GenBus101Midterm

What is the primary purpose of the Federal Reserve System?

The Federal Reserve is the chief economic policy arm of the U.S.. They work with Congress and the president, to create a positive economic environment capable of sustaining low inflation, high levels of employment, a balance in international payments and long term economic growth. The Fed has four main purposes: to control the supply of money (or monetary policy), to regulate the banks and other national checking account procedures, and to supervise the federal deposit insurance programs.

What coverage does the Federal Deposit Insurance Corporation (FDIC) provide to banking institutions?

FDIC insures personal accounts up to a maximum of $250,000. (from Great Depression)

Why is it increasingly common for organizations to have a code of ethics and compliance programs?

It is increasingly common because it shows where the organization stands in terms of ethics. Ethics are good and the company wants everyone aware of the consequences.

Describe the relationship between management, marketing, finance, owners, employees, and customers.

Management needs to inspire the employees to keep them motivated, to keep working efficiently and to keep working towards achieving the business's goals. The main purpose of marketing is to satisfy the customer. It is the owner's responsibility to provide financial resources for the overall operations of the business.

How do top managers differ from first-line managers?

Top management (president, CEO, Executive) First-line managers (foreman, supervisors, office managers)

What is the difference between short-term and long-term liabilities? Give some examples of each.

Long-Term liabilities are debts that will be repaid over a number of years such as long-term loans and bond issues.

Why would a firm want to invest its idle cash?

Lower interest rates, stimulates employment and economic growth.

What is owners' equity?

Owners' equity includes what contributions the owner made to the company along with the earned income retained.

Why do services tend to be more labor-intensive than manufacturing?

Services are generally more labor-intensive because of the high level of customer contact, perishability of the output, and high degree of variation of inputs and outputs.

What is organizational culture and how is it expressed?

A firm's shared values, beliefs, traditions, philosophies, rules, and role models for behavior. It ensures that organizational members: share values, observe common rules, and share problem solving approaches.

What are the benefits and drawbacks of using a matrix structure to organize?

A matrix structure sets up teams from two different departments thereby creating two or more intersecting lines of authority. Benefit's from the matrix structure include flexibility, enhanced cooperation, and creativity, and also enable the company to respond quickly to changes in the environment by giving special attention to specific projects or problems. Drawback's of this structure is that they are generally expensive and quite complex, and employees may be confused as to whose authority has priority

What is total quality management?

A philosophy whereby uniform commitment to quality in all areas of an organization will promote a culture that meets customers' perceptions of quality. This involves coordinating efforts to improve customer satisfaction, increasing employee participation, forming and strengthening supplier partnerships, and facilitating an organizational culture of continuous quality improvement.

What is management?

A process designed to achieve an organization's objectives by using its resources effectively and efficiently in a changing environment.

What is the most important characteristic of money?

Acceptability is the most important characteristic because if nobody trust the value of your currency, businesses won't accept payments.

How do you recognize an ethical issue in business?

An ethical issue is a problem or situation that requires a decision that will be ethical or unethical.

What is a mutual fund?

An investment that pools individual investor dollars and invests them in large numbers of securities, thereby creating a diversified investment portfolio

How can an organization improve ethical behavior?

An organization can improve ethical behavior by looking at the customers or competitors point of view. An organization can also improve the awareness surrounding their employees such as simple discussion and increased fairness and honesty.

What is the accounting equation? Please describe each part.

Assets=Liabilities+ Equity. Assets include all things the company owns that has value including cash, inventory, land, equipment, buildings and other tangible or intangible things. Liabilities include all debts owed to others. Finally owners' equity is all the money contributed to the company that never has to be paid back.

What are the three leadership styles and under what circumstances is each style most effective?

Autocratic Leaders: make all decisions and then tell employees what must be done and how to do it. Democratic Leaders: involve their employee's decisions Free-rein Leaders: let their employees work without much interference.

What are bonds and typically what is their face value?

Bonds are debt instruments that larger companies sell to raise long-term funds. The face value is the bonds initial sales price which is typically a $1,000.

What is business ethics?

Business ethics is acceptable behavior or principles conducted in a certain organization determined by the organization itself, stakeholders or customers, regulators and the public.

How do credit card companies make money from consumers?

Card companies charge a transaction fee to merchants for performing credit check, guaranteeing the payment and collecting the payment.

What are the different banking institutions in the United States? Which are the oldest and largest?

Commercial banks (oldest and largest), savings and loan associations, credit union, mutual savings bank (old), insurance for banking institutions.

