JOUR 651 Lecture Notes - Lecture 3: Mobile Browser, Webtrends, Google Analytics

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11 May 2020

School

Ball State University

Department

Journalism

Course

JOUR 651

Professor

Robin Blom

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Document Summary

You should know that media has significant impact on the public and shaping discussion/action on issues that are deemed important. So an important thing to know is how we can use data to measure how stories appearing in print, online, or broadcast reach target audiences who consume, amplify, contribute, or consume our content. Questions we want to answer in mobile metrics: How many people are using mobile devices to read our stories. You can use google analytics to gather and report mobile metrics data. There are other kinds of software you can use, such as: You can"t combine data across tools because they use different terms and methods. There are two ways to access content online with a phone, tablet, or other similar mobile device: a mobile browser and an application. You need to recognize the differences between them because they are tracked differently. Sometimes websites even have different urls on mobile devices.

Related Questions

Can you summarize this article and wrtite down some important points regarding GDP?

NEW YORK â Striving to revive the world economy while simultaneously responding to the global climate crisis has raised a knotty question: are statistics giving us the right âsignalsâ about what to do? In our performance-oriented world, measurement issues have taken on increased importance: what we measure affects what we do. If we have poor measures, what we strive to do (say, increase GDP) may actually contribute to a worsening of living standards. We may also be confronted with false choices, seeing trade-offs between output and environmental protection that donât exist. By contrast, a better measure of economic performance might show that steps taken to improve the environment are good for the economy. Eighteen months ago, French President Nicolas Sarkozy established an international Commission on the Measurement of Economic Performance and Social Progress, owing to his dissatisfaction â and that of many others â with the current state of statistical information about the economy and society. On September 14, the Commission will issue its long-awaited report. The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizensâ own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximize it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth â all of which might lower GDP growth. The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics. For example, while GDP is supposed to measure the value of output of goods and services, in one key sector â government â we typically have no way of doing it, so we often measure the output simply by the inputs. If government spends more â even if inefficiently â output goes up. In the last 60 years, the share of government output in GDP has increased from 21.4% to 38.6% in the US, from 27.6% to 52.7% in France, from 34.2% to 47.6% in the United Kingdom, and from 30.4% to 44.0% in Germany. So what was a relatively minor problem has now become a major one. Likewise, quality improvements â say, better cars rather than just more cars â account for much of the increase in GDP nowadays. But assessing quality improvements is difficult. Health care exemplifies this problem: much of medicine is publicly provided, and much of the advances are in quality. The same problems in making comparisons over time apply to comparisons across countries. The United States spends more on health care than any other country (both per capita and as a percentage of income), but gets poorer outcomes. Part of the difference between GDP per capita in the US and some European countries may thus be a result of the way we measure things. Another marked change in most societies is an increase in inequality. This means that there is increasing disparity between average (mean) income and the median income (that of the âtypicalâ person, whose income lies in the middle of the distribution of all incomes). If a few bankers get much richer, average income can go up, even as most individualsâ incomes are declining. So GDP per capita statistics may not reflect what is happening to most citizens. We use market prices to value goods and services. But now, even those with the most faith in markets question reliance on market prices, as they argue against mark-to-market valuations. The pre-crisis profits of banks â onethird of all corporate profits â appear to have been a mirage. This realization casts a new light not only on our measures of performance, but also on the inferences we make. Before the crisis, when US growth (using standard GDP measures) seemed so much stronger than that of Europe, many Europeans argued that Europe should adopt US-style capitalism. Of course, anyone who wanted to could have seen American householdsâ growing indebtedness, which would have gone a long way toward correcting the false impression of success given by the GDP statistic. Recent methodological advances have enabled us to assess better what contributes to citizensâ sense of well-being, and to gather the data needed to make such assessments on a regular basis. These studies, for instance, verify and quantify what should be obvious: the loss of a job has a greater impact than can be accounted for just by the loss of income. They also demonstrate the importance of social connectedness. Any good measure of how well we are doing must also take account of sustainability. Just as a firm needs to measure the depreciation of its capital, so, too, our national accounts need to reflect the depletion of natural resources and the degradation of our environment. Statistical frameworks are intended to summarize what is going on in our complex society in a few easily interpretable numbers. It should have been obvious that one couldnât reduce everything to a single number, GDP. The report by the Commission on the Measurement of Economic Performance and Social Progress will, one hopes, lead to a better understanding of the uses, and abuses, of that statistic. GDP Fetishism - Project Syndicate 2/8/10 4:05 PM http://www.project-syndicate.org/commentary/stiglitz116/English Page 2 of 3 The report should also provide guidance for creating a broader set of indicators that more accurately capture both well-being and sustainability; and it should provide impetus for improving the ability of GDP and related statistics to assess the performance of the economy and society. Such reforms will