Grade 10 - Intro To Business Flashcards
What is perfect competition?
Many consumers buy a standardized product from numerous small businesses (no seller is big or influential enough to affect price). Sellers accept the growing price.
What are the functional areas of business?
Management, operations, marketing, accounting, finance
Supply
The quantity of a products sellers are willing to cell at various prices
Demand
The quantity of a product that buyers are willing to purchase at various prices
Equilibrium price
The price at which buyers are willing to buy exactly the amount that sellers are willing to sell
Monopolistic Competion
Many sellers supply differentiated products (different in quality, style, convenience, location, and brand name - however similar purpose)
Ex. Coke & Pepsi
Oligopoly
A few sellers supply a large portion of all the products sold in the market place.
- starting a business in this industry is usually expensive, therefore number of businesses entering it is low
- large scale enterprises: automobile and airlines
- competition usually has similar promotions
Monopoly
Only one seller supplying products at regulated prices
- Natural: due to the industry’s importance to society, one seller is permitted to supply product without competition (electricity and gas)
- legal: one seller supplies a product or technology which holds a patent (Polaroid)
What are the world main economic goals?
Growth, high employment, price stability
How do you measure economic growth?
Gross Domestic Product (GDP)
How can you see if there is a high employment?
Unemployment rate should be low
How do you measure price stability?
Consumer price index (measure of inflation - price keeps increasing)
What does it means if there is a low GDP? What is the result?
Low GDP= recession
Therefore start losing jobs (high unemployment) and consumers do not spend as much
How long does the business cycle typically run?
3-5 years
What are the 4 phases of the business cycle?
Prosperity, recession, recovery, depression
Explain prosperity
Economy expands
- low unemployment
- income rises
- consumers buy more products
- businesses increase production & offer new and better products
Explain recession
Slow down in economic activity
Explain recovery
Economy starts growing again
Explain depression
Severe long lasting recession
What is GDP
Markets values of all good and services produced by the economy in a given year; includes goods and services produced domestically
What do changes in GDP show?
GDP goes up (after adjusting inflation) - economy is growing
GDP goes down - economy is contracting
What is the unemployment rate?
Percentage of labour force that is unemployed and actively seeking work
What is price stability?
Occurs when the average of the prices for goods and services doesn’t change or changes very little (shouldn’t change by more than 1-3%)
Inflation
When overall price level goes up
Deflation
When price levels go down
What is CPI?
Consumer price index- measures the rate of inflation by determining price changes
What is interest?
The cost for borrowing money
Lagging economic indicators
Statistical data that measures economic trends after the overall economy has changed (few months in the past)
Leading economic indicators
Predicts status of economy 3-12 months in the future
Monetary policy
Efforts exerted by the federal reserve system (bank of Canada) to regulate the nations money supply
What is a contractionary policy? When is it used?
When inflation is a problem
- decrease money supply
- and raise interest rates
- less demand for goods, therefore prices will also decrease
What does it mean when interest rates are high? When would this be?
Used during inflation (contractionary policy)
- borrowers have to pay more money for the money they borrow
- banks are more selective when giving loans
- less demand for goods, therefore prices will also decrease
What would banks do to counter a recession (deflation)?
The will use the expansionary policy to increase money supply and reduce interest rates
- cheaper to borrow money
- banks are more willing to lend it
- encourage businesses to expand production
- encourage consumers to buy more goods & services
- help economy escape recession
Fiscal policy
Governmental use of taxation and spending to influence economic conditions
What would the government do when there is a recession?
Government wants to increase spending or reduce taxes (or both)
- put more in the hands of businesses and consumers (encourage businesses to expand and consumers to buy)
National debt
Total amount of money owed by federal government
Budget surplus
Takes in more than it spends
Budget deficit
Spends more than it takes in
Ethical dilemma
Have to select between 2 or more acceptable, but opposing alternatives that are important to different groups
- “right vs right”
Ethical Decision
Choose between right (ethical) and wrong (unethical) choice
- “right vs wrong”
Ethical lapse
Make a decision that is unmistakably unethical or illegal
Corporate Social Responsibility
Approach that an organization takes in balancing its responsibilities towards different stakeholders when making legal, economic, ethical, and social decisions
- actions taken by a company to make a positive impact on society
Stakeholders
Owners, employees, customers, and the communities in which the business operator
- affected by the activities of the business
Conflict of interest
Choose between the promotion of your personal interest and the interest of others
Conflicts of loyalty
Decide between being loyal to either your employer or to a friend or family member
Whistle blower
Someone that exposes illegal or unethical behaviour in an organization
Why is CSR important?
