INTRODUCTION TO BUSINESS
INTRODUCTION TO BUSINESS BCOR 1010
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This 6 page Class Notes was uploaded by Jaron Rowe Jr. on Friday October 30, 2015. The Class Notes belongs to BCOR 1010 at University of Colorado at Boulder taught by Kevin McMahon in Fall. Since its upload, it has received 10 views. For similar materials see /class/232072/bcor-1010-university-of-colorado-at-boulder in Business at University of Colorado at Boulder.
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Date Created: 10/30/15
3 personal concepts of finance 0 The value of money is always changing mattress money in ation 0 Small cutbacks today can pay of greatly in the future 0 Every decision involves a tradeoff Asset Allocation when investing put your money in different assets stocks bonds etc This is important because if one market is doing bad you won t lose all your money another part of diversification Asset Ratio Assets the things that you own Balance Sheet a snapshot of the financial position of a company deals with inventory Assets Liabilities equity Bear Market a descending market Bull Market a rising market Capital Structure Whether the firm uses debt to finance or equity Common Stock the most common type of stock gets paid back last each owner recives one vote more room for apprecaition Compound interest interest upon interest This is important because Credit card can create negative compound interest The interest adds up and the item is more expense then when you bought it Savings accounts create a positive compound interest Cons for Debt Financing says debt on your balance sheet risk if you don t have an adequate cash ow to make payments pay interest on loans Credit Ratings how likely a company is to pay back a loan This is important because companies with really good ratings AAA will have an easier time getting a loan than a company with a bad rating CCC Debt Financing Pro leverage using debt to create a profit no loss of ownership Debt Utilization how risky a company is Compares total income to debt A company with a high debt utilization ratio is risky a company with a low debt utilization ratio may be missing out on valid opportunities Depreciation paying off a longterm good over a period of time Diversification buying stocks in more then one area not putting all your eggs in one basket this is important because if one company or industry goes down and all of your stock is there Dividends per Share dividends of shares Downgrading if a company doesn t pay back loans it can lose its credit rating Sometimes a company will have a contract on a loan that says if you get downgraded you must pay us back immediately Death spiral a constant cycle of getting downgraded having to pay back immediately getting down graded again etc Eamings Share Total eamings of stock 7 this is important because the EPS help determine the stock price As the Earnings per share goes up the stock price goes up Equity what the company is worth Equity financing cons loss of control loss of ownership dilution Financial Accounting external accounting Accounting information for outsiders to evaluate the company s nancial position Finanical Managers deal with 0 Cash ow management obtaining and maintaining the funds in order to meet the company s goals and needs Financial Control Financial Managing Mangaing Assets Managing Liabilties Firm Short term needs wages rent producing the product Firm Short term resources secured loans unsecured loans commercial paper selling accounts payable borrowing GAAP Generally Accepted Accounting Principles 0 Rules and regulations for the form and content of financial reports as set out by the FASB Relevant reliable consistent comparable Income Statement shows sales Show information over a period of time usually a year Revenue costs of goods sold minus expenses Expeneses General and administrative depreciation interest and research and development Inventory Tumover how quickly a company sells out of a product and then is able to restock Leverage using debt in order to get a higher profit Liabilties what the company owes Liquidity how quickly assets can be turned into cash in order to pay back debt Current assets current liabilties Long term needs for firms fixed assets furniture machinery research and develpment Managerial Accounting internal accounting Accounting information that is used for people within the company to evaluate the company s performance Managing Stock Risk 0 Invest in different comanpies industries and countries Diversification asset allocation Market Capitalization What the company is worth Number of shares outstanding times the price Opportunity Cost the value of the next best thing you could be doing What you gave up Owner s Equity money that company has that does not have to be paid back Either from investors or previous profitable operations Preferred Stock paid back before common stock if the company goes under they are guaranteed money Guaranteed dividends Less likely to appreciate Fixed value Primary Market the first time a firm goes public The company gets to keep all the revenues Private Accountants accounts that are hired by a company specifically for the purpose of doing their accounting Profitability Ratios determine how well a company is using its assets owner s eqity and sales to maximize profits OOOO Pros for Equity financing doesn t say debt on balance sheet don t need to pay interest Public Accountants individual accountants who are hired by people or business to do their accounting Ratios ratios are used to 0 Compare different companies 0 Make complex data simpler 0 Determine relationships and correlations 0 Evaluate data over a period of time Resources for long term firms equity debt Retained eamings the connection between the income statement and the balance sheet Risk and Retum there is a direct correlation between risk and return This is important because the greater the risk the great potential there is for return Rule of 72 The rule that says the factos of 72 will tell you how long it takes