help us direct our efforts (and resources) in ways that lead to improvement in both. Copyright: Project Syndicate, 2009. www.project-syndicate.org Reprinting material from this website without written consent from Project Syndicate is a violation of international copyright law. To secure permission, please contact [email protected]. tvselvakumaran 05:30 30 Sep 09 The official consensus Professor Martin Feldstein's latest article, "The G-20's Empty Promises" on Project Syndicate needs careful consideration. In his article, Professor Feldstein essentially adopts the "official consensus" of the economics profession on the current economic crisis. This official consensus, in its various mainfestations, has also been elaborated on by other famous economists, notably Professor Robert Lucas in his article in the Economist in early August, and by Professor Paul Krugman in his recent article in the New York Times Magazine. One characterizing feature of this official consensus is a confidence (a.k.a. triumphalism) in the certainty of outcomes predicted by modern economic theory. The main precepts of this official consensus are (i) Professor Ben Bernanke, the Chairman of the Board of Governors of the Federal Reserve, has at his disposal all the theoretical tools of economics that are necessary and sufficient to deal with the current economic crisis. As Professor Lucas explains it in his Economist article, if one were able to predict in advance exactly when a market crash would occur, it would imply that the market entertains arbritrage opportunities. Hence, it is not possible to predict financial crises in advance. However, except for the precise timing of the occurrence of financial crises, macroeconomic theory could explain the workings of the economy completely. In particular, to avert the recurrence of the Great Depression, certain actions were needed to be taken by the Fed -- the specifics of these actions were all clearly understood by the economics profession. However, it was politically untenable to take these actions before there was a financial crisis. Once the financial crisis occurred though, Professor Bernanke could intervene in the markets and take the necessary actions (in the Fall of 2008). These actions include the injection of several trillion dollars into the economy and making the availability of credit the cheapest possible. The actions taken by the Fed have now resulted in the economy avoiding a recurrence of the Great Depression. This is, in brief, what Professor Lucas has stated in his Economist article. (ii) Thus in Professor Lucas' interpretation of things, the collapse of Lehman Brothers, for example, was necessary, in order to justify the intervention of the Federal Reserve in the functioning of the markets. The collapse of Lehman Brothers was, although regrettable, an unavoidable event. But, on the whole, monetary policy, even if it is a profligate one, would be necessary and sufficient to prevent the recurrence of the Great Depression, in Professor Lucas' view. Furthermore, the old wisdom of the Chicago School that government should be kept minimal at all times continues to hold, even in light of the current economic crisis. The Keynesians led by Professor Krugman, on the other hand, believe that Lehman Brothers should never have been allowed to fail. In their view, when the Fed's fund rate is at zero, monetary policy is largely ineffective for sustaining and stimulating economic activity. This is because of liquidity traps caused by businessmen who don't see economic opportunities that would induce them to borrow the cheap money available from the banks. Hence the government should step in to provide massive fiscal assistance to the economy by taking on spending directly, even if it means assuming trillions of dollars of public debt. (iii) Professor Krugman scored a lot of points by pointing out that the current state of economic theory, highly influenced as it is by the efficient market hypothesis of the Chicago School, indicated that a crisis of such magnitude as the current economic crisis could not happen at all. This fundamental failure to recognize that an enormous crisis could indeed happen, calls for the overthrow of the policy that markets provide the best social gain when they are completely free from government interference. From first impressions, it might seem that the views of the monetarists and Keynesians are vastly different. However, it is important to note that in the view of the Keynesians too, once large scale government spending as prescribed by the Keynesians is instituted, there is again enough assurance that modern economic theory (although with a heavy Keynesian tilt) would be sufficient to deal with the current economic crisis. (iv) In this regard, perhaps it is relevant to refer here to Professor Robert Shiller's latest article, "Re-inventing Economics" on Project Syndicate. Professor Shiller points out that the free market ideology fails to identify bubbles. Because of the belief that markets know best on all occasions, bubbles cannot occur according to the free market ideology. Professor Shiller's approach pursues a different branch of the Keynesian school of thought than the big spenders. Rather than advocate large government spending to avert a depression, Professor Shiller proposes using techniques from behavioral psychology to predict bubbles in advance. In this way, the socially harmful effects of massive misallocations of capital that arose in the case of the housing bubble or the tech bubble could be prevented in the future. In his other recent article, "Echo Chamber of Boom and Bust" in the New York Times, Professor Shiller elaborates further on the techniques that one could use for studying bubbles. Briefly, the process by which confidence or panic spreads in markets is very similar to the process by which diseases spread among populations. This outlook allows for introducing methods that scientists use to study epidemics into the study of bubbles. (v) The Keynesians have also managed to re-write the conventional wisdom on the advantages of a strong dollar. Through the works of Professors Barry Eichengreen, Jeffrey Sachs and Ben Bernnake, a consensus has developed that attempting to support the gold standard was a major cause for the prolongation of the Great Depression. This has resulted in a viewpoint among economists that a devaluation of the dollar at present would help to reduce global imbalances by restoring the American manufacturing industry. The implications of this viewpoint were analyzed by Professor Feldstein in his July 2009 article "America's Saving Rate and the Dollar's Future" on Project Syndicate, with