Chapter 1:

- Business and Wealth Building:

- Business: Any activity that seeks to provide goods and services to other while
operating at a profit
- Goods: Tangible products such as computers, food, clothing, cars, and
appliances
- Services: Intangible products such as education or health care
- Entrepreneur: A person who risks time and money to start and manage a
business
- Revenue: The total amount of money a business takes in by selling goods and
services in a given period of time
- Expense: The cost of producing the goods or services being offered
- Profit: The amount of money a business earns above and beyond what it spends
for salaries and expenses
- Loss: When a businesses expenses are more than its revenues
- Nonprofit Organizations: An organization whose goals do not include making a
personal profit for its owners or organizers, they use financial gains to meet
social or educational goals
- Risk: The chance an entrepreneur takes of losing time and money on a business
that may not prove profitable, big risks could make big profits
- 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 its political freedom,
natural environment, education, health care, safety, amount of leisure, and
rewards that add to the satisfaction and joy that other goods and services provide
- High quality of life requires combined efforts of businesses, nonprofits, and
government agencies
- Stakeholders: All the people who stand to gain or lose by the policies and
activities of a business and whose concerns the business needs to address.
- A primary challenge is to recognize and respond to the needs of
stakeholders
- Outsourcing: Contracting with other companies to do some of the functions of a
business such as production or accounting

- The Importance of Entrepreneurs to the Creation of Wealth

- The positives to being an entrepreneur
- The freedom to succeed
- Make your own decisions
- Possible wealth
- The negatives to being an entrepreneur
- The freedom to fail
- No paid vacations
- No health insurance
- The Five Factors of Production:
 - Land (natural resources)
- Labor (worker)
- Capital
- Entrepreneurship
- Knowledge

- The Business Environment: The surrounding factors that either help or hinder the
development of the business
- Economic and Legal Environment
- Governments can promote businesses by:
- Allowing private ownership
- Minimizing interference with free trade
- Passing laws that enable businesspeople to write enforceable
contracts
- Establishing a currency that's tradable in world markets
- Minimizing corruption
- Technological Environment
- Any technological advancement that makes business processes more
effective, efficient, and productive.
- How technology benefits workers and you
- Effectiveness: Producing the desired result
- Efficiency: Producing goods and services using the least number
of resources
- Productivity: The amount of output you generate given the amount
of input
- Business Processes
- Ecommerce: The buying and selling of goods over the internet
- Using technology to be responsive to customers
- Personalized Attention: identifiable data for marketing
- Database: An electronic storage file for information
- Identity Theft
- Competitive Environment
- A competitor is not identified by being in the same industry or having the
same line of products but instead by the customer they target.
- Customers want good quality products at low prices with great customer
service
- Customer-driven not Management-driven
- Because business is more customer-driven, some managers give
frontline employees more decision-making power
- Empowerment: Giving frontline workers the responsibility,
authority, freedom, training, and equipment they need to respond
quickly to customer needs
- Social Environment
 - Demography: The statistical study of the human population with regards
to its size, density and other characteristics, such as age race gender and
income
- Global Business Environment
- Globalization has grown due to efficient distribution systems and
communication systems such as the internet.
- Competition can also be global
- How global changes affects you:
- As businesses expand into global markets, new jobs are created
- Rapid changes create a need for continuous learning
- The ecological environment
- Climate Change
- Greening: the trend toward saving energy and producing products
that cause less harm to the environment
- The Evolution of U.S. Business:
- Progress in Agricultural and Manufacturing Industries
- In the 1800s agriculture was the dominant industry
- Innovation and technology made agriculture more efficient
- Industrialization moved jobs from farms to factories
Chapter 2:
- Economics: The study of how to allocate resources
- Macroeconomics: The part of economics study that looks at the operation of a
nation's whole economy
- MIcroeconomics: The part of the economics study that looks at the behavior of
people and organizations in particular markets
- Resource Development: The study of how to increase resources and create conditions
that will make better use of these resources
- Adam Smith Believed:
- Freedom is vital to an economy’s survival
- Freedom to own land or property and the right to keep profits of a business is
essential
- People work hard if they believe they are rewarded
- Capitalism: An economic system in which all or most of the factors of production and
distribution are privately owned and operated for profit
- State Capitalism: A combination of freer markets and some government control
- Capitalism’s four basic rights:
- The right to own private property
- The right to own a business and keep all that business’s profits
- The right to freedom of competition
- The right to freedom of choice
- How prices are determined:
- If the seller lowers their price quantity will increase and vice versa
- Supply: The quantity of products that manufacturers or owners are willing to sell at
different prices at a specific time
- Demand: The quantity of products that people are willing to buy at different prices at a
specific time

- Competition within free markets:

