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| The creation of finished goods and services; uses the factors of production |
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| converting resources into goods and services; provide high-quality goods in response to demand |
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| tailoring products to meet the needs of individual customers; still done in mass. Ex: Dell laptops, dress shirts (embroidered initials), jeans, Nike shoes, custom m&ms, private investments |
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| Ten qualities to look for in a facility location |
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Definition
convenient for customers
labor costs-cheaper in Africa and Asia than in the U.S.
access to transportation
availability of resources
proximity to suppliers
crime rates
weather
taxation
government
quality of life for employees e.g. schools, etc. |
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| working from home; location is not a factor |
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| kinds of facility layouts |
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Definition
product layout/assembly line layout; used to produce large quantities of a few types of products
process layout-used in operations that serve different needs of customers; more customization
cellular/module layout-can accommodate changes in design or customer demand
fixed-position layout-used for building houses, planes, etc; everyone gathers around the product that is being built |
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| helping a firm find the best suppliers and best prices |
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| just in time inventory control; a minimum of inventory is kept on the premises and parts, supplies, and other needs are delivered just in time to go on the assembly line. |
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| is critical in business; should strive to have zero defects |
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| formal quality control program; their benchmark is 3.4 defects per million opportunities |
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| worldwide quality control program. The EU demands companies certify with ISO 9000 standards |
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| PERT=program evaluation and review technique; used to analyze the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the whole project |
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| bar graph showing production managers what projects are being worked on and what stage they are in at any given time |
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| the longest path in a PERT network; the sequence of tasks that takes the longest time to complete |
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| through the early 1900s; you can produce as much as you wanted and there would still be a market for it; only applies nowadays to a few products, such as oil |
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| 1920s; mass production was used, companies emphasized selling and advertising; most didn't offer extensive service after the sale |
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post WWII; competition was fierce; advertising became vital
marketing concept-three part business philosophy including a customer orientation, service orientation (everyone in the company has the same objective), and profit orientation |
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| Customer Relationship Era |
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Definition
| starting in the 1990s; must learn about customers in order to exceed their expectations, and increase customer satisfaction and loyalty; service after the sale |
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| The four Ps (the marketing mix) |
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Product
Price
Place
Promotion |
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| business to business; Dell selling to Chase |
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| business to consumer; Dell selling to you |
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| also know as middlemen (middlepeople?); they help get the products where they need to go. includes agents, brokers, wholesalers, and retailers. They make up the channel of distribution |
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Definition
| one can save 75% by cutting out the middlemen, but it would be inefficient and not cost-effective in the end. It is hard to distribute your product yourself. It cost more to use middlemen, but they add value. Economists say it adds cost. Marketers say it adds value. The public tends to view intermediaries with suspicion. They can be eliminated, but what they do cannot. |
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| the planning, implementing, and controlling of the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. |
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| large shipments, bulky items such as coal, wheat, heavy equipment. The greatest volume of "stuff" shipped within the U.S. is by train. Warren Buffet invests in them. |
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| smaller shipments, can reach more locations than trains, high price of gas |
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| fast, but expensive. Not so much actually travels by air, although anything can--from small packages to elephants |
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| inexpensive, but slow. There are also ships in rivers |
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| water, petroleum and petroleum products, crushed coal--fast an efficient |
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| the use of multiple modes of transportation to complete a single long-distance movement of freight |
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| two purposes of accounting |
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Definition
to help managers make well-informed decisions
to report financial information about the firm to interested stakeholders |
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| managerial versus financial |
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Definition
| within the organization as opposed to for outside the firm i.e. creditors, suppliers, investors, etc |
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| private versus public accountant |
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Definition
| private accountants work in one company as in-house accountants while CPA provide accounting services for multiple clients. There are 650,000 CPAs in the U.S. It is risky to be an accountant because they are liable for any mistakes. |
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| generally accepted accounting principles |
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| reviewing and evaluation the information used to prepare a company's financial statements |
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the recording of business transactions; bookkeepers don't make decisions
categorize transactions, enter into journals, and post to ledgers. |
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| fundamental accounting equation |
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| ASSETS=LIABILITIES+OWNER'S EQUITY |
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| the practice of writing every transaction in two places |
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| financial statement that reports a firm's financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owner's/owners' equity |
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| the financial statement that shows a firm's profit (or loss) after costs, expenses, and taxes. It summarizes all of the resources that have come into the firm (revenue), all the resources that have left the firm, and the resulting net income (or loss) |
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| the ease with which an asset can be converted into cash |
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| a measure of the cost of merchandise sold or cost of raw materials and supplies used for producing items for resale |
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| financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing. |
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| function in a business that acquires funds for the firm and manages those funds within the firm |
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| the job of managing a firm's resources so it can meet its goals and objectives |
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Term
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Definition
| examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm |
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Term
| most important ___ years of a small business |
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Definition
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Definition
| analyzing short-term and long0-term money flows to and from the firm |
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| financial planning three steps |
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Definition
1. forecast financial needs for short and long term
2. develop a budget
3. establish controls that compare actual revenues, costs, and expenses with the company's budget |
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Definition
| highlights a firm's spending plans for major asset purchases (usually of property and equipment) |
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| estimates cash inflows and outflows during a particular period, such as a month or quarter (3 months) |
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| ties together the firm's other budgets and summarizes its proposed financial activities |
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| the practice of buying goods and services now and paying for them later |
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Definition
"two-ten, net thirty". 2% discount if you pay in ten days; otherwise, the full amount is due within 30 days
whether you take it or not depends on your current and projected cash flows |
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ask them for money