the conclusion that devaluation of the dollar would necessarily lead to a better future for GDP Fetishism - Project Syndicate 2/8/10 4:05 PM http://www.project-syndicate.org/commentary/stiglitz116/English Page 3 of 3 America. Lost in this new interpretation is the fact that a stable dollar provides many economic benefits for America. The equity premium for American companies taking more risks globally, the transaction charges for providing market making facilities in global markets, and the provisions of liquidity for the currency of international trade are major drivers of economic growth for America, which derive from the dollar being the global reserve currency. (vi) Some other Keynesians have gone beyond questioning just the free market ideology. For example, in his latest article, "GDP Fetishism" on Project Syndicate, Professor Joseph Stiglitz proposes a broad set of economic indicators like health, well-being and sustainability rather than a narrow focus on GDP growth. Yet other developments imply that the rest of the world is steadily moving away from using the dollar as the main reserve currency. To finance this new global reserve system, the IMF has created $250 billion worth of Special Drawing Rights (SDR), and the IMF has indicated its intention to triple this allocation of $250 billion in the future. It would need a strong commitment from the policy-makers in America to re-claim for the dollar its position as the predominant global reserve currency. However, judging from the writings of American economists like Professor Feldstein, it appears that the consensus among professional economists favors devaluing the dollar instead. (vii) The official consensus is a result of a grand compromise between the Chicago School economists and the Keynesians.The conservative economists of the Chicago School would like to avoid the embarassment of getting publicly criticized for the failures of the efficient market hypothesis that this current economics crisis has severely exposed. So famous conservative economists like Professor Lucas have reached out for a consensus by indicating their willingness for a compromise. This compromise involves among other things, (a) foregoing raising concerns about the government's mismanagement of Fanie Mae and Freddie Mac, and (b) lending support to the Fed and the Treasury in their efforts to stabilize the economy, even if the methods that the Fed and the Treasury employ are highly inefficient. What are the Keynesians compromising on? Well, the Western liberal tradition has been intellectually bankrupt ever since the late 1960s. It is only the free market ideology of the Chicago School that has served as the driver of wealth creation in the advanced countries during the last four decades. Hence, the official consensus is a convenient compromise for the Keynesians to avoid asking difficult questions about the future of the Western liberal tradition. Instead, they would like to enact much drama in the media about the resurrection of their hero, John Maynard Keynes. (viii) One other characterizing feature of the official consensus in the economics profession is a collective tendency to "Blame It All On Obama". The conservative economists blame President Obama for not focusing adequately on America's ballooning national debt. The liberals, led by Professor Krugman, fault President Obama for getting distracted from the left's free spending ways by concerns on the size of the fiscal deficit. In the confusion that has ensued, President Obama's own team of economics advisors has fallen back on the official consensus in the economics profession. Availing themselves of the security provided by this official consensus, President Obama's economics team has misled the President thoroughly in economic matters. To begin with, the President is only empowered to administer the nation's affairs for a four year term. The projections put out by the Congressional Budget Office (CBO) for the deficits in the next decade are only a non-authoritative guidance for where the nation's finances would be, if current policies hold for the next decade. Instead, the democrats have been behaving as if the $9 trillion of additional public debt that the CBO projects for the next decade is already a given certainty. In particular, they have not been careful to mention clearly in public discussions how much of this extra spending can be attributed to the President's own spending plans in his current four-year term. Neither have they shown any concerns for taking the Fed and the Treasury to taks for their highly inefficient methods to stabilize the economy. Because of these instances of neglect, the public is not willing to trust the government in financial matters. President Obama has rapidly lost his approval ratings. Professor Lawrence Summers, Professor Christina Romer, Professor Austan Goolsbee and Professor Peter Orszag are directly responsible for this abuse of public trust. (ix) The official consensus has also prevented economists from recognizing that President Obama's universal message of tolerance and justice, which has been received very favorably all around the world, actually opens up vast areas of economic opportunity for America. Unfortunately, it does not matter, for the economists, whether George W. Bush or Barack Obama is in office. The most they can do is re-work their models to favor Keynesian policies, and to argue that the policies they propose arise directly from their number-crunching methods. One might be tempted to attribute this widespread consensus among economists to stick to a narrow theoretical interpretation of the current economic crisis, to the certainty afforded by the mathematical models, which have become indispensible through the course of the 20th century, for the development of economic theory. However, this would be a big mistake. The official consensus in the economics profession is primarily a result of undue influences of power and money. It is much less a result of mathematically based economic theory. In the longterm, this attitude among economists of sticking to an official consensus is going to do serious damage to the American economy. Some other aspects of the official consensus have been explained very well by Professor Kenneth Rogoff in his recent article, "The Confidence Game" on Project Syndicate. I recommend that the reader go through that article. The official consensus is the single largest threat to a robust recovery in the global economy. The official consensus also gravely misinterprets the events of the Great Depression. The implications of this misinterpretation bear directly on the economic health of America.

