Balance Sheet |
Attempts to describe the financial condition of the firm at a point in time. Includes: Assets, Liabilities, & Equity – "net assets" what remains after deducting liabilities from assets.. |
Income Statement |
Presents the results of the operations of an entity over a peroid of time. Includes: Revenues, Expenses, Income, Gains & Losses |
Statement of Equity or Statement of Retained Earnings (Capital) |
Bridges the gap between the income statement and the balance sheet. Arrangement depends on type of organization: Proprietorship: Statement of Owners Equity Partnership: Statement of Partners Equity Corporation: Statement of Stockholders Equity In addition, it contains: Investments by Owners and Distribution to owners |
Statement of Cash Flows |
Provides information about a company’s cash receipts and cash payments during a specific period of time. Includes all 10 elements of financial statements: assets, liabilities, equity, net income, income, gains, losses, Statement of ‘X’ Equity, Investments by Owners, Distributions to Owners. |
Cash Basis Accounting |
Revenue is recognized in the accounting period in which the associated cash is received and Expenses are recognized in the accounting period that the cash is paid. |
Accrual Basis Accounting |
Revenue is recognized in the accounting period in which the revenue is earned, regardless of when the associated revenue is received. (Recorded when the sale is made, not when it is paid for.) |
Depreciation |
A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes. |
Straight-Line Deprecation |
Straight Line Depreciation – (estimated value/useful life) Equal amounts of depreciation expense are recorded in each period of the useful life of the asset, if not disposed of prior to the end of estimated useful life. The value is divided among estimated life of item. |
Double Declining Balance Depreciation |
Double Declining Balance An "accelerated" depreciation method (more expense is recorded in the early periods of useful life and less in the later periods.) |
Basic Inventory Equation for Goods |
Beginning Inventory + Purchases = Goods |
Basic Inventory Equation for Cost of Goods Sold (COGS) |
Goods Available for Sale – Ending Inventory = Cost of Goods Sold (COGS) |
Basic Inventory Equation for Ending Inventory |
Beginning Inventory + Purchases = Goods Available for Sale – Cost of Goods Sold (COGS) = ending inventory |
Periodic Inventory Accounting |
No transactions are recorded in the inventory account until the end of the accounting period. Merchandise purchases are recorded in a purchases account. Inventory is counted and costed at the end of each accounting period. The inventory account beginning balance is adjusted to physical inventory amount and the difference is added to or subtracted from periodic Cost of Goods Sold. |
Perpetual Inventory Accounting |
Merchandise purchases are added to the inventory account when the merchandise is received. Cost of Goods Sold is computed and subtracted from the inventory account as sales are recorded. |
FIFO (Inventory) |
Inventory Oldest items inventory are sold first .(Example: Fruit) |
LIFO (Inventory) |
Most recent items added to inventory are sold first. (Example: Ore from Mining) |
Average Cost (Inventory) |
Ending inventory units are costed using an average cost of goods available divided by the units available for sale. (Example: Rope) |
Specific Identification (Inventory) |
Inventory items are tagged with their cost. (Example: automobiles) |
Generally Accepted Accounting Principles (GAAP) |
A framework of accounting standards, rules and procedures defined by the professional accounting industry, which has been adopted by nearly all publicly traded U.S. companies. |
Securities Act of 1935 |
Established the SEC Securities and Exchange Commission with the explicit authority to establish the rules, standards, and procedures used to account for transactions and events. Also to establish the form and content of published financial reporting. |
Management Accounting |
Concerned with identification, measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used my management to plan and evaluate and control within an organization to assure appropriate use of and accountability of resources. |
Cost Accounting |
Concerned only with the cost of a product or service. |
Product Costs |
Cost of the various products manufactured and sold by a company. (Examples: Inventory Costs or Cost of Prodcution |
Period Cost |
ll costs incurred by a company that are not considered product costs. (Examples: Administration Expenses or Selling Expenses) |
Direct Costs |
A cost that is easily traceable to the cost object and is a result solely of the cost object. (Example: Lye used to make bars of soap.) |
Indirect Cost |
A cost that supports more than one cost objects, and must be "allocated" to those various cost objects (Example: Electricity used at a plant.) |
Direct Material |
Cost of materials used in production. (Examples: sheet metal, tires, fabric, etc.) |
