| A | B |
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| Managers who follow McGregor's Theory Y management style are more likely than Theory X managers to: | give subordinates more freedom and responsibility in their work |
| One advantage of a business relying on long-term debt to fund its expansion rather than raising the money by issuing common stock | Interest paid on long-term debt is tax deductible, while dividends paid to stockholders are not. |
| Two methods of raising capital to fund a company's expansion | taking on debt or by issuing stock in the company |
| borrowing money involves incurring additional | expenses in the form of fees and interest |
| shareholders can often expect to be paid | regular dividends on their shares - can be viewed as a cost of raising capital by issuing stock |
| Unlike dividends on stock, interest paid on debts | is tax deductible which may lead to savings in the cost of raising capital in the long run. |
| company strategy | a comprehensive plan that defines the critical directions and goals of a company and guides the allocation of its resources. |
| change in strategy | a change in company product lines and marketing to appeal to a niche rather than a general market |
| economies of scale associated with increased production | likely to be greatest for a company when fixed costs do not change regardless of how many units are produced |
| economies of scale | occur when the unit cost of producing an item decreases as output increases |
| unit cost equals | the sum of the variable and fixed costs of producing each unit |
| economies of scale | can be achieved by reducing the variable costs of producing each unit or by reducing the fixed costs of producing each unit |
| Fixed costs will decrease | if the costs remain constant as the number of units produced increases |
| advantage of replacing a "tall" organizational structure with a "flat" structure | The speed at which decisions can be made and implemented will be increased |
| "Tall" organizational structure | decisions made at the top must pass though multiple management layers before being implemented at the level of the workers at the bottom. |
| "Flat" organizational structure | decisions must pass through fewer management layers and will take less time to be finalized and implemented |
| product organizational structure | each unit has responsibility for a different product in a product line |
| Functional organizational structure | each organizational unit is responsible for performing a different function (e.g. marketing, operations) within the company. |
| operational lmanagement | ensures the availability of adequate resources in terms of plant, capacity, materials, and labor to meet demand |
| When demand increases rapidly | resources must also be increased, often at considerable expense |
| drop in demand | leaves the company with excess capacity, high materials inventory and excess workers |
| way to adjust resources to an increase in demand | outsourcing some portion of production to an outside vendor until demand returns to normal. |
| outsourcing provides | flexibility to meet increases in demand, while avoiding the necessity of dealing with excess capacity, materials, and labor when demand drops. |
| primary goal of affirmative action programs | helping correct past inequities in hiring by making an extra effort to recruit and hire minority employees |
| Affirmative action | policies that take race, ethnicity and/or gender into consideration in decisions about staffing to promote equal opportunities/diversity. |
| Cross-training employees | involves teaching employees to perform other roles, in addition to their primary role. |
| Arbitrators and mediators | neutral third parties who are called in to facilitate conflict resolution in various situations |
| Mediator | helps two parties arrive at a mutually agreed upon solution to a disputes |
| Arbitration | both parties must agree in advance to use this method of conflict resolution, and is generally binding upon both parties. |
| Flexible spending account | plan that allows an employee to set aside a % of earnings each pay period to pa for qualified expenses (medical, dependent care, etc.). $ deducted pretax. |
| Criminal Court | deals with inidividual who have boken federal or state laws |
| probate court | deals primarily with wills and other matters of inheritance |
| Civil Court | lawsuits involving plaintiff and defendant where redress for harm done by another party is being sought. |
| Uniform Commercial Code | developed by private organizations as recommendations for standardizing commercial transactions and eventually codified as law by all 50 states. |
| UCC addresses | sales, leases, negotiable instruments, bank deposits, etcl to reflect the Code's focus on commercial transactions and contracts. |
| Antitrust laws | foster competition by prohibiting agreements between companies that restrict competition (e.g., price fixing) and by controlling mergers and acquisitions to prevent monopolies. |
| Superfund | Comprehensive Environmental Response, Compensation, and Liablity Act - common name |
| Superfund provides federal tax dollars | to clean up sites that are contaminated by hazardous wastes |
| Fixed assets | long-term assets that will not be used up, sold, or converted to cash over a short period of time. |
| Examples of fixed assets | buildings, equipment, machinery, and furniture. |
| owner's equity | can be increased by profits from operations, gains on the sale of assets, or investment in capital |
| A small business activity that will increase owner's equity | business realizes a net profit at the end of a given period. |
| when posting transactions from the journal, an accountant should first | separate the entries into appropriate accounts. |
| managers use the journalized transactions of a business | to produce financial statements and reports that allow evaluation of business stats and trend interpretation |
| journal transactions | raw information organized into separate entries and appropriate account categories |
| statement of operations | aka income statement, provides a summary of a business's revenues and expenses for a given period to analyze net profit or loss for a period. |
| LIFO | last in, first out - inventory costing method which uses the most recently purchased materials first for production. |
| LIFO more accurately reflects | the current cost of production |
| FIFO | First in, first out - inventory costing method |
| With LIFO, if raw materials rise | most recently purchased material will be more expensive and the cost of inputs will be higher - leading to increase in COGS, decreasing gross profit. |
| Process costing system | typically manufacture large quantities of hoogeneous products or identical units continuously/standardized. |
