10 Financing And Producing Goods

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10 Financing And Producing Goods

  1. 1. Financing and Producing Goods Objective: Analyze how businesses acquirer financing and the production process
  2. 2. Cost Benefit Analysis <ul><li>This analysis requires you to estimate the cost of any action and compare it with the benefits of that action </li></ul><ul><li>1. Estimate the cost of expansion </li></ul><ul><li>2. Calculate expected revenues </li></ul><ul><li>3. Calculate expected profits </li></ul><ul><li>4. Calculate the cost to borrow </li></ul><ul><li>5. If expected profits cover the cost of borrowing then expand </li></ul>
  3. 3. Three Kinds of Financing <ul><li>Short Term- is money borrowed for less than a year </li></ul><ul><li>Intermediate Term- Borrowing money for 1 to 10 years </li></ul><ul><li>Long Term- Borrowing for longer than 10 years </li></ul>
  4. 4. Choosing The Right Financing <ul><li>Things to consider: </li></ul><ul><li>1. Interest Costs </li></ul><ul><li>2. Financial condition of your company </li></ul><ul><li>3. Market climate </li></ul><ul><li>4. Control of the Company- common stocks have voting rights; preferred stocks do not </li></ul>
  5. 5. Steps in Production Operations <ul><li>Production is the process of changing resources into goods </li></ul><ul><li>1. Planning- Where to locate the business </li></ul><ul><li>2. Purchasing- Equipment and inventory </li></ul><ul><li>3. Quality Control- is it good enough </li></ul><ul><li>4. Inventory Control- How much do we have? </li></ul>
  6. 6. Technology and Production <ul><li>Mechanization- putting labor and machines together </li></ul><ul><li>Assembly Line- where goods being produced comes to the worker on a conveyer belt </li></ul><ul><li>Division of Labor- the breaking down of a job into smaller tasks </li></ul><ul><li>Automation- where machines do all the work and people supervise </li></ul><ul><li>Robotics- computer controlled machinery </li></ul>
  7. 7. Review <ul><li>List the five steps of cost benefit analysis </li></ul><ul><li>Ans. Estimate the cost of expansion </li></ul><ul><li>Calculate expected revenues </li></ul><ul><li>Calculate expected profits </li></ul><ul><li>Calculate the cost to borrow </li></ul><ul><li>Name the steps in Production Operation </li></ul><ul><li>Ans. Planning, Purchasing, Quality Control, Inventory Control </li></ul>
  8. 8. Review <ul><li>What are the four basic market structures? </li></ul><ul><li>Ans. perfect competition, monopoly, oligopoly and monopolistic competition </li></ul><ul><li>Give an example of a regulatory agency? </li></ul><ul><li>Ans. FTC, OSHA, FDA </li></ul><ul><li>What is a monopoly? </li></ul><ul><li>Ans. Is a market situation in which a single supplier makes up the entire industry </li></ul>
  9. 9. Review <ul><li>What are the factors of production? </li></ul><ul><li>Ans. Land, Labor, Capital, Entrepreneurship, Technology </li></ul><ul><li>What are the three basic questions of economics? </li></ul><ul><li>What goods and services should be produced </li></ul><ul><li>How should these goods and services be produced </li></ul><ul><li>Who will get the goods and services </li></ul>

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