Chapter1-4 Flashcards
What is revenue?
The money that your customers give you when they pay for your product or service
What is cost?
The money that you give for the things you need to run your business
What is profit?
When your revenue exceeds the cost
What are the 4 factors of production
Natural resources, labor, capital, and entrepreneurs
what does internal environment have?
Entrepreneurs, managers, workers, and customers
What does the external environment have?
Economic, political, legal, demographic, social, competitive, global, and technological
What is a business?
An organization that strives for a profit by providing goods and services desired by its customers
What are goods?
Tangible items manufactured by businesses
What are services?
Intangible offerings of business that can’t be held, touched, or stored
What is the standard of living measured by?
Measured by the output of goods and services people can buy with the money they have
What is the quality of life?
The general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time
What are risks?
The potential to use time and money or otherwise not be able to accomplish an organizations goods
What are not-for-profit organizations?
They achieve some goal other than the usual business goal of profit
What is an Economic influence?
Fluctuation in the level of economic activity create business cycles that affect businesses and individuals in many ways
When an economy grows, what happens?
Unemployment rates are low, and income levels rise
What is the factor that change inflation and interest rates?
Economic activity
What does supply and demand determine?
Determine how prices and quantities of goods and services behave in a free market
What are the 3 components of political and legal influences?
The amount of government activity, types of laws it passes, and the general political stability of government
what are demographic factors?
A uncontrollable factor in the business environment and extremely important to managers
What do demographic factors help?
Companies define the markets for their products and also determine the size and composition of the workforce
What are social factors?
Attitudes, values, ethnics, and lifestyles influence what, how, where, and when people purchase products or services
Why are social factors difficult to predict?
They can be subjective and constantly change
What is the nations economic system?
The combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated
What is economics?
The study of how a society uses scarce resources to produce and distribute goods and services
what are the 2 broad categories of economics?
Free market and capitalism
What is capitalism?
Based on the competition in the marketplace and private ownership of the factors of production, and has steady growth. An example, the united states
What are the economic rights?
Own property, make profit, make free choices, and to compete
What happens in communism?
The government owns virtually all resources and controls all markets, economic decision making is centralized, and the government decides what will be produced, when, and how, and has no growth. An example, Cuba, and North Korea
What is socialism?
An economic system in which the basic industries are owned by the government control. Controls critical, large-scale industries. The state determines the goals of businesses, prices, selection of goods, and the rights of workers. Stable with slight growth. An example, Finland, India, and israel
What is a mixed economy system?
Uses more than one economic system. Government owns basic industries, and provides health care. Government involved through taxing.and has continued growth. An example, Great Britain, France, Sweden, and canada
What is macroeconomics?
The study of the economy as a whole. Looks to aggregate data for large groups or people, companies, or products considered as a whole
What is microeconomics?
Focuses on individual parts of the economy, like households and firms
what are circular flow inputs?
Natural resources, labor, capital, entrepreneurship, and knowledge
What are circular flow outputs?
Goods and services
What is economic growth?
An increase in a nations output of goods and services
What is GDP?
The basic measure of economic growth. The total market value of all final goods and services produced within a nations borders each year. When GDP rises it means the economy is growing. When the growth rate is 0, it means the economy begins to decline
What is the business cycle?
Upward and downward changes. Vary in length. Changes in GDP trace the patterns as economic activity expands and contracts
What is recession?
A decline in GDP that lasts 2 consecutive quarters, meaning 3 months. It is followed by a recovery period when economic activity once again increases
What is full employment?
Having jobs for all who want to and can work. Where 94-96% of those available to work actually have jobs
What is unemployment rate?
Indicates the percentage of the total labor force that is not working but is actually looking for work.
what are the 4 types of unemployment ?
Frictional, structural, cyclical, and seasonal
What is inflation?
Situation in which the average of all prices of goods and services is rising
What is purchasing power?
A function of two things, inflation and income. If income and inflation rise, there in no change in purchasing power. If prices rise and income stays the same, purchasing power decreases. If income rises and inflation stays the same, purchasing power increases.
what are the 2 types of inflation?
Demand-pull, and cost-push
What is demand-pull?
Occurs when the demand for goods and services is greater than the supply. Buyers have more money than amount needed to buy goods and services.
what is cost-push?