- Perfect Competition: many sellers in a market and none is large enough to
dictate the price
- Monopolistic competition: large number of sellers produce similar products that
buyers still perceive as different
- Oligopoly: few sellers dominate the market with barriers to entry
- Monopoly: one seller controls the total supply and sets the price
- Benefits of free market:
- It allows for open competition between companies
- It provides opportunities for poor people to work their way out of poverty
- Limitations of free market:
- People may let greed drive them
- Market sellers may collude
- Socialism: An economic system based on the premise that some or most basic
businesses should be owned by the government so that profits can be more evenly
distributed amongst the people.
- Entrepreneurs run small businesses
- Citizens are highly taxed
- Government is more involved in protecting the environment and the poor
- Benefits of Socialism:
- Social Equity
- Free Education
- Free health care
- Shorter work weeks
- Negatives of Socialism:
- Few incentives for business people to take risks
- Brain Drain: the loss of the best people to other countries
- Fewer inventions and less innovation because of lesser reward than in
capitalism
- Communism: An economic and political system in which the government make almost
all economic decisions and owns almost all the major factors of production
- Prices don’t reflect demand which may lead to shortages
- Most communist countries suffer severe economic depression
- Mixed Economies: Economic systems in which some allocation of resources is made by
the market and some by the government
- Free market economies: Mostly decided by market
- Command economies: Mostly decided by government

- Key economic indicators:

- Gross domestic product (GDP): The total value of final goods and services
produced in a country in a given year
 - Gross output (GO): GDP plus intermediate consumption, a total of all the
stages of production, usually way bigger than GDP.
- Unemployment Rate: The number of civilians at least 16 years old who are
unemployed and tried to a find a job within the past 4 weeks
- 4 types of unemployment:
- Frictional: new graduates, returning employment, problems
between employer and employee
- Structural: restructuring result
- Cyclical: downturn or business cycle declines
- Seasonal: demand for labor changing over the year
- Inflation: A general rise in the prices of goods and services over a period of time
- Consumer Price Index: Monthly statistics that measure the pace of
inflation or deflation
- Producer Price Index: An index that measures the changes in prices at
the wholesale level
- Disinflation: when the price is still increasing but at a lower speed
- Deflation: when prices are declining
- Stagflation: when an economy is slowing but prices are still increasing

- Business cycles: the periodic rises and falls that occur economies over time
- 4 phases of a long-term business cycle:
- Economic Boom: New businesses being set up, everything is going great
for the economy, more transactions, more jobs, more people.
- Recession: two or more consecutive quarters of decline in GDP
- Depression: a severe recession usually accompanied by deflation
- Recovery: when the economy stabilizes and starts to grow, eventually
leading to an economic boom
- Governments can stabilize the economy through:
- Fiscal Policy: the government directly changes their spending and taxation to
regulate the economy
- National Deficit: the amount that the government spends more than they
earn in a given fiscal year
- National Surplus: when the government takes in more revenue than it
spends
- National Debt: the sum of government deficits over time
- Monetary Policy: the management of the money supply and interest rates by the
federal reserve bank
- Mostly by increasing and decreasing interest rates

