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AFM 132 > Unit 2: business overview > Flashcards

Unit 2: business overview Flashcards

1
Q

what does being in tune with the business world aid accounting and financial professional with

A
  1. understanding the changes transforming their industry
  2. anticipate future developments
  3. capitalize on new opportunities
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2
Q

what is more emphasized for CEOs and CFOs today?

A

placed on how well you understand business

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3
Q

what are CFOs expected to be the catalyst of?

A

catalyst for change with a focus on driving innovation and growth

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4
Q

what are the expectations of CFOs?

A

to help the entire organization focus on activities that align with the companies strategy to drive value.

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5
Q

how is decision making today based on?

A

the ability of financial leaders to understand trends in the broader business environment and anticipate future change to business models to both act and capitalize on their strategy.

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6
Q

what 3 elements can support new and seasoned CFOs

A

digital literacy
entrepreneurial mindset
social intelligence

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7
Q

define business

A

activity that you intend to carry on for profit

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8
Q

why was business activity and the trade of goods + services challenging during canada’s infancy?

A
  1. large land mass; complicating travel + transport of goods across the country
  2. low + spread out population
  3. lack of infrastructure connecting the country from coast to coast
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9
Q

why was north to south trade with the US initially easier than east to west trade in canada?

A

many immigrants to Canada originally settled along the border

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10
Q

What national policy did sir john a macdonald develop to support + protect Canadian business activities and promote east to west trade

A

tariffs - taxes on imported goods - made goods form US more expensive and Canadian goods more affordable and encouraged trade within canada

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11
Q

what was another government decision that improved connectivity across the country and why?

A

railway as it expanded settlements, facilitated trade, and communications

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12
Q

define a mixed economy in terms of resource allocation?

A

some allocation of resources are made by the market and some are made by the various levels of government that play an active role in the economy, .

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13
Q

define a crown coroporation

A

a company owned by the federal or provincial government

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14
Q

why were there crown corporations

A

to provide services not already offered or available

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15
Q

why have crown corporations gone through privatization?

A

source of cash for governments to reduce debt and fund other government activities

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16
Q

what is a benefit of privitization

A

promotes competition which drive innovation which ultimately improves efficiencies and reduces costs for consumers.

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17
Q

define a small business

A

an organization that is independently owned and operated, is not dominant in its field, and meets certain standard size, typically 1 - 99 employees.

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18
Q

what percentage of the workforce is employed for small business in canada?

A

70%

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19
Q

define a sole proprietorship

A

owned and operated by one person and exists once you start selling a product or service.

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20
Q

advantages + disadvantages to a sole proprietorship

A
  1. easy to set-up - only need to complete a business registration to get started
  2. lower start-up costs
  3. freedom/control for owners, 4. less regulatory requirements - no separate file tax return
  4. unlimited liability - no distinction between your personal assets + business assets
  5. business continuity - business may be put on hold
  6. raising funds - have access to personal savings
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21
Q

define a partnership

A

a business created with 2 or more people who share knowledge and resources in launching the business

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22
Q

define a partnership agreement

A

aims to address the nature of the business, financial contributions from each partner ,responsibilities of each partner, how profits are shard, how decisions will be made, how disputes can be resolved, what happens if a partner wants to leave, and how to end the partnership

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23
Q

what are the advantages of a partnership

A
  1. being easy + inexpensive to form
  2. sharing start-up costs between partners - more people = more finanical resources
  3. shared management + decision making
  4. less regulatory requirements - income + expenses of the business flow through personal tax returns
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24
Q

what are the disadvantages of a partnership

A
  1. unlimited liability - personal assets could be used to off any debt
  2. potential conflict between partners
  3. business continuity - definite life
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24
Q

define a corporation

A

considered a separate legal entity - ownership is through shared capital - shareholders aren’t personally liable for debts or acts of the corporation.

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24
Q

what are the advantages of the corporation

A
  1. limited liability - personal assets = distinct from company’s assets
  2. business continuity - corporation has an indefinite life as ownership is transferable
  3. greater access to financing
  4. possible tax advantages - taxes may be lower
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24
Q

What are the disadvantages of a corporation

A
  1. higher start-up costs - corp. requires a lawyer to form articles of incorporation and bylaws
  2. greater regulatory requirements - corps are closely regulated , filing sperate tax returns, regular reporting, requirements to maintain corporate records
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25
Q

what percentage of small businesses survive past their 5th year of operations

A

50%

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26
Q

Why is it that business that are typically easier to start tend to have the least growth potential and greater failure rates?

A

the ease entry indicates lots of competition, larger supply in the marketplace and lower prices

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27
Q

why is it that business that are harder to start more likely to be successful and generate significant profit?

A

the difficulty to enter and main the business keeps competition away, lowers supply, and allows business to charge higher prices.

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28
Q

what are some critical elements of business management

A
  1. planning
  2. understanding your customers
  3. managing your employees
  4. maintaining good records
  5. financing your business
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28
Q

what are some causes of small business failure

A

poor management of business - under/overpricing goods, plunging in first without testing waters on a smaller scale, going into business with little to no experience

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29
Q

how does globalization impact consumers?

