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

Basis Property Acquired as Gift

If donor ABFMV, then dual basis applies (1 gain basis & 1 loss basis). Where GB=DonorAB & LB=FMV prop. If sellpr>DonorAB D1EAB=DonorAB @ date of gift. If sellpr,

Scott has decided to dispose of these assets that he received as a gift. Compute his realized & recognized g/l on these disposals: a. In 2000, he received stock with a FMV of 88k. The donor’s AB was 100k. He sells the stock for 72k this year. Gain basis=100k Loss basis=88k Amtreal=72k-Lossbasis88k=(12k) RecogL.

In 2001, he received land with FMV of 42k. The donor’s AB was 50k. He sells the land this year for 45k. Since sellpr b/w AB & FMV. No g/l permitted.

Nicky receives a car from Sam as a gift. Sam paid 48k for the car. He had... Continue reading "Tax Implications of Property Disposal and Exchange" »

Unique Selling Proposition (USP)

A Unique Selling Proposition (USP) is the attribute or characteristic that makes a business special and differentiates it from the competition in the minds of customers.

External Stakeholders

External stakeholders include:

• Local community – e.g., local farmers, herders, and villagers.
• Government – e.g., central and regional.

Target Profit Formula

The target profit formula is:

Target Profit Quantity = (Fixed Cost + Target Profit) / (Price - Variable cost per unit)

Example: (800,000 + 400,000) / (10,000 - 5,000) = 240 trekkers

Impact of Changes in 2014

In 2014, the following changes occurred:

• Annual fixed costs increased by 20%.
• Rising fuel costs of flights increased average variable costs by 40% per trekker.
• The average

Drivers of Globalization

1. Trade and Transactions

The rise of free trade agreements and the elimination of barriers like tariffs have fueled global trade. The mutual recognition market ensures the acceptance of goods across borders, leading to increased cross-border trade, manufactured goods, and multinational corporations.

2. Capital and Investments

Foreign investment has shifted significantly, with a decrease from 65% of the world's GDP in 1991 to 30% in 2006. There's a growing trend of investments in developing countries like those in Africa. For example, Santander generates 25% of its business in Brazil.

3. Migration

Global migration has seen a dramatic increase from 78 million people in 1975 to 2 billion in 2005. Migrant remittances play a... Continue reading "Globalization: Drivers, Impacts, and Paradoxes" »

-External Analysis: To detect Opportunities and Threats - Internal Analysis: To discover Strengths and weaknesses.

PEST Analysis

Strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact their business now and in the future. The framework examines opportunities and threats due to:

• Political
• Economic
• Social
• Technological forces

SWOT Analysis

Understanding TODAY TO BUILD A BETTER TOMORROW! It should be placed at the beginning of a project to begin the process of decision-making. SWOT analysis is the first stage in the planning process for a business venture or to measure almost anything that is influenced by internal and external factors.

• Strengths - Internal Factor +, favorable when

1 - In the Five Force Model: Factors Influencing Existing Competition

1. The degree of existing rivalry - Determined by number of firms, relative size, degree of differentiation between firms, demand conditions, exit barriers.
2. Threat of potential entrants - Determined by attractiveness of industry, height of entry barriers (e.g., start-up costs, brand loyalty, regulation, etc.)
3. Bargaining power of suppliers -Determined by number of suppliers and their degree of differentiation, the portion of a firm's inputs obtained from a particular supplier, the portion of a supplier's sales sold to a particular firm, switching costs, and potential for vertical integration.
4. Bargaining power of buyers - Determined by number of buyers, the firm's degree of differentiation,

Financial Terms

Basic Concepts

• Mortgage: A loan to buy real estate.
• Deposits: Money you put in the bank.
• Pension: Money paid to a retired person.
• Stock/Shares: Securities representing part-ownership of a company.
• Capital: Money invested in a business.
• Bonds: Interest-paying securities issued by companies that need to borrow.

Company Actions

• Takeover: When a company gains control of another by buying its stock.
• Merger: When two formerly separate companies join together.

Financial Institutions

1. Retail Banks: Making loans, receiving deposits.
2. Building Societies: Arranging mortgages.
3. Insurance Companies: Providing pensions, offering life insurance.
4. Investment Banks: Issuing shares or bonds, arranging mortgages, arranging or fighting takeover bids.

Vocabulary

Key

Monetary Policy

Monetary policy involves actions taken by a central bank or regulatory committee to control the money supply and influence interest rates. These actions include modifying interest rates, buying or selling government bonds, and adjusting bank reserve requirements.

Types of Monetary Policy

Expansionary Monetary Policy

Expansionary monetary policy increases the money supply to lower unemployment, encourage borrowing and consumer spending, and stimulate economic growth.

Contractionary Monetary Policy

Contractionary monetary policy slows or decreases the money supply to control inflation. While necessary at times, it can slow economic growth, increase unemployment, and reduce borrowing and spending.

Example: The Federal Reserve in the 1980s

To... Continue reading "Monetary Policy: Controlling Inflation and Economic Growth" »

Market Segmentation and Targeting

True/False Questions

Question 4

Dove, a division of Unilever, traditionally targeted both men and women with its Dove-branded skin care products.

Question 6

For some consumer products such as cigarettes, soft drinks, and candy that have a low per-unit cost, income is often a more valuable segmentation variable than population.

Question 12

Categories such as "successful idealists" and "affluent materialists" can be used to describe psychographic segmentation, not age segmentation.

Question 13

Sometimes it is preferable to market to a particular mind-set rather than an age group; in such an instance, psychographic studies can help marketers arrive at a deeper understanding of consumer behavior than is possible with traditional... Continue reading "Understanding Market Segmentation and Targeting" »

Basic Economic Problems

In view of the scarcity of resources at our disposal and the unlimited ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of the consumer and maximum profit for the producer. Hence, economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends.

Fundamental Problems facing an economy (Basic Economic Problems)

What to Produce?

The first major decision relates to the quantity and the range of goods to be produced. Since resources are limited, we must choose between the different alternative collection of goods and services that... Continue reading "Understanding Basic Economic Problems and Economic Systems" »