- consumers and other groups examine not only the quality and price of a firm’s product, but it’s character as well
How can a company be socially responsible?
Financial contributions
Volunteer
Supporting social causes
When does a nation have an Absolute advantage
- only source of a particular product
- make more of a product using the same or fewer resources
When does a nation have a comparative advantage?
- produce a product at a lower opportunity cost compared to another nation
Opportunity cost
Products that a country must decline in order to produce something else
Balance of trade
Value of exports - value of imports
Trade surplus
Sells more than buys
Trade deficit
Buys more than sells
Balance of payment
Difference over a given period of time, between total flow coming in and total flow going out of a country
What are the 5 main ways to participate in International business
Importing and exporting Licensing and franchising Outsourcing Strategic alliance and joint venture Foreign direct investment
Importing
Practice of buying products overseas and reselling them in ones own country
Exporting
Practice of selling domestic products to foreign countries
Licensing
Allows a foreign company to sell the products of a producer or use its intellectual property - ideas (such as patents, trademarks, or copyright) in exchange for royalty fees
Franchising
A company grants a foreign company the right to use its Brand’s name and to sell its products or services
Outsourcing
Contract with a local company in a foreign country to manufacture one if its products, however, retain of product design and development and puts its own label on the finished product
Strategic alliance
An agreement between two companies (or a company and nation) to pool resources in order to achieve business goals that benefit both parties
External forces that influence business activities
Government - monitoring laws
Economy
Consumer trends
Public pressure to be good corporate citizen
Joint venture
Alliances in which the partners find a separate entity to manage their joint operation
Foreign Direct Investment
Establishments of business operations on foreign soil
Offshoring (FDI)
Setting up facilities in foreign counties that replace manufacturing facilities to produce goods that will be sent back to the home country for sale
*** cheap labour
Foreign subsidiary
An independent company owned by a foreign firm
Sole proprietorship
Business owned by only one person
Partnership
Business owned jointly by two or more people
Corporation
A legal entity separate from the parties who own it
Advantages of sole proprietorship
Easiest and cheapest Few government regulations Complete control Get all earned income No special taxes
Disadvantages of sole proprietorship
Death = dissolution (when you die so does the business)
Your own resources and financing
Unlimited liability
Advantages of partnership
Relatively easy & inexpensive Shared responsibility & talent Financing is easier Continuity is not an issue No special taxes
Disadvantages of partnerships
More complex than SP Disputes among partners Unlimited liability including for partners action Shared decisions Share profits
What are the two types of parters in a general partnership?
General - runs business and responsible for liability
Limited - limited involvement; losses = investment
Advantages of a corporation
Limited liability
Financial resources
Specialized management
Continuity and transferability
Disadvantages of a corporation
Goals of management & shareholders differ
Costly to set up
Regulation and government oversight
Double taxation
Merger
Two companies combine to form a new company
Acquisition
Purchase of one company by another
Efficiency
Use or waste as few resources as possible
Effectiveness
Achieve goal as fully as possible
Management
Planning, organizing, directing, and controlling resources to achieve specific goals
What is planning? (Management)
Process of setting goals and determining the best way to achieve them
Strategic plan
Mission statement Core values/beliefs SWOT Goals & objectives Tactical/ operation plans
Top level manager
Responsible for health and performance
Set objectives
Plan and make decisions
Middle Manager
Oversee activities of first line managers
Develop and implement activities
Allocate resources
First line managers
Supervise & coordinate employees
Involved in day to day operations
The role of planning
Planning- setting goals and determining the best way to achieve them
Organizing -
Directing -
Controlling -
What is human resource management
All actions that an organization takes to attract, develop and retain quality employees
HR process
Strategic plan
Job analysis - identify tasks, responsibilities and skills that it enrols, as the knowledge and abilities needed to perform it
Forecast hiring and firing needs
Recruit
Demand > supply
Hire more workers
Extra hours
Labour Savin initiatives
Supply > demand
Encourage early retirement
Layoffs
Fire (usually based on performance)
What is recruiting?
