Business 121 Lecture Notes

Lecture 0
Thursday, December 24, 2009

11:32 PM
Accounting
Critical Success Factors
- Achieving financial performance

- Meeting customer needs
- Providing quality goods and services
- Encouraging innovation and creativity
- Gaining employee commitment
Accounting
- The process of gathering, recording, classifying, summarizing, reporting, and analyzing in monetary
terms, information about an organization to aid in decision-making
- 2 main branches of accounting
○ Managerial accounting
○ Financial accounting
Managerial Financial
People inside Who uses People outside
C.M.A Who prepares C.A.
Specific info What General info
Segments Where Whole
Current & future When Past
Speed Why Precision
Relevant, flexible, useful How Required
Whatever form suits How G.A.A.P
G.A.A.P - C.I.C.A
Generally accepted accounting principles
Lecture Notes Page 1

- Generally accepted accounting principles
- Canadians institute of Chartered Accountants
- Relevancy information - predictive and feedback of performance (allows outside person to get
information) value
- Reliability - investors want to rely on the information
○ Verifiability
○ Representational faithfulness ( represent true facts )
○ Neutrality - don't create impression that it is incorrect
○ Comparability - can compare companies
○ Consistency - stay consistent with approach so you can trust and rely on the information
- Audit
○ All public companies by law
○ Check GAAP applied on consistent basis - not checking every standard
○ Auditor's statement
 Scope and opinion sections, qualifications
○ Do NOT say statements are accurate
 Could be minor mistakes
 There are estimates
 Fairly represent how the company is doing
 No material errors
○ Qualification errors are problems
○ Section 404 of the Sarbanes-oxley Act/CSA
 CEO's and CFO's must certify the design and effectiveness of internal accounting controls
- Concepts
○ Conservatism (use lowest number)
 Inventory (stock of goods)
□ Cost figures
□ Market figure - what I can sell it for
○ Objectivity (verify)
 Bill of sale
 Historic cost
□ Cost from the past, when we bought it-- how much did it cost
 Can't use opinion of value
○ Matching
 Fundamental principle underlying the income statement
□ Match cost to revenue -- spread cost
□ Amortization
 Matching revenue to expenses over year

Matching revenue to expenses over year
The Statements
- Balance sheet
○ Statement of financial position
○ Snapshot of a point in time
○ "stock or status of firm's resources and claims against those resources at certain pt in time"
○ XYZ Company LTD Balance Sheet as of December 31, X
- Income Statement
○ Profit and loss statement, statement of earnings
○ Movies over a period of time
○ "flow of revenues and the costs associated with generating those revenues for a period of time"
○ XYZ Company LTD Income statement for the year ended DEC 31, X
Balance Sheet
- The financial position at a given point in time

 What the firm owns (assets) (fin'l resources)
 And what the firm owes EQUITIES = Liabilities + Owners' Equity (claims against those
resources)
- Accounting Equation
 Premise upon which the balance sheet is built
Assets = Equities
Assets = Liabilities + OE
Ex buy car for 15000 with 5000 down

Sell the car for 12000 shortly after

Lecture 0
Wednesday, January 06, 2010
2:48 PM

Lecture 1
Monday, January 11, 2010
2:26 PM
Key Points from Last Class
- Managerial vs. Financial accounting

- GAAP (IFRA - International financial reporting standards)
- Auditor's Statement
- Balance sheet vs. income statement
○ Cash vs. profit
○ Accounting equation
Sustainability
- development that meets the needs of the present without compromising the ability of future
generations to meet their needs
- Dow Jones Sustainability Index
- Global reporting initiative - guidelines
○ 1000 companies, 80% of global fortune 150
○ More holistic image of company
- Virtue Rewarded
○ 3 factors that determine ROI
○ Examples - companies and industries that could/do most benefit and why?
○ Social responsibility and profitability
 Corporate and societal interest intersect
Accounting
A = L + OE / DOUBLE ENTRY ACCOUNTING
- Sell $1mm inventory for $1mm cash