Chapter 5:
- Sole Proprietorship: A business owned, and usually operated by one person
- Advantages:
- Ease of starting and ending a business
 - Being your own boss
- Pride of ownership
- Legacy
- Retention of company profits
- No special taxes
- Disadvantages:
- Unlimited Liability: the business owner is liable for all the debts of the
business
- Limited financial resources, harder to attract loans
- Management difficulties, attracting employees to a sole proprietorship
- Overwhelming time commitment
- Few fringe benefits, company car, health insurance, etc.
- Limited growth
- Limited life span
- Partnership: A legal form of business with two or more owners
- Advantages:
- More financial resources
- Shared management and complementary skills or knowledge
- Longer survival
- No special taxes
- Disadvantages:
- Unlimited liability
- Division of profits
- Disagreements among partners
- Difficulty of termination
- Major types of partnerships:
- General partnership: All owners share in operating the business and
assuming liability for the business’ debts
- Limited Partnership: A partnership with one or more general partners and
limited partners
- General partners: Someone who puts in money with unlimited liability,
and is active in managing the business
- Limited Partner: An owner who invests money but is not active in the
business and has limited liability
- Limited Liability: The responsibility of a business’ owners for the
losses only up to the amount they invested
- Master Limited Partnership: a partnership that acts a lot like a
corporation, because they are publicly traded, but they are still taxed as a
partnership without corporate income tax
- 90% of their income or more must be from qualifying sources such
as production, processing, storage, etc. of depletable natural
resources
 - Limited liability partnership: A partnership that limits partners’ risk of
losing their personal assets to only their own acts and omissions of
people under their own supervision
- Corporation: A legal entity with authority to act and have liability separate from its
owners
- Conventional (C) Corporation: A state-chartered legal entity with authority to act
and have liability separate from its owners
- Advantages of corporations:
- Limited liability
- Ability to raise money for investment
- Size and ability to grow
- Perpetual life
- Ease of ownership change
- Ease of attracting talented employees
- Separation of ownership from management
- Disadvantages of Corporations:
- Initial Cost
- Extensive paperwork
- Double taxation and filing two tax returns (corp inc tax and inc tax)
- Size (too big in some cases)
- Difficulty of termination of business
- Possible conflict between shareholders and board of directors
- S Corporation
- A unique government creation that looks like a corporation but is taxed
like a sole proprietorship and a partnership
- They have shareholders, directors, employees, limited liability
- Profits are only taxed on income of shareholders
- S corporations must:
- Have no more than 100 shareholders
- Have shareholders that are individual or estates with us
citizenship or permanent residency
- Have only one class of stock (common or preferred)
- Derive no more that 25% of income from passive sources
- 75% from active sources (income from the main source of income
for that business)
- If an S corporation loses its S status, it may not operate under it again for
at least 5 years
- Individuals can incorporate to get possible tax benefits limited liability
- Limited Liability Corporation: Similar to an S corporation but without the special
eligibility requirements
- Advantages:
- Limited Liability
- Choice of taxation
- Flexible ownership rules
 - Flexible distribution of profits and losses
- Operating flexibility
- Disadvantages:
- Ownership is difficult to transfer due to absence off actual stock
- Limited life span
- Fewer incentives (no stock options)
- Taxes (owners pay a special tax for medicare/social security that
S corporation owners don't)
- Paperwork (more than sole proprietors)
- Mergers and acquisitions:
- Merger: The result of two firms forming one company
- Acquisition: One company’s purchase of the property and obligations of
another company
- Types of Merger:
- Vertical Merger: The joining of two companies in different stages
of the supply chain (coffee company merging with coffee beans
farming company)
- Horizontal Merger: The joining of two firms in the same industry
- Conglomerate Merger: The joining of firms in unrelated industries
- Leveraged Buyout: An attempt by employees, management, or a group of
private investors to buy out the stockholders in a company
- Franchise agreement: An arrangement where the owner of a business
sells the rights to use the business name, sell a product or service, and
act on their behalf
- Advantages:
- Management and marketing assistance
- Personal Ownership
- Nationally recognized name
- Financial advice and assistance
- Lower failure rate
- Disadvantages:
- Large start-up costs
- Shared profit
- Lack of freedom and independence
- Management regulation
- Coattail effects
- Restrictions on selling
- Fraudulent franchisors
- Home Based franchising:
- Advantages:
- No commuting stress
- Family time
- Low overhead expenses
- Disadvantages:
 - Isolation
- Long hours
- Usually cleaning services, tax services, childcare, etc.
- Cooperatives: A business owned and controlled by the people who use it -
producers, consumers, or workers, with similar needs who pool their resources
for mutual gain

Chapter 7:
- Management: is the process used to accomplish organizational goals through planning,
organizing, leading and controlling people and organizational resources
- Managers:
Managers were mainly known as bosses and still are in conventional companies
today
Managers Today:
- Tend to be collaborative
- Emphasize teams and team building
- Guide, train, support, motivate, and coach employees
- Need to be skilled communicators
- Need to be globally prepared
- More part of the team then leading the team
- The 4 Management Functions (POLC):
- Planning (What needs to be done):
- Setting organizational goals
- Developing strategies to reach those goals
- Determining resources needed
- Setting precise standards
- Organizing (How it can be done):
- Allocating resources, assigning tasks, and establishing procedures for
accomplishing goals
- Preparing a structure for authority and responsibility
- Recruiting, selecting, developing, and training employees
- Placing employees where they’ll be most effective
- Leading (Who can do it):
- Guiding and motivating employees to accomplish organizational goals
- Giving assignments
- Explaining routines
- Clarifying Policies
- Providing performance feedback
- Controlling (How to keep it going):
- Measuring results against corporate objectives
- Monitoring performance relative to standards
- Rewarding outstanding performance
- Taking corrective action when necessary
- Planning
- Vision: (more than a goal) an encompassing explanation of why the organization
exists and where its trying to go
- Mission: An outline of the fundamental purposes of an organization including:
- The organizations concept
- Philosophy
- Long-term survival needs
- Customer needs
- Social responsibility
- Goals: The broad, long-term accomplishments an organization wishes to attain
- Objectives: Specific, short-term statements detailing how to achieve the
organization's goals
- Planning answers the fundamental questions:
- What is the situation now?
- How can we get our goal from here
- SWOT Matrix:
- Strengths
- Internal positives within the company
- Weaknesses
- Internal negatives or disadvantages within the company
- Opportunities
- External advantages or positives in the external environment
- Threats
- External disadvantages or negatives in the external environment
- 4 types of planning:
- Strategic Planning: Determining the major goals of the organization and
the policies and strategies for obtaining and using resources to achieve
those goals
- Which customers to serve, when to serve them, what products to
offer, and where to offer them
- Tactical Planning: Developing detailed, short-term statements about what
is to be done, who is to do it, and how it is to be done
- Operational Planning: Setting work standards and schedules necessary
to implement the company’s tactical objectives
- Specific to daily and weekly operations to achieve tactical
planning
- Contingency Planning: Preparing alternative courses of action that may
be used if the primary plans don't achieve the organization’s objectives
- Decision making: find the best alternative
- Choosing among two or more alternatives to fix the current problem
- Rational Decision making model:
 - Define the situation
- Describe and collect needed information
- Decide important information
- Develop alternatives
- Brainstorm and list alternative
- Decide which alternative is best
- Using criteria decide and calculate best decision
- Do what is indicated
- Determine whether the decision was a good one
- Gain feedback
- Problem Solving: The process of solving the everyday problems that
occur, this is less formal than decision making and usually calls for
quicker action
- Problem solving techniques use brainstorming, PMI, and pros and
cons

