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

CH:3 Term: Balance Sheet: The balance sheet is a snapshot of the firm’s assets and liabilities at a given point in time. Assets are usually listed in descending order of liquidity, or the ability to convert to cash. While the assets depict what is owned, liabilities and equity represent what is owed or who provided the funding for the assets. Balance Sheet Identity: {Assets = Liabilities + Stockholders’ Equity}

Net Working Capital: The difference between current assets and current liabilities. It is positive when the cash that will be received over the next 12 months exceeds the cash that will be paid out. Usually, it is positive in a healthy firm.

Market Value vs. Book Value: The balance sheet provides the book value of the assets, liabilities,... Continue reading "Understanding Balance Sheets and Income Statements in Finance" »

Effective Segmentation

MEASURABLE: The size, purchasing power, and profiles of the segments can be measured.

ACCESSIBLE: The market segments can be effectively reached and served.

SUBSTANTIAL: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.

DIFFERENTIABLE: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.

ACTIONABLE: Effective programs can be designed for attracting and serving the segments.

Important:

The difference delivers a highly valued benefit to target buyers.

Differences to Promote

DISTINCTIVE: Competitors do not offer the difference, or the company can... Continue reading "Principles of Marketing" »

A Free Market Economy

A free market economy is a rationing system by which societies allocate resources to the production of goods and services using the price mechanism, with no government intervention. All economic decisions are based on the market forces of demand and supply. (Adam Smith)

A Command Economy

A command economy, also called centrally planned economy, is a rationing system where the means of production are owned by the state. There is no private property and all economic decisions are made by the government. (Karl Marx)

Positive Economics

Positive economics are statements based on facts or evidence; free from subjectivity. They can be tested scientifically and proved.

Normative Economics

Normative economics are economic statements based... Continue reading "Economics Concepts and Definitions" »

Financial Statements

1. Income Statement

For the month ended...

• Service Revenue....x

Expenses:

• ...exp
• ...exp
• ...Maintenance
• ...Advertising
• ...Utilities

Revenues-Expenses=...

2. Retained Earnings

For the month ended...

• Ret Earnings, 1st...0 euros
• + Net Income...
• - Dividends...

Profitable and generated resources + paid dividends.

3. Balance Sheet

Assets:

• - Cash
• - Acc Receivable
• - Supplies
• - Equipment

Total:+

Liabilities (Payable)

• - ...payable
• - ...payable

Equity

• - Common Stock
• - R. Earnings

Assets x un lado y L + E por otro.

1. What are the differences between micro and macroeconomics?

Microeconomics is concerned with:

• Supply and demand in individual markets
• Individual consumer behavior. E.g., Consumer choice theory

Macroeconomics is concerned with:

• Monetary/fiscal policy, e.g., what effect do interest rates have on the whole economy?
• International trade and globalization

2. Briefly explain how countries gain from international trade.

The comparative advantage provided by differing opportunity costs of various goods in two countries allows both to benefit from mutual trade. This occurs if they specialize in producing (and exporting) those goods that have relatively low opportunity costs compared to another country.

E.g., Canada exports minerals to Spain, and Spain exports... Continue reading "Microeconomics vs. Macroeconomics, International Trade, and Key Economic Concepts" »

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" »