Read the article below and write a brief (1-2 paragraph) summary. This assignment should be approximately 250 words . Complete this assignment as a Word document.

Time to Scrap Performance Appraisals

Times have changed. More and more companies have decided to radically change (read âscrapâ or âre-engineerâ) their performance appraisal process.

Last week at our research conference we spoke with Adobe, Juniper, Kelly Services, and a variety of other companies who have decided to do away with traditional performance ratings and dramatically change the annual appraisal process.

Our research shows that this is a strong and positive trend.

Why the process must change.

Why do companies have annual reviews in the first place? They are an artifact from traditional top-down organizations where we had to âweed outâ the bottom performers every year. By forcing managers to rate people once per year we can have annual talent reviews and decide who gets more money, who to promote, and who to let go.

Coupled with the performance rating is the âpotentialâ rating, which tries to capture an individualâs potential to move up two levels in the organization (the traditional definition).

This approach is based on a philosophy that â we cant totally trust managersâ so weâre going to force them to fit people into these rating scales. And in many companies (around 20%) there are forced distributions, which mandate that some percent of employees are rated at the bottom and only a limited percent can be rated at the top.

The well publicized problems with this process abound. These include:

Employees need and want regular feedback (daily, weekly), so a once-a-year review is not only too late but itâs often a surprise. Regular coaching is the key to alignment and performance.

Managers cannot typically âjudgeâ an entire year of work from an individual at one time (imagine if your spouse gave you an annual review!), so the annual review is awkward and uncomfortable for both manager and employee.

Manager-employee relationships are not 1:1 like they used to be. We work with many leaders and peers during the year, so one person cannot adequately rate you without lots of peer input.

While some employees are a poor fit and likely are poor performers, these issues should be addressed immediately, not at the end of the year.

Some companies really do have a lot of high performers, so forced ranking eliminates great people and damages the culture.

People are inspired and motivated by positive, constructive feedback â and the âappraisalâ process almost always works against this.

The most valuable part of an appraisal is the âdevelopment planningâ conversation â what can one do to improve performance and engagement â and this is often left to a small box on the review form.

Companies are nervous about eliminating this process because:

We need a fair and validated way to distribute compensation increases (donât we?)

We need a record of low performance when we let someone go

We need to capture performance data in an employeeâs profile for future promotion and other talent reviews, development plans, and career migration

We need a way to make sure managers are doing their jobs well.

Well, Iâve probably discussed these issues with 100+ companies over the last five years and our research shows more and more that companies are ready to let this process go.