Direct Labor |
Cost of Labor used in production. (Example: assembly line workers) |
Manufacturing Overhead |
Indirect factory-related costs that are incurred when a product is manufactured. (Examples: facility costs, indirect labor, machine set up costs, quality control, etc.) |
Variable Costs |
Expenses that vary directly with changes in activity or changes in volume. |
Fixed Cost |
Expenses that do not change as a function of the activity of a business, within the relevant period. (Examples: Rent, Utilities, etc.) |
Adam Smith |
Father of Economics Responsible for Division of Labor 1776: Tasks are subdivided into individual jobs Employees perform only the tasks relevant to their specialized function Jobs tend to be small, but they can be performed efficiently Proposes that production can be increased by dividing labor on to similar tasks |
Frederick Winslow Taylor |
Scientific Management 1911: Developed standard method for performing each job Selected workers with appropriate abilities for each job. Trained workers in standard method. Provided wage incentives to workers for increased output. Did not acknowledge variance among workers. Did not appreciate social context of work and higher needs of workers. |
Max Weber |
Bureaucracy: Focused on the organization as a whole Organizations needed division of labor with clear definitions of authority and responsibility. Positions organized in a hierarchy of authority. |
Henri Favol |
Developed the 14 General Principles of Management |
14 General Principles of Management |
Division of Labor, Authority, Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interests to the General Interest, Remuneration, Centralization, Scalar Chain, Order, Equity, Stability of Tenure of Personnel, Initiative, and Esprit de Corps |
Division of Labor or Work (Management) |
When employees are specialized, output can increase because they become increasingly skilled and efficient. |
Authority (Management) |
Managers must have the authority to give orders, but they must also keep in mind that with authority comes responsibility. |
Discipline (Management) |
Discipline must be upheld in organizations, but methods for doing so can vary. |
Unity of Command (Management) |
Employees should have only one direct supervisor. |
Unity of Direction (Management) |
Teams with the same objective should be working under the direction of one manager, using one plan. This will ensure that action is properly coordinated. |
Subordination of Individual Interests to the General Interest (Management) |
he interests of one employee should not be allowed to become more important than those of the group. This includes managers. |
Remuneration (Management) |
Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial compensation. |
Centralization (Management) |
Centralization – This principle refers to how close employees are to the decision-making process. It is important to aim for an appropriate balance. |
Scalar Chain (Management) |
Employees should be aware of where they stand in the organization’s hierarchy, or chain of command. |
Order (Management) |
The workplace facilities must be clean, tidy and safe for employees. Everything should have its place. |
Equity (Management) |
Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness where appropriate. |
Stability of Tenure of Personnel (Management) |
Managers should strive to minimize employee turnover. Personnel planning should be a priority. |
Initiative (Management) |
Employees should be given the necessary level of freedom to create and carry out plans. |
Esprit de Corps (Management) |
Organizations should strive to promote team spirit and unity. |
Abraham Maslow |
Hierarchy of Needs: Proposes that individuals have a hiearchy of needs that need to be fulfilled in order. The hierarchy includes: physiological needs, safety, belongingness, esteem, and self-actualization |
Maslow’s Hierarchy of Needs: |
Physiological needs, Safety, Belongingness, Esteem, and Self-actualization |
Douglas McGregor |
Proposed Theory X and Theory Y view of management. |
Theory X of Management |
Employees dislike work and must be threatened with punishment. |
Theory Y of Management |
Employees like work, self-direction and seek responsibility and have creativity. |
Dr. William Ouchi |
Proposed Theory Z view of management; a so-called "Japanese Management" style popularized during the Asian economic boom of the 1980’s. |
Theory Z of Management |
Focused on increasing employee loyalty to the company by providing a job for life with a strong focus on the well-being of the employee, both on and off the job. |
Tuckman’s Stages of Team Development |
The process of (1) Forming – orientation break the ice, (2) Storming – marked by conflict disagreement, (3) Norming – establishment of order and cohesion, (4) Performing – marked by cooperation and problem solving. |
Expectancy Theory of Motivation |
Effort will lead to increased performance and that performance will lead to some expected outcome (bonus, promotion, etc.) the greater my motivation will be. |
