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

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

Business Ownership and International Markets

Most businesses are owned by foreign companies or use markets/suppliers in other countries. Methods of international business involvement include:

• Owning a retail or distribution outlet in another country.
• Owning a manufacturing plant and exporting.
• Importing from businesses in another country.
• Investing in businesses in another country.

Historical Context and Emerging Markets

First Tier Trade Partners (1st TTP): French and British. Asia during World War II.

Three Emerging Markets: Middle East, Africa, India, and South America.

Example: Morocco exports clementines. Canada has a weak manufacturing sector.

Industrial Sectors Defined

Second Industry: Adds value by creating finished goods from raw materials extracted... Continue reading "Canadian Economy and Global Business Interactions" »

Unit 4: Cost Allocation and Imputation Itinerary

1. Methodologies for Cost Location

1.1. Based on Functions and Departments

The location of costs, or the itinerary of imputation, aims to find the entity that originates the cost.

In accounting for the presence of indirect costs—which measure resource consumption that cannot be directly traced to the product—it is necessary to find a way of estimating the relationship between the volume of costs and the volume of production. The solution is to set an itinerary of imputation, with different stages represented by cost centers, determining the relationship between resource consumption in the center and the different costs. Costs could be directly allocated to sections or centers or indirectly, using... Continue reading "Cost Allocation and Imputation Itinerary" »

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

Defining Business and Core Functions

Business: A business organization that offers goods and services to customers in exchange for money.

Key Business Departments

• Marketing: Publicity and promotion.
• Accounting: Recording incomes, profits, and outcomes.
• Sales: Controlling what the company sells and ensuring quality.
• Budgeting: Planning the spending of money.
• Customer Services: Attention to the client.
• Hiring Employees: Building the best team for the company and comparing candidates.

Organizational Interrelationships

Interrelationships: Effective strategic decision-making, good communication, and cooperation ensure the correct operation of the company.

Legal Entities and Fundamental Rights

Types of Legal Persons

• Natural Person: All individual human beings.

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.