for your money to double This is important because with a high interest rate your money will double quicker so it is an incentive to invest and save SarbanesOXley Act 0 An act that was created by the FASB o Eliminates accounting fraud 0 Requires executives to sign off on nancial statements Secondary Market Self regulations listing requirements there are certain requirements that a company must have in order to have their stock listed Circuit breaker if there is a huge decrease in stock the stock market will suspend buying and trading for a period Stock Regulations SEC 0 Prohibits inside trading information Who uses accounting information o EXtemal stockholders govemmentIRS investors o Intemal managers board of directors employess owners Sean Michael Moser BCOR 1010 Log 1 Toyota Offers Employee Buyouts In 2010 Toyota Corp lost market share for the first time in a dozen years Due to this fact the company has offered employee quotincentivesquot to white collar staff for them to leave the company The article said that 629 people are eligible for this buyout This is a voluntary program and in no way is Toyota letting people go or firing them but it is an incentive in order to help the company save money According to the article this could be good for many of the employees at Toyota because many other companies like General Motors and Ford Motor Co are hiring for the first time after shedding thousands of jobs In my personal belief this is a very ethical thing to do The company respects their employees and their loyalty to not just let 600 people go instead they are offering incentives possible a severance pay and are respecting their decision to either leave or stay with the company through trying times They could have easilyjust gone with their enlightened self interest and fired them due to monetary issues but they did the right thing and the incentives are not just a small price The offer is 20000 dollars in cash and 2 weeks of pay for each year at the company The company is helping their management lower class workers and the CEO They will all get paid more with these incentives and the company should be much better off due to these circumstances The company hopes this will help increase profits and put the company back on the top list of car companies after the 17 million car recall early 2010 Due to these circumstance and if I was a fan of the Toyota cars I would enjoy working for this company They respect their employees and their loyalty and that is close to my heart Ramsey Mike 2011 Februaw 1 Toyota Offers Employee Buyouts Wall Street Journal Retrieved February 2 2011 from httponlinewsjcom Sean Michael Moser BCOR 1010 Log 2 Bookseller Borders to Delay January Payments In December the big bookstore Borders Group Inc announced that it was heading for a financial crisis but was restructuring in order to avoid bankruptcy court Late last month the company announced the inevitable that it would most likely end up in court It has announced that it has delayed its January payments of nearly 125 million dollars to its vendors in order to help restructure their financials and get a load from GE Capital But most people that were interviewed for the article didn t have high hopes for the big company Most did not think that the company could get their suppliers and publishers to accept the debt and take the risk that they would not be able to come out of the economic crisis Many people may not find this unethical but in my personal opinion it is A company has a responsibility to deliver what it says it will It promised the suppliers and publishers that it would pay them for the books and products they serve and yet they failed to back up that promise I do believe this is unethical They should pay the company and use the money from the GE Capital loan to save their business if they can The book market is depleting with the rise of iPads and Electronic Bookreaders being released by every electronic company known to man take the fate Borders and file for bankruptcy don t dig yourself a hole too big to come out of I would personally never work for a book store I don t like reading I don t enjoy working a slow boring job but this just put it over the edge They are putting their employees at risk to have to find another job by going through with this horrific idea Specter Mike amp Trachtenberg Jefferey A 2011 January 31 Bookseller Borders to Delay Januaw Payments Wall Street Journal Retrieved Februaw 2 2011 from httponlinewsjcom Sean Michael Moser BCOR 1010 Log 3 Pfizer to Cut Research Shift Funding to Buybacks In the article about Pfizer it talks about how Pfizer is going through monetary issues as is every major company in America in the last few years but they are doing something smart Pfizer is having to cut 235 percent of their Research and Development in 2012 and will have to cut about 5 oftheir work force about 5500 employees Analysts and clients alike applauded Pfizer s plans for share buybacks and RampD cuts Pfizer is one of the few companies doing something smart in this economic crisis of the past few years They are basically shutting down their research department in order to keep clients buying back some faulty drugs and keeping their clients If I were one of their clients I would be thrilled that they are doing this they are being an honest company saying something was wrong with a drug instead of trying to cover it up and keep the income rolling It is very honorable and ethical ofthem to do this Though it is causing problems with employees jobs in the end I do believe that their economic situation will rise again and they will be able to hire more employees If I were capable of working at such a high end chemical and pharmaceutical company then I would be happy to work for Pfizer Ethics are something that are very important to me and I do take it very well that they are treating their clients with respect and moral dignity Loftus Peter 2011 Februaw 2 Pfizer to Cut Research Shift Funding to BuybacksWaI Street Journal Retrieved Februaw 2 2011 from httponlinewsjcom