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

Return on Assets (ROA) Measurement Models

AECA Model

AECA considers the employed as the base for the measurement of Return on Assets (ROA). When an entity manages its trade payables as part of its trade policy, AECA is useful for estimating the investment requirements for the business. The AECA model reveals the effect of the cash policy on the net cost of finance (high liquidity negatively impacts the cost of finance).

DuPont Model

The DuPont model is very intuitive and useful for entities with a low level of liabilities and low financial expenses. Economic profitability here is meaningless because financial results distort the ROA.

PARES Model

PARES is more precise in measuring ROA because it avoids the disadvantage of DuPont by considering operating... Continue reading "Financial Analysis Metrics: AECA, DuPont, and PARES" »

PROFORMA INVOICE

It is a document without taxes value, the seller provides it to the buyer, contains most of the necessary information about an international operation. If the buyer accepts, it is understood that the buyer accepts and confirms the information indicated on it.

Freight Transportation Fundamentals

Importance of an Effective Transportation System

• Greater competition
• Economic Scale
• Reduced price

Service Choices and Their Characteristics

• Price
• Transit time and variability
• Loss and damage

Transportation Rate Profile

1. Volume related rates
2. Distance-related rates
   • Uniform rates
   • Proportional rates
   • Tapering rates
   • Blanket rates: meet the rates of competitors
3. Demand-related rates: Transportation rate is set by competitor

Transportation Charges

• Line-haul rate
  • By products
  • By shipment size
  • By route
  • Miscellaneous rates
• Special service

Line-Haul Rates

1. By products
   • Classification system was devised (T 6.4)
   • Class rates: once a product has a freight classification, line-haul charges can be determined. Zip codes are used for the location (T 6.5)
   • Break

Accounting concepts and conventions are the fundamental guidelines that must be followed when preparing financial accounts. These principles provide direction when multiple alternative options are available for recording transactions.

The Prudence Concept

Prudence means being cautious. This principle dictates that we should be conservative when valuing assets or measuring profits. It ensures that we do not anticipate profits before they are actually earned. Examples include:

• Depreciation of fixed assets.
• Valuing inventory at the lower of cost or net realizable value.
• Creating provisions for doubtful debts or unrealized profits on unsold stock.

Accruals and the Matching Principle

The Accruals or Matching principle states that a firm's profit figure... Continue reading "Essential Accounting Concepts and Conventions" »

The 2008 Global Financial Collapse

• September 2008: Lehman Brothers, the fourth-largest investment bank, collapsed.
• The crisis spread globally, initiating a vicious cycle where banks stopped lending and credit dried up.
• European rescue efforts, amounting to 37% of the EU's annual GDP, began in 2007 to prevent a total collapse of the banking system.

Impact on the Eurozone and Sovereign Debt

• The EU launched a recovery program to protect jobs, maintain social protection, and support economic investment. This prevented bank runs and protected savings.
• The Euro maintained its value, protecting the Eurozone by providing companies with stable international trade and investment. However, the EU had to borrow money to achieve this.
• The most exposed EU countries

What is Economic Growth?

Economic growth refers to the increase in the production of goods and services within an economy, typically measured over a long period, such as a year. It is expressed as a percentage increase in the real gross domestic product (GDP), which accounts for inflation.

Calculating GDP

There are two primary methods for measuring an economy's total production:

1. Expenditure Approach: This method sums up all spending on goods and services by households, businesses, governments, and foreign entities. The formula is GDP = C (consumer spending) + I (investment spending) + G (government spending) + (X - M) (net exports).
2. Income Approach: This method calculates the total income earned by all households within a nation.

The Expenditure

Product Levels and Market Organization

The product structure is categorized into several dimensions:

• Outer Left: Repair, maintenance, installation instructions, and related services.
• Outer Right: Deliveries, warranty, spare parts, and legal requirements.
• Inner Left: Trademark, brand name, and legal status.
• Inner Right: Price, quality, packaging, and styling.
• Center: Design, features, and functional attributes.

Market Organization and Stability

The market environment is influenced by socio-cultural, economic, political, legal, international, foreign exchange, and technological factors. Stability of government is assessed through:

• Radical shifts in government philosophy.
• Pressure from nationalists.
• Weakened economic conditions.
• Conflicts between governments.

Production Theory: Short-Run vs. Long-Run

What is the difference between the short-run and the long-run from the perspective of production theory?

In the short run, only labor varies, and in the long run, both labor and capital vary.

Profit Analysis: Accounting vs. Economic

Accounting profit is ________ compared to economic profit, because accountants ________ opportunity costs in their calculations.

Bigger; do not consider.

Profit Maximization Strategies

A firm will maximize profits when:

The difference between Marginal Revenue and Marginal Cost is the greatest.

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it:

Increased production.

In order to maximize profits, a

Strategic Approach to International Marketing

Internacionalizacija i globalizacija međunarodnih tržišta i konkurencija, Brz tehnološki razvoj, Skraćenje životnog ciklusa proizvoda, Sve teže ofržavanje konkurentske prednosti, Ekonomske integracije stranih tržišta, Višak punude nadpotražnjom > povećana moć kupaca i potrošača, Trgovci smanjuju broj dobavljača

Macroeconomic Environment

Ekonomski sustav, BDP, Stanovništvo i prihodi, Koncepcija ekonomskog napretka, Struktura potošnje infrasturuktura ostali pokazatelji

Hofstede

Hijerarhijska distanca, Individualizam i kolektivizam, Ženstvenost i muževnost, Izbjegavanje nesigurnosti, Kratkoročna i dugoročna orijentacija

Political Risk

Rizik opće nestabilnosti, neizvjesnost budućih... Continue reading "International Marketing and Macroeconomic Environment" »

Introduction to UK Unemployment Reduction Policies

To effectively address unemployment, the UK government can implement a combination of fiscal and supply-side policies. When analyzing such policies, it's crucial to discuss both types and consistently link them back to their impact on unemployment.

Key Considerations for Policy Analysis

• Define unemployment and state its significance as one of the four key UK macroeconomic objectives.
• Illustrate the impact of demand-side policies using an Aggregate Demand (AD) and Aggregate Supply (AS) diagram, showing AD shifting to the right (increasing).

Fiscal Policies to Combat Unemployment

Reducing Income Tax

One significant fiscal policy involves decreasing income tax. When income tax rates are lowered, individuals... Continue reading "UK Government Strategies to Reduce Unemployment" »