Define competition, and describe the different forms it can take on.

Competition is a good thing because it keeps the producers in line. Pure competition is when there is one standardized product because there is no difference the product, price is determined from supply and demand. A monopolistic competition is when there are few producers but there variation of the product is very small and still meets all the same needs. Oligopoly is when there are few suppliers and they still have control over their prices but a price raise or cut will trigger a similar response from competitors. Finally, a monopoly is when there is only one company making the product.

What are the five activities, in the order delineated in your text, of the control process?

Control process: measuring performance, comparing present performance with standards of objectives, identifying deviations from the standards, investigating the causes of deviations, and taking corrective action when necessary.

What are the differences between current and fixed (or long term) assets? Give some examples of each.

Current assets are the ones that are expected to be converted into cash within the calendar year like inventory or finished goods. Fixed assets represent commitment of funds for at least a year such as equipment or a trademark.

Define delegation of authority and show its relationship to responsibility

Delegation of authority means not only giving tasks to employees but also empowering them to make commitments, use resources, and take whatever actions are necessary to carry out those tasks. Delegation also gives a responsibility, or obligation, to employees to carry out assigned tasks satisfactorily and holds them accountable for the proper execution of their assigned work.

Define supply, demand, and equilibrium price, and explain their relationship with each other.

Demand is the numbers of goods or services consumers are willing to buy at a given time while supply is number of goods or services a company is willing to sell at a given time. The equilibrium price is right in the middle of supply and demand meaning the company can maximize profits because they are willing to sell as many as consumers are willing to buy.

What are the different means of organizational departmentalization? Be sure to give an illustrative example of each.

Departmentalization is the grouping of jobs into working units usually called departments, units, groups, or divisions. Departments are commonly organized by function, product, geographic region, and by customer. Functional Departmentalization example: Jobs such as finance, manufacturing, marketing, and human resources. (managed by an expert) Product Departmentalization example: Jobs such as paper products, cleaning products, health products. (organize around the products of the firm) Geographical departmentalization example: Frito Lay, coca cola. (organized based on location, allows the company to respond more quickly and efficiently to its customers) Customer Departmentalization example: Banks, Airlines. (based around the needs of the customer)

Why are entrepreneurs important to the economy?

Entrepreneurs are important because they provide new technology and new ways to manage which in turn will make it easier for smaller businesses to acquire these things and eventually spread the wealth.

What are stock markets and which are the two biggest in the United States?

It is a market where people or companies can invest into a firm in hope of getting a greater return. The two biggest in the US are the NASDAQ and the NYSE.

Define double-entry bookkeeping and explain how to use it, keeping the accounting equation in balance.

It is a way of recording and classifying business transactions. A transaction on one side of the equation is recorded on the other.

Why is financing more difficult for fixed assets than for current ones?

It is more difficult because it takes longer and is more risky.

How do managers and owners use financial statements?

Managers and owners use financial statements to plan and direct the organizations activities. They also use them for reporting to the IRS, stock holders, creditors, customers and employees. The big thing that a financial statement helps is seeing what the cash flow is doing.

What are the different ways which companies can invest their idle cash?

Marketable securities, Treasury Bills, Commercial certificates of deposit, commercial paper, eurodollar market.

What are the three functions of money?

Medium of exchange, measure of value and a store value.

What is monetary policy? List the tools the Federal Reserve has available for use if the money supply grows too quickly for too long.

Monetary policy are the means by which the Red controls the amount of money available in the economy. The Fed uses four basic tools to control the money supply: open market operations, reserve requirements, the discount rate, and credit controls.

How is technology forcing the banking industry to change?

Moving towards paperless money, reduces costs.

What are the different nonbanking institutions available? What do they not offer that banking institutions do?

Nonbanking institutions: diversified firms, insurance companies, pension funds, mutual funds, brokerage firms and investment banks, and finance companies.

What considerations must managers make after materials have been procured and their use has been determined?

Once the materials have been procured, some provision has to be made for storing them until they are needed. Every raw material, component, completed or partially completed product, and piece of equipment a firm uses its inventory, which must be controlled or accounted for.

How do operations for manufacturers and service providers differ?

Operations for manufacturers and services differ by nature and consumption of output, uniformity of inputs, uniformity of outputs, labor required, and measurement of productivity.

What is operations management?

Operations management is the development and administration of the activities involved in transforming resources into goods and services.

What is organizational structure? How does it develop?

