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BA101 Midterm Ch 1-6
BA101 Midterm 1
| Question | Answer |
|---|---|
| What is business? | Any profit seeking activity by selling goods and services. |
| What is non-profit? | Seeks financial gain to help its mission but does not seek personal profit for it's owners or organizers. |
| What is entrepreneur (and the entrepreneurial spirit)? | Willing to take risk of losing money and time to start a new business in exchange for a chance to create more wealth. |
| What is risk and return? | How much profit you stand to make. |
| What is standard of living? | Refers to how much a person can buy with the money they have. |
| What are the four basic and important rights/freedom under free enterprise? | Right to own land, Right to own business and keep profit, Right to compete Right to choose |
| Define stakeholders. | All those who stand to to gain or lose by policies or activities of the business. |
| Who are stakeholders? | community, employees, investors, consumers, competitors, owners |
| Factors of production? | Natural resources, human resources, capital, knowledge and entrepreneurship. |
| Business environments | Global, economics & legal, technological, competitive and social |
| Competitive differentiation (i.e."discriminator") | Quality, cost, innovation, speed and service. |
| What is needed to compete successfully? | exceed customer expectations in all discriminators |
| The US economy has gone through what business era's? | Agrarian early 1800's, Manufacturing late 1800's-late 1900 and now more service oriented. |
| What changed the US economy from agrarian to manufacturing? | Industrial Revolution |
| How did businesses approach customers in the 20th century. | focused on production, marketing era and now relationship era. |
| What is ethical behavior? | acting with integrity, free of bias and with care for others. |
| Why employees who witness ethical violations never do anything about it? | afraid of retaliation, feel their report will not be kept confidential and think management will do nothing about it. |
| What are common ethical violations? | Conflicts of interest, bribes & kickbacks and loyalty vs. truth |
| What does acting ethically require? | Moral Awareness Moral Judgement Moral Character |
| We each approach ethical decisions through the framework of what five standards? | Universalism Egoism Relativism Virtue Ethics |
| Define universalism | we all generally apply this standard. (e.g we all know not to kill to get what we want) |
| Define egoism | Doing what is best for you |
| Define utilitarianism | Do what provides the greatest good for the MOST people |
| Define virtue ethics | Applying the highest standard. Doing what is the most virtuous among us. (angel on my shoulder) |
| How to approach an ethical issue or decision? | -Can i frame it (does it hurt one group and benefit another) -How would I approach if on the other side (balance concept) -Is it legal -Would i want it on the front page |
| What are ethics companies deal with their stakeholders and competitors? | -Employees (fair wages, safe conditions) -Investors (compliance with accounting rules, full disclosure) -Consumer (safe from harmful products) -Community (protecting environment) -Stockholders(maximum profit, honest accounting) -Competitors(fair play |
| Define compliance based codes | emphasize legality and enforcement (not as useful) |
| Define integrity based codes | stress values and proper behavior towards others. |
| What 6 steps are required to have effective ethics codes? | 1-top management support and endorse 2-management creates an expectation 3-training provided 4-ethics office created 5-outside suppliers held at same standard 6-code must be enforced |
| Describe the pyramid of social responsibility | -Global stakeholders desire-philanthropic Resp. -Global stake holders expect-ethical responsibility -Global stakeholders require-legal responsibility -Capitalism requires-economic responsibility |
| Danger signs that a company's ethics may not be important. | -No. 1 reason for violating rules is "pressure from management" -No written code, no clear procedures -No buy-in from top management -Ethics looked as legal issue only/ public relations issue -Quick fix solutions to ethical issues |
| What is economics? | The science of scarcity and choice |
| Macroeconomics | looks at a nations economy |
| Microeconomics | looks at the behavior or individual |
| Define money | Money has value because we know people will accept it. not backed by a commodity like gold. |
| Key functions of money | medium of exchange, unit of account, store of value |
| What are the three main economic systems? | Capitalism-free enterprise, Socialism-more government ownership, higher taxes, Communism-Government owns most businesses and make economic decisions |
| What is the US Capitalist model considered? | Mixed economy, unlike pure capitalist, government has some involvement. Succeeds because of invisible hand. Require free markets so seller and buyers determine price. |
| Define supply and demand | the quantity of goods that is demanded by the buyer and the quantity of a good that is supplied by the seller. |
| Define equilibrium | amount demanded = amount supplied |
| Factors of shift in demand curve | Preferences, # of buyers, Buyers income, Prices of substitute goods, Prices of complimentary goods, Future expectations |
