financial accounting
a system of processing financial data for a company with the purpose of producing a set of financial statements which investors and
... [Show More] creditors can use to make financial decisions.
financial statements
a short report that disclose information about various aspects of a company, including the balance sheet, income statement and cash flow statement
Asset
anything of value owned by the company
Balance sheet
measures the company's financial position at a particular point in time by listing assets and liabilities and showing the difference as owners equity
liability
an obligation to either pay out assets or perform services
owners equity
residual ownership of the assets (assets - liabilities)
income statement
measures company's performance over a given period of time
Accural Accounting
A type of accounting that recognizes incomes when they are earned and expenses when they are incurred, rather than when they are received or paid.
Expenses
cost of goods sold or serviced performed
four basics of financial statements
income statement (statement of operations)
statement of retained earnings
Balance sheet
Statement of cash flows
Define accounting
The information system that identifies, records, and communicates the economic events of an organization to interested users.
what are the four forms of businesses
proprietorship, partnership, llc, and corporation
What is a proprietorship
It is a business owned by one person.
What is a partnership?
An association of two or more persons to carry on a business for profit as co-owners
what is a limited-liability company
one in which the business is liable for the company's debts. it can have one owner or many owners.
what is a corporation
a corporation is a business owned by the stockholders or shareholders who own stock representing shares of ownership in the corporation.
What is GAAP?
Generally Accepted Accounting Principles by the Financial Accounting Standards Board (FASB)
What is IFRS
International Financial Reporting Standards
what is an entity
any organization or person that stands apart from other organizations and individuals as a separate economic unit.
what is the accounting equation
Assets = Liabilities + Owner's Equity
Assets= Liabilities + Stockholder's Equity
Assets = Liabilities + Paid-in capital + Retained earnings
Owners equity = Assets = liabilities
Define revenue
revenue are inflows of resources that increase retained earnings by delivering goods or services to customers
define dividends
payments of cash from a corporation to its stockholders
what is net income
when total expenses exceed total revenues
what is net loss
When total expenses exceed total revenues
What is the net income formula?
Revenue - Expenses = Net Income
how to measure the gross profit
Service revenue - cost of service
what are the two main categories of assets
current and long-term assets
examples of long-term assets
property, plant, equipment, long-term investments, and intangible assets
what are intangible assets
assets that have no physical substance but still represent resources that have a future benefit to the company.
examples of stockholder equity
common stock, additional paid-in capital, retained earnings, treasury stock, accumulated other comprehensive income
three factors that influence business and accounting decisions
economics, legal, and ethical
what are the different types of assets
cash, accounts receivable, inventory, prepaid expenses, investments
examples of liability
accounts payable, notes payable, accrued liabilities.
what is the current ratio equation?
current assets / current liabilities
Cost of Goods Sold Equation
CGS = Beginning Inventory + Purchases of merchandise - Ending Inventory
Gross Profit Equation
sales = cost of goods sold = gross profit
Gross profit margin
Gross profit / sales
positive economics
the approach to economic study involving the observation of economic choices and the prediction of economic events
normative economics
The part of economics involving value judgments about what the economy should be like; focused on which economic goals and policies should be implemented; policy economics.
Define comparative advantage
the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity.
Define absolute advantage
the ability to produce a good using fewer inputs than another producer
define efficient market
market in which profit opportunities are eliminated almost instanteously
market-based economy
producers/consumers make up the market and the market determines the allocations of the resources.
command and control economy
government controls where the resources go
allocative efficiency
produces at the point along its production possibilities curve that makes consumers as well off as possible
law of demand
the price of a good and the quantity demanded are inversely related
Shifters of Demand Curve
income, prices of related goods, tastes, expectations, number of buyers
Law of Supply
producers offer more of a good as its price increases and less as its price falls
Supply Shifters
cost of production, number of suppliers, natural events, government regulations.
shortage
demand exceeds supply
surplus
A situation in which quantity supplied is greater than quantity demanded
demand increase is greater than supply increase, new price is
greater than original
supply increase is greater than demand increase, new price is
less than the original
price ceiling
A limit set by the government about how much suppliers can charge for a product.
price floor
a minimum price for a good or service set by the government
price elasticity
% change in quantity / % change in price
midpoint formula: new-old/midpoint
Income Elasticity
% change in quantity demanded / % change in income
cross price elasticity
the % change in quantity demanded of X divided by the % change in price of Y
inelastic
between 0-1. price and total revenue change in the same direction
elastic
...
