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

External Analysis: To detect Opportunities and Threats

Internal Analysis: To discover Strengths and Weaknesses

PEST Analysis: used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact on their business now and in the future

Political • Change to the political system very often forces business to change its approach. Economic • Changes in the market conditions, such as the presence of new competitors, or simply changes in the economy. Social • Changes in society or culture, such as demographic change, Technological • Technological innovation can force changes in production techniques

SWOT: done to try to access the CURRENT & FUTURE situation of a product, brand, business… (at the beginning... Continue reading "Strategic Analysis and Planning for Business Growth" »

Chart of Accounts

This system codifies business transactions with an account number and name. Accounts are hierarchically ordered:

• Groups (1 digit): Seven primary categories.
• Subgroups (2 digits): Subdivisions within groups.
• Accounts (3 digits): Specific items within subgroups.
• Subaccounts (4 digits): Detailed breakdown of accounts.

Group Examples:

1. Basic Financing
2. Non-Current Assets
3. Inventories
4. Trade Payables and Trade Receivables
5. Financial Accounts
6. Purchases and Expenses
7. Sales and Income

Static vs. Dynamic Financial Views

Net Worth (Static Vision)

• Economic Structure: Assets
• Financial Structure: Liabilities and Equity
• Balance Sheet: Fundamental accounting identity (end of period)

Net Income (Dynamic Vision)

• Resource Generation: Revenues
• Resource Consumption: Expenses
• Income

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

Globalization's Role in UAE Economic Growth

Globalization has transformed the world into a global village, making it easier for other countries to recognize the economic advantages the UAE offers to businesses. This interconnectedness has significantly contributed to the nation's rapid economic development.

Boosting Domestic Investment and Savings

In addition to attracting foreign capital, globalization has significantly boosted **domestic investments** within the UAE. For instance, “The UAE is an important participant in global capital markets through several investment institutions, including, among others, the Abu Dhabi Investment Council, the Dubai Port, Dubai Holding, and the Abu Dhabi’s International Petroleum Investment Co.”

The substantial... Continue reading "UAE Economic Transformation: Globalization's Impact" »

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.