GBS 151 Intro to business lesson 1 - 6

Gross Domestic Product

(GDP) The total value of all final goods and services produced within a nation's physical boundaries over a given period of time

Business Format Franchise

A broad franchise agreement in which the franchisee pays for the right to use the name, trademark, and business and production methods of the franchisor

Conglomerate Merger

A combination of two firms in unrelated industries

Acquisition

A corporate restructuring in which one firm buys another

Federal Deposit Insurance Corporation (FDIC)

A federal agency that insures deposits in banks and thrift institutions for up to $250,000 per customer per bank

Economy

A financial and social system that structures how resources flow through society, from production to distribution to consumption

Corporation

A form of business ownership in which the business is considered a separate and distinct legal entity from its owners

Business Plan

A formal document that describes a business concept, outlines core business objectives and details strategies and timelines for achieving those objectives

Monopolistic Competition

A market structure with many competitors selling differentiated products. Barriers to entry are low.

Pure Competition

A market structure with many competitors selling virtually identical products. Barriers to entry are quite low.

Natural Monopoly

A market structure with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones. Most natural monopolies are government sanctioned and regulated

Monopoly

A market structure with one producer completely dominating the industry, leaving no room for any significant competitors. Barriers to entry tend to be virtually insurmountable.

Oligopoly

A market structure with only a handful of competitors selling products that can be similar or different. Barriers to entry are typically high

Consumer Price Index (CPI)

A measure of inflation that evaluates the change in the weighted-average price of goods and services that the average consumer buys each month

Producer Price Index (PPI)

A measure of inflation that evaluates the change over time in the weightedaverage wholesale prices

Contraction

A period of economic downturn, marked by rising unemployment and falling business production

Deflation

A period of falling average prices across the economy

Inflation

A period of rising average prices across the economy

Recovery

A period of rising economic growth and employment

Expansion

A period of robust economic growth and high employment

Disinflation

A period of slowing average price increases across the economy

Reserve Requirement

A rule set by the Fed, which specifies the minimum amount of reserves (or funds) a bank must hold, expressed as a percentage of the bank's deposits

Economic System

A structure for allocating limited resources

Distributorship

A type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

Hyperinflation

An average monthly inflation rate of more than 50%

Communism

An economic and political system that calls for public ownership of virtually all enterprises, under the direction of a strong central government

Recession

An economic downturn marked by a decrease in the GDP for two consecutive quarters

Socialism

An economic system based on the principle that the government should own and operate key enterprises that directly affect public welfare

Capitalism

An economic system—also known as the private enterprise or free market system—based on private ownership, economic freedom, and fair competition

Depression

An especially deep and long-lasting recession

Money

Anything generally accepted as a medium of exchange, a measure of value, or a means of payment

Mixed Economies

Economies that embody elements of both planned and market-based economic systems

True

Even though nonprofit organizations are not in business for a financial gain, they remain businesses in every other sense. True or false

A college student registers for classes and pays the tuition with a credit card. Because it uses accrual-basis accounting, the college will recognize the payment as revenue as soon as the transaction turns into cash in the school's bank account

False

Attempts to build exporting opportunities abroad through better relationships with other countries are called protectionism. True or false

False

Explicit costs are not easy to measure because they do not involve a monetary payment

False

In the context of factors of production, the term capital means the money businesses use to finance their operations. True or false

False

International companies must comply with international legal standards, but not the laws of their host countries. True or false

False

Ralph owns some stock in the Lottadoe Corporation, and wants to know whether this company earned a profit over the most recent year. He could find this information in the company's balance sheet

False

The only practical way for small businesses to compete globally is by directly investing in foreign production facilities. True or false

False

Monetary Policy

Federal Reserve decisions that shape the economy by influencing interest rates and the supply of money

Companies with a worldwide presence such as Toyota and Sony actually thrived when the Japanese economy entered a deep, sustained economic slump in the 1990s for which of the following reasons?

Global trade reduced their dependence on the Japanese economy.

Fiscal Policy

Government efforts to influence the economy through taxation and spending

GAAP

Greg is a recent graduate with an accounting degree. He has also sat for and passed the CPA exam. At his new accounting position at Get With It.com, inc., he notices that depreciation expense is not calculated in what he understands to be an acceptable accounting method. Greg has decided to approach his supervisor and clarify what he believes to be a discrepancy in standard practices. To make his case, he should refer to

As a small mountain kingdom in the south of Africa, Lesotho has a primarily agrarian economy. If its king and political leadership made decisions that sank the kingdom into unmanageable debt through loans it could not hope to repay, to which international body would the king appeal for debt forgiveness?

IMF

What distinguishes outsourcing from importing?

Importing occurs when a firm buys foreign products that have already been produced, and outsourcing occurs when a firm contracts with foreign vendors to produce products.

Angel Investors

Individuals who invest in startup companies with high growth potential in exchange for a share of ownership

Sally works in the financial department at Porsche. Her duties include preparing reports and analyzing data specific to Porsche. She develops budgets for upcoming new models, appraises financial performance, and verifies the accuracy and validity of Porsche's internal records and accounting procedures. What might her job title be, specifically?

Management accountant and internal auditor

M1

Money supply, including all currency plus checking accounts and traveler's checks

M2

Money supply, including all of M1 money supply plus most savings accounts, money market accounts, and certificates of deposit

On an income statement, which of the following is the profit or loss a firm earns in the time period covered?

