Exam 1 Comm Review Sheet

Exam 1 Comm Review Sheet - How Business Works Review Sheet:...

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How Business Works Review Sheet: Sessions 1-8 Course Introduction The objective of business: To create value The determinants of value: The quantity, timing and opportunity cost/ uncertainty (including risk) associated with the expected future benefits Valuation : the value of something is the present value of the future benefits to be received by its owner The different forms of capital: create value Human capital (people): labor, brings in the costumers, if you want a raise, then boss says no so you quit, you aren’t valuable enough to the company, if you don’t want the job someone else will Real Capital (assets): tangible (product/goods) vs. intangible capital (trademarks, patents, goodwill, brand) Financial Capital (Debt and Equity): money that people invest. You create value by having the financial capital be less than the returns/ benefits. Without financial capital we don’t have any money for Real or Human capital. Business Environment Creating Wealth: Land - real capital Labor - human capital Capital - financial capital Knowledge - intellectual Capital (imbedded in Real & Human Capital) Revenue: the total amount of money a business takes in during a given period by selling goods and services. Expenses: Profits: the amount of money a business earns above and beyond what it spends for salaries and other expenses Losses: when a business’s expenses are more than its revenues The concept of risk: the chance an entrepreneur takes of losing time and money on a business that may not prove profitable, Uncertainty about the future quantity and timings of benefits The relationship of risk and return: investors require a higher return for a higher risk (to compensate). When exposed to more risk their 2 choices are price or hedge the risk. The forces that frame the business environment: Global business - international competition and free trade, improvements in transportation and communication, war & terrorism, global changes Economic & Legal -minimum taxes and regulations, freedom of ownership, contract laws, tradable currency, elimination/ minimization of corruption Social - diversity/ multicultural, aging/ graying of America, two income families, single-parent families Competitive - Customer expectations, restructure/ empower Technology - productivity, E-commerce, Responsiveness to Costumer
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Current trends in business: 1) agricultural/ manufacturing 2) service industries 3) future? Rise of information & communication technology, globalization, doing business 24/7, educated consumers, aging workforce, increasing diversity, pyramid vs. web, self directed empowered employees, communication skills, decision-making skills, teamwork, leadership, continual learning How Economics Affects Business Difference between macroeconomics and microeconomics: Behavior of people and organizations in particular markets (individual) vs. nation’s economy as a whole (summation of microeconomics) Four “what’s” of an economic system What is produced? What amount is produced?
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Exam 1 Comm Review Sheet - How Business Works Review Sheet:...

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