Triggered by increases in production costs, such as an expenses for materials and wages. Push up the prices of final goods and services
what is wage-price spiral?
Wage increases causing a major cost-push inflation
What is the consumer price index?
An index of the prices of a ‘market basket” of goods and services purchased by typical urban consumers. It is published monthly by the department of labor.
what are the major components of consumer price index?
Food, beverage, clothing, transportation, housing, medical exam, recreation, and education. There are special index’s for food and energy
What is the producer price index?
Measures the price paid by producers and wholesalers for various commodities, such as raw materials, partially finished goods and finished products
What is the family of index?
Crude goods (raw materials), intermediate goods(becomes part of finished goods), and finished goods
What are 2 main tools for achieve in macroeconomic goals?
Monetary policy and fiscal policy
What is monetary policy?
Refers to a governments programs for controlling the amount of money circulating in the economy and interest rate
What is the federal reserve system?
The central banking system of the u.s., prints money and controls how much of it will be in circulation. Can use monetary policy
What is contractionary policy?
The federal reserve system restricts or tightens the money supply by selling government securities or raising interest rates. Reduces spending and lowers inflation
What is expansionary policy?
The federal reserve system increases or loosens growth in the money supply, and stimulates the economy. Interest rates decline, business and consumer spending go up.
what is fiscal policy?
An economic tool used by the government. A program of taxation and spending.
What is the demand cure?
Tells you how much you can sell, at what price
What is equilibrium?
The quantity of demand equals the quantity supplied. When the demand and supply curve cross
What causes changes in demand?
Changes in fashion, or tastes. Expectations about future prices, and changes in the number of buyers
What causes changes in supply?
Changes in prices of other goods, taxes, and high energy and goals prices
What is a market structure?
The number of supplies in a market
What are the 4 types of market structures?
Perfect competition, pure monopoly, monopolistic competition, and oligopoly
What is perfect competition?
Large number of firms in the market. Firms sell similar products, easy to open a new business, no ability to control price, no barriers to entry.
what are barriers to entry?
Factors that prevent new firms from competitions equally with the existing firm, technological or legal conditions
What is pure monopoly?
The market structure in which a single firm accounts for all industry sales of a particular good or service. Some created by the government order that outlaws competition , high ability to control price, no products that compete directly, subject to government regulation.
what is monopolistic competition?
Many firms are in the market, close products but still differ, relatively easy to enter the market, some ability to control price, few barriers of entry
what is oligopoly?
A few firms produce most or all of the output, large capital requirements, what one firm does impacts all the other firms, many antitrust cases, some ability to control prices, many barriers to entry
what are the 3 trends in business environment and competition?
Changing workforce, growing demand for energy, and how companies meet competitive challenges, or, increasing number of minorities and elderly, intensified competition, and accelerated tech
What are ethics?
A set of moral standards for judging whether something is right or wrong
What is ethical issue?
A situation where someone must choose between a set of actions that may be ethical or unethical
What is justice?
What is fair according to prevailing standards of society
What is utilitarian ?
Focuses on the consequences of an action taken by a person or organization
what are the problems of utilitarian ?
Nearly impossible to accurately determine how a decision will affect a large number of people, always involves both winners and losers, and some “costs” are so negative that some segments of society find them unacceptable
What is a code of ethics?
Provides employees with the knowledge of what their firm expects in terms of the responsibilities and behavior toward fellow employees, customers, and suppliers.
what is corporate social responsibility?
The concern of businesses for the welfare of society as a whole
What are 2 important points for corporate social responsibility?
Corporate social responsibility is voluntary, beneficial action required by law is not. And the obligations of corporate to include workers, suppliers, consumers, communities, and society at large
What are the 4 CSR responsibilities?
Economic ( business pursues profit), legal (obey the law), ethical ( do right and fair), and philanthropic ( being a good citizen, giving to worthy causes)
What are the 2 basic dimensions of social responsibility?
Legality and responsibility
What are stakeholders?
The individuals or groups to whom a business has responsibility, being the employees, customers, general public, and investors
What are the 3 trends in ethic and corporate social responsibility?
Strategic changes in corporate philanthropy, a new social contract between employers and employees, and the growth of global ethics and corporate social responsibility
what are the 4 aspects of a social contract?
Compensation, management, culture, learning, and development
What is global vision?