...
>1. price and total revenue change in opposite directions
perfectly inelastic
0
perfectly elastics
infinity
to maximize revenue if demand is inelastic
raise prices
if demand is elastic
lower prices
income elasticity is positive when dealing with
normal goods
income elasticity is negative when dealing with
inferior goods
cross-price elasticity is positive when dealing with
Subsitutes
cross-price elasticity is negative when dealing with
compliments
MPL
change in total product labor/ change in L
APL
total product/labor
perfectly competitive markets have ______ demand curves
perfectly elastic (horizontal)
Gross Domestic Product
The sum total of the value of all the goods and services produced in a nation
the income approach to calculating GDP
will generate the same answer as using the expenditure approach
Ted moves into his first apartment. He buys a barely used washer/dryer set from Craigslist and hires a company to pick it up and deliver it to his apartment. What about this transaction will be counted in GDP?
The value of the delivery service
Investment, as a part of GDP, includes:
Spending on productive inputs such as factories, machines, and inventory.
Any goods that are bought by people or firms who plan to use those purchases to produce other goods and services in the future, rather than consuming them.
Capital goods.
Real GDP
is calculated based on goods and services valued at constant prices
is it possible for a country's nominal GDP to increase and real GDP to decrease from one year to the next?
yes, it would indicate a larger rise in prices relative to decrease in output.
a GDP deflator of 112 means:
the overall price level is 12 percent higher than in the base year.
GDP per capita
is an average income per person in an economy
GDP per capita formula
GDP per capita = (GDP) / (population)
price index
a measurement that shows how the average price of a standard group of goods changes over time
CPI formula
100 x (cost of basket in current year/cost of basket in base year)
inflation rate
the percentage increase in the price level from one year to the next
Inflation Rate Formula
CPI Year 2 - CPI Year 1/ CPI Year 1 x 100
producer price index
a measure of the cost of a basket of goods and services bought by firms
Creating economic growth
involves savings, capital, labor, and technology.
intermediate goods and services
goods and services bought from one firm by another firm to be used as inputs into the production of final goods and services
Macroeconomics
The study of the economy as a whole
if the labor force is 400 and employment is 380, then the unemployment rate is
5% 380/400 = 95% - 100% = 5%
the employment rate equals
employed / labor force
final goods and services are those that are
sold to ultimate or final purchasers
if an economy produced 10 pizzas at $20 each and fifteen gallons of root beer at $5 each the total value of these goods and services would be
$275
MPC
change in consumption/change in income
opportunity cost
whatever must be given up to obtain some item
Compound Interest Formula
A=P(1+r/n)^nt
in finance, we generally consider investors to be rational and ______
risk averse
a _______ market is one where the prices of assets traded in that market fully reflect all available information at any instant in time
efficient
efficent
doing something in a way that saves you time and energy
Efficent Market
has no impediments to the free flow of goods and services, such as trade barriers
Depreciation
A decrease or loss in value
standard deviation
a computed measure of how much scores vary around the mean score
________ is used as a measure of total risk; ______ is used as a measure of systematic risk.
standard deviation ; beta
interest rate
Percentage of amount borrowed to be added to the amount loaned and paid back
Rate of Return Formula
total return (capital gain or loss) divided by amount of money invested (principle) equal rate of return (expressed as percent and can be negative)
put the following in order of their claim on assets of a firm
bonds, preferred stock, common stock
Net Present Value (NPV)
the sum of the present values of expected future cash flows from an investment, minus the cost of that investment
supply chain
the group of firms that make and deliver a given set of goods and services
supply network
the network of multiple producers of supplies that a company uses
supplier portal
A subset of an organization's extranet designed to automate the business processes that occur before, during, and after sales have been transacted between a single buyer and multiple suppliers. Also referred to as a "sourcing portal" or "procurement portal."