○ Asset (A) cash increased $1mm
○ Asset (A) inventory decreased $1mm
- Buy $1mm inventory on credit
○ Asset (A) inventory increased $1mm
○ Liabilities (L) increased $1mm
- Sell $1mm inventory for $1.5mm cash
○ Asset (A) inventory decreased $1mm
○ Asset (A) cash increased $1.5mm
○ Owners' equity (OE) increased $.5mm
Assets
- Current Assets
○ Cash or assets that will be converted to cash, sold or consumed within 1 year - liquid
○ Placed in order of declining liquidity
 Cash
 Marketable securities - intent is to sell them
 Accounting Receivable
□ Less allowance for doubtful accounts - (contra account)
 Notes receivable
 Inventory - lower of cost or market
Supplies

Inventory - lower of cost or market
 Supplies
 Prepaid Expenses - benefit paid for, not yet received
Paid 1st year's rent of $18,000 = $18,000.00 $1500 per month on Sept. 1/08
Prepaid rent on Dec 31/08
Received the benefit 4 months rent
8 months remaining for which not yet received benefit x $1500
= $12000 prepaid rent
- Capital (fixed) Assets

○ Assets that have useful life expectancy > 1 Year
○ Placed in order of declining life expectancy
 Land
 Buildings
 Machinery & equipment
 Furniture & fixtures
 Trucks and automobiles
 Tools
○ At historic cost (objectivity)
○ Cost amortized over life of asset, except for land (matching)
○ Amortization - simple straight-line
= historic cost - salvage value

Estimated useful life
Salvage value = what you expect to sell it for
= the portion of the cost of the asset per year that is being matched to revenue AND that
the asset is being reduced by to show its current 'book' value
The amount each year accumulates until the asset's 'book' value = salvage value
Purchased machinery for 160000 Jan 1/04

Estimated useful life 12 years
Assume can sell for $40000 - salvage value
Amortization per year?, accumulated amort'n Dec 31/08
($160000-40000) / 12 years = $10000 per year

X 5 years = $50000 accumulated
On Balance Sheet …
Machinery & Equipment $160 000

Less: accum. amortization $50000
$110,000
- Other Assets
○ Investments
 Long-term holdings of securities - intent to hold (strategic purpose)
○ Intangibles
 Legal right vs. physical existence
 Patents, trademarks, copyrights etc.
 Goodwill
□ Must be bought
□ When one company buys another for more than the fair market value of its net
tangible assets
□ Paying for intangibles not reported on statements, ie. Goodwill that has built up over
time

Equities
= Liabilities + Owners' Equity
- Liabilities
○ You must have incurred expense and not yet paid for it
 Do I have a liability?
 What amount have you NOT paid?
 When is it due?
□ Current or long-term

Lecture 2
2:27 PM

Current Assets
- Order and valuation inventory, prepaid expenses
Capital Assets
- Order and valuation - historic cost, amortization
Other Assets
- Goodwill
= Liabilities + Owners Equity
Current Liabilities
- No specific order, due within one year
Wages payable
- Pay $10,000 is bi weekly wages for work done during the pay period, year end falls at end of one
week into pay period
Current liability Dec 31/08

How do you incur a liability for wages
Therefore $5000 wages payable
When is it due? CURRENT LIABILITY
Loan Payable
- $160000 loan on machinery payable over 10 years on Jan 1st of each year = $16000 year
- Current liability Dec 31/08
- How much is still owing / not been paid?
- When is it due?
- Machinery was purchased Jan 1/04
4 x 16000 = 64000 $
Still owing 160000-64000 = 96000 $
- How much is due within a year?
= $16000 Loan Payable

- Current liability
Example: Interest Payable

- Interest on loan is 15% of remaining balance owing payable at same time as principal
- Current liability Dec 31/08
- How do you incur a liability for interest?
 Hold money for a period of time
- How much is owing?
- When is it due?
- Last payment was Jan 1/08 - paid $64000 by that point
- For the year of '08 held $96000 of bank's money
- Therefore interest interest at 15% = 14 400
- = $14400 interest payable

Long Term Liabilities
- Due > 1 year

- Long term wages payable?
Example : long term portion of loan payable on Dec. 31/08

Paid 64000 by Dec 31/08, $16,000 current
Therefore owe $160 000 - 64000 - 16000 = $80000 loan payable
- Long term interest Payable?
Owners Equity
- Form depends on form of ownership
- All have same components
Beginning O/E
+investments
+profits
-Withdrawals
Ending O/E
Proprietors' Equity
Paul Jones, Capital = total of all components
Partners Equity
Peter Brown, Capital