Identifying suitable candidates and encouraging them to apply for openings
Internal recruiting
Within company
- motivate employees as they now feel they can get promoted
External recruiting
outside of the company
- opportunity to get fresh ideas and skills into the company
- most entry level jobs
Contingent workers
hired to supplement a company’s permanent workforce (temporary) - consultants, independent contractors, on call
Orientation (developing new employees)
the way the employer introduces new employees the organization and their jobs
off the job training
formal employee training that occurs in a location away from the office
on the job training
employee that occurs while the employee is on the job
motivation
internally generated drive to achieve a goal or follow a particular course of action
Maslow’s Hierarchy of needs theory
From bottom to top:
- physiological needs (shelter, salary)
- safety needs (financial stability, seniority)
- social needs (friendships, social activities)
- Esteem needs (status, incentives)
- Self - Actualization needs (creative success, challenging job)
What does maslow’s hierarchy of need suggest?
you must satisfy lower level need before seeking to satisfy a higher level need
- once a need is satisfies it no longer motivates; the next higher need takes its place
what is job redesign?
makes jobs more interesting and challenging
job enlargement
enhancing a job by adding tasks but maintaining the same skill level
job enrichment
adding tasks that increase responsibility and opportunity for growth
What is marketing?
activity, set of institutions, and process for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large
what are the market segments?
- demographic
- geographic
- behavioral
- psycographic
demographic segmentation
age, martial status, gender, ethnic background, income, occupation, education
geographic segmenatation
climate, region, population density
behavioral segmentation
attitudes towards product, user status, usage rate
psychographic segmentation
interests, activities, attitudes, values
what are the 4 p’s (markerting mix)
product, price, place, promotion
product
develop a product that meets the needs of the target market
price
set a price for your product
place
get the product to a place where consumers can buy it
promotion
inform potential buyers about your product
What is skimming (pricing strategy)
seller generates early profits by starting off charging the highest price that customers will pay
what is penetration (pricing strategy)
initially charge a low price to discourage competition and grab market share
- over time higher prices could be charged
Cost based pricing
bases the price of a product on its cost plus a reasonable profit
Demand based pricing
bases the price of product on how much people are willing to pay for it
markup
difference between cost to product and selling price of a product
Target pricing
determines how much to invest in a product (how much to pay to make it) by figuring out how much consumers will pay and subtracting and amount for profit
Prestige pricing
practice of setting a price artificially high to foster the impression that it is a product of high quality
odd - even pricing
practicing of pricing products a few cents (or dollars) under an even number
intermediary
a wholesaler or retailer who helps more products from their original to end user
customer value triad
select products that best combines these factors
- price
- quality
- service
what is the promotion mix?
various ways in which companies communicate with customers
- advertising, personal selling, sales promotion, publicity
consideration before selecting promotional strategy?
- purpose, target market, what features to emphasize, budget, what are competitors doing?
Advertising
paid, non personal communications designed to create an awareness of a product or company
- most prevalent
Personal Selling
one - on - one communication with customers or potential customers
Sales promotion
providing an incentive for potential customers to buy something
Publicity
form of promotion that focuses on getting a company or product mentioned in a newspaper, on TV, or in some other news media (typically free)
what is a break even analysis?
method of determining the level of sales at which a company will break even (have no profit or loss)
HOW TO CALCULATE BREAKEVEN
- determine fixed costs (cost that don’t change even if amount of good sold do)
- Identify your variable cost (costs that vary, in total, as the quantity of goods sold changes but stay constant one a per unit basis)
- Determine your contribution margin/ unit
(selling price - variable cost per unit) - Calculate break-even (fixed costs/CM)
What is accounting?
measuring and summarizing business activities, interpreting financial information, and communicating the result to management and other decision makers
What are the 2 main fields of accounting?