Organizational culture is the arrangement or relationship of positions within an organization. This develops when managers assign work tasks and activities to specific individuals or work groups, and coordinate the diverse activities required to reach the firm's objectives.

What are the people and activities of business? Define each group.

People are the owners, employees and the customers, activities being marketing, financing and management. All parts are critical in the success of a business. Owners supply the resources, employees are the face and bring in the money, and how to use it and management is geared towards organizing and being efficient.

Describe the major functions of management.

Planning (determine organizations objectives), organizing (structure resources), staffing (hiring qualified employees), directing (motivating and leading employees), and controlling (evaluating and correcting activities to keep organization on course.

Explain the difference between common and preferred stock.

Preferred stock has a greater claim to assets and earnings and generally has a greater dividend in which they can expect at a certain time.

What are some of the sustainability issues managers must confront in dealing with social responsibility issues?

Some sustainability issues manager's deal with are mostly include the relationship between nature and business strategies. Economic sectors, work practices, technology, and lifestyle all maintain the health of a natural environment.

What is a span of management? What are the differences between organizations with wide versus narrow spans of management?

Span of management refers to the subordinates who report to a particular manager. A wide span of management exists when a manager directly supervises a very large number of employees. A narrow span of management is when a manager directly supervises only a few subordinates.

What is sustainability and how does it impact manufacturing?

Sustainability deals with conducting activities in such a way as to provide for the long-term well being of the natural environment, including all biological entities. Sustainability impacts manufacturing because manufacturers and operating systems are moving quickly to establish environmental sustainability and minimize negative impact on the natural environment. Sustainability issues are becoming important to stakeholders and consumers as they pertain to the health of the planet. These issues include pollution of land, air, and water, climate change, waste management, deforestation, urban sprawl, protection of biodiversity, and genetically modified foods.

Define the "cost of goods sold" line on an income statement and explain how to calculate it.

The amount of money the company spent to buy or produce products they intend to sell. It is calculated as follows: The beginning inventory plus other purchases added to the inventory, subtracted by the price of the ending inventory.

What are the steps in the accounting cycle?

The first step in the accounting cycle is examining source documents, and then recording the transactions in a journal. Next is posting the transactions in a ledger. Finally one must prepare the financial statements to make sure it is in accordance with all generally accepted principles.

What are the three financial statements? What does each show and what are the uses of each?

The income statement shows profitability over a given period of time. The balance sheet shows an organization's financial position as a given time. The statement of cash flow explains how the company's cash changed from one point in time to another.

What is the Prime Rate?

The interest rate that commercial banks charge their best customers (usually large corporations) for short-term loans.

Briefly describe the goals of a business, especially the primary goal.

The main goal of a business is to earn a profit. Another goal is to also satisfy the customer.

What are some community relations issues that concern businesses?

The main point here is that a business must be concerned with a community's general welfare. Some businesses contribute by way of donation and other ways.

What is capital budgeting and what does it involve?

The process of analyzing the needs of the business and selecting the assets that will maximize its value.

What is quality control?

The processes an organization uses to maintain its established quality standards.

What are some of the skills needed by managers?

The skills needed are technical, conceptual, analytical and human relation skills.

What are the four dimensions of social responsibility?

Voluntary: this includes being a good citizen and contributing to the quality of life. Ethical: this includes doing what is right, just and fair. Legal: this includes obeying the law and playing by the rules. Economic: this is just being profitable.

Credit cards have become quite popular as a substitute for money. Why?

They are popular because of their convenience, easy access to credit, and acceptance by merchants around the world.

What is the systematic six-step approach that leads to more effective decision-making?

They are recognizing and defining the decision situation, developing options to resolve the situation, analyzing the options, selecting the best option, implementing the decision and monitoring the consequences of the decision.

How can analysts use ratio analysis to evaluate a company's financial performance?

They can calculate the financial performance by using information from the income statement and balance sheet to make a number where others can measure the productivity and profitability.

Other than bank loans and short-term loans, discuss how firms raise long-term capital using liabilities.

They can invest in stock and over the counter markets.

Why was the financial statement called the "balance sheet" given this name?

This comes from the reliance on the accounting equation. Assets must equal liabilities plus owners' equity.

What types of bonds are there? Describe each type briefly.

Unsecured bonds aren't backed by anything; secured bonds are back by collateral. Serial bonds are a sequence of small bond issues of progressively longer maturing. Floating-rate bonds do not have fixed interest payments. Junk bonds have high interest rates because of the high risk.