- Organizing
- Management Levels:
- Top Management: Highest level, the president and other key company
executives who develop strategic long term plans
- Participate in strategic planning
- Has Conceptual skills > Human relations skills > Technical Skills
- Middle Management: Includes general managers: division managers, and
who are responsible for tactical planning and controlling
- Participate in tactical planning
- Has an equal amount of technical skills, human relations skills,
and conceptual skills
- Supervisory Management: Those directly responsible for supervising
workers and evaluating their daily performance
- Participate in operational planning
- Has Technical Skills > Human relations skills > Conceptual Skills
- All participate in contingency planning
- Technical Skills at different levels of management
- Technical Skills: the ability to perform tasks in a specific discipline or
department
- Human Relations Skills: communication and motivation: enabling
managers to work through and with people
- Conceptual skills: The ability to picture the organization as whole and the
relationship amongst its various components.
- Staffing: Getting and keeping the right people
- Staffing: Hiring, Motivating, and Retaining the best people available to
accomplish the company’s objectives
- Leading
 - Leaders must:
- Communicate a vision and rally others around that vision
- Establish corporate values
- Promote corporate ethics
- Embrace change
- Stress accountability and responsibility
- Transparency: the presentation of the company’s facts and figures in a way that
is clear and apparent to all stakeholders
- Leadership Styles:
- Autocratic Leadership:
- Make management decisions without consulting others
- Popular in finance or accounting departments
- Participative or democratic leadership
- Managers and employees work together to make decisions
- Popular in marketing or PR departments
- Free-rein Leadership:
- Managers set objectives and employees are relatively free to do
whatever it takes to accomplish those objectives
- Popular with doctors and lawyers
- Empowering:
- Progressive leaders give employees authority to make decisions on their
own without consulting a manager
- Customer needs are handled quickly
- Manager roles become less of a boss and more of a coach
- Enabling workers the tools and education they need to make decisions
- Controlling
- Measuring performance relative to planning objectives
- Reward people for work well done
- Takes necessary corrective action
- One key measurement criterion: Customer satisfaction
- Traditional forms of measuring success are financial
- Pleasing employees, stakeholders, and customers is important
- External Customers: people who buy the goods and services
- Internal Customers: people in the firm who receive services from other
people

