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

Market Research

Market research is the process of gathering, analyzing, and interpreting information about a market.

Product-Orientated vs. Market-Orientated Businesses

A product-orientated business focuses primarily on the product itself. Key characteristics include:

• They produce the product first, then attempt to find a market for it.
• They often produce basic necessities, such as agricultural tools or fresh foods.
• They may lack a recognizable brand name.
• Products are sometimes launched without testing, meaning consumers may hesitate to purchase them until they are fully evaluated.

A market-orientated business carries out market research to identify consumer wants before a product is developed and produced. These businesses are generally more successful... Continue reading "Market Research and Business Orientation Strategies" »

1929 Crisis: Stock Market Crash

1. The Booming Twenties

• After WW1, a period of peace emerged.
• Countries experienced economic growth.
• The League of Nations aimed to prevent wars.
• The Dawes and Young Plans aided Germany's economic recovery and reintegration into the League of Nations.
• The US provided financial assistance to Europe for post-war recovery.

The US appeared prosperous with high production, wages, and cheap labor. However, many lived in poverty. European countries imposed tariffs on US imports to protect domestic products. Overconfidence led US citizens to borrow money to buy shares, despite low share prices. European countries grew wary of the US.

Germany borrowed heavily for post-war reconstruction, but it wasn't enough. France occupied... Continue reading "1929 Stock Market Crash: Causes and Effects" »

Tax Deductions for Business Operations

You can write off operational expenses from your taxes for the year in which they occur. This means you can deduct 100 percent of your daily expenses each year.

Operational Expenses vs. Capital Expenditures

• Operational Expenses (Write-offs): Offer the most advantageous tax deductions for the short term, allowing a 100% deduction in the year incurred.
• Capital Expenditures (Depreciation): Must be depreciated. This means you can deduct only a part of the cost of the asset each year over the life of the asset.

Understanding Risk Aversion

Risk Averse: Investing conservatively, avoiding risk unless there is adequate compensation.

Standard Deviation and Investment Volatility

Standard Deviation is applied to the annual... Continue reading "Investment Metrics, Market Structures, and Tax Deductions" »

Types of Primary Research Methods

Questionnaires

A questionnaire is a set of questions used to collect data for market research.

Advantages:

• Detailed qualitative information can be gathered.
• Customer opinions can be obtained.
• They can be carried out online.
• Vouchers can be offered to encourage participation.

Disadvantages:

• Inaccurate answers may result from poorly designed questions.
• Can be time-consuming and expensive.
• Collating and analyzing answers is time-consuming.

Online Surveys

Online surveys require the target sample to answer questions over the internet.

Advantages:

• Quicker response times.
• Cheaper than interviews or postal questionnaires.
• Easy for participants to complete.
• Data can be quickly analyzed using IT tools.

Disadvantages:

• Lack of an interviewer

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