Business: Chapters 9 & 6

In operations management, producing output or achieving a goal at the lowest cost is known as _____. A. efficiency B. effectiveness C. standardization D. valuation

A. Efficiency

_____ is the process of delaying product customization until the product is closer to the customer at the end of a supply chain. A. Postponement B. Sourcing C. Deferral D. Multisite management

A. Postponement

Which of the following is a disadvantage of debt financing? A. The firm is required to make fixed payments to the creditors. B. Interest payments on debts are tax-deductible. C. Additional funds can be acquired without requiring existing stock holders to invest more of their money. D. Using debt can increase the return on equity to owners during periods of strong earnings.

A. The firm is required to make fixed payments to the creditors

Liquidity ratios

Ability of a firm to obtain the cash it needs to pay short-term debt, convert assets into cash to pay off liabilities

Services

Any primary activity that doesn't directly produce a physical product (INTANGIBLE)

Net Present Value

Sum of the present values of expected future cash flows from an investment, minus the cost of that investment

T/F: Goods are considered tangible, while services are considered intangible

TRUE

T/F: Repainted earnings are the profits a firm reinvests and are often a major source of long-term funds

TRUE

Earnings per Share=

(Net Income- Preferred Dividends)/ Average # shares common stock outstanding

Supply Chain

Key subsystem of a value chain that focuses on physical movement of goods and services

Hedge Fund

Limited partnership of investors that uses high risk methods in hopes of realizing large capital gains

Goal of Finance

Manage risks and maximize the market price of stock

Supply Chain Management

Management of all activities that facilitate the fulfillment of a customer order for manufactured goods (achieve satisfied customers at reasonable cost)

Financial ratios

Measures how effectively a firm is using its assets to generate revenues or cash

Return on Equity=

Net income + Owner's Equity

Moments of Truth

Episodes, transactions, or experiences in which a customer comes into contact with any aspect of the delivery system

Leverage ratios

Extent to which a firm relies on debt financing in its capital structure

T/F: Companies with high inventory turns, which replenish inventory levels more frequently, have more cash tied up in inventory, which means that those funds cannot be used elsewhere

FALSE

T/F: Hillier owns some common stock in a company that is experiencing serious financial problems and may have to declare bankruptcy. Hillier shouldn¿t worry though, because as a common stockholder, his claims on the company¿s assets will be paid before the claims of any other stakeholder.

FALSE

T/F: The time value of money is the principle that a dollar received today is worth less than a dollar received in the future.

FALSE

Capital Budgeting

Financial managers use cash flowers to judge benefits of long term investment proposals

Initial Public Offering

First sale of stock by a private company to the public

Responsive Supply Chain

Focus on flexibility and responsive service and are able to react quickly to changing market demand and requirements

Bond

Formal debt instrument issued by corporation or government entity, legal obligation to pay interest

Financial capital

Funds a firm uses to acquire its assets and finance its operations

Preferred Stock

Gives holder preference over common stockholders in terms of dividends and claims on assets

Asset management ratios

How effectively a firm is using its assets to generate revenue

Types of Securities: (3)

1. Common Stock 2. Preferred Stock 3. Bond

Core of OPS: (3)

1. Cost 2. Efficiency 3. Quality

Project Life Cycle (5)

1. Define 2. Plan 3. Organize 4. Control 5. Close

5 Dimensions of Service Quality

1. Reliability 2. Responsiveness 3. Tangibles 4. Assurance 5. Empathy

Risk and Return=

A Trade Off

Which one of the following skills contributes to project success? A. Lack of data accuracy and integrity B. Clear communication channels C. Ill-defined project objectives D. Inability to resolve conflicts

B. Clear communication channels

A(n) _____ seeks to balance capacity and demand, might use only a few large distribution centers, and minimize costs of routing products from factories to retail stores and customers. A. responsive supply chain B. efficient supply chain C. push system D. pull system

B. Efficient supply chain

Jason, the regional manager for a large electronics firm, is trying to determine whether a new warehouse is a good investment. After working with his firm¿s financial managers, he concludes that the project carries a negative NPV (Net Present Value). What should Jason do and why? A. He should invest in the warehouse to increase profits since a negative NPV indicates that the firm needs to generate more funds to stay afloat. B. He should not invest in the warehouse since a negative NPV means that the present value of the future cash flow does not justify the cost of the warehouse. C. He should invest in the warehouse since a negative NPV means that the cost of financing the warehouse is within the company's budget for expenses. D. He should not invest in the warehouse since a negative NPV means the firm doesn¿t have enough money to afford the investment.