Susan Smith, Capital = total of components, split profits
Total Partners Equity
Shareholders' Equity
Common stock
Preferred stock (represent investments)
Retained Earnings = beginning R/E
+ profits
-withdraws/dividends
Ending R/E
Income Statement
Keys:
- Matching expenses with the revenue they help to generate
□ Expense of given period was incurred to earn revenue of same period
- Format
- Matching
Rent expense
1st year's rent pd. Sept. 1/08

= $18 000 or $1500/month
Paid out 18000
But only incurred rent for Sept - Dec '08 to generate revenues of the same year

But only incurred rent for Sept - Dec '08 to generate revenues of the same year
4 months x $1500 = $6000 Rent Expense
Example: Amortization Expense

- $10, 000 per year
- Accumulated amortization $50,000 on B/S
- But not paid out, not cash expense
= $10,000 Amortization Expense
Wage Expense
10,000 bi weekly = 260 000/year
But 5000 incurred but not paid
= 260 000 wage expense
Interest Expense
96000 for year @ 15% interest
But not paid
= 14 400 interest expense
Loan expense
-principal payment of $16,000/year
NO SUCH EXPENSE - cost of asset already written off as amortization expense
Don't want to double count cost of asset
Matching to revenue more critical, cash flow not an issue for income statement
Income statement
Cash vs Profit
- Sales revenue -> account receivable
- Expenses -> accounts payable
- Amortization
- Owners' equity - cash to use for business?
If profit is not cash, then why consider cash paid when determining expenses?
Format - Merchandising company
Sales
-Cost of goods Sold
Gross Profit
-operating expenses
Income from operations
+/- other income/expenses
Net income before taxes
-taxes
Net income
Gross Sales
- Returns & allowances
- Discounts
- Net sales
Operating Expenses
- Selling & distribution
- General & admin
Cost of Goods Sold

Cost of Goods Sold
- Beginning inventory
- +Purchases *
- Cost of goods avail for sale
- -Ending inventory
- Cost of goods sold
Gross Purchases
- Returned & allowances
- Discounts
- Net purchases
- + freight in
- Net cost of purchases
*COMBINED PROBLEM ON EXAM ON MERCHANDISING NOT MANUFACTURING

Lecture 2
3:28 PM
Key points from Last Class
- Liabilities
○ 3 questions
○ Do you owe money, how much, when is it due?
- Income Statements
○ Matching concept
 Time NOT payment
○ Format
Combined Problem
Information included for both the income statement and the balance sheet
- Deal with the information only once for both the Balance Sheet and Income statement
- Complete the income statement first and use the net income to complete the balance sheet
○ Retained earnings
○ Dividends payable
○ Taxes payable
- advertising expense
 Operating expense
- Cash
 Balance, current assets
- Account receivable
 B/S current asset
- Balance sheet
 B/S sh.equity
- Gross purchases
 I/S cogs
- Marketable securities
 b/s current asset
- Account payable
 b/s current liability
- Inventory, feb 1/07
 I/S beg inv COFGS
- Inventory Jan 31/08
 I/S end inv COGS
 B/S current asset
- Ret. Earnings, FEB 1/07
 B/S beg, R/E sh.equity
- Purchase returns
 I/S COGS
- Net sales
 I/S

Lecture 3 Combined
3:26 PM

- ($4500-500) /10 years = $400/yr
- I/S operating expense - S&D
○ Amortization expense $400
- 5 years accumulated = $2000 accum amort
- B/S capital assets
○ Furniture and fixtures $4500
○ Less: Accumulated amortization 2000
$2500

$4500/6 years = $750/year
Paid 04 05 06 07 = 4 years = 3000 paid
Owing 1500 - B/S
Current Liability
- Note payable $750
Long term liability
- Note payable $750

- $3500 x 12 = $42000.00
- I/S operating Expense
- Selling and distro 80%
○ Payroll 33 600
- General admin 20%
○ Payroll 8400

2 weeks = liability B/S
Current liability
- Wages payable 1750

$2000 x 12 = $24000.00
I/S Operating Expense
Selling & Distri (90%)

Rent expense $21 600
General & Admin (10%)
Rent expense $2400

- Operating expense
Selling and distribution (90%)