Organization structures have changed and companies need to be more agile. We have a shortage of key talent and the keys to success now focus on regular alignment, coaching, creating passion and engagement, and continuous employee development.

The new keys to success:

Develop a âfeedback-richâ culture and set of tools (often online, sometimes formal, often informal) that encourages all employees to give each other feedback. Tools from companies like Achievers, Globoforce, and most HR software vendors now enable and make this easy.

Separate the discussions about performance from discussions about potential and future career plans. Yes we need to evaluate people when raise time comes, but that can be a totally different conversation from.

Talk about performance regularly and let employees create their own goals on a regular basis. Force managers to provide ongoing feedback and teach them how to have honest conversations.

Assume that employees already know something about their own performance, and force them to self-assess. People tend to have a good idea of their own strengths and weaknesses â give them an open and positive opportunity to share it. That starts the dialogue about expectations and the match between their self-assessment and that of the organization.

Enable managers to assess performance regularly. Software teams now use Agile tools which evaluate code on a weekly basis. Managers should be giving people feedback regularly. If they learn to do this on a regular basis it will get easier and employees will learn to appreciate it.

Focus managers on hiring the best, so they build a team which strives for 100% high performers. This is never possible of course, but rather than assuming that 20% of your employees will perform poorly, spend more time on assessment, culture, and fit to make sure very few low performers make it into the organization in the first place.

Remember that everyone wants to succeed. If they arenât performing well itâs not necessarily their fault â the organization should take responsibility for helping them find a better fit if possible.

Set and reset goals frequently. Companies that set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results. This means employees get feedback on a continuous basis (most sales organizations work this way). Read our research for more details.

Beware of pay for performance plans. While many companies (particularly investment banking, sales) have large pay for performance plans, research showsthat these can create perverse behavior. People focus on their own goals at the expense of the organization. In sales related roles this process works well â when you move to customer service, engineering, and other âbuilderâ roles they can create problems.

Give your leaders a cultural framework and set of values to work from. Companies like Juniper and Deckers (Uggs shoes) focus very heavily on corporate values, forcing managers to hire and manage to these values. This makes selection easier and enables us to evaluate and coach people against higher level frameworks.

Invest in leadership development. Being a manager is a tough job. Managers at all levels struggle with selection, hiring, training, coaching, and evaluation. Give them time and tools to learn, a framework for feedback, and a continuous development process so they learn how to become better.

Reward talent âproductionâ not talent âhoarding.â If you pay your managers to âproduce output,â they will focus heavily on talent performance and evaluation. This may be a good thing, but ultimately companies thrive by building skills â so in addition to encouraging managers to produce good work, incent them to produce good talent as well.

Iâve had the opportunity to study HR and performance management for almost 15 years now, and this topic has been controversial for a long time. In todayâs globalized,talent constrained workplace itâs clear to me that the traditional appraisal has to change.

Businesses thrive on agility, speed, passion, and alignment. The process of driving and measuring performance has to do the same.

The following is a transcript of a video

This video explores the vital role of accounting in one of the world's largest firms. Aon is a reinsurance broker, insurance broker, and employee benefits consultant operating in more than 120 countries. Its goal of being the world's most responsive and client-focused insurance company means it must integrate thousands of professionals in hundreds of disciplines in many countries.

Many view accounting as a primary business language. It is of little use, however, unless you know how to "speak" it. Fortunately, the fundamentalsâthe accounting equation and the double-entry bookkeeping systemâare not difficult to learn.

0:01Clearly, in the financial world,

0:03if you want to be an effective accountant,

0:05you just can't be a numbers person.

0:07You also have to understand people.

0:09You need to know how to debate and hold your

0:11position on the arguments that you take.

0:14âªâª

0:34-Narr: You might not have heard of Aon.

0:36They've brokered deals between clients

0:38and more famous insurance companies.

0:40They often even insure

0:42those insurance companies.

0:45In fact, the only building taller than the

0:47Aon building in Chicago is the Sears Tower.

0:50With over 550 offices in 130 countries,

0:55there's a lot of money involved

0:56and a lot of numbers to keep straight.

0:58So who does all that math?

1:00Well, that's easy.

1:01The pencil pushers, the number crunchers,

1:03bean counters, right?

1:05Accountants are traditionally thought of as

1:07humorless people who type into

1:09pocket calculators all day.