Equity Theory of Motivation |
Effort and rewards is affected by perception of others in the organization…when receiving rewards, it does not appear equitable, motivation drops. (based on perceived value of rewards) |
Transactional Leadership |
Leadership is a transaction or exchange process between leaders and followers. Could mean more work for more pay or more work for additional time off. |
Transformational Leadership |
Characterized by the ability to bring about significant change in followers and the organization. |
Great Man Approach |
Leadership perspective that sought to identify the inherited traits leaders possessed that distinguished them from people who were not leaders. |
Leader Member Exchange |
Belief that leadership is individualized for each subordinate. Each dyad involves a unique exchange independent of other dyads. Puts employees into either in-group or out-group categories. |
In-Group |
A group in which a manager, often subconsciously, classifies team members as proven to be loyal, trustworthy, and skilled. Managers give this group most of their attention, providing challenging and interesting work, and offering opportunities for additional training and advancement. This group also gets more one-to-one time with the manager. Often, people in this group have a similar personality and work-ethic to their manager. (Theory Y) |
Out-Group |
A group in which a manager, often subconsciously, classifies team members as either untrustworthy, unmotivated, or incompetent. This group’s work is often restricted and unchallenging. Group members tend to have less access to the manager, and often don’t receive opportunities for growth or advancement. (Theory X) |
Fiedler’s Contingency Model |
Model designed to diagnose weather a leader is task-oriented or relationship-oriented and match leader style to the situation |
Path-Goal Theory |
Contingency approach to leadership on which the leaders responsibility is to increase subordinates motivation by clarifying the behaviors necessary for task accomplishment and rewards. |
Vision |
A picture of a ambitious, desirable future for the organization or team |
Locus of Control |
Defines whether a person places the primary responsibility for what happens to him or her within himself/herself or on outside forces. |
Authoritarianism |
The belief that power and status differences should exist in an organization. |
Interdependence |
The extent to which team members depend on each other for information, resources, or ideas to accomplish their tasks. |
Corporate Culture |
The set of key values, assumptions, understandings, and norms that is shared by members of an organization and taught to new members as correct. |
Mission |
An organizations reason for existing. |
Mission Statement |
Broadly states the basic scope and operations that distinguishes it from similar types of organizations. |
Goal |
A desired future that the organization attempts to realize. |
Plan |
A blueprint specifying the resource allocations, schedules, and other actions, necessary for attaining goals. |
Planning |
Determining the organizations goals and the means for achieving them the most fundamental management function; the most controversial management function. |
Strategic Management |
Set of decisions and actions used to implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals. |
Emotional Intelligence |
Ability to perceive and express emotion, assimilate emotion in thought, understand and reason with emotion, and regulate emotion in oneself and others. |
Virtual Team |
A team made up of geographically or organizationally dispersed members who share a common purpose and are linked primarily through advanced information technologies. |
Individualism |
Extent that people value independence and person uniqueness. Individualists tend to value personal freedom, self-sufficiency, control over themselves, being appreciated for unique qualities. |
Collectivism |
Extent that people value duty to groups to which they belong, and value group harmony. Collectivists tend to identify themselves by group membership and value harmonious relationships with their members. |
Power Distance |
Extent that people accept unequal distribution of power in a society. |
Attribution Theory |
Making inferences about the causes of an individuals behavior. Examples: Internal-failure due to self motivation External- failure due mailly to factors beyond control: luck, resources |
Fundamental Attribution Error |
Attributing own actions to external factors and others actions to internal factors. |
Self Serving Bias |
Attributing our successes to internal factors and our failures to external factors. |
Ethics |
Principals and standards that guide behavior within the business community. Ethical or unethical behavior is often determined by the organizations stakeholders. |
Primary Stakeholders |
Those whose continued association is absolutely necessary for a firms survival. Employees, customers, investors, government, etc. |
