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Accounting & Financial Management
AFM 131
Robert Sproule

AFM 131 Introduction to Business in North America Chapter 1: Managing within the Dynamic Business Environment Business-any activity that seeks to provide goods and services to others while operating at a profit Profit-the amount a business wars above and beyond what it spends for salaries and other expenses Entrepreneur-a person who risks time and money to start and manage a business Revenue-the total amount of money a business takes in during a given time period by selling goods and services Loss-when a business`s expenses are more than its revenues Risk-the chance an entrepreneur takes of losing time and money on a business that may not prove profitable Stakeholders-all the people who stand to gain or lose by the policies and activities of a business Offshoring-sourcing part of the purchased inputs outside of the country Outsourcing-assigning various functions, such as accounting, production, security, maintenance, and legal work to outside organizations Non-Profit Organization-an organization whose goals do not include making a personal profit for its owners or organizers Factors of Production-the resources used to create wealth, land, labour, capital goods, entrepreneurship, and knowledge Business Environment-the surrounding factors that either help or hinder the development of business Regulations-rules or orders made by government to carry out the purposes set out in statures Technology-inventions or innovations from applied science or engineering research Productivity-the amount of output that is generated given the amount of input E-commerce-the buying and selling of goods and services over the internet E-business-any information system or application that empowers business processes Database-an electronic storage file in which information is kept; one use of databases is to store vast amounts of information about customers Identity Theft-obtaining personal information about a person and using that information for illegal purposes Empowerment-giving front-line workers the responsibility, authority, and freedom to respond quickly to customer requests Demography-the statistical study of the human population with regards to its size, density, and other characteristics such as age, race, gender and income Baby-Boom Echo-a demographic group of Canadians that were born in the period from 1980 to 1995; the children of the baby boomers Baby Boomers-a demographic group of Canadians that were born in the period from 1947-1966 Goods-tangible products such as computers, food, clothing, cars and appliances Services-intangible products (products you cannot hold in your hands) such as education, health care, insurance, recreation, and travel and tourism Chapter 2-How Economic Issues Affect Business Economics-the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals Macroeconomics-the part of economic study that looks at the operation of a nation`s economy as a whole Microeconomics-the part of economic study that looks at the behaviour of people and organizations in particular markets Resource Development-the study of how to increase resources and the creation of the conditions that will make better use of those resources Invisible Hand-a phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all Capitalism-an economic system in which all or most of the factors of production and distribution are privately owned and operated for profit Supply-the quantity of products that manufacturers or owners are willing to sell at different process at a specific time Demand-the quantity of products that people are willing to buy at different process at a specific time Market Price-the price determined by supply and demand Perfect Competition-the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product Monopolistic Competition-the market situation in which a large number of sellers produce products that are very similar but that are perceived by buyers as different Oligopoly-a form of competition in which just a few sellers dominate the market Monopoly-a market in which there is only one seller for a product or service Socialism-an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be evenly distributed among the people Communism-an economic and political system in which the state/government makes all the economic decisions and owns all of the major factors of production Free-Market Economy-an economy in which the market largely determines what goods and services are produced, who gets them, and how the economy grows Command Economy-an economy in which the government largely determines what goods and services are produced, who gets them, and how the economy grows Mixed Economies-economic systems in which some allocation of resources is made by the market and some by the government Gross Domestic Product (GDP)-the total value of goods and services produced in a country in a given year Standard of Living-the amount of goods and services people can buy with the money they have Quality of Life-the general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety, free time, and everything else that leads to satisfaction and joy Productivity-the total output of goods and services in a given period divided by the total hours of labour required to provide them Unemployment Rate-the percentage of the labour force that actively seeks work but is unable to find work at a given time Inflation-a general rise in the prices of goods and services over time Disinflation-a situation in which price increases are slowing (inflation rate is decreasing) Deflation-a situation in which prices are declining Stagflation-a situation in which the economy is slowing but prices are going up regardless Consumer Price Index (CPI)-monthly statistic that measures the pace of inflation or deflation Business Cycles (Economic Cycles)-the periodic rises and falls that occur in economies over time Recession-two or more consecutive quarters of decline in the GDP; a severe recession (depression) Chapter 3-Competing in Global Markets Exporting-selling goods and services to another country Importing-buying goods and services from another country Free Trade-the movement of goods and services among nations without political or economic disruption Comparative Advantage Theory-states that a country should sell to other countries those products that it produces most efficiently and effectively, and buy from other countries those products that it cannot produce as effectively or efficiently Absolute Advantage-exists when a country has the ability to produce a particular good or service using fewer resources and at a lower cost than another country Balance of Trade-a nations ratio of exports to imports Trade Deficit (unfavourable balance of trade)-occurs when the value of a countrys imports exceed that of its exports Balance of Payments-the difference between money coming into a country (exports) and money leaving the country (imports) plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment Licensing-a global strategy in which a firm (licensor) allows a foreign company (licensee) to produce its products in exchange for a fee (royalty) Contract Manufacturing-a foreign countrys production of private-label goods to which a domestic company then attaches its brand name or trademark (outsourcing) Joint Venture-a partnership in which 2 or more companies (often from different countries) join to undertake a major project of to form a new country. Benefits: shared technology/risk, shared marketing/management expertise, entry in to foreign markets, shared knowledge Strategic Alliance-a long-term partnership between 2 or more companies established to help each company build competitive market advantages Foreign Direct Investment (FDI)-the buying of permanent property and business in foreign nations Foreign Subsidiary-a company owned in a foreign country by the parent company Multinational Corporation-an organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management Culture-the set of values, beliefs, rituals, and institutions held by a specific group of people Ethnocentricity-an attitude that ones own culture is superior to all others
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