Term 3/4 Flashcards by Blaine Wu

What is the accounting equation

Assets + Expenses (+Drawings) = Liabilities + Revenue + Owner’s Equity

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What is an asset?

Anything that is owned and used by a business

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What is a liability?

Any loans and credit owed to outsiders (not an expense)

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What is Owner’s Equity?

The money invested into the business by the owner plus the profit he has left in it.
Owner’s share of the business

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How do you calculate Mark-up percentage

Gross Profit / Cost of Sales x100

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How do you calculate Net Profit percentage

Net Profit / Sales x100

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How do you calculate Expense Percentage

Expenses / Sales x100

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How do you calculate return on OE?

Net Profit / Closing Capital x100

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How do you calculate working capital?

Current assets - current liabilities

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Equity Ratio is …

Closing Capital : Total Assets

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What is marketing?

The management process that identifies consumer wants, anticipates future wants/needs, and goes about satisfying them profitably.

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Is marketing advertising?

No it is much more. Advertising is only one form of marketing

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What are the objectives of marketing?

Increase Sales
Increase Profit
Increase Market Share
Introduce New Product
Create/Improve brand image
Identity market segments

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What is a Product Orientated firm?

A firm which focuses on product development and measures success in sales numbers.

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What is a Market Orientated firm?

A firm which bases decisions on consumer wants and needs. This requires market research and continual monitoring which can be relatively expensive to gather/interpret.

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What are the broad categories of market research?

Primary - Original data

Secondary - Desktop research eg. books/internet

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What must be considered when choosing what type of market research to use?

Outcomes vs Cost/time and accuracy of results

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What are some examples of primary research?

Surveys
Taste Tests
Interviews
Focus Groups
Test Driving

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What are the advantages/disadvantages of secondary market research?

+Cheaper
+Quicker
-More General
-Info available to other firms

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What are the 4 p’s?

Product
Place
Price
Promotion

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What is marketing mix?

The combination of the 4 p’s chosen by the firm.

Each is important to overall profitability and the success of the product.

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What is price skimming?

Setting a high price initially
This forgoes some sales but maximizes profit margin.
eg. Apple cunts

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What is PENETRATION pricing?

Setting price lower than competition to try get market share
+Gain Market Share
-May be seen as inferior
eg. UBER

What is prestige pricing?

Deliberately setting a high price for high end products
Seldom discounted
eg. Rolex

What is predatory pricing??

Setting a price relatively low, sometimes even below cost. The aim is to try destroy the competition and raise prices in the future and/or create a monopoly. eg.

What is Loss Leading?

Setting a price below cost for a limited number of products to get consumers into a store hoping they make other purchases too. eg. Supermarkets

What is psychological pricing?

Setting a price to not round up based on the theory that we read from left to right so the first digit resonates with us the most. eg.$2.99

What does an organisational chart do?

Show the internal structures of an organisation of company and give A clear visual depiction of the hierarchy

What are the 3 types of organisational charts?

Hierarchial Matrix Flat

What is the law of supply?

As price a firm is able to sell as increases, quantity supplied increases. P up QS up P down QS down

What are the supply C.P. conditions?

Cost of production Technology Change in relative profitability

What is a market?

A place or situation where buyers and sellers know what is being traded and can communicate in some way.

What is market equilibrium?

A stable situation with no tendency to change.

What are the benefits of a free market economy?

It allows for people to specialise in different areas and create surplus for exchange. This creates inter-dependence.

What is barter?

The exchange of output without the use of any | 'medium of exchange'

What is money?

Anything that is accepted as a medium for exchange

What are the 4 main FUNCTIONS of money?

- Medium of exchange - Unit of account (compares value) - Store of value (holds value over time) - Means of deffered payment (can be used as credit)

What are the main CHARACTERISTICS of money?

``` Relatively SCARCE - in limited supply Durable Portable Recognisable Divisible ```

What are the assumptions of a market equilibrium model?

'Free Market' | Ceteris Parabus for demand and supply

What can disequilibrium be caused by?

Firm setting an incorrect price - Too high/Too low

Do prices automatically correct in free markets?

Yes but over time

How do you calculate surplus?

QS-QD

How do you calculate shortage?

QD-QS

What are the demand CP conditions?

Income Tastes and preferences Price of complements Price of subs

Any increase in D/S results in shift to the ...

Right

An increase in price results in QD ___and QS ___.

P up = QD down and QS up

Any decrease in D/S results in shift to the ...

Left

A decrease in price results in QD ___and QS ___.

P down = QD up and QS down

Where must a max. price control be set?

BELOW Pe

What is the aim of a maximum price control?

To keep prices low for consumers

What is the effect of a maximum price control?

Disequilibrium resulting in shortage | This encourages a SAHAN market

Where must a min. price control be set?

ABOVE Pe

What is the aim of a minimum price control?

Protect producer incomes

What is the effect of a minimum price control?

Creates a surplus for some firms

What is a subsidy?

Payment from government to a producer and lowers their COST OF PRODUCTION.

What are subsidies usually given for?

Merit Goods | Public Goods