Domain 2 - Business Principles Flashcards
3 components of business strategy
mission, vision, and objectives
SMART goals spelled out
specific, measurable, achievable, relevant, time-bound
big picture, what does income statement show
profitability
big picture, what does balance sheet show
overall financial health; the company’s total assets and how they are financed - through debt or equits (assets = liabilities+equity)
big picture, what does cash flow statement show
where cash is being allocated; used to discern trends in business performance
what are retained earnings
the amount of net income that is reinvested in an organization
what is accrual accounting
includes money accounted for but not received or spent (earned but not received)
big picture, what is EBITDA
measure of a company’s overall financial performance
what are accounts receivable
the amount due by customers for goods and services already delivered
what are current assets/liabilities
assets quickly convertible and liabilities paid that reporting period
What are the four profitability ratios
cash ratio
operating cash flow ratio
current ratio
debt ratio
debt to equity ratio
What is the formula and meaning of the cash ratio
cash ratio = cash and cash equivalents/liabilities; tells how capable a business is of satisfying short-term debts
What is the formula and meaning of the operating cash flow ratio
Operating Cash Flow Ratio = Cash Flow from Operations / Current Liabilities; tells a company the number of times it can satisfy its liabilities based on the amount of cash it generated over a certain period
What is the formula and meaning of the current ratio
Current ratio = current assets/current liabilities; measures a company’s ability to pay short-term obligations
What is the formula and meaning of the debt ratio
Debt ratio = total debt/total assets (proportion of assets financed by debt); measures the extent of a company’s indebtedness (leverage)
big picture, what does operating profit margin show
the company’s current earning power
big picture, what does net profti margin show
the big picture view of profitability
What is price to earnings and what is the public benchmark
price to earnings = (price per share)/(earnings per share); 17
what is leverage
the amount of debt a firm uses to finance assets
what is internal rate of return (not the formula)
better than ROI, factors in assumed reinvestment rate from future cash flows; gives managers more control over the assumed reinvestment rate from future cash flows
what is ROI used for
to determine the efficiency of an investment
which financial document should the budget resemble
the income statement
which ethics discipline is most relevant to business
applied
what is utilitarianism
a philosophy that ethical behavior maximizes value in the world
what is motivated blindness
acting unethically out of self-interest but being unaware of it
what is the solicitation summary and when in the process is it used
before RFP (basically the rules for the RFP), info like procurement rules and payment policies;
what is the goal of organiational resilience management systems
to support the achievement of strategic, operational, tactical, and reputational objectives; considers risk management
what does the enterprise performance framework do
evaluates metrics based on effectiveness, efficiency, and strategic improvement
what does the security metrics evaluation tool do
helps evaluate metrics based on technical, operational, and strategic criteria
Myers Briggs breaks people into categories of what
mental preferences
What are the sets of mental preference in Myers-Briggs
How people take in information (sensing perception - fits with experience; intuition perception - applies to future possibilities)
How people form judgements or make decisions (thinking vs feeling)
Energy Consciousness (extroversion vs introversion)
How you see the world - judging or perceiving
Life management orientation (sensing - 5 senses vs intuition - applying meaning
What is statutory law and what are the types
approved by executive branch in manner required by constitution; criminal and civil
what is a primary legal source
an in-state or federal statute or case (strongest)
what is a secondary legal source
a case, statute, or journal from another state or jurisdiction (can’t be relied on)
What is stare decisis (definition and literal translation)
The following of prior case law in a jurisdiction is known as precedent or the principle of stare decisis (let the decision stand)
What is the threshold of hours/week at which a contracting agency should have its own supervisor?
