Business Midterm Study Guide
Business Midterm Study Guide Bus 150
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This 11 page Study Guide was uploaded by Jessica D'Aniello on Sunday October 18, 2015. The Study Guide belongs to Bus 150 at Pace University taught by Malki in Fall 2015. Since its upload, it has received 168 views. For similar materials see Contemporary Business Practice in Business at Pace University.
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Date Created: 10/18/15
Business Midterm Study Guide CorporationsA legal entity distinct from any individual persons that has the power to own property and conduct business Advantages of Corporations Ability to raise capital Liquidity Longev y Limited liability Disadvantages of Corporations Cost and Complexity Reporting requirements Managerial demands Possible loss of control Double Taxation Shortterm orientation of the stock market Sole Proprietorship a business owned by a single person Advantages of Sole Proprietorships Simplicity Single layer of taxation anacy Flexibility and control Fewer limitations on personal income Personal Satisfaction Disadvantages of Sole Proprietorships Financial Liability Demands on owner Limited managerial perspective Resource Limitations No employee bene ts for the owner Finite life span Exchange rates and the effect of the dollar going up and down Exchange rate the rate at which the money of one country is traded for the money of another Ex US 1 equals 75 euros Know GDP and GNP and what s included and not included GDP the value of all the nal goods and services produced by business produced by businesses located within a nation s borders lncudes production distribution and use of goods and services Excludes everything produced in the nations boundaries GNP Gross national product Excludes the value of production from foreignowned business within a nations boundaries lncudes receipts from the overseas operations of domestic companies In ation and De ation ln ation a steady rise in the average price of goods and services De ation A sustained fall in average prices BELOW 0 Barriers to Entry Barrier to entry any resource or capability a company must have before it can start competing in a given market Requires large amounts of money equipment land and other resources to get started and to operate are often ca pitalintensive businesses A business is considered capital intensive based on the ratio of the capital required to the amount of labor that is required Other barriers to entry include Government testing and approval Tightly controlled markets Strict licensing procedures Limited supplies of raw materials The need for highly skilled employees Economies of Scale Economies of scale Savings from buying parts and materials manufacturing or marketing in large quantities Part of why countries and companies trade internationally and why and how it is ef ciently worked and they use economies of scale to save money Pro t Markets Monopolistic Competition Monopoly a situation in which one company dominates a market to the degree that it can control prices Ex oil companies Monopolistic Competition a situation in which many sellers differentiate their products from those of competitors in at least some small way Ex restaurants hair salons real estate agents walking through mall Oligopoly Oligopoly A market situation in which a very small number of suppliers sometimes only two provide a particular good or service Ex cable television services airline industry cellular phone services Competitions Competition Rivalry among businesses for the same customers Ex phone industry s trying to one up each other travel industries airplanes competing with train or bus lines or fast food restaurants Pure Competition a situation in which so many buyers and sellers exist that no single buyer or seller can individually in uence market prices Ex the best examples of a purely competitive market are agricultural products such as corn wheat and soybeans Monopolistic competition is much like pure competition in that there are many suppliers and the barriers to entry are rather low Why is it that we love competition so much lt s the need for differentiation and to be on top the need to know you are making and doing more than others to ns success In business we love competition because it keeps the market owing without competition there would be no options for customers or success for big companies Competitive Advantage Competitive advantage some aspect of a product or company that makes it more appealing to target customers lts what the company is better at than others Ex Google s advantage is they are the best at optimizing searches for anything because they continue to innovate a grow there technology Balance of Trade Balance of trade Total value of the products a nation exports minus the total value of the products it imports over some period of time Could be dif cult to calculate due to incorrect data receipts and black market Balence of Payments Balance of payments the sum of all payments on nation receives from other nations minus the sum of all payments it makes to other nations over some speci ed period of time Ex When a US company buys all of part of a company based in another country that investment is counted in the balance of payments not the balance of trade Leading and Lagging Indicators Leading indicators suggest changes that may happen to the economy in the future and are therefore valuable for planning Lagging indicators provides con rmation that something has occurred in the past Free Trade Free trade International trade unencumbered by restrictive measures Free trade is not well liked by people because people believe it is taking away jobs from the American People If a country cannot produce a particular good at a cost that is competitive on the global market its government might chose to subsidize exporters of this good with nancial supports that allow them to charge lower prices than their business operations can naturally support International trade is when we give countries goods and services and