| Factors of shift in supply curve | Cost of inputs, Cost of Technology, Taxes, # of suppliers |
| Types of competition within a free market are: | Pure (perfect),Monopolistic, Oligopoly, Monopoly |
| Define Gross Domestic Product (GDP) | the value of final goods and services produced within the nation's borders. *Key indicator of size, power and condition of nations wealth. |
| What cause unemployment rates | Frictional-quit, Seasonal-teachers, Structural-skills no longer match, Cyclical-have skills but no work |
| What is inflation? | general rise in the price of goods and services. *measured by consumer price index (CPI) comparing market basket of goods now and then |
| Define Productivity | Refers to how much a nation's economy can produce p=output/input |
| Business cycle | begins with peak, contraction, troughs, recovery (expansion) |
| Why does government help to stabilize the economy? | to avoid long term contractions, recession, inflation and unemployment |
| What policies are used to stabilize the economy? | Fiscal policy: increasing/decreasing taxes; Monetary policy: controlled by the federal reserve by changing interest rates, buying selling government securities and adjusting bank reserve requirements |
| What causes inflation | -increased money supply-too much money chasing too few goods. -supply of goods go down. |
| Why do countries trade? | no country is self-sufficient. |
| Define Comparative advantage? | Shows that a country is better off producing what it is most efficient and effective at producing.*more results in more output for all. |
| Define absolute advantage | total lock (monopoly) on producing certain good or can produce it much more efficiently than other nations. very few instances now. |
| What is free trade | The movement of goods and services across national borders without political and economic barriers. |
| Define balance of trade | compares the nation's value of exports to imports over a certain period of time |
| Define trade deficit | occurs when our imports exceed our exports |
| Define balance of payment | compares the cash coming in to the country versus the cash going out. *investments, cash from tourism, military |
| Define dumping | the practice of selling goods in a foreign nation for less than you would charge in your own country to gain the foothold. |
| What are the ways to conduct business abroad? | Exporting, Off-shoring, Licensing, Franchising, Outsourcing/contract manufacturing 6-Joint venture 7-Foreign direct investment |
| Define Off-shoring | Moving part of your operation to another country where it is cheaper to product product |
| Define licensing | allowing someone else to produce your product in a foreign country. *receives royalty fee |
| Define Franchising | selling the rights to use your business name and model abroad |
| Define outsourcing | establishing relationship with a foreign firm to manufacture your product or provide your service |
| Define joint ventures | When two or more firms join together to produce a product or work together |
| Define foreign direct investment | large companies invest in buying foreign companies called foreign subsidiaries. |
| Define multinational companies | have facilities and manufacture goods or provide services in many countries *Wal-Mart |
| Forces that affect foreign trade are: | Sociocultural, Economic and financial, Legal and Regulatory, Physical and environmental |
| Define trade protectionism | the use of government regulations to limit the import of goods and services |
| What are some methods of trade protectionism | Tariffs (tax);Quotas (limit); Embargoes (ban) |
| Debate of trade protectionism | saves domestic jobs and protects industries from failing due to cheaper imports. |
| Debate of Free trade | believe that the best quality oat the best prices should determine which companies prosper or fail. |
| Define North American Free Trade Agreement (NAFTA) | between US, Canada and Mexico. Debated due to jobs lost in US |
| What organizations promote free trade | World trade organization (WTO), World bank, International Monetary fund (IMF) |
| Purpose of world trade organization | attempts to promote free trade among nations, mediates disputes |
| Purpose of world bank | primarily lends money an funds projects to help build infrastructure of less developed countries |
| Purpose of International Monetary Fund (IMF) | Created to promote trade by increasing the financial cooperation among nations, making emergency loans |
| Basic forms of business ownership | Sole-proprietorship, Partnership, Corporation , Limited Liability Company |
| What are key considerations in what forms of business to take? | ALERT A_Autonomy L_Liability E_Expectations R_Resources T_Taxes |
| Autonomy | how much you want to do alone |
| Liability | How much risk you willing to take |
| Expectations | Something you want to do for life, expansion, growth |
| Resources | Ability to raise borrow money for labor to grow business |
| Taxes | how the government taxes your business |
| Sole proprietor | -Main advantage-easy to start and stop -Main disadvantage-Unlimited liability -Tax-taxes added to owners personal income |
| Types of Partnership | -General: all owners share in operations/management -Limited: at least one general partner and 1 or 2 limited partners -LL partnership(LLP): not liable for other partners acts |
