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

Core Concepts of Inventory and Stock

Key Definitions

• Stock (General): A collection of products accumulated in space and time, possessing economic value, remaining stored until used.
• Economic Stock: Material belonging to the firm, which is either in transit or at fixed points (e.g., supplier warehouses).
• Physical Stock: Items that have weight and volume, occupy physical space, and possess economic value. This stock must be managed.
• Assortment: A set of different products (variety) offered.
• Warehouse Stock: The total amount accumulated in the warehouse. Note: A wholesaler typically maintains a large stock but a small assortment.

Provisioning and Inventory Policy

Provisioning Process

Provisioning is the set of operations carried out by the company to source... Continue reading "Stock Management Principles and Inventory Types" »

Understanding Public Externalities

Public externalities are generated when an action has an effect on third parties. The externality can be positive or negative, depending on the effect generated.

• A public good is a good or service that is non-rival and non-excludable.
• For example, public education can be considered an externality. It is non-rival and non-excludable, generating a positive externality because its private cost is less than the social cost.

Real GDP and Economic Growth Measurement

Real Gross Domestic Product (GDP) measures a country's economic growth. The index indicating the annual percentage of GDP growth is the GDP deflator, which is obtained by dividing nominal GDP by real GDP and multiplying by 100.

The key difference between nominal... Continue reading "Key Concepts in Microeconomics: Markets, Growth, and Pricing" »

Product Cost

Acquisition

Purchase of primary materials and other resources + cost of the procurement function - Discounts, commissions, and development shopping.

Storage

Costs originating from holding stock in the warehouse.

Manufacturing

Costs generated at different levels of the manufacturing cycle (transforming primary materials into completed products).

Cost Imputation to Product

Direct Costs

Costs that can be identified with the specific product that caused them.

Indirect Costs

Common costs that are not attributed to any particular department or product.

Semidirect Costs

Costs that cannot be applied directly to a product but can be allocated to a shop, section, or department.

Cost by Level of Activity

Fixed Costs

Costs incurred to make the company operational.... Continue reading "Product Cost, Imputation, Activity Levels, and Order Points" »

NIC / State Cash Flow: Objective

This Standard requires companies to provide information about historical movements in cash and cash equivalents through a cash flow statement classified into operating, investing, and financing activities.

Scope

Companies must prepare a cash flow statement following this Standard's requirements, including it as part of their annual financial statements.

Benefits of Cash Flow Information

The cash flow statement, used with other financial statements, helps users evaluate changes in a company's net assets, financial structure (liquidity and solvency), and ability to adapt to changing circumstances by modifying receipts and payments. It is useful in assessing the company's overall financial health.

Definitions

• Cash comprises

Understanding Quality Costs: A Detailed Classification

Quality costs are expenditures incurred to ensure that products or services meet quality standards, or those that arise when they fail to do so. Understanding and categorizing these costs is crucial for effective quality management and overall business improvement. This classification breaks down quality costs into three primary categories: External Failure Costs, Appraisal Costs, and Prevention Costs.

External Failure Costs

These costs arise when products or services fail to meet quality standards and are detected after delivery to the customer. They directly impact customer satisfaction and brand reputation, often leading to significant financial losses.

Costs Related to Claims Processing

Economic Activity: Production, Distribution, and Consumption

Economic activity is the process by which we obtain products and services that cover human needs. It has three phases: production, distribution, and consumption. The economy is the science that studies the goods and services to be produced, the amount, and investment.

Economic Sectors

• Primary sector: Designed to obtain food and raw materials.
• Secondary sector: Transforms raw materials into processed products.
• Tertiary sector: Services.
• Quaternary sector: Includes research, management, and information processing.

Economic Concepts

• Profit: The difference between expenses and income.
• Good: An object that satisfies a need and has a value.
• Service: A provision intended to satisfy a need.
• Cost of

Market Exchange Mechanisms: Market and Money

Marketplace: A set of allowed activities for the sale and purchase of a product made to put the reach of a buyer. Money: Allows every person to specialize in specific tasks because a wage will allow them to buy other goods. Demand: Many defendants are willing to buy at a certain price.

Factors Conditioning Demand

• Price: The lower the price, the greater the product demand.
• Prices of related goods:
  • Complementary goods: Goods that are consumed jointly. An increase or decrease in price implies a variation in demand.
  • Substitute goods: Using one means leaving others that fulfill the same need.
• Disposable income or purchasing power: Determines the product quality and quantity that a consumer will demand.
• Types

5. How Should Quality Measures and Financial Metrics Align? Financial metrics assess the costs and benefits of inspection versus failure prevention. Non-financial measures identify areas for improvement and indicate long-term performance.

6. Understanding Customer Response Time, Costs, and Delays Customer response time is the duration between order receipt and delivery. Delays stem from: a) uncertainty regarding customer needs, and b) operational bottlenecks. Delay costs include reduced income and increased inventory expenses.

4. Identifying Relevant Costs and Benefits of Capital Improvements Relevant costs are the incremental operational costs of the quality program. Relevant benefits include cost savings and increased contribution margin from... Continue reading "Enhancing Quality: Cost Analysis and Improvement Strategies" »

Trade Credit: Supplier Financing Basics

Trade credit from suppliers is a form of financing offered by suppliers, allowing businesses to defer payment for goods or services for a specified period, typically 30, 60, 90 days, or even longer. It usually involves no explicit interest, offering a more automatic, continuous, and agile process. Once an agreement is established with a vendor for deferred payment, it generally doesn't require constant renewal.

However, a common issue with trade credit is that companies sometimes overlook its implicit cost: the opportunity cost of not taking advantage of potential discounts offered by suppliers for immediate payment.

Bill Discounting: Accelerating Cash Flow

Bill discounting is a financing operation that originates... Continue reading "Essential Business Financing Methods" »

Current Assets Explained

• Securities and Investment: This is the cash that the company should always have to cover not only living expenses but also unexpected costs. Currently, the country's commercial banks have diversified so that you can invest money with tight deadlines.
• Inventory: This refers to a model used to calculate the inventory of raw materials (economic lot).
• Accounts Receivable: This refers to the credit a company typically extends for the sale of its first products when it starts operations.

Understanding the Breakeven Point

The breakeven point is the level of production where sales profits are exactly equal to the sum of fixed and variable costs.

Purpose of Analyzing Results

The aim is to calculate the net income and net cash... Continue reading "Understanding Key Financial Concepts for Businesses" »