Upload
alec-dalton
View
50
Download
2
Tags:
Embed Size (px)
DESCRIPTION
The Mid-Term Exam. WHAT IT ISN’T : Not Bluebook, Scantron , Lap-top, Open-Book or Open-Note WHAT IT IS : Emphasizes Terminology and Applying Themes. The Mid-Term Exam. Bring several Pens or Pencils. Earn all the Points on Essay Questions Clearly State Answer (Thesis) Explain Answer - PowerPoint PPT Presentation
Citation preview
The Mid-Term Exam
WHAT IT ISN’T: Not Bluebook, Scantron, Lap-top, Open-Book or Open-Note
WHAT IT IS: Emphasizes Terminology and Applying Themes
Earn all the Points on Essay Questions
Clearly State Answer (Thesis) Explain Answer Why did you write what you wrote? Don’t repeat Question
The Mid-Term Exam
Bring several Pens or Pencils
Three Organizational
Forms
THREE BASIC FORMS OF BUSINESS ORGANIZATIONS
Corporation
Legislatively Created and Regulated Governance,
Ownership and Financial Structure
Which Form Best Fits the Needs of your Business?
Sole Proprietorshi
p
Any Business Owned and
Operated by an Individual
General Partnership
Two or More Persons Operating
a Business for a Profit
Determinants of Organizational Form
Owner’s Objectives: Control, Liability, Capital Needs, Distribution of Profits (Losses) and Taxes
Dealings with Outside World: Other Owners, Employees, Suppliers, Customers and Future Owners
Legislative Goals: Special-Purpose Entities subsidize Social Objective
THE AGENCY PROBLEM
Corporate Shareholders(Principal)
Investor: Maximum Returns
(High-Risk/High-Return)
Cannot operate Business
Liability is Limited: Can Lose only Investment
Occurs when (1) Goals of Principal (Owner) and Agent (Employee) Conflict and (2) Principal cannot Verify
what Agent is doing
Corporate Management(Agent)
Manager: Stable Returns (Low-Risk/Low-Return)
Can operate Business
Unlimited Liability: Lose Job and Income
7
Who’s responsible for Managing a Corporation?
What Do you get with Common Stock and Do Not get with Preferred
Stock?‘Limited Liability’ and ‘Double
Taxation’
INFLATION
Consumer Price IndexesWho Benefits and Who Loses?
UNEMPLOYMENT/EMPLOYMENT RATE
Job Growth (Demand) vs. Labor Force (Supply)Always a ‘Bad Thing?’
GROSS DOMESTIC PRODUCT (GDP)
National, Regional and Local
INTEREST RATES
Leading IndicatorPrincipal Tool of Monetary Policy
Satisfy 10% Reserve
Requirement Every Day for Two
Weeks of Every Month
9
Shortage creates Market for Needed Reserves
Overnight Loans of Federal Reserve Funds
FOMC tradesGovernment Securities to
INFLUENCEFed Funds Rate
DEMANDElastic or Inelastic?
Elastic Demand: Quantity Demanded is Highly Responsive to Price Changes (Flatter Curve)
Inelastic Demand: Quantity Demanded not as Responsive to Price Changes (Steeper Curve)
Firm hasCOMPETITIVE ADVANTAGEWhen…
Competitors cannot Duplicate Value-
creating Processes of its Product and Market Position
Meaningful Product DifferentiationTargeting Under-served Market
SegmentEffective Distribution Channel
Essential Accounting Reports
Balance Sheet
Income Statement
Statement of Cash Flows
THREE ESSENTIAL METRICS
Current Ratio Debt-to-Equity Ratio Return-on-Equity Ratio
CAPITAL STRUCTURE
SOURCES
INTERNAL
EXTERNAL
Debt: Loan or Bond
Source: Commercial Bank
Stock: Preferred or
CommonSource: Investment
Bank
Retained Earnings Trade Terms
RECONCILE SOURCES/USES OF CASHOPERATING NEEDS Timing and Amounts
CAPITAL NEEDS Growth and Contraction
IMPLICATIONSOPERATIONS Debt Claims on Cash Flow/Assets
GOVERNANCE Common Stockholders’ Rights