Chapter 13:
- Marketing: The activity, set of institutions and processes for for creating, communicating,
delivering, processing and exchanging offerings with values for customer, clients,
partners and society at large
- Marketing used to be about helping the seller sell
- Marketing today helps buyers buy which inevitably helps sellers sell
- The Evolution of Marketing:
- Four eras:
- Production Era
- “Produce as much as you can because there is a limitless
market for it”
- Since production capacity was limited, this was profitable
- Selling Era
- Mass production became common
- Most companies emphasized selling and advertising in an
effort to persuade consumers to buy existing products
- Marketing concept era
- After WW2 consumer spending boomed
- Producers realized they needed to be responsive to
customers
- Customer relationship era
- CRM: (Consumer relationship management) Learning
whatever you can about can about customers and doing
whatever you can to exceed their expectations
- Emerging Mobile/On-demand Marketing Era:
- Now: Consumers want to interact anywhere, anytime
- Can I?: They want to use information in new ways to
create value for them (E.g. Can i afford this house)
- For me: Consumers expect personalized experiences
- Simple: Consumers expect all interactions to be easy
- Marketing concept: A three part business philosophy
- Customer orientation: emphasis on meeting consumer needs
- Service orientation: customer satisfaction is an organization wide
objective
- Profit orientation: focus on what is more profitable
- Non-profit marketing tactics include:
- Fundraising
- Obtaining resources
- Promotion of ecologically safe technologies
- Attracting new members
- Creation of awareness for social issues
- Marketing Mix: The ingredients that go into a marketing program
- The four P’s:
- Product: Any physical good, service, or idea that satisfies a want
or need plus anything that enhances the product in the eyes of the
consumer
- Designing a product to meet consumer needs
- Concept testing: Testing the idea of a product or service
through vivid description
 - Test Marketing: Testing products among potential
consumers
- Brand name: a word, letter, or a group of words or letters
that differentiates one sellers goods and services from
those of competitors
- Price
- Setting an appropriate price depending on many factors
- Competitors prices
- Production costs
- Distribution
- Promotion
- Place
- Getting the product to the right place
- Intermediaries are important because getting a product to
consumers when and where they want it is critical
- Promotion: All the techniques sellers use to inform people and
motivate them to buy goods and services
- Developing an effective promotional strategy
- Promotion includes:
- Advertising
- Personal selling
- Public Relations
- Publicity
- Word of mouth
- Sales promotion
- Marketing research: The analysis of markets to determine opportunities and
challenges, and to find information needed to make good decisions
- Research is used to products consumers have used in the past and what
they want in the future and uncovers business trends
- Marketing Research Process:
- Defining the problem or opportunity and determining the present
situation
- What's the present situation?
- What are the problems or opportunities?
- What are the alternatives?
- What information is needed?
- How should information be gathered?
- Collecting research data
- Primary Data: Data that you compile yourself
- Telephone, online, personal interviews, focus
groups, etc.
- Focus Groups: A small group of people who
meet under the direction of a discussion
leader to communicate opinions
 - Secondary Data: information that has already been
compiled by others and published in journals or available
online
- Usually cheap and easily accessible
- Usually doesn't provide all the needed specific data
- Analyzing data
- Marketers must turn data into useful information through
careful, honest interpretation
- Choosing the best solution and implementing it
- Marketers use their analysis to plan strategies and make
recommendations
- Marketers must review their strategies and determine if
future research is needed
- Market research is a continuous process
- Environmental scanning: The process of identifying factors that can affect market
success
- Factors involved in environmental scanning are:
- Global factors
- Trade agreements
- Competition
- Trends
- Opportunities
- Internet
- Technological Factors
- Computers
- Telecommunications
- Bar codes
- Data interchanges
- Internet changes
- Sociocultural Factors
- Population Shifts
- Values
- Attitudes
- Trends
- Competitive Factors
- Speed
- Service
- Price
- Selection
- Economic Factors
- GDP
- Disposable income
- Competition
- Unemployment
- Consumer Market: All the individuals or households that want goods and
services for personal consumption or use
- B2B Market: All the individuals and organizations that want goods and services
to use in producing other goods and services or to sell, rent, or supply goods to
others
- Market Segmentation: Dividing the total market into groups whose members
have similar characteristics
- Segmenting the consumer market:
- Geographic Segmentation: Dividing the market by cities, states,
regions, countries
- Demographic Segmentation: Dividing the market by age, income,
and education level
- Psychographic Segmentation: Dividing the market using a groups
values, attitudes, and interests
- Benefit Segmentation: Dividing the market by determining which
benefits of the product to talk about
- Volume Segmentation: Dividing the market by usage
- Target Marketing: Marketing targeted towards those groups an organization can
decides it can serve profitably
- Reaching smaller markets:
- Niche Marketing: Finding small but profitable market segments
and designing or finding a product for them
- One - to - one marketing: Developing a unique mix of goods and
services for an individual consumer
- Building Market Relationships:
- Mass Marketing: Developing products and promotions to please
larger groups of consumers
- Relationship Marketing: Keeping individual customers over time
by offering products that exactly meet their requirements
- The consumer decision making process:
- Problem recognition
- Information Search
- Evaluate alternatives
- Purchase decision
- Post purchase evaluation
- Factors that affect consumer behavior:
- Learning
- From trying the product before
- Reference group
- Other peoples experiences
- Culture
- National or religious
- Subculture
- Ethnic or religious
 - Cognitive dissonance
- Internal conflict after purchase

- B2B marketing:
- Small number of customers
- Usually large customers
- Tend to be geographically concentrated
- More rational and less emotional in decision making
- Direct sales without intermediaries
- Personal selling vs. advertising

