Business Case 700 words + 300 words reflection + 10 min presentation pptx
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Week01BusinessBasics.pptxBUSINESS PLUG-IN B1
BUSINESS BASICS
McGraw-Hill/Irwin
© The McGraw-Hill Companies, All Rights Reserved
LEARNING OUTCOMES
Define the three common business forms
List and describe the seven departments commonly found in most organizations
TYPES OF BUSINESS
Profit - occurs when businesses sell products or services for more than they cost to produce
Loss - occurs when businesses sell products or services for less then they cost to produce
Businesses typically organize in one of the following types:
Sole proprietorship
Partnership
Corporation
SOLE PROPRIETORSHIP
Sole proprietorship - a business form in which a single person is the sole owner and is personally responsible for all the profits and losses of the business
Many small businesses are sole proprietorships
PARTNERSHIP
Partnership - similar to sole proprietorships, except that this legal structure allows for more than one owner
Each partner is personally responsible for all the profits and losses of the business
When starting a partnership, it is wise to have a lawyer draft a partnership agreement
Partnership agreement
CORPORATION
Corporation (organization, enterprise, or business) - an artificially created legal entity that exists separate and apart from those individuals who created it and carry on its operations
Shareholder
An important advantage of a corporation is that it offers the shareholders limited liability
Limited liability
CORPORATION
Two general types of corporations :
For profit corporation - focuses on making money and all profits and losses are shared by the business owners
Not for profit (or nonprofit) corporation - usually exist to accomplish some charitable, humanitarian, or educational purpose, and the profits and losses are not shared by the business owners
CORPORATION
Limited liability corporation (LLC) - a hybrid entity that has the legal protections of a corporation and the ability to be taxed (one time) as a partnership
Reasons businesses choose to incorporate
Limited liability
Unlimited life
Transferability of shares
Ability to raise investment capital
CORPORATION
The differences between a sole proprietorship, partnership, and corporation are:
Licensing
Income
Liability
INTERNAL OPERATIONS OF A CORPORATION
ACCOUNTING
Accounting department - provides quantitative information about the finances of the business including recording, measuring, and describing financial information
There is a difference between bookkeeping and accounting
Financial accounting
Managerial accounting
FINANCIAL STATEMENTS
Transaction - an exchange or transfer of goods, services, or funds involving two or more people
Source document - describes basic transaction data such as its date, purpose, and amount and includes cash receipts, canceled checks, invoices, customer refunds, employee time sheet, etc.
Solvency - represents the ability of the business to pay its bills and service its debt
FINANCIAL STATEMENTS
Financial statement - the written records of the financial status of the business that allow interested parties to evaluate the profitability and solvency of the business
Four primary financial statements include:
Balance sheet
Income statement
Statement of owner’s equity
Statement of cash flow
BALANCE SHEET
Balance sheet - gives an accounting picture of property owned by a company and of claims against the property on a specific date
Based on the fundamental accounting principle that assets = liabilities + owner’s equity
Asset - anything owned that has value or earning power
Liability - an obligation to make financial payments
Owner’s equity - the portion of a company belonging to the owners
BALANCE SHEET
INCOME STATEMENT
Income statement (earnings report, operating statement, and profit-and-loss (P&L) statement) - reports operating results (revenues minus expenses) for a given time period ending at a specified date
The income statement reports a company’s net income, or the amount of money remaining after paying taxes
Revenue
Expense
INCOME STATEMENT
| Income Statement | |
| Revenue (Sales) | $60,000,000 |
| Cost of Goods Sold | $30,000,000 |
| Gross Profit (Sales — Cost of Goods Sold) | $30,000,000 |
| Operating Expenses | $7,000,000 |
| Profit Before Taxes (Gross Profit — Operating Expenses) | $23,000,000 |
| Taxes | $18,000,000 |
| Net Profit (or Loss) | $5,000,000 A |
STATEMENT OF OWNER’S EQUITY
Statement of owner’s equity (statement of retained earnings or equity statement) - tracks and communicates changes in the shareholder’s earnings
Profitable organizations typically pay shareholders dividends
Dividend
STATEMENT OF CASH FLOWS
Statement of cash flow - summarizes sources and uses of cash, indicates whether enough cash is available to carry on routine operations, and offers an analysis of all business transactions, reporting where the firm obtained its cash and how it chose to allocate the cash
Companies typically project cash flow statements on a monthly basis for the current year and a quarterly basis for the next two to five years
Financial quarter
FINANCE
Finance - deals with the strategic financial issues associated with increasing the value of the business while observing applicable laws and social responsibilities
Financial decisions include such things as:
How the company should raise and spend its capital
Where the company should invest its money
What portion of profits will be paid to shareholders in the form of dividends
Should the company merge with or acquire another business
FINANCE
Different financial ratios evaluate a company’s performance
Internal rate of return (IRR)
Return on investment (ROI)
Cash flow analysis
Break-even analysis
Break-even point
FINANCE
HUMAN RESOURCES
Human resources management (HR) - includes the policies, plans, and procedures for the effective management of employees (‘human resources’)
HR typically focuses on the following:
Employee recruitment
Employee selection
Employee training and development
Employee appraisals, evaluations, and rewards
Employee communications
SALES
Sales - the function of selling a good or service and focuses on increasing customer sales, which increases company revenues
MARKET SHARE
Measuring the proportion of the market that a firm captures is one way to measure a firm’s performance relative to its competitors
Market share - calculated by dividing the firm’s sales by the total market sales for the entire industry
For example, if a firm’s total sales (revenues) were $2 million and the sales for the entire industry were $10 million, the firm would have captured 20 percent of the total market, or have a 20 percent market share
MARKET SHARE
Reasons to Increase Market Share
Economies of scale
Sales growth in a stagnant industry
Reputation
Increased bargaining power
MARKETING
Ways to Increase Market Share
Product
Price
Place
Promotion
There are also reasons not to increase market share
MARKETING
Marketing - the process associated with promoting the sale of goods or services
Marketing communication - seeks to build product or service awareness and to educate potential consumers on the product or service
Marketing mix - includes the variables that marketing managers can control in order to best satisfy customers in the target market
MARKETING MIX
MARKETING MIX
| Product | Price | Place Distribution) | Promotion |
| Quality | Discount | Channel | Advertising |
| Brand | Financing | Market | Sales |
| Appearance | Lease | Location | Public relations |
| Package | Logistics | Marketing message | |
| Function | Service Level | Media type | |
| Warranty | Budget | ||
| Service/Support |
MARKETING SEGMENTATION
Market segmentation - the division of a market into similar groups of customers
Market segmentation typically includes:
Geographic segmentation
Demographic segmentation
Psychographic segmentation
Behavioral segmentation
PRODUCT LIFE CYCLE
Product life cycle - includes the four phases a product progresses through during its life cycle
OPERATIONS / PRODUCTION
Operations management (production management) - includes the methods, tasks, and techniques organizations use to produce goods and services
The operations department oversees the transformation of input resources into output resources
The operations department is critical because it manages the physical processes by which companies take in raw materials, convert them into products, and distribute them to customers
BUSINESS PROCESS REENGINEERING
Business process - a standardized set of activities that accomplish a specific task, such as processing a customer’s order
Business process reengineering (BPR) - the analysis and redesign of workflow within and between enterprises
TRANSFORMING CORPORATIONS