Secondary Stakeholders |
Do not typically engage in transactions with a company and thus are not essential for its survival. Media, trade associations, special interest groups, community |
Conflict of interest |
Exists when an individual must choose whether to advance his or her own interests, those of the organization, or those of some other group. |
Corporate Governance |
A general term relating to a formal system of accountability, oversight, and control to limit unethical behavior in corporations. |
Federal Sentencing Guidelines for Organizations |
Passed by congress in 1991 focused on guidelines for organizations; Exempts organizations from extreme penalties based the unethical actions of individual employees. |
Fraud |
Any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. |
Moral Philosophy |
Refers in particular to the principles or rules that people use to decide what is right or wrong. |
Sarbanes Oxley Act |
Public Company Accounting Reform and Investor Protection Act Adopted by congress in 2002 to address the loss of corporate regulations necessary to protect the public. Also to addresses the loss in confidence in financial reporting and corporate ethics. |
Dodd-Frank Act |
Wall Street Reform and Consumer Protection Act Adopted by congress in 2010 to address financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes. |
Social Responsibility |
Refers to an organizations obligation to maximize its positive impact on stakeholders and to minimize its negative impact. |
Whistle-Blowing |
Exposing an employer’s wrongdoing to individuals outside the organization/company. Thee outsiders may be the media or government regulators. |
Teleology |
A general or moral philosophy which states that acts are morally right or acceptable if they produce some desired result, such as realization of self interest or unity. (egoism (good for oneself) or utilitarianism (good for the group)) |
Deontology |
Focuses on the preservation of individual rights and on the intentions associated with a particular behavior rather than on its consequences. |
Relativist |
Takes cultural norms into consideration and therefore there can be no absolute right or wrong. |
Virtue Ethics |
Assumes that what is moral in a given situation is not only what conventional morality requires, but also what the mature person with a good moral character would deem appropriate. Immanuel Kant argued that there are some things that ought to be done, and others that ought not to be done merely by virtue of being rational. |
Business Finance: The goal of the firm? |
In finance, the commonly accepted goal of profit maximization is replaced with the more complete goal of the maximization of shareholder wealth. |
Current Ratio |
Measures whether or not a firm has enough resources to pay its debts over the next 12 months. (Liquidity Ratio) _____ = Current Assets/Current Liabilies |
Quick Ratio (Acid Test Ratio) |
Gauges a company’s liquidity. (Liquidity Ratio) _____ = (Cash + Marketable Securities + Accounts receivable) / Current Liabilities |
Cash Ratio |
Measures the ability of a company to pay its current liabilities using cash and marketable securities. Marketable securities are short-term debt instruments that are as good as cash. (Liquidity Ratio) _____ = ( Cash + Marketable Securities ) / Current Liabilities |
Net Working Capital |
Determines if a company can meet its current obligations with its current assets; and how much excess or deficiency there is. (Liquidity Ratio) _____ = Current Assets – Current Liabilities |
Gross Profit Rate |
Evaluates how much gross profit is generated from sales. Gross profit is equal to net sales (sales minus sales returns, discounts, and allowances) minus cost of sales. (Profitability Ratio) _____ = Gross Profit / Net Sales |
Return on Sales |
Also known as "net profit margin" or "net profit rate", it measures the percentage of income derived from dollar sales. Generally, the higher the ROS the better. (Profitability Ratio) _____ = Net Income / Net Sales |
Return on Assets |
Measures return on investment and is used in evaluating management’s efficiency in using assets to generate income. (Profitability Ratio) _____ = Net Income / Average Total Assets |
Return on Stockholders’ Equity |
Measures the percentage of income derived for every dollar of owners’ equity. (Profitability Ratio) _____ = Net Income / Average Stockholders’ Equity |
Receivable Turnover |
Measures the efficiency of extending credit and collecting the same. It indicates the average number of times in a year a company collects its open accounts. A high ratio implies efficient credit and collection process. (Operating/Efficiency Ratio) _____ = Net Credit Sales / Average Accounts Receivable |
Days Sales Outstanding (Receivable Turnover in Days) |
Measures the average number of days it takes a company to collect a receivable. The SHORTER the number of days, the better. Take note that some use 365 days instead of 360. (Operating/Efficiency Ratio) _____ = 360 Days / Receivable Turnover |
