Final Exam Review important key concepts for final exam

20 Pages
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Department
Accounting & Financial Management
Course Code
AFM 131
Professor
Robert Sproule

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Description
AFM 131 Final Exam Review: Globalization (Chapter3) What types of impact does globalization have on our lives? - Economic: large deficits (shortfalls) due to economic recession - Personal: high levels of debt and real estate - Financial: major corporate failures How was globalization affect you as a: consumer, employee, business owner, and student? - Consumer: goods and services - Employees: workplace or head office - Business owner: competition and market - Student: international location Identify a good or service that a company produces even though they are at a comparative disadvantage and identify why they do so? - Agricultural - Industrial - Consumer products - Restrict imports of competing products from countries that can product them at lower costs Why trade with other nations? - No country can product all of the products its people want and need - If a country was self-sufficient, other nations would trade with them to meet the needs of their own people - Some countries have an abundance of natural resources (China) and lack technical know-how - Some countries have technology but new natural resource Reasons why Canada and the United States trade? - We have fresh water and other resources - U.S has lots of consumers - Cultural and social similarities - NAFTA - Exchange rate? Figure 3.6 pg. 75: strategies for reaching global markets Licensing: A firm (licensor) may decide to compete in a global market by licensing the right to manufacture its product or use its trademark to foreign company (the licensee) for a free (royalty) Advantages gain additional revenues from a product that it would not normally have generated, start- up fees (supplies, materials) have been very profitable for companies, extend into long-term service contract, spend little or no money to produce and market their products Disadvantages must grant licensing rights to its product for an extended period of time, product may succeed in foreign market and the revenues earned belong to the licensee, licensing firm may lose its trade secrets Franchising: An agreement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory - E.g. Canadian Tire, Molly Maid, Boston Pizza etc. - Must be careful to adapt their good or service in the country they serve Contract Manufacturing: Involves a foreign companys production of private-label goods to which a domestic company then attaches its own brand name or trademark Advantages enables a company to experiment in a new market without heavy start-up costs (manufacturing plant), can be used temporarily to meet an unexpected increase in orders, Low risk and labour costs are low Internal Joint Ventures and Strategic Alliances: A partnership in which two or more companies (from different countries) joint to undertake a new project or to form a new company Advantages shared technology and risk, shared marketing and management expertise, entry into foreign companies are often not allowed unless goods are produced locally, shared knowledge of local market Disadvantages one partner can learn the others technology and practices and use them, can become obsolete or too large to be as flexible as needed Foreign Direct Investment: The buying of permanent property and businesses in foreign nations Forces Affecting Trade in Global Markets: - Sociocultural: different nations have many different ways of conducting business: religion and language - Economic forces: global financial markets do not have a worldwide currency - Legal and regulatory forces: no central system of law exists in global markets to all and regulations must apply - Technological forces: technological constraints make it difficult to conduct business in global markets Canadian/United States History: - NAFTA: free trade among Canada, United States, and Mexico - Driven by the desire of Mexico to have greater access to the U.S market - Canadian government was concerned that it would be left out or penalized indirectly unless it joined - Canada played a relatively minor role Role of Government (Chapter 4) Impact of Government in Business in these Economic Times: - Massive spending! What historical issues contributed to the impact governments currently have on businesses? - Large landmass, low population connectivity, competitive position to the U.S. Crown Corporation: - Companies that are owned by the federal or provincial governments - Provided services that werent provided by businesses - Created to bail out a major industry in trouble E.g. Air Canada, Canadian National Railway Government Laws and Regulations: - Created by politicians - Power to make laws in based on BNA act - Derived from four sources: the Constitution, precedents established by judges, provincial and federal statutes, and federal and municipal administrative agencies - Federal government responsibilities: ensure countries economic performance :trade regulations, taxation, banking, unemployment - Provincial government responsibilities: issues that affect some provincial residents but not all : natural resources, health and social services, property law, labour law, education - Municipal government responsibilities: defined by the specific province in which they operate e.g. protecting our health, zone requirements Taxation and Financial Polices: - How all levels of government raise money - Sin tax: additional cost of a product from increased taxes to discourage additional consumption - Income, sales, and property is the major basis for tax revenue Government Expenditures: - Allowances to low-income families, employment insurance, welfare, education, health, etc. - Aid through direct and indirect programs designed to help businesses Purchasing Policies: - Governments are very large purchasers and consumers of goods and services - Favour Canadian companies Services: - Federal government has implemented a variety of programs to help small business get started E.g. Industry Canada Forms of Business (Chapter 6) Sole Proprietorship a business that is owned and managed by one person Liability = Debt Liabilities in Addition to Debts: 1. Because of court law 2. Because of law 3. Performance under a contract 4. Damagers to a person or property Advantages of Sole Proprietorships: 1. Ease of starting and ending the business 2. Being your own boss 3. Pride of ownership 4. Leaving a legacy 5. Retention of company profit 6. No special taxes Disadvantages of Sole Proprietorships: 1.Unlimited liability the risk of personal losses: you must repay debts and damage of the business 2. Limited financial resources 3. Management difficulties: inventory, accounting, tax records 4. Overwhelming time commitment: own hours, training people, etc. 5. Few fringe benefits: no paid health insurance, sick leave, vacation pay 6. Limited growth: expansion is very slow 7. Limited lifespan Partnership legal form of business with two or more parties 3 types: - General partnership: all owners share in operating the business and in assuming liability for the business debt - Limited partnership: one or more general partners and one or more limited partners - General partner: owner (partner) who has limited liability and is active in managing the firm; every partnership must have at least one general partner - Limited partner: owner who invests money in the business but does not have any management responsibility or liability for losses beyond the investment Limited Liability liability is limited to the amount they invest into the company personal assets are not at risk Advantages of Partnerships: 1. more financial resources: easier to pay rent, utilities, and other bills 2. Shared management and pooled/complementary skills and knowledge 3. Longer survival 4. Shared risk 5. No special taxes Disadvantages of Partnerships: 1.Unlimited liability: liable for partners mistakes as well as your own 2. Division of profits: causes conflict
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