Intro to Business notes
Intro to Business notes BA101
Popular in Intro to Business
verified elite notetaker
Popular in Business
This 32 page Bundle was uploaded by Olivia Andrus on Monday February 9, 2015. The Bundle belongs to BA101 at University of Oregon taught by Doug Wilson in Fall. Since its upload, it has received 31 views. For similar materials see Intro to Business in Business at University of Oregon.
Reviews for Intro to Business notes
No all-nighter needed with these notes...Thank you!!!
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/09/15
Intro to Business 1112 Olivia s Notes Intro to Business Notes quotUnits Soldquot is constant To increase margin increase price or decrease unit cost A Change in position cuts age in 112 You can change position by altering performance or size but changing MTBF does not change age Promotion builds awareness Lose 33 awareness each year 0 Once reach 100 awareness must invest 1400000 to maintain Sales Budget builds accessibility Lose 33 accessibility each year 0 Once reach 100 accessibility must invest 1650000 to maintain Automation 0 Each level costs 4 per unit of capacity Decreases labor cost by 112 for every unit of automation Capac y 0 Additional inventory costs 6 per unit 0 Can t leave just empty space must add machinery 4 per unit of new capacity Total Quality Management 0 Spend between 250000 and 1 million each year 0 Do not exceed 2 million in any single category over the life of the expenence 1st year 750000 2ncl year 750000 3rd year 500000 Equations Debt to Total Assets Ratio Total Debt Total Assets Quick or Acid Ratio Current Assets Inventories Current Liabilities Current Ratio Current Assets Current Liabilities Asset Turnover Sales Total Assets Return on Assets ROA Net Income Total Assets Return on Sales ROS Net Income Sales Return on Equity ROE Net Income Owner s Equity Leverage Total Assets Total Owner s Equity Book Value of Stock Owner s Equity of shares outstanding Earnings per Share Net Income of shares outstanding Yield Dividend Dividend per share Price per share Market Capitalization Shares outstanding x Current Price per Share Price Earnings PE CloseEPS Cost of Goods Sold Unit Cost Units Sold Revenue Price Units Sold Contribution Margin Revenue COGS Assets Liabilities Owner s Equity Pro t Revenue Expense Net Margin EBIT Contribution Margin Total Period Costs Sales Forecast 1 December Customer Survey your DCS score all DCS scores added including your own Multiply that by Growth Rate 11 for Low Tech 12 for High Tech Do for both Low and High Tech and add them together 2 Potential Market Share 0 Total Industry Unit Demand x Growth Rate 11 Low 12 High 0 Multiply that by the Potential Market Share 0 Do for both Low and High Tech and add them together 3 Actual Market Share 0 Total Industry Unit Demand x Growth Rate 11 Low 12 High 0 Multiply that by the Actual Market Share 0 Do for both Low and High Tech and add them together 4 Market Growth 0 Units sold in Low Tech x 11 Units sold in High Tech x 12 Marketing Marketing Activities designed to expedite transactions by creating distributing pricing and promoting goods services and ideas Marketing Mix includes Products and Services Price Promotion Pace or Distribution Channel Service how an organization can differentiate itself from similar products Market Research the systematic gathering recording and analyzing of data about problems relating to marketing goods and services Primary Research the collection of original data direct mail telephoneonstreet surveys Secondary Research collecting published information then applying the info to apply to a problem of yours surveys books magazines published information Target Marketing Geographic Focusing on needs of customers in a particular area Demographic Focusing on attributes of the market based on gender age income education Psychographic Promoting to groups of people based on lifestyle and behaviors Law of Diminishing Return adding additional investment beyond a certain threshold will not add proportional returns 0 Customer Survey Score Multiply Importance x Attractiveness Score Given 0 Promotion your message 0 Awareness the percent of market that received the message Lose 33 each year 0 Diminishing Returns decreased satisfaction with each additional unit Seller39s Market Actual sales are less than lt total industry demand Buyer39s Market Actual sales are equal to the industry demand 0 Awareness Built by promotion budget concerned with before the sale 0 New Awareness 0 Last year s awareness 1Last year s awareness2 Accessibility Built by sales budget concerned with duringafter sale Production is the conversion of inputs cash labor raw materials into outputs product Primary resources that rms use for the Production process include Human Resources Raw materials Capac y Sales Forecast Methods 1 December Customer Survey 0 your DCS score all DCS scores added including your own 0 Multiply that by Growth Rate 11 for Low Tech 12 for High Tech 0 Do for both Low and High Tech and add them together 2 Potential Market Share 0 Total Industry Unit Demand x Growth Rate 11 Low 12 High 0 Multiply that by the Potential Market Share 0 Do for both Low and High Tech and add them together 3 Actual Market Share 0 Total Industry Unit Demand x Growth Rate 11 Low 12 High 0 Multiply that by the Actual Market Share 0 Do for both Low and High Tech and add them