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

Lack of Homogeneity of Costs Allocated to Sections

Activity-Based Costing (ABC) systems shift the focus from cost centers to activities, and from activities to cost drivers. An activity is defined as a group of operations or tasks necessary to produce its outputs. An activity should have variables that measure the units of output and performance. The concept of the center of analysis as a mere cost pool is replaced by the concept of activity, which requires the participation of several sections or departments to be completed.

A cost driver measures the output of an activity and is also the cost-assignment unit. It allows the assignment of the activity cost to a cost object as a function of the amount of the driver. Causality should be the criterion... Continue reading "Activity-Based Costing: A Comprehensive Approach" »

Segmenting Business Markets

Business buyers can be segmented geographically, demographically or by benefits sought, user status, usage rate and loyal status. Almost every company serves at least some business markets. (Ex. Starbucks has developed marketing programs for coffees and for food).

Segmenting International Markets

Few companies have the resources to operate in all, or even most of the countries of the world. Some large companies, sell products in more than 200 countries, but most international firms focus on a smaller set of countries. Different countries, can vary greatly in their economic, cultural and political make up. Companies can segment international markets using one or a combination of several variables. They can segment by:... Continue reading "Segmenting Business and International Markets: Requirements and Strategies" »

Financial Statement Calculation Flow

The following outlines the calculation of key profitability metrics:

EBITDA Calculation

EBITDA =

• (1) Revenue
• +- (2) Changes in Inventories of Finished Goods and Work in Progress
• + (3+5+9+10) Other Operating Revenue
• - (4) Supplies
• - (6) Personnel Expenses
• - (7) Other Operating Expenses
• +- (11b) Results Arising from Fixed Assets

Operating Result Before Exceptional Items

Operating Result Before Exceptional Items =

• EBITDA
• - (8+11a) Amortization, Depreciation, and Impairment

EBIT Calculation

EBIT =

• Operating Result Before Exceptional Items
• +- (12+14+15+16) Returns on Financial Investments

EBT Calculation

EBT =

• EBIT
• - (13+15) Financial Expenses

Profit/Loss from Ordinary Activities (Net of Tax, Pre-Exceptional)

Profit/Loss from Ordinary

Foreign Exchange Market

The foreign exchange market is a global decentralized market for trading currencies. Like any other market, it operates on the principles of demand, supply, and price.

Nominal Exchange Rate

The exchange rate represents the price of one currency in terms of another. There are two types:

• Direct exchange rate: The cost of one unit of foreign currency is given in units of local currency (e.g., 1 USD = 0.94 EUR).
• Indirect exchange rate: The cost of one unit of local currency is given in units of foreign currency (e.g., 1 EUR = 1.06 USD).

Changes in exchange rates influence relative prices. Currency appreciation occurs when the local currency strengthens, allowing you to buy more foreign currency. This increases the relative price... Continue reading "Understanding Foreign Exchange Markets and Exchange Rates" »

Scarcity

The limited nature of society’s resources.

Economics

The study of how society manages its scarce resources.

Efficiency

The property of society getting the most it can from its scarce resources.

Equity

The property of distributing economic prosperity fairly among the members of society.

Opportunity Cost

Whatever must be given up to obtain an item.

Marginal Changes

Small, incremental adjustments to a plan of action.

Market Economy

An economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.

Market Failure

A situation in which a market, left on its own, fails to allocate resources efficiently.

Externality

The uncompensated impact of one person’s actions on... Continue reading "Fundamental Economic Terms & Definitions" »

Outsourcing an IR Process

Advantages:

1. Services provided by professionals trained in IR.
2. 24/7 monitoring.
3. Early notification of potential problems in the region.

Disadvantages:

1. Potential loss of control of response to incidents.
2. Possible exposure of classified organizational data to service providers.
3. Locked in to proprietary equipment and services.

Long Before a DOS: Six Tasks

1. Coordinating with the ISP.
2. Collaborating and coordinating with professional response agencies.
3. Implementation of prevention technologies.
4. Monitoring resources.
5. Coordinating the monitoring and analysis capabilities.
6. Setting up logging and documentation.

Potential Containment Strategies

1. Monitoring system and network activities.
2. Disabling access to compromised systems.
3. Changing passwords.
4. Disabling

Material Transfer Valuation Criteria

When materials are transferred to the next department, the valuation criteria can be applied by considering each batch of products or by using an average unit cost. The primary methods are:

• Weighted Average Price Criteria (WAP)

  Assuming one batch: The batch includes units in process at the beginning of the period (later completed) and units that have been initiated (completed or not). The unit cost is a weighted average of the unit costs from the previous period and the unit costs of the present period.

• First-In, First-Out Criteria (FIFO)

  Assuming different batches: The first batch includes units in process at the beginning of the period (later completed). The second batch includes units initiated in this period

Understanding Economic Fundamentals: Capital, Technology, Labor, and Systems

In economics, several core concepts define how societies produce goods and services. These include capital, technology, labor, and the overarching economic systems that govern their interaction.

Capital: Resources for Production

Capital refers to the combination of non-human resources needed for production. It can be categorized into different forms:

• Physical Capital: Material elements such as factories, machinery, and tools.
• Financial Capital: Funds available for production, including money or credit.
• Human Capital: The skills, training, and experience possessed by individuals, which contribute to productivity.

Technology: Methods and Procedures in Production

Technology encompasses... Continue reading "Economic Fundamentals: Capital, Technology, Labor, and Systems" »

Business Resources

• Human: Quality and quantity of workers and managers.
• Physical: Materials, machines, and landscape.
• Financial: Cash and sources of finance.
• Enterprise: Business idea management or the coordination of all other resources.

Types of Production

• Capital Intensive: Requires more land and machines.
• Labor Intensive: Requires many low-skilled workers.

Business Products

• Goods: Tangible items.
• Services: Intangible offerings.

Key Functions of Business Organization

• Human Resources: Management, recruitment, and planning.
• Finance: Management of money ($) and other financial assets.
• Operations: Transforming inputs into outputs, ensuring the right quality, time, and quantity.
• Marketing: Identifying customer needs and wants.

Business Growth and Integration

Growth:... Continue reading "Essential Concepts in Business Management and Operations" »

The Degree of Product Acceptance

by the market over time. 'An attempt to recognize distinct stages in sales history of the product' during its life span (Kotler). Evolution of the sales and benefits from the product's launch until its recall. The duration of each stage isn't identical; they can be lengthened, repeated or not even produced at all. Classic stages are:

• Introduction:
• Uncertainty stage.
• The organization risks in choosing the marketing mix variables (4Ps+).
• Higher costs. Limited benefits. Lower sales.
• Basic versions of the product.
• Performances:
  • Attract innovators
  • Activate demand
  • Modifications in products to adapt to what demand wants/needs
• Courses of action:
  • Prestige strategy, higher prices, exclusive or selective distribution, good communication