Final Study Guide
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This 11 page Study Guide was uploaded by howellkaila on Wednesday March 11, 2015. The Study Guide belongs to BA 101 at University of Oregon taught by Tom Durant in Winter2015. Since its upload, it has received 426 views. For similar materials see Intro to Business in Business at University of Oregon.
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Date Created: 03/11/15
The activities to run a business current assets and liability accounts are your working capital Cash is the most liquid current asset is the time between payments of what a business owes accounts payable and collection of money owed to business accounts receivable Includes all activity between when cash is taken out to produce a product to the point that product is sold Production Cvcle Length of time between the purchase of raw materials production of goods and sale of product Accounts Payable Lag Time between purchase of raw materials on credit and the cash payments made Accounts Receivable Lag Time between the sale on credit and the cash receipt Working Capital Cycle represents the time money is quottied u quotfor production costs Profits accounting rules for income statement Recognizes when transactions are made not when money is received accrual accounting system Cash Accounting System Transactions are only recognized when cash is received Cash Flow Cash receipts disbursements or payments over time Current Assets Current Liabilities Day to Day Activities Long term Financing needs to be met with long term sources Day to Day transactions have a balance called transaction balance Speculative Cash Balances For special bargains or discounts early payment on bills and emergencies Short Term Marketable Securities for when vou have a lot of cash Treasury Bills Short Term Loans mature in less than 1 year Commercial Paper Unsecured Loan to large corporation matures in 1545 days Certificates of Deposits Short term by commercial banks can be traded in secondary market Credit Sales per day X Length of Collection Period Factors to Consider 0 Can customers pay back 0 How long to pay back 0 What if they don39t pay 0 Discount if they pay early lnventorv Management Inventory Turnover Rate COGS Inventory Inventory Turnover Days Days in Period Inventory Turnover Rate Ideal Inventory COGS Average Industry Turnover Rate lnventorv Cgrrving Costs total cost associated with inventory time value of tied up inventories Less than one year Advantages 0 Speed 0 Flexibility 0 Lower Costs Disadvantages 0 Increased risk to borrower Short Term Bank Loan Line of Credit Informal understanding between the bank and the borrower that a specific amount of funds is available for future financing purposes Revolving Credit Account Formal line of credit offered to large businesses in exchange for upfront fees and interest payments People will only participate in a transaction if thev are better off for doing it Transactions to get additional funds Taking out a Loan Taking on new owners Common Rule of Transactions The higher the rate the greater the expected risk Form of Rental Agreement Principal of Loan Amount Borrowed Paying down a principal for a loan is NOT an expense Interest Payment for using the money Interest is a business expense Accounts Payable Borrowing use of materials from suppliers to create products If you sell the products you can pay back suppliers If you increase your AP Lag suppliers are less likely to give you more materials Long term financing Borrowing money directly from investors Referred to as securities because they are secured claims for investors Risk rating how good is the bond AAA is best D is worst 0 Lower the rating higher the interest rate The Bond Market To issue bonds have to get permission through SEC Company goes through investment bank specializes in issuing and selling new securities First Sale takes place in Primary Securities Market Can buy or sell to other investors in Secondary Securities Market Interest Rates Fall Bond Price goes up and visa versa End of trading day information about bonds is published in financial press Issue Value Yield Close Rating 5 s AA Above is bond information and below shows what each thing means nterest Rate Year Bond Matures When issued Company Received this much Currently Trading for this percent and the price it is to purchase one ReturnYield When a company sells shares of stock they are selling ownership of their company Those who purchase stock never have to be paid back and do not pay interest they have a say of management in the company Companies issue stock to get money When a company sells shares for the first time it is at an Initial Public Offering IPO People can buy stock at any time from the stock market but can only buy from company at IPO state of ownership voting rights higher dividends first claim to assets no voting rights MVS wealth increases bv owning stock Stock Price Goes up Dividends 0 Companies can choose to keep this money as retained earnings or give a dividend Things a stock buyer may consider Stocks claim against the assets of the company Profit per share Dividend Book value Total Owner39s Equity of shares outstanding 0 Ways to increase book value I Increase total owner39s equity Make a profit and reinvest it Reduce Number of shares Close The value of a share at the end of the trading day Change how high or low the price of the stock is compared to the day before Shares amount of shares in the company outstanding stock Dividend cash payment to owners stockholders Yield dividend stock price Comparison of the dividend amount to stock price PE or Price Earnings Ratio Closing price EPS How many times you have to multiply earnings to get stock price EPS or Earnings Per Share Net Income Shares How much each share has earned KEY PAGE TO LOOKAT IN YOUR BOOK Has a of the ratios on it and what they measure Leverage how big a company managers have made with owner investments A larger leverage number is BAD It means the company has a greater dependency on debt To stockholders it is better to borrow money than to sell stock Leverage tracks this relationship Earnings Per Share how much does a company make per share of stock Cash keeps a business functioning A business can be profitable and still have a negative cash flow This is because on the income statement it shows profits but the Cash Flow statement shows how much cash is actually coming in Determines how much cash is available now and when it will be in the future Primarv Purposes 1 Tracks cash flowing in and out of business over a period of time 2 Reconciles income statement and balance sheet There are no accounting assumptions on the cash flow statement Sections of Cash Flow Statement Cash from Operations Cash activities from day to day accounts receivable and payable and other activities Cash from Investing Activities Purchase of sale of longterm fixed assets Cash from Financing Activities Borrowing and repayment of longterm liabilities Track the inflow and outflow of cash and track business activities from a cash perspective For a more in depth look at the cash flow statement referencein the book The law establishes the private enterprise system and corrects markets when they fail or when they do not produce the desired outcome Right to Private Property Right to Keep Profits Freedom of Choice Fair Competition The right to private property and to keep profits are defined in establishes the rights for people to own use transfer the economic