Inventory Turnover |
Represents the number of times inventory is sold and replaced. Take note that some authors use Sales in lieu of Cost of Sales in the above formula. A high ratio indicates that the company is efficient in managing its inventories. (Operating/Efficiency Ratio) _____ = = Cost of Sales / Average Inventory |
Days Inventory Outstanding (Inventory Turnover in Days) |
Represents the number of days inventory sits in the warehouse. In other words, it measures the number of days from purchase of inventory to the sale of the same. The SHORTER the number of days, the better. Take note that some use 365 days instead of 360. (Operating/Efficiency Ratio) _____ = 360 Days / Inventory Turnover |
Accounts Payable Turnover |
Represents the number of times a company pays its accounts payable during a period. A low ratio is favored because it is better to delay payments as much as possible so that the money can be used for more productive purposes. (Operating/Efficiency Ratio) _____ = Net Credit Purchases / Ave. Accounts Payable |
Days Payable Outstanding (Accounts Payable Turnover in Days or Payment Period) |
Measures the average number of days spent before paying obligations to suppliers. The LONGER the number of days, the better. Take note that some use 365 days instead of 360. (Operating/Efficiency Ratio) _____ = 360 Days / Accounts Payable Turnover |
Operating Cycle |
Measures the number of days a company makes 1 complete cycle; i.e. purchase merchandise, sell them, and collect the amount due. A shorter cycle means that the company generates sales and collects cash faster. (Operating/Efficiency Ratio) _____ = Days Inventory Outstanding + Days Sales Outstanding |
Cash Conversion Cycle |
Measures how fast a company converts cash into more cash. It represents the number of days a company pays for purchases, sells them, and collects the amount due. The SHORTER the number of cycle, the better. (Operating/Efficiency Ratio) _____ = Net Sales / Average Total Assets |
Total Asset Turnover |
Measures overall efficiency of a company in generating sales using its assets. The formula is similar to ROA, except that net sales is used instead of net income. (Operating/Efficiency Ratio) _____ = Net Sales / Average Total Assets |
Debt Ratio |
Measures the portion of company assets that is financed by debt (obligations to third parties). Debt ratio can also be computed using the formula: 1 minus Equity Ratio. (Leverage Ratio) _____ = Total Liabilities / Total Assets |
Equity Ratio |
Determines the portion of total assets provided by equity (i.e. owners’ contributions and the company’s accumulated profits). Equity ratio can also be computed using the formula: 1 minus Debt Ratio. (Leverage Ratio) _____ = Total Equity / Total Assets |
Equity Multiplier |
The reciprocal of equity ratio. (Leverage Ratio) _____ = Total Assets / Total Equity. |
Debt-Equity Ratio |
Evaluates the capital structure of a company. A ratio of more than 1 implies that the company is a leveraged firm; less than 1 implies that it is a conservative one. (Leverage Ratio) _____ = Total Liabilities / Total Equity |
Times Interest Earned |
Measures the number of times interest expense is converted to income, and if the company can pay its interest expense using the profits generated. EBIT is earnings before interest and taxes. (Leverage Ratio) _____ = EBIT / Interest Expense |
Earnings per Share |
Shows the rate of earnings per share of common stock. Preferred dividends is deducted from net income to get the earnings available to common stockholders.(Valuation and Growth Ratio) _____ = ( Net Income – Preferred Dividends ) / Average Common Shares Outstanding |
Price-Earnings Ratio |
Used to evaluate if a stock is over- or under-priced. A relatively low ratio could indicate that the company is under-priced. Conversely, investors expect high growth rate from companies with high ratio.(Valuation and Growth Ratio) _____ = Market Price per Share / Earnings per Share |
Dividend Pay-out Ratio |
Determines the portion of net income that is distributed to owners. Not all income is distributed since a significant portion is retained for the next year’s operations. (Valuation and Growth Ratio) _____ = Dividend per Share / Earnings per Share |
Dividend Yield Ratio |
Measures the percentage of return through dividends when compared to the price paid for the stock. A high yield is attractive to investors who are after dividends rather than long-term capital appreciation. (Valuation and Growth Ratio) _____ = Dividend per Share / Market Price per Share |
Book Value per Share |
Indicates the value of stock based on historical cost. The value of common shareholders’ equity in the books of the company is divided by the average common shares outstanding. (Valuation and Growth Ratio) _____ = Common SHE / Average Common Shares |
Time Value of Money |
A dollar received today is worth more than a dollar received in the future. |
Annuity |