Chapter 14:
- Developing Value:
- Value: Good quality at fair price
- Value is calculating all the benefits and subtracting all the costs
- Adapting products to new markets is an ongoing challenge
- Product development is a key activity in any modern business
- Distributed Product Development: Handing off various parts of your innovation
process - often to overseas companies
- The increase in outsourcing has resulted in using multiple organizations
separated by cultural, geographic, and legal boundaries
- Will need to have more hands on involvement with the outsourcing
process as a part of the innovation process rather than normal
outsourcing
- Developing a total product offer: Everything that consumers evaluate when
deciding whether to buy something
- The core product is the basic product
- The augmented product is the total product offer including all intangibles
- Products are evaluated on tangible and intangible attributes
- Marketers must think like and talk like consumers to find out what's
important
- Product line and Product mix:
- Product line: a group of products offered by a company that are physically
similar or intended for a similar market
- Product mix: The combination of product lines offered by a manufacturer
- Product Differentiation: The creation of real or perceived product differences
- Marketers use a mix of branding, pricing, advertising, and packaging to
create different images
- Marketing different classes of consumer goods and services
- Convenience goods: Products that consumers want to purchase
frequently and with minimum effort
 - Promoted by making them available
- E.g. Candy and gum
- Shopping goods and services: Consumer products that the
consumer buys after comparing value, quality, price, and style
from a variety of sellers
- Best promoted by appealing price, quantity and service
- E.g. Clothing
- Specialty goods and services: Consumer products with unique
characteristics and brand identity. Because these products are
perceived as having no substitute, the consumer puts forth a
special effort to purchase them
- Promoted by reaching special market segments through
unique advertising
- E.g. Fine watches and designer clothes
- Unsought goods and services: Products that consumers are
unaware of, have not necessarily thought of buying, or find that
they need to solve an unexpected problem
- Promoted using word of mouth and review websites
- E.g. Car towing services and insurance
- Marketing industrial goods and services:
- Industrial goods: Products used in the production of other
products (B2B)
- The same product could be consumer or industrial
- Packaging:
- Key function of packaging:
- Attracts buyers attention
- Protects the goods inside and tamperproof
- Be easy to open
- Describe and give information about the contents
- Explain the product’s benefits
- Provide warranty information and warnings
- Give an indication of price value and uses
- Companies often use packaging to change and improve their basic
product
- E.g. Squeezable ketchup bottles
- Good packaging can make a product more attractive to retailers
- Bundling: Grouping two or more products together and pricing them as a
unit
- E.g When financial institutions bundle advice with purchases
- Brand: a name, symbol, or design that identifies the goods and services
of one seller or group of sellers and distinguishes them from the goods
and services of competitors
- Trademark: A brand that has exclusive legal protection for both its
brand name and its design
 - Brand Categories:
- Manufacturer’s Brands: the brand names of manufacturers
that distribute products nationally
- Dealer brands: Products that don’t carry the manufacturers
name but carry a distributors or retailers name instead
(Carrefour)
- Generic goods: Non Branded products that usually sell at a
sizeable discount compared to national or private labeled
brands
- E.g. Fruits and Vegetables
- Knockoff Brands: illegal copies of brand name goods
- Brand Management:
- Brand Manager: A manager who has direct responsibility
for one brand or one product line
- Brand manager handles all the elements of the
brand’s marketing mix
- Generating Brand Equity and Loyalty
- Brand Equity: the value of the brand name and
associated symbols
- Brand awareness: how quickly or easily a given
brand name comes to mind when a product
category is mentioned
- Brand loyalty: the degree to which customers are
satisfied, like the brand, and are committed to
further purchases
- Consumers reach a point of brand preference when
they prefer one brand over another
- When consumers reach brand insistence they don't
accept substitute brands
- Brand association: the linking a brand to other
favorable/unfavorable images
- The new product development process:
- Idea Generation: Focus on consumer wants and needs by
listening to employees, suppliers and customer
- Product screening: A process designed to reduce the number of
new-product ideas being worked on at any time
- Product Analysis: Making costs estimates and sales forecasts to
get a feeling for profitability of new-product ideas
- Concept testing: taking a product idea to consumers to test
reactions
- Crowdsourcing: platforms that allow the public to give their
opinions of potential products
- Commercialization: Promoting a product to distributors and
retailers to get wide distribution while developing strong
 advertising and sales campaigns to generate and maintain interest
in the product by distributors and consumers
- Product Life cycle:
- Stages:
- Introduction
- Growth
- Maturity
- Decline
- Some products remain classics and never decline while other go through
the life cycle quickly
- Product life cycle can be extended using rebranding, repackaging and
other marketing strategies
- Pricing Objectives:
- Achieving a target return on investment (profit)
- Building traffic
- Forming a customer base and reeling customers in
- Achieving greater market share
- Creating an image
- Furthering social objectives in short run and long run
- Pricing Strategies:
- Cost Based Pricing: measuring cost of producing a product and using that
to price a product
- Demand Based Pricing:
- Target costing: Designing a product so that it satisfies customers
and meets the profit margins desired by the firm
- The price that consumers are willing to pay is first determined then
profit is deducted and the remaining is the target cost
- Competition Based Pricing: A pricing strategy based on what all other
competitors are doing
- Price leadership: One or more dominant firms set the pricing
practices that all industry competitors follow
- Skimming Price: where a new product is priced high to make optimum
profit while there is little competition
- Penetration Strategy: Where a product is priced low to attract many
customers and discourage competition
- Everyday low pricing: Setting prices lower than competitors and then not
having any special sales
- Psychological Pricing: Pricing goods and services at price points that
make the product appear less expensive than it is ($10 vs. 9$9.99)
- Break even analysis: the process used to determine profitability at various levels
of sales
- Break even point: Revenue = Costs, profit = 0
- Total fixed costs: all the expenses that remain the same no matter how many
products are made or sold
 - Variable costs: Costs that change according to the level of production