Management accounting and financial accounting
Management Accounting
- provides information to decision makers inside the organization to help operate the business
Financial Accounting
furnishes information to individuals and groups inside/ outside the organization to assess to firm’s financial performance
- preparing an organization’s financial statements
Financial Statements
summarize a company’s past performance and evaluates its financial health
Types of financial statements
income statement, statement of owner’s equity, Balance sheet, statement of cash flows
what is GAAP (generally accepted accounting principles)?
uniform set of rules for financial reporting issued by an independent agency called the Financial Accounting Standards Board (FASB)
What is IFRS (international financial reporting standards)?
a set of worldwide accounting rules and guidelines used by companies to prepare financial statements that can be compares with those of other countries.
Who used financial accounting info?
Owners and managers - provide info they can use to take corrective action; did company make a profit?
Investors and creditors - these are the ones the furnish money that the company needs to operate, therefore they want to know how business is doing (if it worth the money they are investing)
Government agencies - publicly owned companies must provide financial reports to the Securities and Exchange Commission (SEC), federal agency that stocks trades.
what is an income statement?
summarizes a business’s revenues, expenses, and net income
revenues
amount of money earned by a selling products to customers
expenses
cost incurred by selling products to customers
cost of good sold
cost of the products that a business sells to the customer
operating expenses
costs of selling products to customers, not including cost of goods sold
gross profit
positive difference between revenues and cost of good sold.
balance sheet
report on a company’s assets, liabilities, and owner’s equity at a specific point in time
asset
resource from which a business expects to gain some future benefit
liability
debt owed by a business to an outside individual or organization
owner’s equity
amount which is invested in a business by its owners and which owners can claim from its assets
fiscal year
company’s designated business year
Accounting equation
assets = liabilities + owner’s equity
Statement of Owner’s Equity
details changes in owner’s equity for a specified period of time
account receivable
record of cash that will be received from a customer to whom a business has sold products on credit
account payable
record of cash owed to sellers from whom a business has purchased products on credit
inventory
goods that a business has made or bought and experts to sell in the process of normal operation
accrual accounting
accounting system that records transactions when they occur, regardless of when cash is paid or recieved
depreciation expense
costs of a long term or fixed asset spread over its useful life
classified balance sheet
balance sheet that totals assets and liabilities in separate categories
liquidity
speed with which an asset can be converted into cash
current asset
asset that business intends to convert into cash within a year
long term asset (fixed asset)
asset that business intends to hold for more than a year before converting it to cash
current liability
liability that a business intends to pay off within a year
long term liability
liability that a business need not pay off within the following year
statement of cash flows
financial statement reporting on cash inflows and outflows resulting from operating, investing, and financing activities
operating acitivty
activity that creates cash inflows or outflows through day to day operations
investing activity
activity that creates cash inflows or outflows through the selling or buying of long term assets
financing activity
activity that creates cash inflows or outflows through repaying of borrowed or invested funds
comparative income statement
financial statement showing income for more than one year
vertical percentage analysis
analysis of an income statement treating the relationship of each item as a percentage of a base (usually sales)
ratio analysis
technique for financial analysis that shows the relationships between two numbers
profit margin
ratio showing how much of each sales dollar is left after certain costs are covered.
Management Efficiency
ratio showing how efficiently a company’s assets are being used.
Management Effectiveness
ratio showing how effectively a firm is being run and measuring its overall performance
Financial Condition
ratio that helps to assess a firm’s financial strength.
gross profit margin is equal to…
gross profit/sales
net profit margin is equal to…
net profit/sales
inventory turnover
ratios that show how efficiently a company turns over its inventory
= sales/inventory
returns on assets
ratio that show if a company is generating a reasonable profit on assets they have invested in
= net profit/ total assets
current ratio
Ratios that showing the relationship between a company’s current assets and current liabilities.
= current assets/current liabilities
debt - to - equity
Ratios that showing the relationship between debt and equity
Examines the riskiness of a companies capital structure
= total liabilities/ total equity
interest coverage is equal to…
operating income/ interest expense
what are the basic things to succeed?
good profit on each item
move inventory
good return on investment
watch cash