| Partnership | -Main advantage: more financial resources, shared management allows growth -Main disadvantage: unlimited liability for general partners, can lose everything you own, shared profit Tax: Profits flow through to partners' personal income and taxed |
| Corporations | State chartered legal entities. "separate beings" from owners. owned by stock holders |
| Corporations advantages | limited liability, only liable with what they brought, easy to raise money with shares, easy to terminate by selling stock, more resources ability to spend money on new products |
| Corporation disadvantages | more regulations, requirements,paperwork, double taxation |
| Conflicts of interest | taking an action in which i may have a vested interest e.g brothers company |
| Bribes and kickbacks | taking a bribe of gift in exchange for giving someone some business |
| Loyalty vs. truth | is it okay to stretch the truth to close a deal. |
| What is Consumer Price Index (CPI) | measures inflation by comparing market basket of goods now and then |
| Who controls fiscal policy | Government |
| Who controls monetary policy | Federal Reserve |
| How are profits distributed among shareholders? | If distributed, you get respective percentage of ownership. 5% owner=5% profit |
| What happens when ownership and management becomes separate? | Shareholders elect a board of directors to oversee management of company. |
| Is a corporation required to pay shares in forms of dividend? | not required to EVER pay a dividend |
| What is the value of a stock? | Value lies in the fact that it may receive a periodic dividend payment and also that it goes up in value as the company becomes successful. |
| Types of stocks | Common stock: proves each common stock holder with one vote per share of stock held; Preferred stock: has limited or no voting rights but does entitle the shareholder to collect dividends ahead of common stock holders if dividend declared. |
| Define Employee stock ownership (ESOPs) | corporation owned by it's employees. company's offer this as means for employees have a greater vested interest in seeing the company succeed. |
| Define S-Corporation | Special corporation that enjoys the benefits of limited liability and other corporate traits. |
| S-Corporation advantages | Do not have double taxation, limited liability, |
| S-Corporation disadvantages | no more than 100 shareholders, must be US Citizens or permanent residents, only one class of stock, limit on how corporation make it's money. |
| Limited liability companies (LLC) advantages | limited liability like any corporation, can chose to be taxed like a partnership or as a corporation, no S-Corp type ownership restrictions, less reporting more flexible |
| Limited liability companies (LLC) disadvantages | No stocks issued, do not enjoy perpetual life in all states-30yrs in some, owners are treated like partners and pay SE taxes on profit, more paperwork than partnership but less than corporations |
| Define Mergers | joining together two firms to become one firm |
| Define Acquisitions | involve one company buying the stocks or all the property of the other (one company takes over other) |
| vertical mergers or acquisitions | company buys or merges with another company involved in different stages of related business |
| Horizontal mergers or acquisitions | a company buys or merges with another in the same industry that allows it to expand or diversify its product |
| Conglomerate mergers or acquisitions | involves two firms in unrelated business |
| Leveraged buyouts (LBO) | involve internal management, employees or certain investors borrowing money to buy all the stock of their own company and thus becoming the owners |
| joint ventures | two companies will form partnership for a specific project or undertaking |
| Franchise advantage | where a franchisee buys a franchise, have immediate name recognition and marketing and management |
| Franchise disadvantage | very expensive to start, royalty fees paid based on sales, |
| Cooperatives | groups of people that come together to form, own and control an organization |
| Entrepreneur traits | self directed or motivated, more tolerance for risk and failure, action oriented and energetic, able to have a vision for success and often how something might be done differently, self-confident and optimistic |
| Define life-style companies | not all entrepreneurs and small businesses want to grow some are content to achieve a certain level in size and income |
| Organization stages | family and craft, entrepreneurial and professional management |
| Five key factors or considerations to starting s small business | planning, financing, marketing, managing and accounting |
| common financing sources | Equity financing, venture capitalist, angel investor, debt financing, Small Business administration-gov |
| Business plan have what six key sections | Executive summary, analysis of the opportunity, description of the business and financial data |
| why do most small business fail? | management problems |
| Small companies characteristics | less rigid and more flexible to adapt to changing market-circumstances, less layers of management, more innovative, more personal feel, less specialized tasks |
| Large companies characteristics | more layers, more established procedures, better benefits, more stability, sometimes more growth |
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chapina2maggie
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