A

benefit as more options are available

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30
Q

how does globalization impact an employee

A

has helped connect employees with customers, clients or business partners - in business operations, it could mean sourcing resources to make a product or marketing a company’s product in another

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31
Q

how does globalization impact the owner of a business

A

allows businesses to expand their reach beyond their own city - small businesses have the opportunity to consider how they can appeal to customers in a foreign market and larger companies may outsource less critical functions to focus on certain aspects.

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32
Q

what has driven businesses to become more global?

A

competition and advances in connectivity

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33
Q

what percentage do small businesses in Canada account for Canadian exporters

A

90%

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34
Q

why do we trade?

A
  1. no country can produce all the products and services their people want + need.
  2. countries produce beyong their ability to consume
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35
Q

define importing

A

the purchase of goods + services from another country

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36
Q

define exporting

A

the sale of goods + services to another country

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37
Q

define the balance of trade

A

the relationship between importing and exporting

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38
Q

define a trade surplus

A

occurs when there’s a favourable balance of trade where exports are greater than imports

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39
Q

define a trade deficit

A

occurs when their is an unfavourable balance of trade where imports are greater than exports

40
Q

define free trade (theory)

A

where goods + services can be traded between countries without any political or economic obstruction (each country has a level playing field where they can trade in a mutually beneficial manner)

41
Q

what are the challenges to free trade?

A

not true free trade as some countries have more access to resources than other, giving them greater bargaining power. as well, each country wants to maximize revenues and protect their workers.

42
Q

Define comparative advantage

A

countries should export what they produce most effective + efficiently and import when they cannot.

43
Q

define a free market economy

A

where the market determines what goods + services to produce and who gets them without any government intervention.

44
Q

how is the theory of comparative thwarted by?

A

trade barriers set by governments to protect domestic businesses and industries which add on costs to imports in order to inhibit the free trade and flow of goods.

45
Q

what’s NAFTA

A

north American free trade agreement - created a free-trade area between Canada, Mexico, + US

46
Q

what’s the aim of NAFTA?

A

allows all 3 countries to reduce trade barriers with one another while being able to maintain independent trade agreements with other countries

47
Q

what are the advantages + disadvantages of NAFTA?

A

promoted fair competition, worked to improve working conditions in north america,

contributes to employment losses and that economic benefits weren’t realized.

48
Q

what’s the CUSMA?

A

Canadian-United States - Mexico Agreement (2021)

49
Q

how much CETA decrease in tarrifs

A

98%

50
Q

what’s CETA

A

Canada-European Comprehensive Economic Trade Agreement

51
Q

what did CETA do for consumers in Canada

A

made European items cheaper in the Canadian marketplace

52
Q

What did CETA do for Canadian Businesses

A

concern for Canada’s dairy producers that they may not be able to compete against the larger dairy market in Europe.

Canadian government has provided financial support to these industries to help them improve productivity to compete and thrive in a more global business environment amidst these changes.

53
Q

Why are negotiation for progressive free trade agreements challenging for countries?

A

countries put up barriers to protect domestoc workers and key domestic industries

54
Q

define trade protectionism

A

limits the import of goods + services through the use of government regulations

55
Q

advantages + disadvantages of trade protectionism

A

advocates say it allows domestic producers to survive and grow

opponents say that it inhibits free trade which decrease market competitiveness and innovation

56
Q

define tariff

A

taxes on imports –> makes imported goods more expensive

57
Q

define import quota and it’s importance in the market

A

limit on the quantity of products that a country imports

allows for domestic production tot take place and be competitive + allows more products to be imported to meet the needs of the people and provide more options

58
Q

define embargo

A

a ban on the import or export of specific products. can lead to stopping all trade with a particular country.

59
Q

define non-tariff barriers

A

regulations that hinder trade eg. restrictive standards that detail how a product must be sold in a country.

60
Q

what regulatory trade barriers does Canada have?

A

health + safety standards, labelling standards.

61
Q

what are the benefits of going international with your firm?

A

expanding your customer base + additional profit potential

62
Q

how do Canadian companies export

A

by selling directly to foreign customers or indirectly through an intermediary such as a foreign distributor

63
Q

how can small businesses have an advantage in global markets

A

small businesses can react faster to changes in the market place to meet the needs of their customers + can provide more tailored + customized attention

64
Q

Name 1 characteristic of a multinational corporation

A

manufacture + market their products in many different countries where they also have physical presence.

65
Q

how do canadian companies import?

A

by directly purchasing from foreign suppliers or indirectly through an intermediary such as a foreign distributor

66
Q

do many companies operating in Canada import materials that are used in their businesses to produce their goods or services?

A

yes

67
Q

how are imports into Canada monitored?

A

Canada Border Services Agency (CBSA) to keep our country + Canada safe

68
Q

What are the strategies for reaching global markets (from least to most risky)

A
  1. licencing
  2. exporting
  3. franchising
  4. contract manufacturing
  5. international join ventures + strategic alliances
  6. foreign direct investment
69
Q

what are some characteristics to strategies (entering the global markets) with less risk?