exchange them for other sometimes more expensive goods Outsourcing Outsourcing contracting out certain business functions or operations to other companies Hiring other rms to handle some tasks Ex hiring an advertisement company to help marketing strategy customer service accounting computer programming manufacturing International Monetary Fund IMF IMF An international organization created for the purpose of standardizing global nancial relations and exchange rates The IMF generally monitors the global economy and its core goal to economically strengthen its member countries Heps foster global monetary corporation secure nancially stability help international trade primate high employment and sustainable economic growth and reduce poverty Uses 3 tools to carry out its mission employment of economists yearly assessment of how that country is doing economically and assistance and training it provides to its member countries to help with economic policies The World Bank The World Bank an international organization dedicated to providing nancing advice and research to developing nations to aid their economic advancement Attempts to ght poverty by offering developmental assistance to middle and poorincome countnes The Demand Curve Demand curve A graph of the quantities of a product that buyers will purchase at various prices goes down INDIRECT relationship httpswwwyoutubecomwatchvsB7XFPybZM The Supply Curve Supply curve a graph of the quantities of a product that sellers will offer for sale regardless of demand at various prices Goes up DIRECT relationship Indirect and Direct Relationship Indirect The relationship between two variables that move in opposite directions Direct if there is a change in one variable there will most likely be corresponding change in another Equilibrium Equilibrium point the point at which quantity supplied equals quantity demand Franchises Franchise a business arrangement in which one company the franchisee obtains the rights to sell the products and use various elements of a business system of another company Franchisee A business owner who pays for the rights to sell the products and use the business system of a franchisor Franchisor A company that licenses elements of its business system to other companies Product Franchise gives you the right to sell trademarked goods which are purchased from the franchisor and resold Ex car dealers and gasoline stations Manufacturing Franchise such as a softdrink bottling plant gives you the right to produce and distribute the manufacturer s products using supplies purchased from the franchisor Businessformat Franchise gives you the right to open a business using a franchisor s name and format for doing business PROS AND CONS Franchise Agreements Franchise agreement a legally binding contract that de nes the relationship between a franchisee and a franchisor Royalties Royalties A royalty payment is made to the legal owner of a property patent copyrighted work or franchise by those who wish to make use of it for the purposes of generating revenue or other such desirable activities In most cases royalties are designed to compensate the owner for the asset39s use and are legally binding Dividends Dividends Periodic payments that some corporations opt to make to shareholders If a company has money left over they could it invest it or pay it the the people who put stocks in their company dividends Double Taxation D Ub taxation peedrs heeadse eerperatidns are eensidered separate legal entities frem their shareheldersu As sdehg eerperatiens pay taxes en their annual earnings just as individuals den When eerperatiens pay edt diyidends to shareheldersg these dividend payments inedr ineemetax liabilities fer the sharehelders whe reeeiye them even though the earnings that preyided the sash td pay the diyidends were already taxed at the eerperate leyelu httpwwwinvestopediacomtermsddoubletaxationasp Insider Trading Insider trading the use of unpublicized information that an individual gains from the course of his or her job to bene t from uctuations in the stock market Exa man got a call that his company deal fell threw and they were going to let the shareholders know tomorrow and he called people telling them to back out of the stock before the morning Ethical Need For Statement Read section on page 7172 Seed Money Seed money the rst infusion of capital used to get a business started Venture Capitalists Venture capitalists VC s Investors who provide money to nance new businesses or turnarounds in exchange for a portion of ownership with the objective of reselling the business at a pro t Private and Public Corporations Private corporation privately held owned by company s founders management or private investors Public corporation means the company sold part of itself to the initial public offering so shareholders could buy stock and controls some of the company s pro ts and assets NAFTA North American free trade associate Monetary and Fiscal Policy Monetary policy Primarily eoneerned with the management at interest rates and the tetal supply at meney in eiredlation and is generally earried out by eentral banks sueh as the Federal Reserye Fiscal policy the cellectiye term fer the taxing and spending actiens ef geyernments in the United States the Executiye and Legislatiye ranches determine natienal scal pelicy Different Types of Taxation httpwww i nvestoped ia comwa l kth roug hcorporate nance2taxestypestaxesaspx SEC amp FDA Securities and exchange commission enforce security laws they make sure everything is checked and help maintain a well running economy They sue people every year for insider trading accounting fraud and providing false information Food and drug administration oversee things involving food drugs cosmetics animal food dietary supplements medical devices Liability Liability a company s legal debts or obligations during the course of business industry s Liabilities are settled overtime by through the transfer of economic bene ts including money goods or services
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