A series of equal dollar payments that continue for a specific number of years. |
Ordinary Annuity |
A series of equal dollar payments that occur at end of each period. |
Annuity Due |
A series of equal dollar payments that occur at the beginning of each period. |
Perpetuity |
An annuity that continues forever. |
Law |
A rule of conduct or action prescribed or formally recognized as binding or enforced by a court of law or other agency. |
Stare Decisis |
The doctrine under which courts adhere to precedent on questions of law in order to insure certainty, consistency, and stability in the administration of justice with departure from precedent permitted for compelling reasons (adhere to a precedent). |
English Common Law |
The system from which the US Court system developed. |
Constitution |
The supreme law of the United States |
Branches of the Federal Government |
Includes an Executive, Legislative, and Judicial divisions. |
Treaties |
Compacts or agreements made between our nation and other nations of the world. |
Statutes |
Written laws enacted by the legislative branch of either the federal or state governments. |
Ordinances |
These are laws of local government bodies |
Executive Orders |
Orders issued by the president in order to enforce the law. |
Judicial Decisions |
Decisions about an individual lawsuit by federal or state courts. |
Administrative Law |
Consists of the rules,orders, and decisions of administrative agencies. These agencies are often given rule making, investigation, and enforcement powers. |
Criminal Law and Civil Law |
What are the two types of law? |
Criminal Law |
A system of law concerned with the punishment of those who commit crimes; implies that perpetrators of crimes are subject to imprisonment. |
Civil Law |
The the system of law concerned with private relations between members of a community rather than criminal, military, or religious affairs. Typically involves either money damages or changes in a person’s status or behavior. |
Two divisions of criminal law |
Includes: Felonies (punishment over a year) and Misdemeanors (punishment under a year) |
Tort |
A civil wrong committed against a individual. (negligence, malpractice, etc.) |
Contract |
An agreement between two or more persons to do, or to refrain from doing something in exchange for something of value. |
Key Elements of a Binding Contract |
Competent Parties (not drugged, mentally impared, etc.), excludes Minors (must be 18), Consideration (each side must contribute something of value), and Mutual Assent (each side must be clear – write it down). |
Uniform Commercial Code (UCC) |
One uniform act that has been promulgated in attempts to harmonize the law of sales and other commercial transactions in all 50 states. It covers things such as sale of goods, credit, and bank transactions. All states have adopted the entire UCC except Louisiana that only adopted parts of it. |
Forward Integration |
A vertical integration strategy that involves entry into value chain system activities closer to the end user (distribution chain focused). |
Backward Integration |
A vertical integration strategy that involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system (supply chain focused). |
Horizontal Integration |
A strategy in which a company acquires or merges in order to gain with additional business activities at the same level of the value chain (same level of production across multiple industries). |
Vertical Integration |
A strategy in which a company performs value chain activities along more than one stage of an industry’s value chain system (different stages of production and/or distribution in the same industry). |
Market Penetration |
A strategy adopted by companies for new and existing products to attract larger number of buyers and a larger market share. |
Market Development |
A strategy in which company focuses on expanding the potential market through new users or new uses. |
Product Development |
The process of designing, creating and marketing new products or services to benefit customers. |
Concentric Diversification |
A type of diversification strategy in which a company acquires or develops new products or services, closely related to its core business or technology in order to enter one or more new markets. |
Conglomerate Diversification |
A type of diversification strategy in which a company acquires or merges in order one or more new markets that are completely separate from the company’s core business or technology. |
Horizontal Diversification |
Type of diversification under which a firm develops or acquires new products that are different from its core business or technology, but which may appeal to its current customers. |
Joint Venture |
A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. |
Retrenchment |
A strategy used to cut expenses with the goal of becoming a more financial stable business by reducing the diversity or the overall size of the operations of the company. |
Divestiture |