together 4 Market Growth 0 Units sold in Low Tech x 11 Units sold in High Tech x 12 Production CushionInventory Management take best production estimate 3 sales forecast methods divide number by 11 and then multiply by 12 take half of that and add to best production estimate gives you 1 month quotcushionquot in terms of inventory Automation Each automation level reduces labor costs by 112 Costs 4 per unit of capacity for every level of automation capacity x 4 1 As automation goes up labor costs go down 2 As automation goes up RampD project times increase 3 Automation is expensive Capac y To expand factory costs 6 for every unit of capacity you wish to add Expanding factory is just giving you empty space you have to add machinery to ll that space 4 x per unit of capacity Contribution Margin Can be expressed 3 different ways 1 As a per unit dollar amount 0 Price COGS per unit 2 As a total dollar amount 0 Revenue COGS 3 As a percentage 0 CM per unit price 0 CM total revenue Total Quality Management Ways to Invest in TQM 1 Continuous Process Improvement Reduces material costs small extent labor 2 Vendor just in Time Inventory Reduces material costscarrying costs administrative costs 3 Quality Initiative Training Reduces labor costs 4 Channel Support Systems 0 More for your money Sales budget amp demand 5 Concurrent Engineering Reduces RampD cycle time 6 Benchmarking Reduces admin and inventory costs 7 Quality function deployment effort 0 Reduce cycle time for RampD Increase sales and promo effectiveness 8 6 Sigma concurrent engineering Reduces material and labor costs Increases marketing effectiveness Human Resources Compement CaHber Training 3 Aspects to Business ActivitiesAll show up on Balance Sheet Financing Where do you get money 0 Funds to start and grow a business Debtequityretained earnings nvesting What do you do with money Acquire assets stuff to run a business 0 Renting to others who earn higher return Operating Using the money you have o Create goods amp create transactions 0 Change goods into dollars at a pro t Daytoday short term If you have too much cash INVEST Short Term Investment 0 Accounts Receivable 0 Inventory 0 New Product Development Long Term Investment 0 Equipment automation Facilities additional capacity If you have too little cash 0 Borrow Take on Debt 0 Pay rent interest to use someone else s money 0 Dilute Ownership Sell Equity 0 Share the ownership of the company with more people investors reinvest owners income into the company Main difference Midterm 2 question Bank Loans 0 Make application Determines whether to make loan or not depending how risky the loan is Higher the risk the higher the interest rate DebtBorrowing Funds Borrow money from nancial institutions Banks Savings amp Loans Borrow money from the market Bonds Risk Rated by Standard amp Poor s or Moody s Return Degree of risk and interest rate Bond Series Series S Face The cash you received and how much you will have to pay back at maturity does not include interest Yield Bond interestTrading Price Close What it is trading for todayand what you would pay to retire early SampP Risk Rating AAA AAD Stock Value Book Value of Stock Owner s Equity of shares outstanding Earnings per Share Net Income of shares outstanding Yield Dividend Dividend per share Price per share Market Capitalization Shares outstanding x Current Price per Share how much is the entire company worth on the market It is as if every share were sold at the closing price Price Earnings PE CIoseEPS Securities Markets Primary Markets Firm sells new issues of security stock or bonds publicly for the rst time to investment bankers underwriters Secondary Markets Subsequent owners trade previously issues shares of stock and bonds NYSE Nasdaq London Jakarta Owner s Rights Stock Stock Owners share in risk and reward If you as an individual purchase stock 0 You give the previous owner money 0 You now own a piece of the company 0 You bene t when stock price goes up 0 You bene t when the company issues a dividend When a companyissues stock 0 The corporation receives money paidin capital as quotCommon Stockquot in exchange for ownership Types of Stock Stock allows for smooth transfer of ownership 1 Common Stock 0 Voting rights proxy 0 Residual claims to assets 2 Preferred Stock 0 No vote 0 First claim on incomepreferred dividend First claim on assets after debt Short term accounts recievable Inventory New product development Long term Equipment automation Facilities additional capacity Buy other companies not in foundation De nitions Accounts Payable Amount that you own to your suppliers for materials inventory that you purchased on credit Accounts Receivable Amount your customers owe because they purchased from you on credit Accumulated depreciation how much of the value of your plant and equipment you have used up while operating your business over time Administrative Law Regulations passed by state and federal administrative agencies Agency Acts on behalf of another in other s best interest Assets quotstuffquot economic resources that the company has use of and from which it can expect to derive future economic bene t Asset Turnover Measure of activity How good are you at using your equipment to turn cash into inventory and inventory into sales Automation a measure of how sophisticated the machinery used in the production process is Bankruptcy To