value of different kinds of property Can exist either physically or as an idea Real Property Real Estate and everything attached to it Personal Property Anything besides real property Intellectual Property Property generated by a person39s creative activities Eir Competition established in laws to prevent businesses from monopolizing the market and doing anything to substantially lessen the competition mutual agreement between two of more parties whose terms are enforced in court Does not have to be written Contract Elements Legal Purpose Objective of contract is described Consideration The agreement to exchange must involve something of economic value Voluntary Agreement Offer and acceptance have to be freely and knowingly made 0 Contractual Capacity Ability to enter a contract I Those not allowed to enter a contract Minors Mentally unstableincapable Insane Intoxicated Under duressbeing threatened Failure to meet terms of contract is called breach of contract Statutory Law Written Laws established by the federal state country or city government Common Law Unwritten laws or precedents established byjudicial decisions Administrative Law Regulations established by administrative agencies Criminal Law A dispute between the government and an individual 0 Resolved through the court system Trial Courts Determine facts of cases laws involved and apply law to resolve dispute Appellate Courts If a party believes a law was misinterpreted they send an appeal to this type of court Civil LawDispute Dispute between two individuals 0 O O Punishment Fines no prison Initiated and resolved through lawsuits Resolved in trial and appellate courts Alternate Methods Instead of litigation which can take a long time people are starting to prefer these methods instead Arbitration Parties submit their case to a neutral third party arbitrator Third party acts as judge in the process 0 Can be binding or nonbinding Can appeal decision to a court Mediation Use a third party to reach an agreement Mediator meets with each side separately until both sides reach a settlement 0 Nonbinding Mediator is more like a counselor than a judge Parties do not have to accept this decision 0 O O Allows an individual to assign another person the power to act into agreements Principal Person who wants to have a specific task accomplished Agent One who acts for the Principal Power of Attorney Legal Document that authorizes a person to act as another person39s agent Partnership Agreement Establishes a business partnership and mutual agency for the partners When a company asks a court to release them from their contractual obligations The company39s assets are then sold to meet as much contractual obligation as possible Types Chapter 7 Business dissolved and assets liquidated Chapter 11 Frees business from obligations temporarily and works out a court approved plan to meet obligations Chapter 13 Similar to Chapter 11 but for individuals set of statutory laws to simplify commerce Implied Warranty Seller has title to the product Product will perform in the way it was meant to Product will perform as advertised Expressed Warranty Additional terms the seller will honor A civil wrong in which one party causes harm to another Fraud a type of tort One party hurts another party through manipulation or deception Product Ligbilitv establishes a business39s legal responsibility to be tireless in designing producing selling consuming products Pass laws to set up agencies to establish operating rules to guide business practices Issues are decided at hearing versus in court setting If there is an authority in multiple industries it is a quotcrossindustry company behavior and decisions based on honesty fair competition and respect for interests of the company its owners employees and society Treating all involved with the business fairly Fairness is a top priority Holding members accountable for their actions Communicating core values to members Demanding a rewarding integrity Code of Conduct Violation Conflict of Interest Promote personal interest before others Falsification of Records Altering records to show inaccurate information Whistleblower Situations Informing authorities of illegal or unethical behavior Stakeholders people who have interest in the conduct of business Social Contract Theories Companies become democratic associations and employees and stakeholders have a voice in company operations Integrative Social Theory Conflicting interests are best resolved by formulating a fair agreement between parties through universal principals and actual agreements Theories miss the central point that a business is a person 395 property Also people fear that those businesses that survive under these theories will only care about maximizing profits not behaving ethically Increasing unemployment Endanger workers and their future health Increasing air water and soil pollution Contribute to global warming Costs paid for by the third party Corporate Ethic Policies Identify expectations to workers Guidance on handling common ethical problems Create Greater Ethical Awareness and Application Have Employees attend training sessions regarding business conduct Given support of Top Management Explained both in writing and verbally Be doable Monitored by Top Management Observed free of biases known as SOX and Sarbox Establishes new or enhanced standards for all US public company boards management and public accounting firms Responsible for assessing the ethical implications of a company39s activities and makes recommendations regarding ethical policies and giving the information to employees Appointed formally by organizations Federal Sentencing Guidelines for Organizations Act set standards for all organizations Effectiveness of this Position is unclear Ethics of Accounting Address issues of financial reporting trading compensation and payment policies Ethics of Human Resource Management ethical issues between employer and employee Discrimination Representation of Employees Privacy of Employee Privacy of Employer Fairness of Employment Occupational SafetyHealth Ethics of SaleslMarketing Pricing Issues AntiCompetitive Practices Specific Marketing Strategies Content of Advertisements Unethical Marketing to Children Black or Grey Market Strategies Ethics of Production products and production process does not cause harm Defective addictive and inherently dangerous products Ethical relations between company and environment Ethical problems from new technologies Product Testing Ethics Ethics of Intellectual Pronertv KnowledgeI and Skills Patent copyright and trademark infringement Misuse of intellectual property systems Intellectual property has been criticized Employee Raiding Employing all of the most talented people in a specific field Biopiracy Business intelligence or espionage International Business Ethics Universal Values Business ethical traditions in different countries Business ethical traditions from various religious perspectives Ethical Issues in international business transactions Globalization and cultural imperialism Varying Global standards Outsourcing productionservices to lowwage countries International Commerce Ethicism demand for more ethical business processes and actions an ethical or ideological idea theat an entity or individual has the responsibility to society This is through 1 Profitable required 2 Obey the Law required 3 Be ethical expected 4 Be a good corporate citizen desired
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