Insurance expense 1350
General and Admin (10%)
Insurance expense 150

750 every 6 months = 125.month
Last paid sept 1 for September - February
As of Jan. 31, 1 month remaining
B/S Current Asset

- Prepaid expense $125

B/S Other assets
Investment 6750 (75%)

Intangibles
- Good will 2250 (25%)

I/S COGS
- Beginning Inventory $3000

- Gross purchases $42000
○ Less purchase returns & allowances $4000
- Net purchases $38000

○ Add freight in 1650
- Net cost of purchases 39650

- Cost of goods avail for sale 42650
- Less ending inventory 5000
○ COGS 37650

B/S shareholder equity - Add 40% net income to beginning retained earnings
- B/S current liability - Dividends payable = 60% net income
I/S income taxes = 25% net income before taxes

B/S current liability Taxes payable = 25% net income before taxes

Lecture 4
2:42 PM
- Combined problems
○ Process
 Recognizing income statement vs. Balance sheet items
 Recognizing categories and placement on statement
 Process for handling both statements at one time
 Steps to follow for each item on statements
 Completing income statement before balance sheet
 Putting it together
□ No marks deducted from indents, columns, or $ but affects ability to get numbers right
Cost-Volume Profit Analysis

- Tool used for decision making
- Shows effect of changes in Costs or Volumes on Profits - CVP Analysis
- Shows impact of operating leverage
○ Degree to which locked into fixed operating costs
 Must sell more to cover fixed costs (RISK)
 But once covered - leveraged effect on profit (RETURN)
- Also used for 'Breakeven' Analysis
○ Where revenue = expenses or rev-exp = 0
- Most important concept is contribution
Things to Know:
- Fixed costs
○ Constant regardless of level of production and sales
○ Assuming operating in 'relevant range'
 Normal range of operating activity
- Variable Costs
○ Total depends on level of production and sales
- Margin of Safety
○ = current sales - breakeven sales
Approaches:
- Breakeven chart
- Algebraic approach
- Contribution
○ Contribution margin
○ Contribution rate
Example:

Example:
Total revenue
PROFIT
Total Cost
Fixed Cost
LOSS
Variable Cost
3750

10x = 30000 + 2x
X = 3750 units

10000 + 6x - 30000 + 2x
X = 5000 units
Proof : (volume above breakeven, below decision point)

At 4000 units = revenue 10 x 4000 = 40000 regardless
Old machinery = 40000 - 10000 - 24000 = 6000 income
New machinery = 40000 - 30000 - 8000 = 2000 income
Contribution Margin Approach
- What is left over after covering variable costs that contributes toward covering fixed costs?
- Unit contribution margin

= Price - VC
- How many units do we have to sell at a unit contribution of (Price - VC) to cover FC?
= FC/(Price - VC)
Easier way to determine dec'n point
- Point where incremental (additional) fixed costs are covered by incremental contribution
= (30000-10000) / ((10-2)-(10-6))
= 5000 units
Contribution rate approach
- Can't do it on a per unit bases, so use ratio

- What % of every sales dollar is left over after covering variable costs that contributes toward covering fixed costs?
- Contribution rate
= 1 - VC/Sales
= FC / (1-VC/SALES)
Let x be breakeven sales
X = 30000 / (1-2000/10000)
X = 30000 / 1-20%
X = 30000 / .8
X = $37500

X = $37500
At $10 per unit = 3750 units
- Contribution margin = 250-150 = 100 100/unit
Total contribution = 100/unit x 400 units = 40000$
- Contribution rate = 1- $150/$250 = 40%
- If increasing advertising by $10000 meant that sales would increase by $30000, would you do it?
Process:
- What is the additional/incremental contribution?
- Compare to the additional/incremental fixed cost
- Better off?
○ Quantitatively
○ Qualitatively
- $30000 x 40% cont'n rate = $12000 addt'l cont'

- Vs. $10000 increase in FC
- YES

- $250 - $125 = $125.00 contribution margin
- X350 units = $43750 total contribution
- Vs. $40,000 - additional contribution of $3750
- YES
- Qualitative issues
$230 - $150 = $80.00 contribution margin

X 600 units = 48000 total contribution
Vs 40000 = 8000 additional
Vs. 15000 increase in FC

