BA101, Midterm #2 Study Guide
BA101, Midterm #2 Study Guide BA 101
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This 1 page Study Guide was uploaded by Emma Cochrane on Sunday March 6, 2016. The Study Guide belongs to BA 101 at University of Oregon taught by Engel S in Fall 2015. Since its upload, it has received 159 views. For similar materials see Intro To Business in Business at University of Oregon.
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Date Created: 03/06/16
Equations Asset Turnover: sales/total assets = % ROA Return Assets: net income (proﬁt)/total assets $ ROE Return on Equity: proﬁt/owner’s equity account Leverage: total assets/owner’s equity Assets: Liabilities + owner’s equity Current ratio: Current Assets/Current Liabilities Quick (ACID) Ratio: (current assets - inventory)/current liabilities Contribution margin - ﬁxed costs = net proﬁts Break Even: Fixed costs / (selling price/unit – variable cost/unit) Assets: Cash Buildings (investment section of balance sheet) Machinery (investment section of balance sheet) Accounts Receivable Inventory Loans: S.T. Loans L.T. Loans (bonds and debentures) Owner’s Equity Common Stock Retained Earnings Investing Short term: Accounts receivable Inventory New product development Long term: Equipment (automation) Facilities (additional capacity) Buy other companies (not in Foundation) Stock Summary Close: the value of a share at the end of a trading day Change: how much higher (lower) price today than yesterday (in Foundation last year) Shares: the amount of outstanding stock Dividends: the cash payment to owners Yield: Dividend/Stock Price EPS or Earnings Per Share: Net Income/Shares P/E or Price Earnings: Close/EPS Market Capitalization: Shares x Close (price) Stock Value Book Value (balance sheet): Owner’s Equity/Number of Shares Earnings Per Share: Net Income/Number of Shares Dividend: the cash payment to owners from proﬁts Yield: Dividend/Price Stocks vs. Bonds: Stocks: ownership not a legal contract no maturity date no payment promises higher risk higher expected return corporations start with stock Bonds not ownership legal contract maturity date return of principle promised interest payment with due dates lower risk lower expected return Stocks and Bonds: Sources of long term ﬁnancing Originally issues in primary market Trade on secondary market The Law Common Law the law judges establish while deciding disputes (precedent) Statutory Law laws enacted by a federal or state legislature Administrative Law regulations based by state and federal administrative agencies Criminal and Civil Laws Derived from three sources Administrative law Statutory law Precedents Criminal law - a dispute between the government and an individual punished by ﬁnes and/or imprisonment Civil law - a dispute between two individuals ﬁne may be imposed Alternative Dispute Resolution Arbitration: brings in a 3rd person to help who then makes a ruling (arbitrator) binding (agree to abide ahead of time, bound by decision of arbitrator) non-binding Mediation: brings in a 3rd person to help who then makes a ruling (mediator) Non-binding, always. Property Intellectual Property Trademark: symbols used by ﬁrms to identify products Patent: inventors get exclusive right to inventions (17 years) Copyright: authors have exclusive rights to documents Contracts Contracts are legally enforceable agreements between two or more parties. Breach of contract: A violation of a valid contract where the injured party goes to court to enforce contract and (sometimes) collect damages Agency: Acts on behalf of another (in another’s interest) Warranties: Express: speciﬁcally deﬁned by the seller Implied: legally imposed on seller/disclaimed 1. Clear Title (ownership) 2. Product will perform the function it’s designed for 3. Perform as advertised Ethics Deﬁned: Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople. Ethical dilemmas occur when: There is no agreement over what the accepted principles are None of the available alternatives seem ethically acceptable Many accepted principles are codiﬁed into laws: Tort laws: governing product liability Contract laws: contracts and breaches of contracts Intellectual property laws: protection of intellectual property Antitrust laws: governing competitive behavior Securities laws: issuing and selling securities Ethical Issues: Self-dealing: managers weather their nest with corporate monies Information manipulation: Distort or hide information to enhance their personal situation Anticompetitive behavior: actions aimed at harming actual or potential competitors Opportunistic exploitation: of other players in the value chain in which the ﬁrm is embedded Substandard working conditions: Underinvest in working conditions or pay below market wages Environmental degradation: directly or indirectly take actions that result in environmental harm Corruption: companies pay bribes to gain access to lucrative business contracts Behaving Ethically: To make sure ethical issues are considered in business decisions, managers should: Hire and promote people with a well-grounded sense of personal ethics Build and organizational culture that places a high value on ethical behavior Make sure that leaders not only articulate but also act in an ethical manner Put decision-making processes in place that require people to consider the ethical dimension of business decisions Use ethics oﬃcers Put strong corporate governance processes in place. Business Entity Options: Sole Proprietorship Easy, quick, simple, aﬀordable Full control with minimal administration Adaptable The Challenges: Risk and personal exposure Credibility Raising additional capital Partnership General Partnerships Mutual agency Unlimited liability Share risk/wealth equally Limited Partnerships No mutual agency Provision for limited liability for some Do not share the risk/wealth equally Preparing for Partnership The partnership agreement The “buy-sell” clause Corporation Corporate Regulations: A corporation is a separate entity: there is no single individual that is responsible and that makes the government nervous. Securities and Exchange Commission (SEC) Sale of stock/ﬁnancial reporting Full discloser Due diligence Types of Corporations: Domestic Corporations: Operate in state which it is incorporated Foreign Corporations: Operate in states other than their state of incorporation Alien Corporations: Are organized in one country and operate in another country Limited Liability Company (LLC): Limited liability is like a corporation, taxed like a partnership, not limited to a number of shareholders. You will also need to know how to read Cash Flow Statements and FastTrack Reports!
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