Chapter 15 SBM
return on investment
(average annual profits)/(average inventory). measure of connection between an initial inventory and profits that are expected to be obtained from making the inventory
arms length transaction
ALT. business deals where rhe parties have a prior relation or affiliation but where business is conducted as if they were unrelated
acquisition of asset
AOA. acquisition cost: instillation, transportation, and purchase price
advantage of leasing
AOL. (typically) low down payment. easy to replace leased assets than your own assets. less complicated than obtaining a loan and purchasing the asset
advantage of renting
AOR. requires little or no money. no extensive application process. protects company from unexpected repairs. easy company avoidance if conditions change
cost of operating
COO. includes energy cost, maintenance, loss of value from wear and operator training costs
cost of owning
COO. includes loan interest. opposite cost of insurance, taxes, and value of footprint record keeping and security
disadvantage of leasing
DOL. usually cost more than a purchase. likely to be restrictive lease covenants on use maintenance and disposal
disadvantage of renting
DOR. cannot be collateral. must make regular timely payments. total money spent on rent usually exceeds purchase cost
executive manager function
EMF. planning, organizing, and staffing
economic order quantity
EOQ. statistical technology that determines the amount of inventory that a business must possess to reduce total inventory
optimum stocking level
OSL. aka reorder point. minimizes amount of inventory that results in minimum cost of lost sales and time it takes to receive new stock. considers lost sales, units sold per day, and days required to receive inventory
point of sales systems
POS+s. integrate inventory into your accounting. not every sale is immediately recorded, revenues increase simultaneously, not inexpensive enough for SB
whole of life costs
WOLC. when all costs are considered before inventory in a capital asset
pull through system
acquiring inventory in response to a completed sale
best practice
activity identified by author active bodies are example of optimal ways to get things done in particular industry, profession, and trade. productive in an industry
inventory
amount and type of ______ are important bc of supply and demand can't be matched at all time and holding ________ is a nonproductive cash investment. RISKY
safety stock
amount of inventory carried to ensure that the business won't run out of inventory due to fluctuating sales levels
capital assets
assets that are expected to provide economic benefits for periods of time greater than 1 year. cost of disposing asset
capital leases
at end of lease period you own the asset
operating leases
at the end of lease you may return the asset to the owner or you may purchase it as it's current fair market value
reinforcement feedback
awards effective methods and desired employee behavior
outsourcing
contacting with people or company outside of your business to do work for a particular business
replacement value
cost to replace a currently owned capital asset
information feedback
data about process of a business
inputs
determined by your objectives
book value
difference between purchase price and accumulated depreciation. not very useful other than for tax purposes
efficiency
doing the same with less
disposal value
done to help protect against potential conflicts of interest. net amount you would realize in an arms length transaction rough approximation
joint venture
formalized partnership between two firms. makes sense when each party has limited use of an expensive asset
pledging receivables
giving a third party legal rights to debts owed your business in order to provide assurance that borrowed money will be repaid. less expensive
fair market value
lies between disposal and replacement values. sets an upper level value
supply chain
line of distribution of a p from irs start as materials outside the firm to its handling by sellers into hands of customers
inventory valuation
measured by quantity of assets held by firm or sales production. begin with what you hold, conduct physical inventory, assign it a value
depreciation
method used to take asset value as an expense to calculate net income/loss. assumption that an asset has a fixed determinable period of utility. assumes value will DECLINE
accounts receivable
money owed to a business by customers. managing this is VERY important. most SB dont provide customers credit those in wholesale do
periodic inventory
physical counting of assets on a set schedule. may be annually, inexpensive, meets taxing requirements
capital budgeting
process of deciding among various inventory opportunities to create a spending plan
outputs
ps for sale
productivity
ratio measure of how well a firm does in using its inputs to create outputs
productivity
ratio of how well firm does in using inputs to create outputs
perpetual inventory
records receipt/sale of each item as it occurs. provides accurate records but costly in terms of record time keeping
bar coding
reduces cost but you need the equipment
JIT inventory
reduces inventory to a minimum by: accepting inventory only as it's sold; assembling p in minimum time; shipping p immediately
fractional ownership
similar but smaller scale. SB may join
work instructions
specify how job is done- can be large. written in documentation
payback period
statement of how much time must pass before you receive back the same number of money in cashflow as you paid out
procedure
step by step method by which a process is done. used with documentation
operations
taking raw material me and turning it into a prodyct
corrective feedback
value judgment about behavior and process of the business
cost of disposition
value of activities needed to get rid of asset- meeting regulations, disassembly, advertisements, shipping, fees, etc
process
what a firm does when converting raw materials into valuable outputs. list this in documentation
factoring
you can sell your receivables to a financial company. may receive 75-80% of total