Lecture 4
2:57 PM

Lecture 5
2:29 PM
- C-V-P Analysis
○ Importance
○ Operating leverage
○ Fixed costs /variable costs
○ Margin of safety
○ Breakeven - chart and algebraic
- Concept of contribution
○ Contribution margin - with units -P-VC
○ Contribution rate with totals - 1-vc/sales
- Applications
○ When to calculate breakeven and what to do with it (could you make money)
 Margin of safety, and interpreting that margin
○ Making a decision between two alternatives
 Decision point - when become more profitable
 When incremental contribution covers incremental fix
○ Making a decision that would affect costs and/or volumes
 Quantitative - incremental contribution vs. incremental fixed
 Qualitative issues
Marketing
What is marketing?
- An "integrated system of activities designed to plan, price, promote and distribute, want-satisfying
goods and services to present and potential customers"
- 2 keys to successful marketing:
1) Related to providing a want-satisfying good or service
- Used to be sell what you produce
- Now it’s produce what you can sell
- Production - sales - customer orientation
The Marketing Concept

- Customer orientation
- Service orientation
- Integrated focus on customer satisfaction
- Profit orientation
- Customer relationship management
- But the product must not only provide a particular benefit/satisfy a particular want or need, but it must
be needed or wanted…
- It must provide a unique benefit that the competition does not #1 KEY
Target Market
- The group of customers to whom you wish to direct your product toward
- A group of customers whose wants and needs have not been met by the competition
Steps to Defining Target Market:

- Market segmentation
- Perceptual mapping
Preference analysis

- Preference analysis
Market Segmentation
- Need to know what groups of customers exist from which to choose a target market
- Involves splitting the market into meaningful segments to determine what groups exist
- Everyone is different but they tend to similar with respect to what they want our of a product…
- Homogenous needs (similar needs)
- Bases for segmentation:
- State-of-being (who they are)
 Geographic - region, population size, density, climate
 Demographic - age, gender, lifecycle, income, occupation, education, religion, social class
 Customer type
- State-of-Mind
 Psychographics - personality, and lifestyle, attitudes, interests, and opinions
- Product Usage - Behaviouralistic
 Volume - usage rate, user status, readiness to buy
 Sensitivity to market factors, occasions
 Loyalty
- Benefits sought *z

Lecture 5
3:03 PM

Lecture 6
2:31 PM
Key points for the Financial Advantage
- Weakest advantage in the competition

- Cash is king - profit vs cash - cash budget
○ Quarterly sufficient - most do monthly
○ Pre-operating and operating cash flows - sources must fund negative balance - can't carry
○ Cash required to fund startup and until cash positive - what re you using it for?
- 90% forecast is predicting sales - realistic, supportable
- Pitfalls of forecasting - capacity - operations and marketing - specific plans, contingency
- Attendance, respect for presenters
Key points from last class
- CVP
○ Context - fixed costs covered?
- Marketing
○ Marketing concept
○ #1 key - provide unique benefit
- Target market
○ Market segmentation
Marketing
Flavor, Brightness, Decay Price

appearance Fresh breath prevention
Teens, Families,
Children young people Parents Older men
Sociable, Hypo-
Self-involved Self-conscious chondriacs Autonomous
Hedonistic Active Conservative Value-

oriented
Steps:
1. Segment on basis of benefits
2. Describe using other bases
3. Name them last
Demographics vs. psychographics

- Psychographics more difficult to measure

Theory in Use
"Luxury Goods - Bling sting"

- How is a company's choice of target market affected by the pest model discussed last semester
Perceptual Mapping & Preference Analysis
- Determine which of the segments will be the target market

- By finding the biggest gap between how the customer perceives the competition meets their needs perceptual map and what they really
want preference analysis
Steps:
1. Draw axes that represent the relevant dimensions by which people differentiate between product offerings
2. Locate the positions of competing products on the axes/dimensions according to customer perceptions
Perceptual mapping
- Locate each segment's ideal product
Preference analysis
- What is the target market?