The partial or full disposal of a business unit through sale, exchange, closure or bankruptcy; typically resulting from a management decision to no longer operate a business unit because it is not part of a core competency. |
Liquidation |
When a company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims because said company can no longer pay its obligations. |
Bankruptcy |
Legal procedure for liquidating a business which cannot fully pay its debts out of its current assets. |
(1) people face trade-offs; (2) the cost of something is what you give up to get it; (3) rational people think at the margin; and (4) people respond to incentives. |
The Principles of Economic Decision Making assume that: |
(1) trade can make everyone better off; (2) markets are usually a good way to organize economic activity; and (3) governments can sometimes improve market outcomes. |
The Principles Concerning People’s Economic Interactions assume that: |
(1) Convenience products, (2) Shopping products, (3) Specialty products, (4) Unsought products |
The types of Consumer Products include _____. |
Convenience products |
Relatively inexpensive products that merit little shopping effort. Examples are soft drinks, aspirin, deodorant and snack food. |
Shopping products |
Products that require comparative shopping behavior because it is usually more expensive than a convenience product and is found in fewer stores. Examples are major appliances, furniture and clothing. |
Specialty products |
Particular products for which consumers search extensively and are reluctant to accept product substitutes. Examples are particular brands of perfumes, Steinway pianos and Rolls-Royce cars. |
Unsought products |
Products unknown to the potential buyer or a known product that the buyer does not actively seek. Examples are a product that is brand-new to the market and products like encyclopedias, burial plots and insurance policies that young consumers do not actively seek and buy. |
Safety |
McNeil Consumer Healthcare ran ads for its Tylenol brand pain reliever that claimed it was "least likely to interact with your prescription medicines." In terms of Maslow’s hierarchy of needs, the ad is most likely trying to show how it satisfies ________ needs. |
Marketing |
The management process through which goods and services move from concept to the customer. |
(1) Product, (2) Place, (3) Price, and (4) Promotion |
The 4 P’s of Marketing include: |
temporal discrepancies. |
By having Valentine’s Day candy on the store shelves four weeks before February 14th and not in July when customers are not buying it, a distributor overcomes: |
Pulsing |
Beatrice Foods, the maker of Reddi-Wip topping, spends almost 40 percent of its entire advertising budget during November and December. Its advertising budget is spent evenly over the next 10 months. Beatrice is using what kind of a media schedule? |
elastic |
When baking cookies, Monique can use real butter, margarine, vegetable oil, or shortening and create basically the same cookie. From this information, you know that demand for vegetable oil for baking is most likely _____. |
Sustainability |
_____ refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs. |
a series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco and numerous others. |
The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to: |
board of directors |
A company’s _____ is (are) potentially the most effective instrument of good corporate governance. |
Public Company Accounting Oversight Board (PCAOB) |
In the US, the _____ has been given the power to adopt auditing, quality control, ethics, and disclosure standards for public companies and their auditors as well as investigate and discipline those involved. |
accounting; financial management |
The controller’s _____ responsibilities are primarily in nature, while the treasurer’s responsibilities are primarily related to _____ . |
investment, financing, and asset management |
The decision function of financial management can be broken down into the _____ decisions. |
the creation of value for shareholders. |
The focal point of financial management in a firm is: |
individuals buying and selling the stock. |
The market price of a share of common stock is determined by: |
shareholder; manager |
A(n) _____ would be an example of a principal, while a(n) _____ would be an example of an agent. |
maximize the value of the firm’s common stock. |
The long-run objective of financial management is to: |
the market price per share of the firm’s common stock. |
"Shareholder wealth" in a firm is represented by: |
secondary data usually cost less. |
In marketing research, a firm might consider using secondary data over primary data because |
enforcement of internal policies |
In organizational decision making, managers are able to exercise the greatest degree of discretion in the |
proof of breach of a statutory or |
A tort of negligence of requires: |
Major Field Test Business Study Set
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