is it a good idea? no. It creates strain. What will you tell them if you can't pay them back? They probably don't know about cash flows. Entrepreneurs are relying on F+F less and less |
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Definition
| in the business of giving out loans. you show them your business plan, and they give you a loan. Since, 2008, banks give out barely any loans on the basis of a business plan alone. |
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Definition
secured-backed by collateral e.g. mortgage, the house is collateral for the loan
unsecured-not backed by collateral |
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| debt financing by selling bonds |
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Definition
| borrow money from someone, paying them interest along the way, and give them their investment back at the end |
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Definition
| usually 5-6% interest, high risk of default. begin at BB on the S&P scale (almost no bonds are AAA, the highest rating) |
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| can buy bonds in increments as small as ____ dollars |
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Definition
| 2,000 (includes several bonds) |
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Term
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Definition
| the terms that dictate how the bond will be handled |
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Term
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Definition
common stock (lower dividend with voting rights)
preferred stock (higher dividend without voting rights) |
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| If Sprint goes bankrupt, in what order do they pay back the the kinds of stock and bonds? |
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Definition
| bonds-->preferred stock-->common stock |
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Term
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Definition
| initial public offering; the first time a company offers to sell its stock to the general public |
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Term
| what percentage of debt is okay for a large corporation? |
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Definition
| 33-40% of L+E is liabilities |
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Term
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Definition
| raising needed funds through borrowing to increase a firm's rate of return; if you owe a lot of money, you are highly leveraged |
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| Warren Buffet has around ____ dollars |
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Definition
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| Buffet lives in the same _______ in Omaha he bought in ______ |
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Definition
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| Buffet's secretary pays a ... |
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| higher percent of income tax then he does |
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| Buffet started managing money at age____ |
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Definition
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| In 1962, Buffet invested in _____, a textile company and took it over three years after and moved into _______ |
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Definition
| Berkshire Hathaway, insurance |
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| name at least three holdings Buffet's company has |
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Definition
| Coca-Cola, Geico, Dairy Queen, Wells Fargo and 70 others |
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| Buffet's company was worth __________ billion dollars at the time the book came out |
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Definition
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| Buffet promised to donate ___% of his own money to ____ foundations |
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Definition
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| the financial marketplace for stocks, bonds, etc. assists _______ in finding money and gives _______ a place to buy and sell |
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Definition
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| stocks tend to grow over time; true or false? |
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Definition
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Definition
primary-where you buy new stocks; IPO
secondary-trading between investors of previously issued securities |
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Definition
| assist in the IPO process, they sometimes buy the whole offering at a discount and sell it at a higher price (this is called underwriting) |
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Definition
| new york stock exchange; has become more electronic, there is still trading by shouting; they determine how much was traded by counting the trading papers strewn on the floor |
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Definition
| Securities and Exchange Commission; the federal agency that regulates exchanges and requires that prospectuses of economic and financial info be prepared |
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| pros and cons of issuing stocks |
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Definition
pros-no debt, don't have to pay a dividend, can promise to pay a dividend and then go back on the promise
cons-more owners, have to keep them happy |
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Term
| bonds can be bought at a _____ or a _____ |
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Definition
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| the face value of the bond. No matter what, you will get that back at the maturity date |
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Definition
| the company can call back the bond, usually if the interest is too high |
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| pros and cons of issuing bonds |
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Definition
pros-no more owners, temporary obligation, can be called back if there is a call feature
cons-debt, have to pay the interest and the principal |
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Definition
| the company agrees to set aside money to repay bondholders |
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Definition
| bonds are somewhat liquid, you can sell them every day, but you might not get back the full price you paid for them |
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Definition
| "buy it immediately at the 'best price'" |
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Definition
| "wait for a certain price to be reached and then buy it if it is available." You can set an order for 30 days, then you have to reset it |
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| bear market vs. bull market |
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Definition
bear market is going down
bull market is going up |
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Definition
an organization that buys stocks and bonds and then sells shares in those securities to the public.
some say it is good for diversification. Prof. GBJ says it is too diversified. many mutual funds have 1000+ positions. mutual funds trade only at the end of the day. one can get capital gains on a mutual fund even if the price goes down |
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Definition
| net asset value; closing price |
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Definition
| exchange traded funds; mutual funds that trade like stock (can trade all day, etc.); exist for countries, real estate, commodities, etc. Fees are lower than mutual funds |
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| only put in to the markets what you can afford to lose |
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Definition
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Head of the Federal Reserve Bank
name, place of birth, SAT score, undergrad, Phd, predecessor |
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Definition
| Ben Bernanke; Augusta, Georgia (taught himself Calculus); 1590; Harvard; MIT; Alan Greenspan |
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Term
| The 700 billion dollars for the 2008 bailout were part of this program |
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Definition
| TARP-troubled asset relief program |
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| current interest, inflation, unemployment, and growth rates in U.S. |
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Definition
| basically zero, 3% or so, 7.3%, and 1.8% (5% is good) |
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| What if there is too much money in circulation? |
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Definition
| inflation; too many dollars chasing too few goods |
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| How much money in bonds does the U.S. buy each month? |
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Definition
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reserve requirement
pros and cons |
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Definition
| the minimum that a bank must have in their vault. The Fed keeps increasing the requirement. The more money they keep in their vaults, the less they have to loan out to others. Having a lot of reserves is good for safety; bad for stimulating the economy |
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Definition
| the interest rate at which banks can get a loan from the Fed (a lifeline). For the past five years, it has been nearly zero. This is supposed to help the economy by giving the banks money so people can take out mortgages, but the banks are hoarding the money for comfort--much more than the minimum they need to keep |
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Definition
| the rate at which banks loan to each other. Banks can loan out any extra funds to other banks; this rate is also statistically zero |
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