fm116 final review

Index of Durable Goods

Reflects cost of machinery used for production of goods and services Higher index can foreshadow a slowdown of corporate expansion Durables are of the last industries to leave the US

comparative advantages in trade

an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.

Lagging Economic Indicators

variables that follow, or trail, changes in overall economic activity; examples include the interest rate and the average duration of unemployment

credit unions

"Members only" savings and loan institution Members must belong to an organization that is a member of the credit union Pay a higher fee on deposits than savings banks and offer loans at a lower rate

management roles of planning, leading, and controlling

- Planning: a management function that includes anticipating trends and determining the best strategies and tactics to achieve organizational goals and objectives. accomplishing the other functions depends heavily on having a good plan - Leading: creating a vision for the organization and guiding, training, coaching, and motivating others to work effectively to achieve the organization's goals and objectives in a timely manner - Controlling: a management function that involves establishing clear standards to determine whether or not an organization is progressing toward its goals and objectives, rewarding people for doing a good job, and taking corrective action if they are not

time vs demand deposits

- time deposit: typical name for a savings account. Bank can require a prior notice before you make a withdrawal - demand deposit: technical name for a checking account. Money is available on demand from the depositor

corporate bond maturity date

1-30 years

federal reserve bank member requirements

12 federal districts and 25 regional branches district banks Each district owned by member banks and run like a corporation Primary job is to regulate the supply of money in the economy

treasury department

A cabinet-level agency that is responsible for managing the federal government's revenue. It prints currency, collects taxes, and sells government bonds.

joint venture

A partnership in which two or more companies (often from different countries) join to undertake a major project.

whistle blowing

A person that reports unethical behavior to the proper authorities. First step is to report the behavior to the proper people within the organization, if no response, seek legal assistance and then go to the public

sinking fund

A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond. Ensures that enough money will be available to repay bondholders on the bond's maturity date

Ex-Im Bank

An agency of the U.S. federal government that provides financial assistance to U.S. exporters.

sole proprietor vs entrepreneur

An entrepreneur might also invest in companies that he does not personally own or participate in, whereas a sole proprietor is actively involved in the company.

trade deficit

An excess of imports over exports

Importing vs. Exporting

An export is the sale of goods to a foreign country, while an import is the purchase of foreign manufactured goods in the buyer's domestic market.

registered bonds

Bonds owned by investors whose names and addresses are recorded by the issuer; interest payments are made to the registered owners.

The BRIC nations are:

Brazil, Russia, India, China

Largest Asian trading partner

China

Chapter 7 Bankruptcy

Corporate and personal bankruptcy where all assets are liquidated Can't pay bills so you go out of business Law specifies order in which debtors are paid Dissolved the corporation (corporate chapter 7)

Chapter 11 Bankruptcy

Corporation is reorganized Debts are reduced because the firm files a plan to eliminate the factors that caused the financial distress Firm agrees to a timetable Plan is overseen by court appointed trustee and must be approved by creditors The creditor benefits in chapter 11: can continue doing business with the corporation Government allows chapter 11 because it preserves the business as a tax base and a source of employment

economic recovery

Demands of goods and services increases and the economy increases.

socio-economic ethics

Demands that companies assume responsibility for the outcome of their practices on the society regardless of the legal status within that country of production

EEC

European Economic Community EEC trades amongst themselves duty free Use of a unified currency, the euro Trading as a bloc, creates a unified market that has greater market value

open market operations and the federal reserve

Fed reserve banks buy and sell government bonds which regulate the supply of money into the marketplace Supply of bonds decreases when government buys in the market: yield on the bond increases

FTC

Federal Trade Commission. Protects consumers from misleading and fraudulent advertising. Reviews advertising claims. Can order a company to change their ad

angel investors

Individuals who invest in start-up companies with high growth potential in exchange for a share of ownership. Seed money, smaller investors that loan up to 2 million to new businesses in a series of stages. Businesses must have a plan that shows reasonable short term growth potential

federal reserve discount rate

Interest rate the fed charges member banks and other depository institutions to borrow money from them Rate can be primary, secondary, or seasonal but is usually 1% higher than the fund rate

CEO of macy's

Jeffrey Gennette

Chairperson of the Fed

Jerome Powell

Disadvantages of Sole Proprietorship

Lack of business skills and experience can expose entrepreneurs to financial liability Unlimited liability: major disadvantage, entrepreneur is personally responsible for all business losses and could be risking seizure of personal property Lack of continuity: business ceases to exist when the owner retires or dies

unemployment

Measures the number of people who are able to work, but do not have a job during a period of time.

consumer price index (CPI)

Monthly report of the "shopping basket" for a family of four Food, gas and electric, rent, phone, medical bills, clothing, insurance, entertainment, travel Reported regionally

federal reserve prime rate

Most important rate for retailers Interest rate charged to primary customers for loans All other interest rates are based on the prime rate

NAFTA

North American Free Trade Agreement; allows open trade with US, Mexico, and Canada.