Positioning
- Finding a distinct position for your product in the customer's mind

- One that communicates that the product provides a unique benefit
- The objective is to position the product as close to the target's ideal as possible
- 2 approaches
- Consumer approach
- Competitive approach

Lecture 7
Monday, February 01, 2010
2:24 PM
- Marketing
○ Target market
 Market segmentation - demographics vs. psycho graphics
 Perceptual mapping and preference analysis
 Positioning
- Group Hand in Case

○ Alternatives
○ Numbers
○ Write-up
Theory in Use…
- "attack of the monster cinemas"

- How is the mega-plex theatre concept positioned in the entertainment market?
- How do they make money?
○ Where is the highest contribution?
#1 key
- To be successful is to provide a unique benefit to the customer

○ Something that they want - benefit
○ That they don't feel they are getting from the competition - unique
- Do consumers want sustainable/green products?
#2 Key
- Be successful is to convince them that the product provides that unique benefit - through your product,
pricing, promotion, and distribution/place decisions
○ Integrated/consistent system of activities

 Be consistent, don't confuse
- Core Benefit Proposition/CBP

 Clear concise statement of product's unique benefit to ensure all decisions deliver same
message
Sustainable Marketing
- Product price place promotion for people, plant, profit
Product
- The creation of a good or service that provides greater value to customers than previously existed.
6 Types of product development

- New-to-world product
- New product line
- New product added to existing line
- Improved product
- Repositioned product
- Lower-priced version of existing product
- "cradle-to-cradle" vs "cradle-to-grave"
□ Principled design based on the laws of nature - transform the making and
consumption of products into a sustainable regenerative force
□ Transform harmful activitiy vs reduce negative impact
Product Life Cycle.
Product Life Cycle

Sales
Saturation
Product Life Cycle.
Product Life Cycle

Sales
Saturation
Maturity Decline
Growth
Introduction
Time
Introduction G rowth Maturity/ Decline

Saturation
P roduct Standardized Increase share Defend share Maintain share

Small mix Improve Variations Cut mix
Limited mix Differentiate
P rice Skim/ Adjust to meet Competitive P rofitability
P enetrate competition Aggressive Liquidation or
Cover costs Increase
P romotion Awareness Brand Differences Reinforce
Heavy Competitive Loyalty Decrease
P lace Establish Solidify Loyalty/ Drop marginal

network relationships Takeover
Increase
*Slow down cycle - new uses, new users - market modification

*Slow down cycle - new uses, new users - market modification
*can also speed up cycle
- Planned obsolelescence - fashion/style, quality, functional
Planned Classification
- Convenience good/service
- Staples
- Impulse goods
- Emergency good
- Shopping good/service
- Homogenous
- Heterogeneous
- Specialty good/service
- Unsought good/service
*different markets classify products differently

*important to see your product as customer does
Product Differentiation
- To prove that the product satisfies wants and needs that the competition does not - that it has a unique
benefit
- Creation of real or perceived product differences
- How does it differ?
Theory in Use..
- Massaging the message

Lecture 8
Wednesday, February 03, 2010
2:27 PM
Key Points for the Marketing Advantage
- Sales projections based on research and logic = educated guess you can defend
- Top down forecasting…
○ Market potential not just #households
○ #with lawns demographics likely to mow own lawn, psychographics care about benefits
- Bottom up forecasting
○ What you can do - capacity
- Compare to breakeven - what have to do
- Sensitivity analysis and contingency plan
○ Assumptions to base sensitivity on
○ Need milestones - if not on track, contingency plan
- Keys - focus (relevant info), cash, consistency (integration), milestones, specifics(commit), structure
(organized thoughts, visuals), KISS (easy for judges to understand)
- Sustainable Marketing
○ Meet customer needs
○ 4Ps for 3Ps
- #2 Key - consistency in marketing mix/4Ps
○ CBP(core benefit proposition)
- Product
○ Life cycle
 Identification and impact on marketing mix/4Ps
 Ability to affect speed of cycle
○ Product Classification
 Identification and implication
○ Product differentiation
Total Product Concept
- Physical features necessary to support CBP

- Total package of benefits as seen from the eyes of the consumer - "everything they evaluate before
deciding to buy something"
○ Brand
○ Package
○ Service
○ Warranty
○ Delivery
○ Credit
○ Atmosphere
○ Image reputation
○ Accessibility
○ Price
Theory in Use
"massaging the message"

Third place concept.
What is a Brand?
- A collection of perceptions in the mind of the consumer

- Built not only through effective communications or appealing logos - it is built through the total
experience that it offers
Brand Name
- Communicate CBP
- Move customer through stages of recognition
 Non-recognition
 Brand recognition
 Brand recall
 Brand preference
 Brand loyalty
Theory in use
"Massaging the Message"

