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

Sizing Capacity Cushions

Capacity cushion is the amount of reserve capacity a process uses to handle sudden increases in demand or temporary losses of production capacity.

Capacity cushion = 100% - average utilization rate (%)

Timing and Sizing Expansion

Expansionist Strategy: Timing and sizing of expansion are related if demand is increasing and the time between increments increase

Wait-and-See Strategy: The conservative wait strategy is to expand in smaller increments, such as renovating existing facilities.

Combination of Strategies

Project

An interrelated set of activities with a definite starting and ending point, which results in a unique outcome from a specific allocation of resources.

The Three Main Goals

Complete the project on time, Do not... Continue reading "Project Management Strategies and Techniques" »

Investing in Global Financial Markets

Capital Flows and Investment Opportunities

One of the main features of globalization is the free flow of capital across borders. Investors constantly seek profitable avenues to maximize their return on investment. As an individual, you can deposit money in a bank and earn interest. Banks, in turn, lend this money to individuals, businesses, and governments to finance their projects, profiting from the difference between interest earned on loans and interest paid on deposits.

Investment Options and Risk-Return Trade-off

Investors have various options, each with its own risk profile. Bonds offer interest payments and eventual repayment of principal, provided the issuer doesn't default. Shares, on the other hand,... Continue reading "Investing in Global Financial Markets: Understanding Risk and Return" »

Production

Processing raw materials to create products that are ready for consumption. Production also includes the assembly of goods. This department exists in companies that belong to the secondary sector. In general, the primary sector (agricultural and fishing) and the tertiary sector (services) do not have this functional area.

Purchasing

Obtaining and analyzing quotes/prices from suppliers, buying at the right time by coordinating with the warehouse supervisors.

Sales

Organizing sales promotions, looking for new customers, preparing the best quotes/prices.

Marketing & Advertising

Dissemination of information about the company's products. Persuading potential clients to buy the company's products through promotions, advertising, sales…

Commercial

Providing... Continue reading "Understanding Organizational Structures and Functional Areas in Business" »

The Interwar Period: Economic Turmoil (1918-1939)

Global Economic Context

Following World War I, European countries faced devastating human losses, rampant inflation, and low production. They were burdened by significant war debts and desperately needed credit to finance their reconstruction efforts. The crisis was especially severe in Germany, which was unable to pay war reparations, facing hyperinflation, and struggling with immense debts.

In contrast, the United States emerged as the world's leading economy, becoming a hegemonic power in international trade and finance. The dollar became the main currency for international transactions. European countries were obligated to repay their war loans to the USA, and US agricultural and industrial... Continue reading "Economic Turmoil Between World Wars: The Interwar Period" »

Niche market - It is a small market that aims to meet specific user needs.

Merger

A combination of two or more companies in which the resulting firm maintains the identity of the acquiring company.

Consolidation

The combination of two or more firms, generally of equal size and market power, to form an entirely new entity.

Portfolio Effect

Merger allows acquiring firms to enjoy potentially desirable portfolio effect:

• Achieves risk reduction while maintaining firm’s rate of return

Tax Loss Carry Forward

A loss that can be carried forward for a number of years to offset future taxable income and perhaps utilized by another firm in a merger.

Horizontal Integration

The acquisition of a competitor.

Vertical Integration

The acquisition of customers or suppliers by the company.

Synergy

The recognition that the whole may be equal to more... Continue reading "Merger and Acquisition Terms for Multinational Corporations" »

Economic Value Added (EVA)

EVA: The industry has an operating income for the year of $3,500,000 and a 36% tax rate. Its total invested capital is $20,000,000, and its after-tax percentage cost of capital is 8%. What is the firm's EVA?

EVA = $3,500,000 (0.64) – ($20,000,000 x 0.08)

$2,240,000 – $1,600,000 = $640,000

Personal Taxes

A married couple files a joint income tax return, where the tax rates are based on the tax tables presented in the chapter. Assume that their taxable income was $375,000.

What is their federal tax liability? $51,577.50 + ($375,000 – $230,450) * 0.33

= $51,577.50 + $47,701.50 = $99,279.00

What's their marginal tax rate? 33%

What is their average tax rate? $99,279.00 / $375,000 = 26.47%

Statement of Stockholders' Equity

The... Continue reading "Financial Statement Analysis: Solved Problems" »

1 Steps to Elaborate a Job Description

Job title, duties, skills and competencies, relationships, salary

2 Skills for New Receptionist

For our receptionist positions we need certain skills, communication skill, multitasking skills, confidential, computer literacy, friendly, intelligent, tolerant and patient, professional, innovative, organized

3 Pre-Opening Plan

• Establish a positive image
• Let customers know you are opening for business
• Bring in customers or have them contact you
• Interest customers in your new company and your product or service

Ongoing Plan

• Explaining major features and benefits of your products
• Communicating information about seller
• Clearing up customers' questions and concerns
• Introducing new goods or services

4 Labor Union

Is an organization... Continue reading "Effective Strategies for Job Description and Product Promotion" »

Economies and Diseconomies of Scale

Economies of scale: Reduction in the average unit costs as the business increases in size. When a business increases the scale of operations, it becomes more efficient.

Diseconomies of scale: Increase in average unit costs as the business increases in size. This occurs when the business experiences inefficiencies as it becomes larger.

Internal Economies of Scale

Efficiencies the business makes itself:

• Technical: Bigger units of production reduce costs since the increase in variable costs are spread over a set of fixed costs.

• Managerial: Managers specialize in one job and not in many.

• Financial: Bigger businesses are less risky than smaller ones since big businesses are considered safe by financial institutions,