BUAD100 Lecture 2:

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Published on 21 Feb 2019
Week 2:
- What is a business: an activity that seeks to provide goods and services
- A business has three musts:
o Must be organized
o Satisfy needs consumer not likely to buy product they do not want or need
o Earn a profit
- Business goal of business is to develop a product (physical goods and services is wha
most people think of)
o Provide benefits to the customer
- Business organization;
o What is profit: revenue minus expenses
Coffee shop example
o Nonprofit habitat for humanity not main purpose of making profits. A lot of
these get funded through donations
o For profit
- Profit: An example
o A movie theater popcorn = $4
o Theater’s popcorn cost = 80 cents (20%)
o Theater’s popcorn profit = $3.20 (80%)
o Profit margins range maybe they make only 10% on sodas.
o Profit is revenue TOTAL expense
Cant forget the popcorn makers, cups for popcorn, utility costs, etc.
o The total net profit may only be 10% or even lower
- What to do with profits?
o What is a public versus private company?? Is the company public or private?
Pay dividends
Not all companies pay dividends, but those who do are attractive
to investors
Growth in share price
o Reinvest in the company
Research and development attempt to develop new product offerings
Expand into new markets
Expand into different product lines
o When a company gets larger, it does not necessarily mean it will go public
- Stakeholders
o A party that has interest in a company and can affect or be affected by the
o can be internal or external
o examples:
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