Chapter 17:
- Accounting: The recording, classifying, summarizing, and interpreting of financial events
and transactions to provide management and other interested parties the information
they need to make good decisions
- Outside parties: Such as employees, owners, creditors, unions, investors, and
the government. They make use of a firm’s accounting information
- Accounts Receivable: The account that holds all the money owed to a business
- Inventory: The account that holds the value of stock or inventory that the
business has
- The Accounting System:
- Inputs:
- Accounting documents such as:
- Sales documents
- Purchasing documents
- Shipping documents
- Payroll documents
- Bank records
- Travel records
- Expense records
- Processing:
- Entries made into journals/recordings
- Effects of the entries are posted into ledgers
- All accounts are summarized
- Outputs:
- Financial Statements
- Accounting Cycle: A six step procedure that results in the preparation and
analysis of major financial statements
- Steps of the accounting cycle:
- 1. Analyze documents
- 2. Record transactions in journals
- Bookkeeping: The recording of business transactions
- Double entry-bookkeeping: Writing the recordings
in two places to compare them for accuracy
- 3. Transfer journal entries to ledger
- Ledger: A specialized accounting book that records
information from journals in a summarized form for
management
- 4. Take a trial balance
- Trial Balance: A summary of all the financial data in the
account ledgers that ensures the figures are correct and
 balanced (Add all debits and add all credits they should be
equal)
- 5. Prepare financial statements
- Financial statement: A summary of all the transactions that
have occurred in a particular period which include:
- Balance sheet: Financial statement that reports a firm’s
financial condition at a specific time and is composed of
three major accounts:
- Fundamental accounting equation: The basis for
the balance sheet:
- Assets = Liabilities + Owners Equity
- Assets: Economic resources or things of value that
are owned by a firm
- Current Assets: An asset that could or
should be converted to cash within the next
year
- Fixed Assets: Assets that are relatively
permanent
- Intangible Assets: Long term assets that
have no physical form but do have value
(patents, trademarks, copyrights)
- Liquidity: The ease in which an asset can be
converted to cash
- Liabilities: What a business owes to others
- Accounts Payable: Current liabilities
involving money owed to others for
merchandise or services purchased on
credit but not yet paid for
- Notes Payable: Short or long term liabilities:
that a business promises to pay by a certain
date
- Bonds Payable: Long term liabilities that
represent money lent to the firm that must
be paid back
- Owners Equity: The amount of a business that
belongs to the owners minus any liabilities owed by
the business
- Retained Earnings: The accumulated earnings from
a firm’s profitable operations that were reinvested in
the business and not paid out to stockholders
- Income Statements: The financial statements that shows a
firm’s profits after costs, expenses, and taxes
- Net income or net loss: Revenue left over after all
costs and expenses including taxes have been paid
 - Formula for Income statement:
- Revenue: the monetary value a firm
received for goods sold, services rendered
or other payments
- Minus cost of goods sold: A
measure of the cost of raw materials
or supplies used to produce the
goods
- = Gross profit: How much a firm earned by
making and selling merchandise
- Minus operating expenses: costs
involved in operation a business
- = Net income before taxes
- Minus taxes
- = Net income or loss
- Depreciation: the systematic write-off for the cost of
a tangible asset over its estimated useful life
- Statement of cash flows: financial report that details cash
receipts and disbursements related to a firm's three major
activities:
- Operations: running the business
- Investments: the firm’s investment activities
- Financing: debt, equity, or cash used to pay
business expenses, past debts or dividends
- Cash flow: The difference between cash coming in
and cash going out of a business
- Ratio Analysis
- 6. Analyze financial statements
- Ratio analysis: using key ratios from a firm's financial
statements to analyze a firm's financial position such as:
- Liquidity ratios: measures a firm's ability to turn
assets into cash to pay its short term debts
- Current ratio:
- Current assets / Current liabilities
- Acid-test ratio:
- Cash + Receivables + Marketable
securities / Current liabilities
- Shows current assets minus
inventory incase sales drop
- Debt ratios: Measures the degree to which a firm
relies on borrowed funds in its operations
- Debt to owners equity ratio:
- Total Liabilities / Owner’s Equity
 - Profitability ratios: measures how effectively a firm’s
managers are using the firm’s various resources to
achieve profits
- Earnings per share:
- Net income after taxes / No. of
common stock shares outstanding
- Return on sales
- Net income after taxes / Net sales
- Return on equity:
- Net income after taxes / total
owner’s equity
- Activity ratios: measures how effectively
management turns over inventory
- Inventory turnover ratio:
- Cost of goods sold / average
inventory
- Technology in accounting:
- Computerized accounting programs post information instantly and
from remote locations
- Accounting software address the specific needs of small
businesses
- Financial accounting: Accounting information and analyses prepared for people
outside the organization
- Outside users have three questions:
- Is the organization profitable?
- Is it able to pay its bills?
- How much debt does it owe?
- Annual report: a yearly report of a firm's financial condition, progress, and
expectations of the organization
- Private accountant: An accountant that works for a single firm,
government, or agency
- Public accountant: An accountant who provides accounting services to
individuals or businesses on a fee basis
- Certified public accountant: (CPA) passes a certification by the American
Institute of Certified Public Accountants
- Managerial Accounting: Accounting used to provide management with
information and analyses and aid them in the decision making process. It
involves:
- Costs of production
- Costs of marketing
- Preparation and control of budgets
- Minimizing tax liabilities
- Auditing: the job of reviewing and evaluating the information used to prepare a
company’s financial statements
 - Independent Audit: An unbiased audit of the accuracy of a company’s financial
statements
- Tax Accounting: An accountant trained in tax law and responsible for preparing
tax returns or developing tax strategies
- Government and not-for-profit accounting: Account for government and NPO
entities

