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  • gross margin =

    gross income / total sales

    operating margin =

    operating income / total sales

    net margin =

    net income / total sales

    return on assets =

    net income / total assets

    inventory turn days =

    365 / (sales / inventory)

    Debt to Equity Ratio =

    total liabilities / total equity

    Management accounting

    provides information and analysis to decision makers inside the organization (such as owners and managers) to help them operate the business

    Financial accounting

    provides information not only to internal managers, but also to people outside the organization (such as investors, creditors, government agencies, suppliers, employees, and labor unions) to assist them in assessing a firm's financial performance

    generally accepted accounting principles (GAAP)

    U.S. companies adhere to this uniform set of rules issued by an independent agency called the Financial Accounting Standards Board (FASB)

    International Financial Reporting Standards (IFRS)

    Many companies outside the United States follow this set of accounting principles issued by the International Accounting Standards Board (IASB)

    income statement

    shows revenues, or sales, and expenses—the costs of doing business

    gross profit or gross margin

    positive difference between sales and cost of goods sold

    net income or profit

    positive difference between gross profit and operating expenses

    fixed costs

    the total cost doesn't change as the quantity of goods sold changes

    variable costs

    These are costs that vary, in total, as the quantity of goods sold changes but stay constant on a per-unit basis

    balance sheet

    reports assets, liabilities and stockholder's equity

    accrual accounting

    a system in which the accountant records a transaction when it occurs, without waiting until cash is paid out or received

    statement of cash flows

    tells you where your cash came from and where it went, furnishes information about cash flows that come from operating activities, investing activities and financing activities

    financial plan

    a document that performs two functions: 1.Calculating the amount of funds that a company needs for a specified period and 2. Detailing a strategy for getting those funds


    the schedule by which you'll reduce the balance of your debt

    make-to-order strategy

    products are made to certain customer's specifications

    mass production (or make-to-stock strategy)

    practice of producing high volumes of identical goods at a cost low enough to price them for large numbers of customers

    mass customization

    combines the advantages of customized products with those of mass production


    the maximum number of goods that it can produce over a given time under normal working conditions.

    plant layout

    how equipment, machinery, and people will be arranged to make the production process as efficient as possible

    process layout

    groups together workers or departments that perform similar tasks

    product layout

    high-volume goods are produced efficiently by people, equipment, or departments arranged in an assembly line—that is, a series of workstations at which already-made parts are assembled

    cellular layout

    small teams of workers handle all aspects of building a component, a "family" of components, or even a finished product. Each team works in a small area, or cell, equipped with everything that it needs to function as a self-contained unit

    fixed-position layout

    product stays in one place and the workers (and equipment) go to the product

    materials management

    encompasses purchasing, inventory control, and work scheduling

    electronic data interchange (EDI)

    computerized exchange of business transactions

    just-in-time (JIT) production

    materials arrive just in time to enter the manufacturing process

    material requirements planning (MRP)

    uses computer programming to determine material needs

    master production schedule (MPS)

    managers create this to schedule jobs

    Gantt chart

    easy-to-use graphical tool that helps operations managers determine the status of projects

    PERT chart

    used to diagram the activities required to produce a good, specify the time required to perform each activity in the process, and organize activities in the most efficient sequence

    Total quality management (TQM)

    includes all the steps that a company takes to ensure that its goods or services are of sufficiently high quality to meet customers' needs


    compare their performance on a number of dimensions with the performance of other companies that excel in particular areas


    entails all activities involved in getting the right quantity of your product to your customers at the right time and at a reasonable cost


    wholesaler or retailer who helps move products from their original source to the end user


    buy goods from producers and sell them to consumers


    intermediaries who buy goods from suppliers and sell them to businesses that will either resell or use them

    physical distribution

    responsibility for getting its products to customers

    storage warehouse

    building used for temporary storage of goods

    distribution center

    location where products are received from suppliers then shipped to final destination

    materials handling

    the process of physically moving or carrying goods during production, warehousing, and distribution

    supply chain

    flow that begins with the purchase of raw materials and culminates in the sale of the product to end users

    supply chain management (SCM)

    process of integrating all the activities in the supply chain

    customer value triad

    quality, service, and price

    value chain

    the entire range of activities involved in delivering value to customers

    human resource management (HRM)

    consists of all actions that an organization takes to attract, develop, and retain quality employees

    strategic human resource planning

    the process of developing a plan for satisfying an organization's human resources (HR) needs

    contingent workers

    hired to supplement a company's permanent workforce (temporary/part time)

    job redesign

    make jobs more interesting and challenging.

    job enlargement

    the policy of enhancing a job by adding tasks at similar skill levels

    Job enrichment

    practice of adding tasks that increase both responsibility and opportunity for growth


    guidelines that allow employees to designate starting and quitting times

    job sharing

    two people share one full-time position,


    you regularly work from home


    ex. workers' pay is based on the amount of crabmeat that's picked from recently cooked crabs

    profit-sharing plan

    relies on a predetermined formula to distribute a share of the company's profits to eligible employees

    stock-option plans

    gives employees the right to buy a specific number of shares of company stock at a set price on a specified date

    union structure

    local, national, labor federation

    ethical dilemma

    morally problematic situation

    ethical decision

    entails a "right-versus-wrong" decision—one in which there is a right (ethical) choice and a wrong (unethical or illegal) choice


    an individual who exposes illegal or unethical behavior in an organization

    Corporate social responsibility

    refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions

    fiduciary responsibility

    company is responsible for safeguarding the company's assets and handling its funds in a trustworthy manner

    Defensive stage (corporate responsibility)

    When first criticized over some problem, companies take a defensive stance. They reject allegations of wrongdoing and refuse to take responsibility

    Compliant stage (corporate responsibility)

    During this stage, companies do only what they have to do to satisfy their critics, protect brands or reputations, and reduce the risk of litigation

    Managerial stage (corporate responsibility)

    When it's clear that the problem won't go away, companies take responsibility and look for long-term solutions

    Strategic stage (corporate responsibility)

    At this point, they may start to reap the benefits of acting responsibly. Responding to public needs gives them a competitive edge and enhances long-term success

    Civil stage (corporate responsibility)

    Ultimately, companies recognize the importance of getting other companies to follow their lead. They enlist the cooperation of other companies in supporting the issue of concern to the public.

    absolute advantage

    (1) it's the only source of a particular product or (2) it can make more of a product using the same amount of or fewer resources than other countries

    comparative advantage

    exists when a country can produce a product at a lower opportunity cost compared to another nation

    trade surplus

    If a country sells more products than it buys, it has a favorable balance

    trade deficit.

    If country buys more than it sells

    balance of payments

    difference, over a period of time, between the total flow of money coming into a country and the total flow of money going out

    low-context cultures

    such as those of the United States, Germany, Switzerland, and the Scandinavian countries, personal and work relationships are more compartmentalized: you don't necessarily need to know much about the personal context of a person's life to deal with him or her in the business arena


    trade controls that protect domestic industries by reducing foreign competition

    General Agreement on Tariffs and Trade (GATT)

    which encouraged free trade by regulating and reducing tariffs and by providing a forum for resolving trade disputes

    World Trade Organization (WTO)

    encourages global commerce and lower trade barriers, enforces international rules of trade, and provides a forum for resolving disputes

    International Monetary Fund (IMF)

    loans money to countries with troubled economies

    World Bank

    important source of economic assistance for poor and developing countries

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