Simon Seto

Short Run Production Theory and Isoquants Overview Theory of the firm – Describes how a firm makes cost-minimizing production decisions and how the firm’s resulting cost varies with its output. The Production Decisions of a Firm Production decisions of the firms are analogous to purchasing decisions of the consumers there are 3 steps: Production Technology – Inputs (labor, capital, and raw materials) are transformed into outputs. Cost Constraints – Consider the prices of labor, capital, and oth

The Representative Consumer Considers the behaviour of a single consumer who represents the whole economy. Preferences - Consumption Good and Leisure. Utility Function where is utility function, is quantity of consumption, and is quantity of leisure, as a particular consumption bundle. then bundle 1 is strictly preferred. then consumer is indifferent. Three Assumptions More is preferred to less. The consumer likes diversity in the consumption bundle. Consumption and leisure are normal g

Financial Statements & Financial Reporting Accounting Essential Characteristics Identifying, measuring, communicating financial info It is about economic entities It is to interested persons Financial Accounting (reporting) – Culminates in preparation of financial reports that cover the enterprises’ business activities to be used by internal and external parties. Users include investors, creditors, etc. Managerial Accounting – Identifies, measures, analyzes, and communicates financial info to in

Inventory Understand inventory from a business perspective. What Types of Companies Have Inventory? Manufacturing, retail, and wholesale often have significant amount of inventories. Some companies produce “just-in-time.” Inventory Categories Merchandise Inventory – Unsold units left on hand for retailers and wholesalers. Manufacturers have 3 accounts: Raw Materials Inventory – Costs for goods/materials on hand byt not yet in production. Work-in-Process – Costs of raw material on which producti

Objective 1 – What is Marketing? Goal of marketing is to attract new customers by promising superior value and keep/grow current customers by delivering satisfaction. Marketing Defined Marketing – The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. The Marketing Process Steps Understand the marketplace and customer needs/wants. Design a customer-driven marketing strategy. Construct a marketing p

Objective 1 - Explain the activity-based costing model and how it differs from a traditional costing system. Activity-Based Costing – A costing method based on activities designed to provide managers with cost info for strategic or other decisions that may affect capacity (fixed costs). Most companies have 2 costing systems – The Official Costing System and the ABC system for internal decisions. Treatment of Costs Under the Activity-Based Costing Model Differences between traditional cost vs A

Price Changes Increased Price of a Good Budget line rotates inward (steeper) and maximum utility is found at a new point on a lower indifference curve. Lower purchasing power and utility. Decreased Price of a Good Budget line rotates outward (flatter) and maximum utility is found at a new point on a higher indifference curve. Higher purchasing power and utility. Individual Demand Curve Price-Consumption Curve Curve tracing the utility maximizing combinations of 2 goods as the price of one chan

Direct Marketing – Connecting directly with carefully targeted segments or individual consumers, often on a one-to-one, interactive basis. Objective 1 – The New Direct Marketing Model Direct marketing is a supplementary channel or medium for several firms, but it may also constitute a complete model for doing business. Growth and Benefits of Direct Marketing Benefits to Buyers Direct Marketing is convenient, easy, and private due to ease of using the Internet. Gives buyers ready access to a wea

Cash and Receivables Understand cash and accounts receivable from a business perspective. How do Companies Manage and Control Cash? Businesses rely on cash flow budgets to help anticipate cash needs and minimize borrowing requirements. Without surplus cash, businesses must carefully manage its cash resources. Includes implementing internal control over physical custody of cash on hand and preparation of bank reconciliations. What types of Companies have Extensive AR? Manufacturers and wholesale

Understanding Investments Types of Investments Investments serve 1 of 2 reasons: To have capital appreciate. To earn dividends and/or income. Debt Instruments – Companies that invest are creditors of the issuing company. Debt Securities – Prices are normally quoted in an active market, such as government investments, corporate bonds, convertible debt. High contractual requirements regarding payment of principal and interest. Cash is paid upfront and receives the rights to receive interest and re

Objective 1 – What is a Price? Price - The amount of money charged for a product or service; the sum of all values that customers exchange for the benefits of having or using the product or service. Major factor affecting buyer choice – And only element in the marketing mix that produces revenues and is flexible. Plays a key role in creating customer value and building customer relationships. Objective 2 – Major Pricing Strategies Price falls between too high to produce demand and too low to pro

Objective 1 - Identify the business importance and characteristics of property, plant, and equipment and explain the recognition criteria. PP&E - Business Perspective All enterprises invest in long-lived assets: physical (Property, plant, and equipment), and not physical (patents). Important for producing goods and providing services. To assess an enterprise’s potential for future cash flows, users need: A solid understanding of the enterprise’s investment in long-term productive assets. The ex

Preface Labour Market - Frictions complicate the workings of the macroeconomy. Goals - Examine behaviour of unemployment rate, participation rate, and employment/population ratio. Two Models One-sided Search Model - Behaviour of an unemployed person considering job offers Two-Sided Search Model - Incorporating the behaviour of firms The Behaviour of the Unemployment Rate, the Participation Rate, and the Employment/Population Ratio in Canada Important Values N – Working age population Q – Labour

Standard Costs – Management by Exception Standard – Benchmark for measuring performance, relating to the quantity and cost and are set for each major input. Quantity Standards – Specify how much of an input should be used to make a unit of product or provide a unit of service. Cost (price) Standards – Specify how much should be paid for each unit of the input. Management by Exception – A system of management in which standards are set for various operating activities that are then periodically c

Marketing Environment – Consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. Consists of Microenvironment – The actors close the company that affect its ability to serve its customers – the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. Macroenvironment – Larger societal forces that affect the microenvironment – Demographic, economic, natural,

Evaluating the Gains and Losses from Government Policies – Consumer and Producer Surplus Review of Consumer and Producer Surplus Consumer Surplus Total benefit or value that consumers receive beyond what they pay for the good. E.g. Market price of $5 for an apple, Boris would pay much more than $5 so he receives a net benefit. If a consumer is willing to pay only slightly more there is less surplus. Producer Surplus Total net benefit that producers receive beyond what they would sell a good fo

International Trade Questions of International Macroeconomics International Trade and the gains from opening up to trade. Sovereign debt and recurrent defaults Flexible vs. fixed exchange rates and capital controls The transmission of macroeconomic shocks among countries. Small Open Economy model is used to analyze current account surplus. Economic agents are price takers. Intertemporal consumption-savings model is used A Two-Period Small Open Economy Economy lasts for 2 periods → current and f

Analyzing a Statement of Financial Position Provides info about a company’s liquidity and solvency to assess the risk of investing in the company. It also provides data on financial structured → like if it is heavily financed by debt and equity. Investors use the SFP and related notes to assess financial flexibility and risk of failure. Assessing Earnings Quality Users use statement of cash flows to assess earnings quality. Management may use accounting trickery to manipulate numbers for bonuse

Objective 1 – The Promotion Mix The Promotion Mix (Marketing Communications Mix) – Specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships. Five Major Promotion Tools: Advertising – Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. i.e. Broadcast, Print, Internet, Outdoor, other forms. Sales Promotion – Short-Term incentives to encourage the purchase or sale

The Role of the Professional Accountant in Value Creation Plays a key role in decision making and managing employees across various functional areas of an organization. Management Accounting – Provides info to managers for use in planning and controlling operations and for decision making. Determining and developing internal accounting info as a tool for managers’ business decisions. Reports compare results to plans, provide timely updates, or help in investigations of problems. 1) Describe th