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BA101 Midterm Ch 1-6

BA101 Midterm 1

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
Created by: chapina2maggie



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