Lecture Notes Week 8 (Classes 15 and 16)
Lecture Notes Week 8 (Classes 15 and 16) BA 101
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This 7 page Class Notes was uploaded by howellkaila on Saturday February 28, 2015. The Class Notes belongs to BA 101 at University of Oregon taught by Tom Durant in Winter2015. Since its upload, it has received 113 views. For similar materials see Intro to Business in Business at University of Oregon.
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Date Created: 02/28/15
Week 8 Class I and ll I3reakEven Analvsis BreakEven Costs and sales are equal No net loss or net income Formula Fixed Costs Price Variable Cost per unit Eaual to Contribution Marain Total Cost Fixed Cost Variable Cost Total Revenue Units Sold x Price of Unit When total cost and total revenue are equal this is the BreakEven Point Anything below the breakeven point is a loss Anything above the breakeven point is a profit BreakEven Advantages Disadvantages Quick way to see the potential for a Assumes all products are sold at the same business or a new product price Identifies the target number in Does not specify a time frame unitsrevenue Does not consider net present value Net Present Value Would you rather have 51 million todav or 1 00 000 paid to vou everv vear for the next ten vears This is like saying would you rather have a chocolate bar or a lemon squirted in your eye Key Concept of Net Present Value Better to have the amount of money today and invest it Why Waiting for payments causes you to have less money in the end due to inflation Inflation lowers the value of money over time Returns increase the value of money One may use NPV to analyze the current value of an investment that will produce revenue in the future If the NPV is positive it should be accepted If the NPV is negative it will be denied Calculation of Inflation and Interest Rates To calculate the NPV of a 500000 investment if inflation is 5 for the next 5 years Year 1 Year 2 Year 3 Year 4 Year 5 Value at end of 500000 5 475000 5 451250 5 4286875 40725313 Period 475000 451250 4286875 5 5 40725313 38689047 The way I calculated these step by step is 1 Multiply your starting value for the year by 5 or whatever inflation rate you are given in the future 2 You now have a new number much smaller than the original number If you don39t go back and try again 3 Subtract the new smaller number from the starting value for the year In the case of Year 1 above 500000 25000 which is 5 of 500000 475000 and an interest income of 8 Year 1 Year 2 Year 3 Year 4 Year 5 Value at end of 500000 8 540000 8 583200 8 629856 8 68024448 Period 540000 583200 629856 68024448 8 73466404 The way I calculated these step by step is 1 Multiply your starting value for the year by 8 or whatever interest rate you are given in the future 2 You now have a new number much smaller than the original number 3 Add the new smaller number to the starting value for the year In the case of year 1 above 500000 40000 which is 8 of 500000 540000 To calculate the combined impact of both inflation and interest it can be a bit more complicated You have to take this at a year by year step by step process once again 1 Take the smaller number you got in the Year for Interest In the example above this number was the 40000 2 Take the smaller number you got in the Year for Inflation In the example above this was 25000 3 Subtract the Inflation number from the Interest number 40000 25000 15000 4 Add this number to the original investment value 500000 15000 515000 5 You now have your Net Present Value for the year 515000 NPV If you need a clearer table to follow when looking at these instructions see Slide 18 from the Class 15 Powerpoint The numbers may look a bit different but this is due to the fact that I did not round in my calculations If a business was for sale valued at 500000 a Good dealfor the Buyer Purchase the business for less than 500000 Bad Dealfor the Buyer Purchase the business for more than 500000 Marketing Strategv The Marketing Mix Product Price Placement Promotion Service Marketing Channels Producer 9 Consumers Producer 9 Retailers 9Consumers Producer9 Wholesalers 9 Retailers 9 Consumers Producer 9 Agents 9 Wholesalers 9 Retailers 9Consumers Promotion Create Awareness Create an Image Reach Target Market Building Loyalty with Market Value and Purpose Measure Success Promotional Mix Commercials can focus on the benefit or expected outcome or not focus on the product at all Pricing Both includes and excludes Communicates Value Either Elastic or Inelastic Producers sometimes sell their product through many different marketing channels because it is often inconvenient to create a store for one kind of product This is why there are things such as convenience