> 400 hour/week
what has the greatest impact on employee productivity
relationship with frontline manager
What are the 5 leadership theories
“Great Man” theory - great leaders are born, not made
Trait theory - traits are inherited that make a great leader, lists desirable traits; doesn’t consider the work environment/situation
Situational theory - leaders choose the best course of action based upon situational conditions (internal and external) or circumstances and do not become leaders by possessing some combination of traits
Behavioral theory - two notable points: 1 - leadership behavior is good if it leads to immediate satisfaction or expectation of future satisfaction; 2 - leadership behavior is motivational if that satisfaction is contingent on effective performance (with proper support)
Competency model - based on required competencies (but not just a checklist)
what is the triple bottom line
people, planet, and profit
What are the 9 types of cognitive bias
attribution error
overconfidence bias
anchoring effect
selective perception
confirmation bias
recency effect
selectivity error
escalation of commitment
framing effect
what is attribution error
the tendency to overemphasize personal characteristics and ignore situational factors in judging the behavior of others (believing professional success is due to talent and failure due to bad luck, might credit the same for someone else to the opposite)
what is overconfidence bias
unrealistic views of one’s own performance and abilities
what is anchoring effect
focusing only on initial information gathered and ignoring subsequent information
what is selective perception
selecting, organizing, or interpreting events based on one’s personal perception to explain an incident
what is confirmation bias
limiting the search for and interpretation of information to that which confirms preconceptions
what is recency effect
putting more weight into recent info
what is selectivity error
only looking at one metric, even if it isn’t representative of what is really trying to be measured
what is escalation of commitment
not seeing previous time/investment as a sunk cost
what is framing effect
the observation that the manner in which data is presented can affect decision-making (how question is framed will influence answers)
what is hindsight bias
always believing mistakes should have been foreseen
what are the 4 approaches to decision making, and definition
Directive style - made by those with a low tolerance for ambiguity, seeking to be efficient, use logic, make fast decisions. Used more for short-term decisions
Analytical style - for longer term goals with decisions along the way; embraces a greater tolerance for ambiguity, seeks more info, considers more alternatives
Conceptual style - high tolerance for ambiguity, creative, taps into intuition, focuses on the long term
Behavioral style - low tolerance for ambiguity, less intuitive, tries to avoid conflict, seeks acceptance of others
3 type of conditions for decision making regarding information known
certainty, risk (estimate probability of failure), uncertainty (no estimate)
what is group think
individuals are unaware the team’s decision is wrong or risky
what is the abilene paradox
the social phenomenon in which a group collectively decides on a course of action that is counter to the preferences of many or all the individuals in the group
strategic management process/selecting a strategy (5 steps)
Establish vision, mission statement, and core values
Set objectives for measuring performance/progress
Create a strategy to achieve objectives
Execute strategy
Monitor/adjust as needed
what is the length of short term goals
quarterly
what is the length of long term goals
1-3 years
what are the 3 strategy evaluation tests
Fitness test - does it fit the current situation
Competitiveness test - is it helping pursue a better competitive position
Performance test - is it producing superior company performance
what are the 4 things a prudct must have to give competitive advantage
VRIN - valuable, rare, inimitable (irreplicable), and non-substituable (must have all 4)
“economic value of product” definition
the amount someone will pay over the cost of production
what is an oligopoly
small number of competing firms with homogenous product, high entry/exit cost; historically US auto and steel; today cereal companies (4 make 90%); high entry/exit cos
what is competitive parity
the optimal expenditure needed on branding and advertising activities to stay on par with the competitors of a particular brand, product, or company as a whole
definition of recession (duration required)
economy is low, GDP contracts to where growth is negative for 2 or more consecutive quarters
definition of depression (duration required)
a recession that lasts for several years
what is the five forces framework and what are the 5
a model that identifies and analyzes competitive forces that directly shape every industry and determine an industry’s weaknesses and strengths. The analysis is used to identify an industry’s structure and determine a strategy
; 3 or more make it unattractive to join (if all weak, industry is likely dying)
Competition from rival sellers within the industry
Competition from potential new entrants to the industry
competition from producers of substitute products
supplier bargaining power
customer bargaining power
what is a strategic group
a cluster of industry rivals that helps determine those that have similar competitive approaches and market positions
what is tacit knowledge
skills, ideas, and experiences that people have but are not codified and may not be easily expressed. Difficult to transfer to another person unless though practice or experience
what is the typical acquisition cost compared to value
25% over value
what percentage of acquisitions fail
70-90%
what is the reason for unrelated diversification, and what are 4 bad reasons
good - value; bad - risk reduction, growth, stabilization, managerial motives
what is parochialism
a narrow, restricted view of the world that fails to recognize other people have distinct and important differences in how they live and work. This can lead to issues of trust and prevent employee development and promotions (monolingualism is a sign)
what is ethnocentric attitude
the belief in the intrinsic superiority of the nation, culture, or group to which one belongs, often accompanied by feelings of dislike for other groups
what is polycentric atttitude
the view by home office management that employees in the host country know the best work approaches and practices for running their business because every foreign operation is hard to understand
what is geocentric attitude
the view by management that focuses on using the best approach and people from around the globe
How do exchange rates affect profits
companies in country a selling product in country b are better off when country b’s currency grows stronger (or a’s grows weaker) (p235)
what is a greenfield adventure
a subsidiary business that is stablished by setting up the entire organization from the ground up
what are the three international strategy approaches
Multidomestic - think local, act local (market using known, local names; decision making is decentralized)
Global - think global, act global (integrated strategy)
Transnational - think global, act local (McDonalds - single strategy, but accommodates local needs)
what are the BRIC countries
major developing countries - Brazil, Russia, India, and China
what is the cash ratio
cash ratio = cash and equivalents / liabilities
what is the purpose of a management system
Provides a framework that the component parts of a system can best be understood when viewed in the context of relationships