Recognizing and reacting to international business opportunities, being aware of threats from foreign competitors in all markets, and effectively using international distribution networks to obtain raw materials and move finished products to the customer. Managers must develop this
What are exports?
Goods and services made in one country and sold to others
What are imports?
Goods and services that are bought from other countries. U.S is the largest importer and second largest exporter
What is the balance of trade?
The difference between the value of a countries exports and the value of its imports during a specific time
What is trade surplus?
A country that exports more than it imports. Favorable balance of trade
What is trade deficit ?
A country that imports more than it exports. Unfavorable balance of trade
What is balance of payments?
Another measure of international financial transactions showing the difference between the countries total payments and its total recipients from other countries
What is exchange rate?
The price of one’s country’s currency in terms of another country’s currenf\cy
What is floating exchange rates?
The system currency markets operate under. Prices of currency “float” up or down based on that currency’s investment, trade potential, and economic strength
What is absolute advantage?
When it can produce and sell a product at a lower cost than any other country
What is the principle of comparative advantage?
That each should specialize in the products that to can produce most readily and cheaply and trade those products for goods that foreign countries can produce most readily and cheaply
what is free trade?
The policy of permitting the people or businesses of a country to buy and sell where they please without restrictiond
What is protectionism
when a nation protects its home industries from outside competition by establishing artificial barriers such as tariffs and quotas
What is outsourcing?
Sending domestic jobs to another country
What are the cons of global trade?
Millions of Americans lose jobs due to imports shifting abroad,
What are the barriers to trade/
Natural barriers( language and distance), tariff barriers, and non tariff barriers
What is a tariff?
A tax imposed by a nation on imported goods
What are protective tariffs?
Make imported products less attractive to buyers than domestic products
what are non tariff barriers?
Imported quotas( limits on the quantity of a certain good that can be imported), embargo( a complete ban against importing or exporting a product, set up for defense purposes)
what are buy-national regulations?
Government rules that give special privileges to domestic manufacturers and retailers
What are exchange controls?
Laws that require a company earning foreign exchange from its exports to sell the foreign exchange to a control agency
What is dumping?
The practice of charging a lower price for a product in foreign markets than in the firms home market
What is predatory dumping?
The attempt to gain control of a foreign market by destroying competitions with impossibly low prices
What is the world trade organization?
An agreement that dramatically lowers trade worldwide, just like the Uruguay round. It replaces the old general agreement on tariffs and trade
What is GATT?
Contained extensive loopholes that enabled countries to evade agreements to reduce trade barriers
What is the International Monetary Fund?
Promotes trade through financial cooperation and eliminates trade barriers in the process
What is a preferential tariff
Gives advantage to one nation over others
What is free trade zone?
Few duties or rules restrict trade among the partners, but nations outside the zone must pay the tariffs set by the individual members
What is the North American free trade agreement(NAFTA)?
Includes Canada, Mexico, and the U.S
What is mercosur?
One of the largest new trade agreements. Includes Peru, Brazil, Argentina, Uruguay, and Paraguay
what is the regional comprehensive economic partnership?
The largest new trade agreement, has 15 Asian states
What is the Central American free trade agreement(CAFTA)?
The newest free trade agreement
What is the European Union?
Has helped increase this integration by creating a border less economy for the 28 European nations
what is a joint venture?
The domestic firm buys part of a foreign company or joins with a foreign country to create a new entity
What are the pros of a joint venture?
A quick and relatively inexpensive way to enter the global market
What are the cons of a joint venture?
Can be very risky, many fail, or fall victim to a takeover
What is direct foreign investment?
Active ownership of a foreign company or of overseas manufacturing or marketing facilities, has the greatest potential risk
What is counter trade?
Fast growing way to conduct international business
what is infrastructure?
The basic institutions and public facilities upon which an economy’s development depends, and business opportunities are better
What are multinational corporations?
Have resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located. Heavily engaged in international trade, can overcome trade problems
What are the trends in global competition?
Market expansion, resource acquisition, and the emergence of china and India
china
Will stay dominated in mass manufacturing, one of the few nations building multibillion dollar electronics and heavy industrial plants
india
A rising power in software, design, services, and precision industry
What is a sole proprietorship?
A business that is established, owned, operated, and often financed by one person
What are the advantages of a sole proprietorship?