motivation

Process of giving employees a reason to work toward a common goal - Theory X: workers are best motivated by fear. Useful in critical life threatening situations like the military - Theory Y: workers like to work and will seek responsibility and promotions - Theory Z: states that workers at all levels should contribute to the decision making process, and ability to contribute is a major motivation factor. Encourages ownership

Advantages of Sole Proprietorship

Simplicity of structure and ease of control: no contracts or legal fees, minimum documentation Low cost of formation Retention of profits: all profits are personal earnings Flexibility and freedom to make decisions Tax advantages: owners pay personal tax rate on earning and are not subject to higher corporate tax rates No public scrutiny

business ethics

Study of what is morally right or wrong, apply these principles to the workplace. Is it Legal? Is it Safe? Is it Honest? Is it Fair? Consumers have certain rights: Products need to be safe/warnings, service for broken products

Roles of the Federal Reserve

Supervise and regulate banks, set reserve requirement, Replacing old currency, Auditing member banks to insure that they are functioning properly, Store gold for foreign nations, clear checks and debit purchases, monetary policy

tariffs

Taxes on imported goods, also called duties. We charge a reduced tariff rate to our allies

duties

Taxes on imported goods, also called tariffs. Referred to as the harmonized system of tariffs. Used by most members of the world trading organization (WTO). Trade with israel is duty free, we support them

financial leverage

The use of debt to buy more assets, the strategy of using borrowed money to increase return on an investment. If the return on the total value invested in the security is higher than the interest you pay on the borrowed funds, you can make significant profit.

major market indicators

Used to assess the economic health of a nation - Dow jones industrial average - Standard and poor 500 - NASDAQ 100 - Russell 1000 - Interest rates - GDP - Index of durable goods - Consumer price index (CPI) - New housing starts and sales of existing homes - Consumer conference index - Unemployment figures

Equal Employment Opportunity Commission (EEOC)

a government agency with the power to investigate complaints of employment discrimination and the power to sue firms that practice it

trade embargoes (specific nations)

a government order that restricts commerce with a specified country or the exchange of specific goods. - Cuba, Iran, North Korea, Venezuela and Syria

capital requirement

a government regulation that specifies a minimum amount of capital, intended to ensure banks will be able to pay off depositors and debts

supply chain management

a management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value

commodities

a raw material or primary agricultural product that can be bought and sold. Metals, oil, gas, agriculture, chemical, lumber, rubber

laissez-faire leadership

allows workers to accomplish tasks with minimal interference and make their own decisions. Requires highly motivated workforce

M1

amount of cash and money in demand deposits (checking accounts)

environmental protection agency

an independent federal agency established to coordinate programs aimed at reducing pollution and protecting the environment

corporate bond interest rate

between 5.52 and 6.14%. have an interest rate with checks sent to the registered owner of the bond. The checks must be endorsed

authoritarian leadership

controls all decision making process and assigns work. One boss makes decisions

M3

money no longer in timed deposits over $100K, longer term timed deposits, and the M1&2

short-term financing

financing needs for a small period normally less than a year. bank loans are a means of financing business ventures and are considered short term financing

long-term financing

funds needed for more than a year (usually 2 to 10 years). bank loans, credit lines, bonds etc with longer maturity dates

middle management

general managers, division managers, and branch and plant managers who are responsible for tactical planning and controlling

democratic leadership

holds final responsibility but incorporates workers decisions

WTO (World Trade Organization)

international organization established to negotiate trade between member nations, in a fair and equitable manner

upper management

leadership team, vice presidents and above

affirmative-action programs

legally mandated plans that try to increase job opportunities for minority groups by analyzing the current pool of workers, identifying areas where women and minorities are underrepresented, and establishing specific hiring and promotion goals, with target dates, for addressing the discrepancy

M2

money in times deposits (interest bearing) and securities that are under $100K, and the M1

emerging markets

newly industrialized countries plus those with the potential to become newly industrialized

serial bonds

principal becomes due at staggered dates. mature at different dates

t-bills

pure discount bonds with original maturity of one year or less. sold at auctions, discounted, higher face value than actual paid value, issued by the treasury department, meant to pay for daily expenses of the government

absolute advantages in trade

the ability of an entity to produce a product or service at a lower absolute cost per unit using a smaller number of inputs or a more efficient process than another entity producing the same good or service.

corporate bond face value

the amount the issuer provides to the bondholder, once maturity is reached

balance of trade

the difference between a country's total exports and total imports - exports>imports=surplus - exports<imports=deficit

balance of payments

the difference between the amount of money that comes into a country and the amount that goes out of it

Leadership

the process of influencing people to work toward a common goal. There are different styles that are appropriate for different businesses.

money

the set of assets in an economy that people regularly use to buy goods and services from other people

debenture bonds

unsecured, not backed by any specific collateral

lower management

working teams, buyers, planners, assistant buyers, assistant planners, etc.