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