Easy and inexpensive to form, profits all go to owner, direct control of business, freedom from government regulation, no special taxation, ease of dissolution
what are the disadvantages if a sole proprietorship?
Unlimited liability, difficulty raising capital, limited managerial expertise, trouble finding qualified employees, personal time commitment, unstable business life, losses are the owners responsibility
What is a partnership?
An association of two or more individuals who agree to operate a business together for profit
What are the 2 types of partnership?
General ( all partners share in the management and profits, unlimited liability), and limited(unlimited liability, one or more limited partners whose liability is limited to the amount of their investment, help finance the business, but genera partners maintain control, exchange limited liability for no taking part in day to day management of the firm)
what are advantages of a partnership?
Ease of formation, availability of capital, diversity of skills and expertise, flexibility, no special taxes, relative freedom from government control
what are the disadvantages of a partnership?
Unlimited liability, potential for conflicts between partners, complexity of profit sharing, difficulty exiting or dissolving
what is a corporation?
A legal entity subject to the laws of the state in which it is formed, where the right to operate as a business is issued by state charter. Can own property, enter into contracts, sue and be sued, and engage in business operations under the terms id its chapter
What are the 5 main steps to a corporation?
Selecting the company’s name, writing the articles of incorporation and filling them with the appropriate state office, usually the Secretary of State, paying required fees and taxes, holding an organizational meeting, and adopting bylaws, electing directors and passing the first operating resolutions
What are bylaws?
Provide legal and managerial guidelines for operating the firm
what are stakeholders?
The owners of a corporation, holding shares of stock that provide then with certain rights. May recieve a portion of the firms profits in the form of dividends
What is the board of directors?
Govern and handle the overall management of the corporation. They are elected by stockholders. Include both corporate executives and outside directors chosen for their professional and personal expertise
What are officers?
Top management and include the president and chief executive officer (CEO), vice president, treasurer and secretary, who are responsible for achieving corporate goals and policies. Hired by the board
What is a C corporation?
The conventional or basic from of corporate organization. Small businesses may achieve liability protection through S corporations or limited liability companies (LLC)
what is a S corporation?
A hybrid entity, allowing smaller corporations to avoid double taxation or corporate profits as long as they meet certain size and ownership requirements. With stockholders, directors, and officers. Taxed like a partnership
What is a LLCs?
a hybrid organization, they appeal to small businesses bc they are easy to set up and not subject to many restrictions. Offer the same liability protection as corporations as well as the option of being taxed as a partnership or a corporation
What are cooperatives ?
A legal entity with several corporate features, such as limited liability, and unlimited life span, and elected board of directors, and an administration staff. Autonomous businesses owned by its members not investors.
what are buyer cooperatives?
Combine members purchasing power. Pooling buying power and buying in volume increases purchasing power and efficiency, resulting in lower prices
What are seller cooperatives?
Popular in agriculture, wherein individual producers join to compete more affectively with large producers
What is franchising?
A form of business organization that involves a franchiser and the franchisee
What is a franchiser?
The individual or company selling the goods or services in a certain goegraphic area. Buys packages that include a proven product or service, proven operating methods
What is a franchise agreement ?
A contract that allows the franchise to use the franchisers business name, trademark, and logo. Outlines rules for running the franchise, services provided by the franchiser, and financial terms
What are the advantages of a franchise agreement?
Increased ability for franchiser to expand, recognized name, product and operating concept, management training and assistance, financial assstance
What are the disadvantages of a franchise agreement?
Loss of control, cost of franchising, restricted operating freedom
what is merger?
When two or more firms combine to from one new company
What is aquisition?
A corporation of investor group finds a target company and negotiates with its board of directors to purchase it
What is a horizontal merger?
Companies at the same stage in the same industry merge to reduce costs, expand product offerings, or reduce competition
What is a vertical merger?
A company buys a firm in its same industry, often involved in an earlier or later state of the production or sales process. Buying a supplier of raw materials, a distribution company, or a customer gives the acquiring firm more control
What is a conglomerate merger?
Brings together companies in unrelated businesses to reduce risk. Combining companies whose products have different seasonal patterns or respond differently to business cycles can result in more stable sales
what is leveraged buyout?
Corporate takeovers financed by large amounts of borrowed money, as much as 90% of the purchase price. Financially motivated merger. Can be started by outside investors or the corporations management
what are the trends in business ownership?
Social, demographic, and economic