stores n convenience stores the items most often bought are placed in the back of the store so as you walk up to the cash register you grab a little something extra to go with that big gulp or Slurpee There was a lot of review from Class 15 at the beginning of this class so review above if needed Business Law Private Enterprise Review The market turns selfinterest into social good Requirements Private Property Freedom of Choice Right to Keep Profits Fair Competition The government makes sure these factors exist They do this by intervention 0 Promote economic health and social responsibility 0 Correct market failures and ethical lapses How does the aovernment intervene 0 Legal Structure Rule of Law 0 Industry regulation Problems with Business Power of Business vs Consumer Actions of Business vs Consumer Public Reaction Reaction from Government The Law Standards set by society to govern behavior Common Law Judges interpret laws based on precedent earlier decisions made in other cases to resolve disputes Statutory Law Laws enacted by a federal or state legislature Administrative L Regulations passed by state and federal administrative agencies Judiciary The Judicial Branch of Government settles disputes through application of law Tvnes of Courts Trial Courts Dispute is first heard 0 Federal US District 0 State Circuit 0 Superior Common Pleas 0 Specific State Courts Probate of Small Claims Appellate Courts Dispute is heard again if lower court had errors in decision Criminal and Civil Law Comes from 3 sources Administrative Law Statutory Law Precedents Criminal Law a dispute between an individual and the government Punishment Fines andor prison Civil Law Dispute between 2 individuals Punishment Possible fine but no prison Torts A civil wrong inflicted on other people or their property form of negligence Include all wrongs that are not a breach of contract Examples Assault Slander Libel Product Liability m 0 someone hurts another by deception or manipulation dishonest way to trick people Alternative Disnute Resolution Arbitration 0 Can by binding or nonbinding Mediation 0 Always nonbinding Property Types of Property Real Real Estate and everything permanently attached to it Personal Everything Else Intellectual Property generated by a person39s creativity EX music art computer software cooking recipe etc 0 Trademark symbols used by firms to identify products I Kettle Chips They trade marked the term kettle and because the term kettle is generic it cannot be a protectable trademark It must be available to use for the public marketplace 0 Patent Inventors get exclusive right to inventions 0 Copyright Authors have exclusive rights to documents your notes from class are copyrighted Contracts Legally enforceable agreements between two or more parties Elements of a Contract Offer Acceptance Consideration Voluntary Agreement Parties must have legal ability to enter a contract meaning they must have Contractual Capacity Example of People who CANNOT enter a contract Minors under 18 years old Mentally unstable or incapable insane Intoxicated Being threatened into the contract Breach of Contract A violation of a contract where the injured party goes to court to enforce the contract and possible collect money for damages Agency Acts on behalf of another in someone else39s interest Bankruptcy Primary Purposes of Bankruptcy 1 Give a debtor a fresh start by relieving most debts 2 Repay creditors in an orderly manner to the extent that the debtor has property available for payment Bankruptcy is categorized by Chapters of Legal nonpayment of Financial Obligation Chapter 7 Liquidation and Erases Debt Chapter 11 Restructure and Repay Chapter 13 Repayment Plan for individuals Uniform Commercial Code Used to harmonize the law of commercial transactions in the states Addresses topics of Warranties legally imposed on the seller and specifically defined by the seller Negotiable Instruments tools that allow commercial transfer of wealth cher Roles of the Government Mange Money monetary policy Take money out of markets taxes Put money into markets government spending Regulate Industries administrative law Industry Specific Agencies 0 Food and Drug Administration FDA Interstate Commerce Commission ICC Federal Communications Commission FCC Federal Energy Regulatory Commission FERC Federal Aviation Administration FAA Federal Highway Administration FHA Securities and Exchange Commission SEC Crosslndustrv Agencies Federal Trade Commission FTC keep track of false and deceptive advertising and promotion Consumer Product Safety Commission CPSC Occupational Safety amp Health Administration OSHA Equal Employment Opportunity Commission EEOC Environmental Protection Agency EPA
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