give an honest debtor a quotfresh startquot in life by relieving the debtor of most debts and to repay creditors in an orderly manner to the extent that the debtor has property available for the payment Benchmarking method of evaluating performance by comparison with another company in a different industry Caliber the talent of the workforce Results in higher productivity and lower turnover Capacity the number of units you can produce running one shift You can produce more than your rst shift s capacity but every additional unit costs you 15 times your base wage Close What it is trading for today and what you would pay to retire early Common Stock Paidin capital This is value of what the owner s quotpaidinquot direct investment in the company corporation sale of stock Common Law Precedent LawThe law that judges establish while deciding disputes Complement the number of workers required to ll the production schedule without overtime Contribution Margin difference between the revenue and the cost of goods sold Current Assets asset that can will be converted to cash within a year Includes Cash Accounts Receivable Inventory Current Debt Loans to be paid back this year Current Liabilities Loans that have to be paid back within a year Includes Accounts Payable Current Debt Depreciation value that operating quotuses upquot the factory and equipment Earn Before Interest Tax Face The cash you received and how much you will have to pay back at maturity Revenues Variable Costs contribution margin period costsNet Margin Financing Funds to start and grow a business debtequityretained earnings Fixed Assets assets that have long term use or value land building equipment lncludes PropertyPlant Accumulated Depreciation lnterest Expense The rent you pay to use other people s wealthmoney lnventory the value of the products that has been acquired for sale to customers and is still on hand lnvesting Acquire assets to run a business and renting to others Labor costs cost of the labor for the products sold Liabilities these are loans or debt contracts Liabilities and Owner39s Equity Where the money came from to get the assets lt accounts for who has claims against the assets of the company Leverage measures the amount of debt versus the amount of equity owned in an asset It compares the amount you woe to the amount you own Markets any mechanism that facilitates the exchange of goods and services between buyers and sellers Market Capitalization How much is the company worth on the market Marketing Expense Money spent on advertising selling and distributing products Material costs cost of the materials in the products you sold Negotiable Instruments Tools that allow the commercial transfer of wealth Checks CDs good when endorsed Net Income aka Pro t Earnings Return Bottom Line Net Income Revenues variable Cost Period costs lnterest Taxes Owner39s Equity the value of the owners investments in the company Includes Common stockpaidin capital and Retained Earnings Operating Create goods and create transactions Change goods into dollars at a pro t Period Costs xed over a period of time Do not vary with activity Includes Depreciation RampD Marketing Expense Property plant and equipment The purchase price of the land buildings and equipment that you use to manufacture your products R amp D Money spent developing new productsimprove existing Retained Earnings The value of owner s pro ts that they choose to re invest in the company Return Degree of risk and interest rate Return on Assets ROA The more quotstuffquot you have the more wealth you should create Return on Equity ROE How much pro t did you create using the owner s investment Return on Sales ROS How much of your sales dollar is pro t Measures the ef ciency of operations Revenue Funds from the sale of product Either cash or onaccount Risk Rated by Standard amp Poor s SampP Risk Rating AAA AA A BBB BB B D Statutory Law written law Laws enacted by a federal or state legislature Taxes the tribute you pay to the government as a citizen of a society Total Current Assets these are the assets that you use to operate your businessan important part of working capital Total Current Liabilities What you have to pay back within this yeah Total Fixed Assets the net value of your property plant and equipment Total Liabilities and Owner39s Equity Always equal to Total Assets Liabilities and owners equity account for the money used to acquire the assets Total Owner39s Equity This is the owner s claim against the assets of the businessor value of owning the business Total Period Costs The costs of operating your business over a period of time Total Quality Management Increasing quality expectations through advanced production techniques Based on the work of W Edwards Deming Total Variable Costs the Cost of Goods Sold COGS Training The investment of time Better training leads to higher productivity and lower turnover but takes people off the job while they are in the classroom Uniform Commercial Code Seeks to harmonize the law of commercial transactions in all 50 states Addresses topics such as Warranties and Negotiable Instruments Variable costs More products you make the greater the total cost Includes Material and Labor Warranties 0 Express Speci cally de ned by the seller Implied Legally imposed on sellerdisclaimer Working Capital Includes Current Assets and Current Liabilities