determine when a parent entity, which is itself a subsidiary, is *not* required to prepare consolidated financial statements:

• When the ultimate parent entity produces consolidated general-purpose financial statements that comply with full IFRSs or with IFRS for SMEs.
• When an entity has no subsidiaries other than one that was acquired with the intention of selling or disposing of it within one year.

Presumption of Control

Identify the circumstances under which control is presumed to exist:

• When the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity.
• When the parent owns half or less of the voting power of

When talking about tourism you always come with ideas like luxurious hotels, incredibles views, relaxing spaces, Paradise and pure fun, this is idea when think in Puerto Colombia.Nobody think and talk about tourism is the risk that this entails, risks as destruction of environment, pollution, overpopulation, among many other risks that result in the development of a tourist destination, but not only can we that about the risks that making Puerto Colombia a tourist city, the risks that would have been tourism in this areas, risks such as losing a large volume of visitors, less investment in the structure of city, that bring as a result less economic income to the city. So that question arise what is better, to make Puerto Colombia tourist destination... Continue reading "The Risks and Benefits of Making Puerto Colombia a Tourist Destination" »

Chapter 1: Core Management & Business Fundamentals

Key Business Definitions

• Management: A set of activities designed to achieve an organization's goals by using available resources effectively and efficiently within a changing environment.
• Organization: A group of individuals working together to achieve a common goal.
• Resources: People, equipment, finances, and data used by organizations to achieve their common goals.
• Stakeholders: All individuals who can affect or are affected by an organization's goals or its means of reaching those goals.
• Profit: The financial gains collected by a company after achieving its goals.
  • Gross Profit: Total revenue minus the cost of goods sold.
  • Net Profit: Total revenue minus total costs.

Functions of a Manager

• Planning:

Regional Dynamics

Speculative Housing Bubbles

Regional Comparative Advantage

• Natural Advantages
• Employee Characteristics
• Access to Transportation
• Quality of Life

Base & Service Industries

Location Quotient (LQ) > 1 is a base industry, LQ < 1 is a service industry

Housing Supply

• Housing Starts
• Existing Home Sales

Local Supply Influences

• Interest Rates
• Zoning
• Building Codes
• Land Terrain

Neighborhood Influences

• Public Goods
• School Quality/Capitalization Effect
• Public Services Provided Relative to Taxes Paid

Sales Comparison (Market) Approach

The "subject" is the property being appraised. "Comparables" are recently sold, similar properties.

Estimate the value of the subject by adjusting the sales price of the comparable for any differences.

Subject Value Estimate... Continue reading "Real Estate Valuation and Analysis" »

Convertible Securities: An Overview

Convertible securities are financial instruments that offer investors the flexibility to convert them into a different form or type of security, typically common stock. These securities provide investors with the potential for both fixed income and equity returns.

Types of Convertible Securities

• Convertible Bonds: Bonds that can be exchanged for a predetermined number of shares of common stock.
• Convertible Preferred Stock: Preferred stock that can be converted into common stock.

Key Features of Convertible Securities

• Conversion Ratio: The number of shares of common stock an investor will receive if they exchange their convertible security.
• Conversion Price: The price at which the convertible security can be converted

The United States: From Prosperity to Crisis

The Roaring Twenties

Economic growth in the United States continued throughout the decade following the end of the war (1918-1929). It was the decade of prosperity, the Roaring Twenties, in which the American way of life and the values that underpinned it (initiative, individual effort and success), which guaranteed the wealth and wellbeing of its citizens, became a model for the whole world.

Economic growth was based on a comprehensive transformation of goods manufacturing processes, which were dominated by technical innovation. Taylorism and Fordism helped increase productivity and reduce costs. The rise in workers' wages, advertising campaigns, hire purchase (payment for something in regular amounts)... Continue reading "The United States: From Prosperity to Crisis - The Roaring Twenties and the Wall Street Crash of 1929" »