- What does the article say about brand loyalty?
- What is the myth, what is the reality?
"Wal-Mart - Counter Intuitive"

- What is Wal-Mart's Brand
- What market segments is it focusing its new branding on?
- Does this shift make sense? Why or why not?
"don't go changing"
- What lessons about branding strategy can the article teach us.
Price
Approaches:
- Cost based, target profit, mark-up
□ Cost $5, retail price $7, retail markup = 29% ($2/$7)
□ CVP analysis!
- Competitive-based (achieve market share)
- Value-based - price-led
□ Customer
- Most important
□ Support CBP
□ Test pricing
Specific Strategies
- Introductory pricing - "skimming" or "penetration"
□ Life span
□ Speed of competitive entry
□ Sunk costs
- Market protection
- Market domination
□ Predatory pricing
 Illegal
- Market stabilization - follow the leader
- Product line promotion
□ Buying a set
Price lining

- Price lining
□ Pricing things at few price points
- Customer attraction (building traffic)
□ Loss leader
□ Bait & switch
 Must have bait or else illegal
- Image enhancement - 'psychological pricing'
□ Odd/even pricing
□ Multiple pricing
 Buy in bulk
□ Quality / premium pricing
 Above competition to project quality/image
Theory in Use
Massaging the Message
Why is price leadership works a myth

Lecture 9
2:29 PM
Hand in Case
- Accounting
- Total product concept

○ Brand, brand loyalty
- Pricing
○ Approaches
○ Strategy
Promotion
Advertising
- An non personal ad, long term, paid for by a identifiable sponsor, to mass audience
Personal Selling
- Paid for, long term, one to one, no mass audience, extremely expensive per person but more effective.
Sales Promotion
- Mass audience, paid for, short term
Publicity
- Free
All 4 are integrated marketing communication / IMC
Advertising
- Product/institutional advertising
○ Institutional : advertising the institution
- Objectives
○ Create AIDA
- Awareness
- Interest
- Desire
- Action
○ Remind
○ Communicate CBP
Communication Model
Feedback (Get sale)

Message
Source Medium Receiver
How other party receives
1. Increase credibility of source

a. Familiarity
b. Spokesperson
c. Pros & cons
2. Develop clear message
a. Unique selling proposition
b. Tone
3. Use most effective medium
a. Must reach consumer with message intended

a. Must reach consumer with message intended
"the medium is the message"
b. At the most effective CPM (cost per thousand)
- CPM
 A $5000/1,000,000 = $5 CPM
 B $5000 / 100,000 = $50 CPM
BUT
- A $5000/10000 target = $500 effective CPM
Other factors in media selection
- Geographic selectivity
○ Local tv
○ Direct mail
○ Radio
- Target selectivity
○ Specialty magazine
○ Go to the place
- Flexibility/timeliness
○ Websites
○ Newspapers
- Absolute cost
○ Tv
- Length of life
○ Magazines
- Quality of reprod'n
○ Magazines
- Creative ability
○ TV
○ Internet
- Capacity for detail
○ internet
'Green Washing'
- Mislead consumers regarding the environmental practices of a company or the environmental benefits
of a product or service
Environmental qualifiers such as organic or etc
Like green insectide

Claims based on a single attribute while ignoring others
Sales Promotion

- Short term incentives to induce purchase
○ Free samples, trial period
○ Cents off coupons, cash rebates
○ Extra volume for same price, bonuses
○ Giveaways, contests
○ Premiums
○ Point of purchase displays (setting up a display in store to promote product)
- Support personal selling and advertising
- Support CBP
Public relations & Publicity
- Greater impact due to perceived objectivity

- Very hard to get, must be "newsworthy"
Place
- Purchase is a function of desire and availability

○ Logistical decisions costly, time consuming, and not easily changed
○ Choice of location must fit with CBP
○ Critical decision
 Use of marketing intermediaries / channel of distribution
Manufacturer Demand-Backward Pricing

Agent
Wholesaler
Retailer
Customer
- Demand-backward pricing
$4.99 - 1.50 - 1 = $2.49 to wholesaler
$2.49 + 1 + 1.50 = $4.99 to consumer
(MSRP)
= lower contribution?