Yield Bond InterestTrading Price Foudation Statistics Low Tech Price 41 1535 Age 29 3 years Reliability 21 1400020000 Position 9 05 faster 05 smaller High Tech Position 33 07 faster 07 smaller Age 29 0 is the ideal Price 25 2545 Reliability 13 1700023000 Leverage Total Assets Total Owner s Equity Measures the amount of debt versus the amount of equity owned in an asset Another way of asking for measure of leverage quotHow much stuff did you gather using owner s investmentquot It compares the amount you owe to the amount you own The lower the score the less you owe Lower leverage less debt Having a leverage measure of 1 means they have no debt Return on Equity ROE Net Income Owner s Equity how much pro t did you create using the owner s investment quotWho created the most pro t with their owner s investmentquot Return on Sales ROS Net Income Sales How much of your sales dollar is pro t Measures ef ciency of operations quotWho made the most pro t as a percentage of salesquot Return on Assets ROA Net Income Total Assets The more quotstuffquot you have the more wealth you should create Asset Turnover Sales Total Assets A measure of activity How good are you at using your equipment to turn cash into inventory and inventory into sales quotWho created the most sales activity with the assets they hadquot Current Ratio Current Assets Current Liabilities The Higher this number is the lower risk you have Quick or Acid Ratio Current Assets Inventories Current Liabilities Use when inventory has no real market value Debt to Total Assets Ratio Total Debt Total Assets Another measure of leverage Law System 3 Types of Law Common Law Precident Statutory Law Written Administrative Law Trial Courts Fed US District State Circuit Superior Common Pleas Speci c State courts Probate or small claims Appellate Courts The dispute can be heard again if lower court errors Criminal Law A dispute between the government and an individual Punished by nes and or imprisonment Civil Law A dispute between two individuals Fine may be imposed Torts and Fraud A tort is a civil wrong in icted on other people or their property It s a form of negligence and includes all wrongs that are not a breach of contract Assault slander libel fraud Product Liability is an example of a tort 0 Fraud is a form of tort where someone quothurtsquot another by deception or manipulation Alternative Dispute Resolution 1 Arbitration 0 Binding or NonBinding 2 Mediation Nonbindingalways Types of Property Real Real estate and everything permanently attached to it Personal Everything else tangible and intangible lntellectual Property generated by a person s creative activities a Trademark Symbols used by rms to identify products 0 Patent Inventors get exclusive rights to inventions 17 years 0 Copyright Authors have exclusive rights to documents Elements of a Contract Legaity or Capacity Consideration Vountary Agreement CrossIndustry Agencies FTCFederal Trade Commission 0 False and deceptive advertising and promotion Consumer Product Safety CommissionCPSC Occupational Safety amp Health AdministrationOSHA Equal Opportunity CommissionEEOC Environmental Protection AgencyEPA Food and Drug AdminsitrationFDA lnterstate Commerce CommissionICC Federal Communications CommissionFCC Federal Energy Regulatory CommissionFERC Federal Aviation AdministrationFAA Federal Highway AdministrationFHA Securities and Exchange CommissionSEC BreakEven Advantages Quick assessment of potential for a business or a new product o It identi es a nite quottargetquot number in revenue andor units Disadvantages Breakeven assumes all products are sold and at the same price Breakeven does not specify a time frame Breakeven does not consider the net present value of money Net Present Value Compares the value of a dollar today to the value of that same dollar in the future Taking in ation and dollar returns into account 0 The difference between the present value of cash in ows and the present value of cash out ows Used to analyze the impact on rm value of an investment or project 0 The NPV analysis is sensitive to the reliability of future cash in ows that an investment will yield RISK If the NPV of a prospective project is positive it should be accepted o If NPV is negative the project should be rejected Business Entity Options 1 Sole Proprietorship Easy quick simple and affordable Full control with minimal administration Adaptable The Challenges Risk and personal exposure Credibility only as good as yours Raising additional capital Unlimited liablility 2 Partnership Voluntary association Unimited Liability Mutual Agency one bad apple Limited life Limited access to Partners keep control Relatively unregulated Single taxation 0 General Partnerships 0 Mutual Agency 0 Unlimited liability 0 Share riskwealth equally Limited Partnerships o No mutual agency 0 No provision for limited liability 0 Do not share the riskwealth equally 3 Corporation Separate legal entity Limited liability Limited stockholder power Unimited life Easy access to capital Stockholders may lose control Government Regulation Double Taxation 0 Domestic Corporations Operate in state in which it is incorporated 0 Foreign Corporations Operate in states other than their state of incorporation Alien Corporations Are organized in one country and operate in another 0 S Corporations 0 Limited liability Single taxation Unlimited life