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.