1:11Nothing could be farther from the truth.

1:13Accountants are actually some of the most

1:15important and influential people in business,

1:18and Joe Prochaska is probably

1:20the most important accountant at Aon.

1:23Accounting is the process of recording,

1:25categorizing and interpreting financial

1:28transactions, but there are more creative

1:30aspects to accounting than mere bookkeeping.

1:32That's why Joe is usually smiling.

1:35-Oh, yeah, and my staff is learning to smile.

1:37It's very rarely that they see

1:39me frown, okay, but there are

1:40different kinds of smiles.

1:42-At Aon, managerial accountants interpret

1:46financial data for a company's internal use.

1:49Financial accountants such as CPAs summarize

1:52that information for outside parties

1:54like potential investors.

1:56At the end of the year, Joe uses

1:58a tax accountant to assure that

2:00Aon is in full compliance with

2:02changing tax laws, and to assure that Aon is

2:05taking advantage of the best tax strategies.

2:08But Joe gets the lion's share of the duties

2:10when it comes to Aon's financial information.

2:13-The role I play in the process of handling

2:16all these inputs is reviewing all the reports

2:20that come in so that when our management

2:22takes a look at those financial statements,

2:24they can have some assurance that they're

2:26looking at this as our shareholders will be

2:30looking at it when we

2:31present the information.

2:34-Did you know that every book

2:35you've ever read,

2:36every comic strip, poem and Web page,

2:39has its roots in accounting?

2:40That's because the earliest

2:42written languages were created

2:44to keep track of financial transactions.

2:46Every world culture engages

2:48in some form of trade,

2:49and Aon operates in most of those places.

2:53-The information we get

2:54on a monthly and a quarterly basis

2:56from our different operations around the globe

2:59is stated in a variety of currencies,

3:01yet Aon is a U.S.-based company that publishes

3:05its financials in U.S. dollars.

3:07There's a requirement for some assurance from

3:11a party outside the management

3:12of the company that you've done

3:15a fair job in presenting your financials,

3:17that they've been presented reasonably

3:20and in a consistent manner.

3:23-That's why the

3:24Financial Accounting Standards Board created

3:26the Generally Accepted Accounting Principles,

3:29to help everyone get on the same page

3:31with their accountant.

3:32The Generally Accepted Accounting Principles

3:34and the interpretation are one

3:36of my key functions at Aon.

3:38The Securities and Exchange Commission makes

3:41sure that companies stay on that page.

3:44-In its most adverse reaction,

3:46the SEC also is capable of doing

3:49what they would call an enforcement action.

3:52Many of you have heard of Enron,

3:53okay, and WorldCom.

3:56-The core of those principles is

3:58the six-step accountant cycle.

4:00Pretend you're on Joe's staff for a moment.

4:02First, a hundred different people

4:04send you transaction records

4:06from a dozen different departments.

4:08You collect and organize that pile of

4:10receipts, invoices, bank statements and

4:12purchase orders, account by account,

4:15into a book called a journal.

4:17Now divide all those

4:18transactions into purchases, sales,

4:21investments and so on, in a ledger.

4:24When that's done, do a trial balance

4:26to check your work.

4:28If it's off, go back and find the error.

4:31If it's okay, you can now begin

4:33the real task of accounting,

4:35reporting and analysis.

4:36-The mechanics of doing the accounting,

4:39that doesn't excite me too much.

4:41But going through the philosophy

4:42of what you're trying to accomplish

4:44and how you match revenue and expenses,

4:47which is really the underlying philosophy behind

4:50Generally Accepted Accounting Principles,

4:52to make sure when you recognize the revenue,

4:54you recognize the proportion of the expense.

4:57There's a lot of judgment and

4:58interpretation of what goes into

4:59an individual company in doing that.

5:05The two most basic reports you'll do are the

5:07balance sheet and income statement.

5:10The balance sheet contains the

5:12fundamental accounting equation.

5:14Assets are all the things Aon owns,

5:16like furniture and investments.

5:18Liabilities are how much the company owes

5:21others in the form of loans,

5:22bonds or unpaid bills.

5:24Equity is a little trickier to understand.

5:27Say that Aon owns $100,000, although we can

5:30pretty much guarantee they made a lot more.

5:33If they owe $70,000 in bills and loans to

5:36run the business, the $30,000 difference

5:39is called owners' equity.

