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UO / Business / OBA 101 / what is finance?

what is finance?

what is finance?


School: University of Oregon
Department: Business
Course: Intro to Business
Professor: Tom durant
Term: Winter 2015
Tags: BA101, Intro to Business, and business
Cost: 50
Name: BA101, Midterm #1 Study Guide
Description: This study guide covers what will be on the midterm
Uploaded: 01/31/2016
1 Pages 7 Views 16 Unlocks

Colton Mitchell (Rating: )

If Emma isn't already a tutor, they should be. Haven't had any of this stuff explained to me as clearly as this was. I appreciate the help!

Important definitions: 

what is finance?

Finance: where the company got the money to buy the assets to start the business; there is equity financing and there is borrowing financing.

Accounting: looking forwards and backwards; evaluates the company and issues income statements (quarterly) on how the company operated looking backwards and predicts what will happen in the future Management (HR): decides who to hire and how many people to hire, decides what to pay them and what benefits they get, decides how much of production should be manual labor and how much should be machine labor. Chooses to hire the best people they can as competition to other businesses. Research and Development: chooses what products to come out with based on what people want to buy, designs product for consumers.

Operations: what’s going on inside the factory: Is it running efficiently? Are materials being used efficiently? Is everything cost effective? How much factory capacity needs to be added with company growth? Marketing: an organizational function and a set of process for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and it stakeholders. Includes: Product (what it is), Price (how much it costs), Place (where it can be bought), Promotion (advertising), and Service (customer service).

what is marketing?

Don't forget about the age old question of What are the theoretical underpinnings of communism as an ideology?

Demographics: age, gender, income, education, etc.

Psychographics: lifestyle, beliefs, etc.

Segments are different groups of customers that companies can describe.

Purchasing Criteria: What you want in a product

Expectations: What you expect from your purchase criteria

Importance: Prioritized purchasing criteria (this has to add up to 100%)

Attractiveness: What buyer rates product on based on purchasing criteria and expectations Customer Survey Score: Used to compare products between competitors.

Mean Time Before Failure (MTBF): Average time before a product lasts before breaking/failing. (how reliability is measured) Don't forget about the age old question of What is the polio virus?

Price: The lower the price, the more attractive, but if you sell it too low priced, you won’t make a profit. Age: How old is the product? When was the last time there was an upgrade or an update. Position: Position within the market. (Uses monthly customer survey score)

what is Demographics?

Profit Maximization: setting prices so that total revenue is as large as possible relative to total cost. Diminishing Returns: the more you invest, the less you get back.

Promotion: your message

Awareness: Percent of the market that received the message.

Owner’s Equity: what the owner’s own (accumulated profits of the company) Don't forget about the age old question of what is economics?

Common Stock: original investment by owners

Retained Earnings: profits accumulated

Liabilities: loans/borrowing

Assets: cash, inventory, equipment, accumulated depreciation (land, buildings, etc)

Capacity: how many units the factory can produce

Important Equations:

Sales – Expenses = Profit (profit ≠ revenue) or total revenues – total cost = profit

Sales (revenues) = price x quantity sold (demand)

Contribution margin – fixed expenses = net profit

Customer Survey Score: importance % x attractiveness points, then adding all numbers together. Industry unit sales last year x industry growth rate % = next year industry demand forecast Next year industry demand forecast x my company’s market share percentage = my company’s demand forecast

Assets = Liabilities + Owner’s Equity We also discuss several other topics like who is inanna?

Forecast + (forecast/12) = number of units available for sale

CM% = CM/Sales

Add capacity: $6/unit floor space

Add automation: $4/unit leve

if you increase the automation levels, labor declines by $1.12 per unit.

Types of Customers

Low Tech Customers 

People who buy the cheaper, more easily manufactured option

High Tech Customers 

People who buy the more expensive, more complicated/more difficultly manufactured option

Who are our customers?

Low tech

High tech Don't forget about the age old question of What are the differences between Secular and Political time?

What do they want?






Segments are different groups of customers that companies can describe (geographic, psychographic, demographic)

Within a segment, customers share similar characteristics

Ex: Same age, same gender, same income, same lifestyle, etc.

Companies don’t always market to all segments. They choose which ones they want to market to. Segments chosen to market to become the target market.

Segments are described using demographics and psychographics If you want to learn more check out What is Sexual selection?

Segment Criteria Ranking

Low Tech Market:

1. Price

2. Age

3. Reliability

4. Positioning

High Tech Market:

1. Positioning

2. Age

3. Prices

4. Reliability

Marketing Research

Primary Data Research: research is done by the company/research department (used when answer isn’t readily available)

Ex: surveys, observational research, contracting a third party to do research specifically for you Secondary Data Research: Someone has already done the research and made it publicly available for a free or for a fee. (most used way of collecting research)

Ex: online research, book research (anything that’s already been done and is available)

Perceived Age

You introduce a product on July 1, 2010.

On July 1, 2010 it is 0 years old.

On December 31, 2010 it’s .5 years old.

You reposition and the revision date is July 1, 2010

On June 30, 2010, it’s almost 2 years old.

On July 1, 2010, it’s perceived age is cut in half (1 year old)

Seller’s Market

Limited supply is available due to stock out

Customers search for any available products and reduce their expectation (rough cut)

Sellers have the opportunity to sell 'less appealing' products

Can add $9.99 to price 

Buyer’s Market

Supply and demand are in equilibrium

There is plenty of product available

Can’t raise prices

Watch pricing, watch range


Your total capacity represents what you are capable of producing in your first shift.

You have a second overtime shift and it is an expensive way to build products, but you can produce a total of twice the amount of the first shift.

Forecast + 1 month demand (inventory target)

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