A

least control + profit potential since the amount of commitment is minimal

70
Q

what are some characteristics to strategies (entering the global markets) with more risk?

A

most control + profit potential

71
Q

Define licensing

A

when a domestic company (licensor) allows a foreign company (licensee) to make its product in exchange for a fee

72
Q

What fee is involved in licensing

A

usually a royalty which may be a percentage of profits

73
Q

what are the benefits to licensing

A
  1. have the ability to generate additional revenues
  2. costs to produce or promote your product in the foreign market are borne by the foreign licensee, which gives your product exposure to a new market with minimal additional investment
74
Q

what are some problems/cons to licensing

A
  1. having to grant licensing rights for your product for an extended period - if your product experiences remarkable growth in the foreign market, the licensee gets the profits, the licensor only get the royalties agreed upon within at licensing agreement
  2. there is a risk that you could lose your trade secrets if the foreign licensee copies your secrets + starts selling a competing product.
  3. it can be hard to control quality because you’re not directly involved in the foreign licensee’s business
75
Q

what’s a characteristic of exporting to a global market

A

requires more coordinator with respect to shipping, duties (taxes) and other regulations.

76
Q

what’s a benefit to exporting, in terms of a strategy for entering the global market

A

market potential is huge + the cost to the exporter is much lower than having a presence in that country

77
Q

what’s a challenge in exporting? in terms of entering the global market

A

identifying global customers when you don’t have a home base in other countries, especially in places where customers may prefer to work with local suppliers

78
Q

define franchising

A

where someone with a business concept (franchiser) sells the rights to use the business name + to sell its product or service to another party (franchisee)

79
Q

what’s a characteristic of franchising?

A

offer more control than licensing as a franchisor has the ability to dictate certain standards + processes as part of the franchise agreement

80
Q

what’s a benefit of franchising?

A

a franchisor can earn more revenue through franchise fees, start-up fees, + other consulting resources provided to franchises

81
Q

how can franchises be successful in other countries

A

franchisors have to be willing to adapt to the preferences of the countries they operate in

82
Q

Define contract manufacturing (outsourcing)

A

involves finding a foreign manufacturer to make your product and then have your own brand/trademark attached - they are your supplier + you retain ownership of the products made

83
Q

What are benefit to outsourcing

A

allows you to test drive in a new market in a cost-effective way - if the experiment is successful, you’ve already established a market for your product before incurring significant capital costs to set up your own production facilities. if it’s not successful, the contract relationship can end

helps with capacity challenges - businesses can meet excess/growing demand by outsourcing when domestic facilities are at capacity.

cost saving

84
Q

What’s a challenge to outsourcing

A

the need to develop + execute a marketing + promotions strategy to support sales

85
Q

what are the elements to consider when outsourcing

A
  1. quality control
    2 .public image
  2. expanded capabilities + access to talent
  3. employment standards
86
Q

which business activities should never be outsourced? why?

A

functions critical to the success of a company
1. core human resource function - employees = lifeblood + key to success of a company
2. core accounting finances - to ensure proper financial management + decision making

87
Q

Define a joint venture

A

where 2 or more companies form a partnership to take on a major project

88
Q

what are some benefits of a join venture

A
  1. shared resources
  2. shared expertise
  3. access to a market where foreign companies can’t operate unless goods are locally produced
89
Q

what are some drawbacks to joint venture?

A
  1. becoming too large to function efficiently
  2. trade secrets being exploited by the other party
90
Q

define a strategic alliance

A

where 2 or more companies form a long-term partnership to support each other in building competitive market advantages

91
Q

strategic alliance vs joint venture

A

no sharing of resources/costs/risks/management in strategic alliance

92
Q

Define a foreign subsidiary

A

a company located in another country owned by the parent company

93
Q

benefit of a foreign direct investmenet

A

most risky but most potentially profitable way to enter the global market

94
Q

define a foreign direct investment

A

when you purchase property or a business and operate in a foreign country

95
Q

what’s the relationship between a foreign direct investment and a foreign subsidiary

A

foreign direct investment typically becomes a foreign subsidiary

96
Q

things to consider for a foreign direct investment/foreign subsidiary

A
  1. you have to follow the legal + regulatory requirements of both the parent company (home country) and the foreign subsidiary (host country)
  2. should there be any political unrest or the host country falters, it leads to expropriation
97
Q

define expropriation

A

when your company’s assets could be taken over by the foreign government

98
Q

Why would local government encourage foreign investment

A
  1. can bring jobs to local community
  2. brings additional revenue to the local community
  3. can bring new knowledge + tech to the local community
99
Q

Why would critics argue against foreign investment

A

profits generated into these entities are not reinvested back into the Canadian economy, jobs in these organization are not always innovation and it may not make decision that are in the best interest of the local community.

100
Q

Who is Canada’s top trading partner

A

US

101
Q

Which global market characteristic is Canada looking to enter

A

large populations and a growing middle class

102
Q

what elements should industries + government consider to better set up their initiatives + policies to help their people succeed + their companies to compete and thrive on the global stage?

A
  1. political environment
  2. economic environment
  3. social environment
  4. technological environment

AFM 132 (12 decks)

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