Chapter 2: The Foundations of Business

financial accounting

prepare financial statements to help users, both inside and outside the organization, assess the financial strength of the company

managerial accounting

prepare information, such as reports on the cost of materials used in the production process, for internal use only

owner

primary role is to invest money in the business

revenue

represents the funds an enterprise receives in exchange for its goods or services

legal

requirements related to labor and consumer protection, equality, and product safety

Entrepreneur

someone who take the risks and reap the rewards associated with starting a new business enterprise

stakeholders

those with a legitimate interest in the success or failure of the business and the policies it adopts

owners, employees, and customers

three types of participants in business

management, operations, marketing, accounting, finance

types of functional areas

profit

what's left (hopefully) after all the bills are paid

1) polish the business 2) bring together the resources (money and people) needed to turn the idea into a business

Things business owners do

plan by setting goals and developing strategies for achieving them organize activities and resources to ensure that company goals are met and staff the organization with qualified employees lead them to accomplish organizational goals design controls for assessing the success of plans and decisions and take corrective action when needed

Things managers do

develop benefits and features of products, including price and quality decide best method of delivering products and best means of promotion manage relationship with customers

Things marketers do

macro-environment

big picture world external to a company over which the business exerts very little if any control

operations

converting resources (labor, materials, money, information) into goods or services

political

impact of gov't, including taxes, tariffs, trade agreements, and labor regulations

environmental

includes availability and care for natural resources, pollution levels, and carbon footprints

sociocultural

includes cultural attitudes and demographic factors such as age, race, and income

economic

includes inflation, employment rates, exchange rates, oil prices, GDP growth and others

technological

includes the impact of the internet, smart devices, and automation on business and society

finance

involves planning for, obtaining, and managing a company's funds

management

involves planning for, organizing, leading, and controlling a company's resources so that it can achieve its goals

accounting

measuring, summarizing, and communicating financial and managerial information and advise other managers on financial matters

operations manager

person who designs and oversees the transformation of resources into goods or services

marketing

Identifying customer needs and designing products to meet those needs

Sociocultural Forces

In the PESTEL model, where are demographic forces like age, personal income levels, and gender classified? Environmental Forces . Sociocultural Forces . Economic Forces . Legal Forces

Sociocultural Forces

In the PESTEL model, where are demographic forces like age, personal income levels, and gender classified? Environmental Forces . Legal Forces . Economic Forces . Sociocultural Forces

political, economic, sociocultural, technological, environmental, and legal

PESTEL

Suppliers

Sean owns a local burrito restaurant similar to a Chipotle. He buys his chicken from Fred's Farm Products. From the point of view of Sean's company, in which stakeholder group would Fred's be classified? Policy Makers . Suppliers . Funders . Customers

Customers, vendors, employees, landlords, bankers, policymakers, shareholders, funders, owners, service users, suppliers

Types of stakeholders

Expenses

What is the difference between revenue and profit? No difference - the terms are interchangeable . Contribution margin . The capital invested in the business . Expenses

Because new business owners usually need to borrow money to get started

Why is good financial management important?

functional areas

activities needed to operate a business