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

Ethical Business Conduct

T6- "Do to others as you would like them do to you". Business ethics involve describing inappropriate behaviors (taking gifts, bribing government officials, misrepresenting data, discriminatory practices, boycotting third parties). Maximization: Produce quality products at low costs. Codes: Control ethical behaviors (have employees adopt standards, write contracts that align interests, write codes of ethics, and provide training).

Financial Management

T7- Goal: Maximize shareholder wealth. Financial management in a typical corporation: Board of directors – Chief Executive Officer (CEO). The CEO oversees the (A) Chief Operating Officer (COO) and (B) Chief Financial Officer (CFO). The CFO is responsible for the (Bi) Controller... Continue reading "Business Principles: Ethics, Finance, Marketing, HR, and Operations" »

MPO: Management, Planning, and Organization

Goals

Goals are defined as the long-term strategic aims of the organization. Examples include consumer goals, product goals, operational goals, and secondary goals.

Objectives

Objectives are defined as the things a business wants to achieve in a certain time frame. Examples include business survival, maximizing profit, maximizing sales, boosting customer satisfaction, and expanding the business.

Policies

Policies are defined as the framework and structure a business works within. Examples include legal policy, human resources, health and safety policy, promotion and employment policy, and recruitment policy.

How They Contribute to Effective Management

• Goals provide a long-term look at what the company wants

International Trade:

• Comparative advantage
• Case for free trade
• Terms of trade
• Trade barriers

The Real Goods and Services Market:

• Gross Domestic Product (GDP)
• Inflation
• Unemployment
• Aggregate Demand and Aggregate Supply

Money, Banking, and the Central Bank:

• Money
• Commercial Banks

Monetary Policy:

• Purpose of monetary policy
• Main tools of monetary policy

Fiscal Policy:

• Role of government
• Discretionary vs. non-discretionary fiscal policy

Foreign Exchange Market:

• Foreign exchange rate
• Nominal vs. Real exchange rate
• Central bank intervention

Balance of Payments:

• Definition of BoP
• Main accounts of BoP

3 Sector Model of Macroeconomic Analysis:

• Purpose of 3SM
• Interconnectedness of the 3 sectors
• 3-step process of 3SM analysis

Consumer Theory: Practice Questions

1. Marginal Rate of Substitution and Optimal Choice

   A consumer has an MRS = 2. If the relationship between the prices is: Px = 3Py, the optimal choice will be found in:

   • a) Any bundle on the budget constraint.
   • b) The consumer will spend all income on X.
   • c) The consumer will spend all income on Y.
   • d) None of the above.

2. Utility Maximization with Cobb-Douglas Function

   A consumer has an income of 100€. Prices are Px = 10 and Py = 5. If the utility function is u(x, y) = x²y, the optimal choice will be:

   • a) X* = 6.66, Y* = 6.66
   • b) X* = 1, Y* = 18
   • c) The utility at the optimal choice is 245.
   • d) None of the above.

3. Characteristics of Utility Functions

   Which of the following options is correct:

   • a) In a Cobb-Douglas function, the equilibrium

Financial Statement Analysis

Creditors, investors, management, and regulatory authorities all have a vested interest in analyzing a company's financial statements.

Purpose of Financial Statement Analysis

Creditors: Assess a company's ability to repay debt by focusing on cash flow measures.

Investors: Evaluate a company's potential for dividends, cash flow generation, and growth to make informed investment decisions.

Management: Conduct ongoing analysis of financial results, comparing them to internal operational metrics for performance evaluation.

Regulatory Authorities: Ensure compliance with accounting standards and regulations, particularly for publicly traded companies.

Methods of Financial Statement Analysis

1. Horizontal and Vertical Analysis

Horizontal

CHAPTER 14

1. Which of the following factors exacerbates the volatility in demand in industrial markets?

Professional buyers tend to act in concert.

2. Why are Japanese and German firms generally better at managing market volatility than American firms?

They value employees and stability very highly.

3. If a country has reached an economic development level where there is a focus on manufacturing of both semi durable and nondurable consumer goods and goods demanded relate to equipment and supplies to support manufacturing, which stage of Rostow's five-stage model of economic growth is the country in?

Takeoff.

4. The perception of quality rests solely with the:

customer.

5. Business-to-business marketers frequently misinterpret the concept of quality.

Equity

Equity is the residual interest in the assets of a company after deducting all its liabilities. It represents the financing resources that are not borrowings.

Components of Equity:

• All contributions made by owners
• Reserves, share premiums & equity instruments
• Retained earnings, prior losses & profit/loss of the period
• Grants, subsidies, donations, and bequests received
• Valuation adjustments & hedging transactions

The Balance Sheet: A Fundamental Accounting Identity

The Balance Sheet represents the fundamental accounting equation:

USES OF FUNDS = SOURCES OF FUNDS

This equation highlights that a company's assets (uses of funds) are financed by either its liabilities or equity (sources of funds).

Static vs. Dynamic Vision of Financial Statements

While... Continue reading "Understanding Equity, Financial Statements, and Accounting Principles" »

Marketing Plan Essentials

Defining Your Approach

A marketing plan outlines key elements for reaching your target audience and achieving business goals. It encompasses:

• Customer Awareness: Making potential customers aware of your brand and offerings.
• Messaging: Crafting the right message to resonate with your audience.
• Delivery Methods: Choosing the most effective channels to deliver your message.
• Sales Generation: Converting awareness and interest into actual sales.

Identifying Marketing Vehicles

When developing your strategy, consider various marketing vehicles such as:

• Brochures
• Websites
• Networking events
• Social media platforms
• Advertising campaigns

Leveraging Social Media

To effectively utilize social media, businesses should:

• Create engaging content about

The Impact of Declining Oil Prices on the Global Economy

The most relevant issue in recent economic news is the spectacular decline in petroleum prices over the past several months, with its economic value falling by 46% since last June.

Nowadays, petroleum is considered the most important energy source, leading many countries to base their economies on petroleum and its byproducts. Therefore, it is widely known as 'black gold'.

Global Demand and Price Fluctuations

In July 2014, the International Energy Agency (IEA) predicted that worldwide demand would increase by 1.4 million barrels per day (bpd) in 2015. However, these projections were revised three months later. Demand growth was lower than expected due to slower global economic growth and... Continue reading "Oil Price Decline: Economic Impact and Market Dynamics" »