vertical market
Concentrates on a specific industry or market
Just-in-time (JIT)
An inventory-management approach in which supplies arrive just when needed for production or resale
vendor-managed inventory (VMI)
an inventory management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items
why is it important that information shared between supply vendors and businesses customers is held in private or protected?
to strengthen the supply chain strategy by preventing business competitors from gaining inside information.
Supply Chain Management (SCM)
The management of information flows between and among activities in a supply chain to maximize total supply chain effectiveness and profitability
demand planning and forecasting
forecast and plan anticipated demand for products
Materials Management
includes activities that govern the flow of tangible, physical materials through the supply chain such as shipping, transport, distribution, and warehousing
supply chain analytics
the use of key performance indicators to monitor performance of the entire supply chain, including sourcing, planning, production, and distribution
what are the four key processes of supply chain planning?
demand planning and forecasting
distribution planning
production scheduling
inventory and safety stock planning
demand planning and forecasting
examination of historic data
distribution planning
A systematic decision-making process regarding the physical movement and transfer of ownership of goods and services from producers to consumers.
production scheduling
time sequencing of events required by the production subsystem to produce a meal
inventory and safety stock planning
focuses on the development of inventory estimates
supply chain execution involves the management of
product flow
information flow
financial flow
product flow
Managing the movement of goods all the way from suppliers to customers, including customer service and support
information flow
the movement of information along the supply chain
financial flows
involve money transfers, payments, credit card information and authorization, payment schedules, e-payments, and credit-related data.
supply chain effectiveness
all about doing the right thing
supply chain analytics
the use of key performance indicators to monitor performance of the entire supply chain, including sourcing, planning, production, and distribution
Radio Frequency Identification (RFID)
uses electronic tags and labels to identify objects wirelessly over short distances
Customer Relationship Management (CRM)
a company-wide business strategy designed to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups
RFID tag
an electronic identification device that is made up of a chip and antenna
Architecture of a CRM System
operational crm
analytical crm
collaborative crm
Operational CRM
supports traditional transactional processing for day-to-day front-office operations or systems that deal directly with the customers
Analytical CRM
includes applications that analyze customer data generated by operational CRM applications to provide information for improving business performance
collaborative crm
systems for providing effective and efficient communication with the customer from the entire organization
Enterprise Marketing Management (EMM)
improves the management of promotional campaigns
data warehouse
a repository of historical data that are organized by subject to support decision makers in the organization
Business Intelligence
Information collected from multiple sources such as suppliers, customers, competitors, partners, and industries that analyzes patterns, trends, and relationships for strategic decision making
ERP (Enterprise Resource Planning)
Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.
tangible costs
easily measured costs such as utilities, labor, materials, taxes
Intangible costs
Things that cannot be measured physically or with a monetary measure, such as pain and suffering
break-even analysis
a method of determining what sales volume must be reached before total revenue equals total costs
net-present-value analysis
a type of cost-benefit analysis of the cash flow streams associated with an investment
discount rate
the rate of return used by an organization to compute the present value of future cash flows.
tangible benefits
Benefits that can be quantified and assigned a monetary value; they include lower operational costs and increased cash flows
intangible benefits
Benefits that are not easily quantified; they include more efficient customer service or enhanced decision making.
what are the key issues to consider when presenting the business case?
know the audience
convert benefits to monetary terms
devise proxy variables
measure what is important to management
Joint Application Design (JAD)
a group-based tool for collecting user requirements and creating system designs
Groupthink
the tendency of group members to conform, resulting in a narrow view of some issue [Show Less]