B. He should not invest in the warehouse since a negative NPV means that the present value of the future cash flow does not justify the cost of the warehouse

Which of the following best explains the time value of money? A. This concept explains how inflation works. B. It means that it¿s best to have money today, so it can be put to work sooner to make even more money. C. It refers to the calculation of an amount using compound interest. D. This concept states that it is always more profitable when money is invested for a long term.

B. It means that it's best to have money today, so it can be put to work sooner to make even more money

Which of the following best describes the fiduciary duty of financial managers of a firm? A. Their main goal is to maximize the sales figures and increase the profits of the firm. B. They are legally and ethically obligated to make decisions consistent with the financial interests of their firm's owners. C. They are responsible for representing a firm's financial condition in a positive way on the annual reports. D. Their sole duty is to come up with strategies to decrease losses and eliminate expenses for the firm.

B. They are legally and ethically obligated to make decisions consistent with the financial interests of their firm's owners

At a local convenience store, an increase in the inventory turnover ratio would indicate that it is: a. at risk of holding too much inventory. b. selling out its merchandise quickly. c. relying heavily on credit sales. d. more likely to face a cash flow problem.

B. selling out its merchandise quickly

Common Stock

Basic form of ownership in a corporation

Exchange-Traded Funds

Bundle of stocks or bonds that are in an index that racks the overall movement of a market, prices change constantly

Which of the following is NOT a stage in the project life cycle? A. Define B. Organize C. Improve D. Close

C. Improve

One of the benefits of holding a large inventory is that: A. it reduces risks of spoilage, depreciation, and obsolescence. B. it reduces costs for heating, cooling, taxes, and insurance. C. it reduces the chance of stock-outs and lost sales. D. it facilitates the easy flow of funds.

C. It reduces the chance of stock-outs and lost sales

The _____ measures the extent to which a firm relies on debt to meet its financing needs. A. liquidity ratio B. activity ratio C. leverage ratio D. profitability ratio

C. Leverage ratio

Which one of the following has the lowest goods content? A. Automobile muffler replacement B. Computer diagnosis and repair C. Movie presentation D. Fast-food restaurant

C. Movie Presentation

The main disadvantage of financial leverage is that it: A. increases the firm¿s taxes. B. requires owners to invest even more of their own money. C. reduces the financial return to stockholders when times are bad. D. requires the firm to make higher dividend payments.

C. Reduces the financial return to stockholders when times are bad

The three issues that are at the core of operations management include all of the following EXCEPT _____. A. cost B. quality C. tangibility D. efficiency

C. Tangibility

A pull system _____. A. requires high levels of finished goods inventory B. relies heavily on accurate sales forecasts C. waits for customer orders D. produces goods in advance of demand

C. Waits for customer orders

Compound Growth

Compounding of interest over time

Inventory Turnover Formula=

Cost of Goods Sold/ Average Inventory

Effective Supply Chain

Designed for efficiency and low cost by minimizing inventory and maximizing efficiencies in process flow

Inventory Turnover Ratio

Determines how many times a company's inventory is sold and replaced over a period of time

Dividend

Payment to shareholders from the company's earnings

Goods

Physical product that you can see, touch, or consumer (TANGIBLE)

Time Value of Money

Principle that invested money grows over time by earning interest

Push System

Produces goods in advance of customer demands

Pull System

Produces only what is needed at upstream stages in the supply chain in response to customer demand signals from downstream stages

Mutual Funds

Raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many securities

Profitability ratios

Rate of return a firm is earning on various measures of investment

Finance

Responsible for finding the best source and uses of financial capital, study of how to obtain and allocate money

Operations Management

Science and art of ensuring that goods and services are created and delivered successfully to customers