| Job order costing system | used by businesses that offer a customized product or service. |
| Formula for current ratio | total current assets divided by the total current liabilities |
| advantage of a 401(k) plan | individuals can determine how their funds are to be invested in the 401(k) plan |
| investment strategies with low rates of return | are less risky than strategies with higher rates of return |
| Pension plan | contributions from all the employees in a company are put together in a large fund and invested by the employer |
| 401(k) plan | each employee contributes to his or her individual plan and controls how the money is invested and are cheapter to administer and less risky to a company |
| Retirements benefits | vary widely depending upon the success of each individual's investments in a 401(k) plan. |
| stocks are considered | most risky |
| CDs are considered | least risky |
| Bonds are considered | in the middle - not too risky, but not entirely safe |
| FICA | a payroll tax to fund Social Security and Medicare - taxes are assesed at the same rate for every individual, regardless of income. |
| Graduated income taxes | tax rates increase as income increases |
| In high inflation - dollars used to pay off debt | will be worth less in real terms than they were when the debt was incurred. |
| Inflation | measures changes in the purchasing power of money |
| High rate of inflation means | a sum of money today will purchase less goods when spent in the future. |
| High rate of inflation affects | both savings and debt |
| During high inflation - money saved today | will be worth less when spent in the future. |
| During high inflation - debt owed today | will be paid off with money that is worth less in the future. |
| when applying for a mortgage, the collateral used to secure the loan | is the property being purchased |
| collateral | refers to a borrower's pledge of personal property to secure a loan and serves as prtoection for a lender against default of the loan. |
| default on a loan leads to | foreclosure and reversion of the property to the lender |
| Liability | a legal term for the practice of holding an individual responsible for actions that cause injury or loss to another |
| Collision coverage | an auto insurance policy that covers the cost of repairs to the owner's vehicle after an accident. |
| Impulse purchases | purchases that are made quickly without a great deal of forethought or careful consideration. |
| quality control | maintain uniformity of a product by establishing specifications regarding length, width, density, weight, or other measures and reducing the amount of variations |
| standard deviation | a measure of variability of a data set around the mean. |
| Calculation of standard deviation | the most effective way to asses the degree to which a group of items deviate from their specifications. |
| circle graph | a circular chart divided into sectors that represent the various magnitudes of the factors that contribute to the whole |
| central angle and area of each sector in a circle graph | is proportional to the percentage of the whole contributed by the corresponding factor |
| Circle graphs are useful in | business to visually represent the relative importance of carious factors in contributing to a total (ie: % of total gross sales by each product) |
| Demand curve shifts right | indicates an increase in demand for a products |
| If all other factors are equal, an increase in demand will cause | an increase in price |
| If supply increases and outruns demand | a decrease in price may occur |
| opportunity cost | the concepts that resources are finite and deciding to use resources in one way implies that resources cannot be used in an alternate way. |
| Opportunity cost implies that | a choice must be made between desirable but mutually exclusive results. |
| An increase in the supply of a product | will cause the supply curve to shift to the right |
| With a supply curve - if all other factors remain the same | the slope of a new curve will be the same as that of the old. |
| In a free-market economy, | competitions reqires that each business must persuade customers to choose its products rather than the products of competing businesses. |
| Competition in a free-market economy | puts downward pressure on prices and upward pressure on quality. |
| Increase in the quality of goods and services offered | a Free-market economy |
| Nonprice competition | occurs when businesses use methods other than lowering prices to persuade customers to purchase their products instead of those of competitors. |
| Example of nonprice competition | packaging products in an appealing manner, using endorsements to imply exclusiveness, or offering additional services to the product. k |
| Diminishing retursn | occurs when an increase in a factor of production leads to a decrease in the rate of marginal return. |
| Aggregate demand | a measure of the total amount of goods and services demanded in an economy. |
| Aggregate demand is highly correlated with | discretionary income since higher income levels lead to greater spending on goods and services. |
| Reducing personal income taxes increases | discretionary income and raises aggregate demand. |
| Cyclical unemployment | refers to unemployment that rises and falls as a result of changes in the business cycle. |
| Example of a worker who is cyclically unemployed | a laid off worker when the employer cuts jobs during a recession |
| Outside influences that interfere with competition | government regulations of the economy or traditional customs or beliefs. |
| Competition is least affected by | outside influences in a free-market economy |
| Prices are most heavily influenced by | supply and demand in a free-market economy |
| During the expansion phase of a business cycle | the economy is growing, unemployment is falling and wages are rising. |
| Increased income leads to | increase in aggregate demand increasing inflation |
| An increase in federal spending | will increase the money supply and competition for goods and services, fueling a faster rise in inflation. |
| Structural unemployment | long-term and chronic unemployment resulting from mismatches between worker skills and employer needs. |
| Primary cause of structural unemployment | A change in the job market that makes the current skills of unemployed workers no longer relevant |
| Which economic indicator demonstrates economic growth or contraction | Gross domestic product (GDP) |
| GDP | the market value of all goods and services produced in a nation within a year. |
| GDP Formula | private consumption + gross investment + government spending + (exports - imports) |
| GDP is used | to assess the state of the economy and whether it is growing or contracting. |
| reducing social security taxes would | stimulate economic growth by reducing the cost of labor to businesses and employees |