5:42That's the amount of actual value

5:43that Aon's stockholders divide up

5:45between them to see how much their

5:47investment is worth at the moment.

5:49The income statement covers a specific period

5:52such as a quarter or year.

5:53It starts with revenue, which is all

5:56of Aon's earnings for the period,

5:58including sales, licensing fees

6:00and gains on investments.

6:02By subtracting the cost of goods sold,

6:04which is the amount of money applied

6:06to producing and distributing a product,

6:09you come up with a gross margin,

6:11or the profit and loss for the period.

6:18Okay, we've been throwing a lot of terms

6:20around, so let's take a break and learn a

6:22little bit more about what Aon does.

6:25One particularly interesting service

6:27has to do with extreme weather.

6:28-For instance, we do catastrophe modeling

6:32for hurricanes so that some of our insurance

6:35clients that may insure a whole lot

6:36of homes along the Gulf Coast to Florida

6:39what happens if a certain hurricane comes?

6:41What type of insurance or reinsurance

6:43protections do they need to make sure

6:46that they're still financially solvent

6:47if a big wind blows and takes out a

6:49lot of their clients' homes?

6:53In addition to that,

6:54one of the things that we innovated,

6:55we were one of the first people

6:56to provide a terrorism model.

7:00And you may be aware that Aon lost

7:02its major operations in New York,

7:04and we lost 175 of our associates

7:06in the World Trade Center disaster.

7:08That certainly spurred us into taking a look

7:11at what can we do to help companies manage

7:14and monitor their exposure to terrorism acts,

7:18and we've done a - have a strategic

7:20partnership with Rudy Giuliani and his group

7:23to try and help companies

7:25prevent and prepare for

7:27if a disaster like that would ever occur again.

7:34Okay, back to the income statement.

7:37Subtract the operating expenses of the company

7:39- that's salaries, electricity and stuff -

7:42from the gross margin to reveal

7:44net income before taxes.

7:46Then, obviously, subtract the taxes,

7:48and you get Aon's net income or net loss.

7:52That figure is what's known as

7:53the bottom line.

7:54If these two reports seem similar,

7:58just remember that the balance sheet is

8:00like a snapshot of the business at any

8:02particular moment, while the income statement

8:05is more like a movie of the company's

8:07performance over a certain period of time.

8:09Now you're at the final and most important

8:12step of the accounting cycle, analysis.

8:15A good example of analysis is budgeting,

8:18which looks at Aon's history to

8:19find ideas for the future.

8:22The budgeting and the planning process

8:23help us analyze and understand that

8:25and create a consensus among management

8:28of what are reasonable expectations

8:30for the coming years,

8:32and it also helps us to give some guidance to

8:34our shareholders on what they should expect

8:36for earnings from our company, which then

8:39I think also helps give people guidance

8:41on what reasonable valuations of our

8:43companies are for our shares.

8:45There are a host of other analyses

8:47you can do, financial ratios

8:49and activity ratios and liquidity tests.

8:52Of course, you don't have to do

8:53all of this math in your head; these days,

8:56most of it can be done by computer software.

8:58I can't think of anybody in our

9:01financial shop that doesn't have a computer

9:03on their desk, and I'm probably one of the

9:04biggest dinosaurs in that I can read all these

9:07financial reports and I can manipulate them,

9:09but I'm too far away from them

9:11to actually create them anymore.

9:13But clearly, the analysis and

9:15the financial reporting is definitely enhanced

9:18by the reporting tools that exist in computers.

9:22Well, your first day as an

9:23accountant went pretty well.

9:25You made a few decisions and learned a little

9:27about how Aon functions financially.

9:29If you're interested in learning more about

9:31accounting as a career,

9:32talk to your instructor.

9:34On the other hand, if accounting isn't for you,

9:36don't worry; your day hasn't been wasted.

9:39Understanding and applying the

9:41basic fundamentals of accounting is a skill that

9:43will help you in almost any

9:45business endeavor you pursue.

9:47Clearly, if you want to do

9:48anything in business - and I am biased,

9:51but there is no better foundation than

9:53having an accounting background,

9:55because that's how businesses are

9:57measured at the end of the day, and the

10:00intrepretation of those numbers are critical.

Question:

The value of the owners' interests is the same as

short-term liabilities.

equity.

revenue minus costs.

liabilities minus assets.

profits plus revenue.

pinkplatypus23

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