Chapter 18:
- Finance: the function in a business that acquires funds for the firm and manages those
funds within the firm
- Financial management: The job of managing a firm's resources to meet its goals
and objectives
- Financial managers: Examine the financial data and recommend strategies to
improve financial performance
- Financial managers obtain funds and effectively control the use of funds
- Most common reasons a firm fails financially:
- Undercapitalization (did not raise enough funds)
- Poor control over cash flow
- Inadequate expense control
- Financial Planning: analyzing short-term and long-term money flows to and from
the company using three key steps:
- Forecasting: predictions of financial future
- Short-term forecast: predicts revenues, costs and expenses for a
period of one year or less
- Cash flow forecast: predicts the cash inflows and outflows in
future periods, usually months or quarters
- Long-term forecast: predicts revenue, costs, and expenses for a
long period of time
- Budgeting: Sets forth management’s expectations and allocates the use
of specific resources throughout the firm
- Capital Budget: A firm’s spending plans for major asset purchases
that often require large sums of money
- Cash budget: cash inflows and outflows during a particular period
- Operating budget: ties together all the firm’s other budgets and
summarizes it’s proposed financial activities
- Financial control: a process where a firm periodically compares its actual
revenues, costs, and expenses, with its budgets
- Key needs for operational funds in a firm:
- Day to day needs of the business:
- Meeting short term financial obligations
- Controlling credit operations:
- Managing deferred payments and credit cards
- Acquiring needed inventory
- To buy or produce stock
 - Capital expenditures
- Major purchases in either tangible long term assets such as land,
buildings, and equipment or intangible assets such as patents,
and trademarks
- Alternative sources of funds:
- Equity financing: Long-term source of finance raised from operations or
through the sale of ownership in the stock of the firm
- Comes from:
- Selling stock
- Retained earnings
- Venture capital: money that is invested in new or emerging
companies that are perceived as having great profit
potential
- Debt Financing: Short or Long-term source of finance raised through
various forms of borrowing that must be repaid
- Long term financing loans from institutions that usually come due
within 3 to 7+ years
- Term loan agreement: A promissory note that requires the
borrower to repay the loan in specified installments
- Risk/Return trade off: The higher the risk a lender take by lending
money, the more interest is required
- Secured bond: A bond issued with some form of collateral
- Debenture bond: A bond backed by only the reputation of the
issuer
- Short term financing:
- Trade credit: The practices of buying goods and services now and paying
for them later
- Promissory note: An agreement with a promise to pay a supplier a
given amount by a definitive time
- Family and friends
- Both parties must:
- Agree to specific loan terms
- Put it in writing
- Arrange for repayment in the same structure as a bank
- Bank loans
- Secured loan: Backed by collateral
- Unsecured loan: doesn’t require any collateral
- Line of credit: Given amount of unsecured short-term loan that a
bank will lend, provided the availability of funds
- Credit cards
- Factoring: The process of selling accounts receivable for cash
- Commercial paper: Unsecured promissory notes in amounts of $100K+
that are due in 270 days or less
- When comparing debt or equity financing one must consider
- Leverage: Raising needed funds through borrowing to increase the firm’s rate of
return (Debt financing)