Net income

Budget Surplus

Overage that occurs when revenue exceeds expenses over a given period of time

Commercial Banks

Privately owned financial institutions that accept demand deposits, make loans, and provide other services for the public

Budget Deficit

Shortfall that occurs when expenses exceed revenue over a given period of time

Open Market Operations

The Federal Reserve function of buying and selling government securities, which include treasury bonds, notes, and bills

Productivity

The basic relationship between the production of goods and services (output) and the resources needed to produce them (input) calculated via the following equation: output/input = productivity

Corporate Bylaws

The basic rules governing how a corporation is organized and how it conducts its business

Articles Of Incorporation

The document filed with a state government to establish the existence of a new corporation

Demand Curve

The graphed relationship between price and quantity from a customer demand standpoint

Supply Curve

The graphed relationship between price and quantity from a supplier standpoint

Board Of Directors

The individuals elected by stockholders of a corporation to represent their interests

C Corporation

The most common type of corporation, which is a legal business entity that offers limited liability to all of its owners, who are called stockholders

Unemployment Rate

The percentage of people in the labor force over age 16 who do not have jobs and are actively seeking employment

Business Cycle

The periodic contraction and expansion that occur over time in virtually every economy

Equilibrium Price

The price associated with the point at which the quantity demanded of a product equals the quantity supplied

Privatization

The process of converting government-owned businesses to private ownership

Demand

The quantity of products that consumers are willing to buy at different market prices

Supply

The quantity of products that producers are willing to offer for sale at different market prices

Discount Rate

The rate of interest that the Federal Reserve charges when it loans funds to banks

Macroeconomics

The study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies

Microeconomics

The study of smaller economic units such as individual consumers, families, and individual businesses

Economics

The study of the choices that people, companies, and governments make in allocating society's resources

Federal Debt

The sum of all the money that the federal government has borrowed over the years and not yet repaid

Money Supply

The total amount of money within the overall economy

A franchisor offers other businesses the right to produce and market its products within specific guidelines. True or false

True

Businesses raise the standard of living through the payment of taxes, which the government can use to pay for socially desirable projects. True or false

True

Cost is defined as the value of what is given up in exchange for something else

True

Countries with the highest trade barriers often have the least competition. True or false

True

Demographic factors that affect business include population size and density, age, gender, race, education, and income. True or false

True

Following your passion in making career choices can lead to financial and personal success. True or false

True

Generally accepted accounting principles (GAAP) are a set of accounting standards used in the preparation of financial statements

True

Tanya Osborne, the chief executive officer of Osborne Computer, recently announced she was considering using foreign licensing to enter the Chinese market. What is one problem Osborne Computer might experience when using foreign licensing as an international entry strategy?

Unethical licensees may become competitors in the future.

In regard to the history of American business, what environment typified the industrial revolution?

Unprecedented production efficiency occurred, but so did a loss of individual ownership and personal pride in the production process.

Retained earnings

Which of the following would the owners' equity section of a balance sheet list?

Exporting

_____ is the most basic level of international market development and involves shipping domestically produced products overseas.

Your college has contracted with a construction company to build a new bookstore. The heavy machinery and equipment the contractor will use in the construction process are classified as

capital

The auditor's _____ indicate(s) whether the firm's financial statements are prepared and presented in a way that will likely fairly represent the firm's financial condition.

certification statement

In the late 1970s, Pepsi Cola wanted to enter the Russian marketplace but faced a significant hurdle. Due to the Russian lack of a tradable currency, Pepsi Cola would not be able to receive payment in the traditional sense. Ultimately, a deal enabled Pepsi Cola to trade Pepsi products for Russian-made vodka. This transaction is an example of

countertrade

The stock market, housing foreclosures, and unemployment rates are all part of an organization's ____ environment.

economic

As producers of sophisticated military hardware, companies such as Boeing and General Dynamics are restricted from exporting to governments such as Cuba and North Korea. This total ban on exporting of sophisticated technology is an example of a(n)

embargo

Out-of-pocket costs are also referred to as

explicit costs.

Children's Campground is a summer program for school-aged children. It advertises 1 counselor for every 4 children and that its staff includes several other highly-trained professionals. Its advertisements demonstrate that Children's Campground relies heavily on _____ to provide its services.

human resources

The Financial Accounting Standards Board hopes to

make U.S. accounting practices more consistent with those of other nations.

The _____ budget brings together all of the firm's budgeting documents to provide a unified plan for a specific budget period.

master

As aging baby boomers retire, companies will

need to compete for top talent, driving up the costs of recruitment and payroll.

As the chief of strategy for Paradigm Software, Bill Fence has decided the risks of software piracy in Indonesia are too high to justify a continued presence in that country. The barrier to international trade that most concerns Bill Fence is _____ in Indonesia.

political climate

A negative aspect of the entrepreneurship era was that

powerful businesses gained the ability to manipulate prices and exploit workers.

One purpose of the Sarbanes-Oxley Act of 2002 was to

prevent relationships that created conflicts of interest between CPA firms and the firms they audit.

Due to the rising prices of gasoline, Harleen is looking for a car with better gas mileage. She hopes to purchase the newest Preo, an imported car using hybrid technology. However, Preos are hard to find because the government in Harleen's country has limited the number of them that can be imported each year. Harleen is witnessing the impact of a(n)

quota

Key infrastructure challenges to consider when entering a foreign market include

transportation, communication, and energy.