Restrictions Number Type of shareholders 000 Limited Liability Companies Limited Liability like a corporation Taxed like partnership Not limited to number of shareholders Restrictions 0 Type of Shareholders o If you invest more that 12M in your closing cash position and are NOT planning to make signi cant investments in a new product capacity or automation you may consider Paying dividends 501 152 Retiring stock Max Retiring Long Term debt Paying off debt Go to quotProformasquot or quotRatio39squot to check you projected stock price with each decision option Sales Forcasting Help tutorials demos Slides from Sales forcasting techniques Class 5 October 13th chcker 2 D 3 D My inventory number gives me a quotcountquot of The quotleft overquot or remaining products that I have available to sell next year 6 A stock out 9 B 10 A plant improvements 11 C Purchase stock 12 E Issue bonds long term debt brings cash in 13 B 14 E Cash Flow Statement Survey Had to take an emergency loan Look at 0 at bottom and the biggest amount of money Changes for round 4 70 130 20000 3349 1400 2200 0 lower price 1 every year Low Tech Demand for last year 6708 The growth rate is going to be 13 6708 x 113 7580 High Tech Demand Last Year 3732 The growth rate is going to be 24 3732 x 24 4628 DCS low tech example 7580 x 2028 1537 What about the forcast Go with High Inventory Management Adding the 13th month Production With a forecast of 1885 Want available 2056 Current Inventory 175 Product after adjustment 1881 Finance 1881 Buysell capacity 200 4000 Automation 80 20 Leverage on FastTrack report page Golf score lower means the lower debt you have 15 Issue long term debt 7000 Monday Week 8 111714 lclicker questions 4 Total xed costs are 100000 The product sells for 100 The variable cost per unit is 80 How many units do you have to sell to break even Contribution Margin 10080 20 Answer d 5000 5 The variable cost per unit is 90 Contribution margin 1009010 Answer b 10000 6Total xed costs are 10000 the product sells for 15 the contribution margin is 10 10000010 10000 7 Assume that interest rates are expected to be greater than 10 Which is worth the most A 1 million today B 200000 for 5 years C 11M in 10 years Answer A 1 million today 8 What is the primary goal of business E Create wealth for its owners 9 In Foundation how can you increase your company39s contribution margin E All of the above Increase automation 10 Average sale 1000 25 margin 250 per sale Fixed Cost are 15000 month Answer A 13 E Break even Analysis The breakeven point is the point at which cost or expenses and income are equal there is no net loss and there is no net gain The business has quot been brokenquot BE xed costs pricevariable cost per unit contribution margin unit Exampe Selling some CD39s Total cost xed cost variable cost x number sold Fixed cost 100000 Variable Cost 800 per CD Total Revenue Calculating Break Even 100000 8x 15x solve for x X 100000 15 8 Disadvantages to BreakEven Break even assumes all products are sold and the same price Does not specify a time frame Does not consider the net present value of money Net Present Value would you rather have 1M dollars today or 100000 paid to you over the next 10 years worth less that cash can39t work for you to make investments Net Present Value says It is better to have an amount of money today and invest it versus waiting for future payments of the same amount The difference between the present value of cash in ows and the present value of cash out ows NPV compares the value of a dollar otday to the value of that same dollar in the future taking in ation and returns For example A business is for sale the potential buyer estimates the future cash ows the business will generate The cash ow is quotdiscountedquot into one lump sum present value amount 500000 Good Deal buyer will bene t if the buyer purchases the business for less than 500000 Marketing Strategy The Marketing Mix Product price place Marketing channels Producer consumers example of direct del Producer retailers consumers Examples Direct Value Added Resellers VARS Online retailers Retail stores Driven by the quotvaluequot each channel member offers Second Chance Category Leader law enforcements 1 Protection Range 2 Certi ed 3 Price 200 500600 8001000 4 Comfort Second chance went through bankruptcy due to using material Zylon Implications Motivated by drive to control costs The Fate of Second Chance Bankruptcy Reorganization Legal protection Marketing Strategy Promotion Creating awareness Creating an image Reaching the target market Value and purpose quotConnectingquot with your market and building loyalty Measuring success In Foundation You will invest money in a quotpromotionquot budget to create awarness In Reality Companies focus on the bene t the expected outcome Sometimes ads don39t focus on the product at all but rather create a heart warming feeling Marketing Strategy The Role of Pricing It includes and excludes It communicates value It can be elastic or inelastic Elastic TP lnelastic Gas for car It is a critical aspect of the marketing mix product promotion price place Pricing let39s talk about pricing issues for a convenience store Pricing Breakeven Objectives Marketing Channels Twinkees example Producer 20 Agents middleman Wholesalers middleman Retailers middleman Consumers
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'