GB 490 Units 1 and 2

Sales Price Variance

(Actual Price − Standard Price) × (Actual Units Sold)

standard volume variance

(Standard Price) × (Actual Volume − Expected Volume)

Variance Analysis

A technique for determining the cause and degree of difference between the baseline and actual performance.

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

Accrual Basis Accounting

reporting income when it is earned and expenses when they are incurred

aggregate demand curve

slopes downward because the buying power of wealth (e.g., your bank account or cash in your pocket) rises and the general price level falls.

three assumptions econ

maximizing behavior the existence of markets stable preferences

the current account

measures all the transactions involving goods and service trades and unilateral transfers (i.e., one-way gifts) or foreign aid

Accounting

-The language of business -Provides quantitative information that enables managers to make informed business decisions

total revenue variance

= (Volume Variance) + (Price Variance)

real rate

has to be estimated with hindsight (mathematically it is the nominal rate minus the expected inflation) and tend to be influenced by the demand for credit.

Balance Sheet Equation

Assets = Liabilities + Owner's Equity

Macroeconomics

Focuses on the broad state of the economy -level of unemployment - rate of inflation -rates of economic growth -level of interest rates

preferences

Individual's tastes for a certain good relative to other goods Assumed to be rational and stable

maximizing behavior

Individuals seek the least costly path toward their goals and in the process will also seek out all relevant knowledge about how best to improve their situation utility function

fiscal policy

Refers to the use of government expenditures and taxation to influence the level of aggregate demand. -spends money on programs such as defense, education, highways, or space exploration, it is buying goods and services

Cash Flow Statement

Specifies in detail how the cash on the balance sheet changes from period to period

equilibrium price

The intersection of the supply and demand curves reflects the interaction of all the forces in the market for the particular good or service being examined.

opportunity cost

The opportunity cost is the cost of the next best available use of those resources. i.e., the value you give up when you choose a particular use for some resource

Income Statement

This financial report is a measure of the flows of business over a period of time expressed in terms of profit and loss

balance sheet

This financial report presents a snapshot of the assets of the firm, and the claims upon those assets, at a particular point in time

markets

are venues, physical or virtual, where buyers can come together to buy and sell products and services. -assume mutually consistent behavior

Internal Control System

ensure that actions within the organization are consistent with company financial reporting objectives.

demand curve

is downward sloping and reflects the quantity of a good that consumers are willing to buy at any given price.

favorable variance

is either actual revenues higher than expected or actual costs lower than expected

nominal rate

is the interest rate we observe in the market or see reported by the press.

supply curve

is upward sloping and reflects the quantity of a good a producer is willing to supply at a price

interest rate

price of credit

Microeconomics

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses how much should we produce? how profitable will we be? how much should we charge for product?

aggregate

we mean the value of all of the goods and services produced in the economy during a period of time. -how macro supply and demand is measured