Lecture 10
2:29 PM
Key Points for the Operations
- Operations is about how your business works

○ Logistics, processes, flow diagram
○ Space utilization
○ Need operational capacity to meet sales projections and sales projections/funding to cover
operating expenses
 Burn rate
○ Operating expenses
○ Need for conservatism, milestones, contingency planning
- HR is about having the right people to make it work
○ Do you have the right people to weather the surprises, proven competencies
○ Timing of hiring
○ Paying yourself(last) - where is investor's money going?
Midterm Exam
- Mark breakdown
 10 multiple choice - distribution marketing and accounting chapters
- Short answers
 10 marks accounting theory
 50 marks marketing
- Problems
 10 marks CVP
 20 marks - 1 combined - merchandising corporation
- Accounting 35% + CVP 10% + marketing 55%
- Articles - those covered in class
- Review sheet of topics on website; more detail when exam finalized
- Marketing
 Promotion
□ Advertising - communication model
□ Sales promotion
□ Publicity
 Place
□ Importance of decisions
□ Implications of using marketing intermediaries
 Price and contribution
 Promotion
Place
Push vs. Pull

- Push to channel members
 Volume - distribution arrangements, training
 Contribution -case allowances, volume discounts
 Promotional allowances
- Pull - promotion to customers

Finance
Financial management is made up of:
- Accounting
Provides information
- Finance
Makes decisions about the acquisition, disposition, and management of capital with the help of
accounting information
- Ultimate objective
- Maximize shareholder wealth
- Goals
- Viability - liquidity and stability (risk)
- Profitability
- Risk-return tradeoff
Finance department's responsibilities
- Determining financial resources required

- Budgeting - disposition
- Obtaining financial resources required
- Financing - acquisition
- Managing the financial resources effectively
- Working capital management
- Investing - management of long-term funds
Decisions - Balance sheet
Decisions – Balance Sheet
Assets Equities
short-term Investing Financing
working capital management
- liquidity
- working capital cycle
- cash budgeting
long-term
» Capital budgeting - Capital structure
- Amount and mix - stability
- Operating leverage - financial leverage
- CVP - EBIT analysis
DIVIDENDS
Budgeting
- 3 steps
 Forecasting financial needs
Short term - cash flow forecast

□ Short term - cash flow forecast
□ Long term
 Developing budgets to meet those needs
□ Master budget
 Operating budget
 Capital budget
 Cash budget
 Establish financial control
□ Deviations from budget
Advantages of Budgeting
- Compels managers to plan

- Promotes communication and coordination among subunits of the organization - "systems"
approach
- By clarifying goals and providing yardstick for rating performance - source of motivation
- Establishing goals or standards against which actual performance can be measured - facilitates
control
Negative aspects of Budgeting - Abuses
- Means to reward waste and penalize thrift

- Individuals subjected to guidelines not consulted
- Evaluate device - perceived as threat
- Convenient scapegoat or lost opportunities
Cash Budget
- Management of cash flows

- Management of working capital cycle
Beginning Cash Balance

+ Receipts
Total Cash Available
-Disbursements
Cash excess / (deficiency)
Minimum cash balance desired
Borrowing Req'd / surplus or repayment
Ending Cash Balance
*Worksheet based on historical measure of amounts and timing of cash flows in working capital
cycle
Worksheet based on historical measures of amounts and timing of cash flows in working capital
cycle
• ex: you need to prepare a cash budget for the months of June, July and August; min. cash
balance = $6,000
• assume that sales are forecasted at $10,000, $20,000, $30,000, $15,000, $25,000, and
$20,000 from April to September respectively
• assume also that you expect to collect 30% in month of sale, 60% in month following sale,
and 10% in the 2nd month after sale
• assume that purchases are 75% of the next month’s sales
• assume also that you pay for 20% of purchases in the month of purchase, and 80% in the
month following
Worksheet
April May June July Aug. Sept.
Net Sales 10,000 20,000 30,000 15,000 25,000 20,000
Worksheet
April May June July Aug. Sept.
Net Sales 10,000 20,000 30,000 15,000 25,000 20,000
Collections:
3,000
30% month of sale
6,000
60% month follow 1,000
10% 2nd month
22,000 24,500 19,500
Total Receipts
Net Purchases
75% next mth. sales 22,500 11,250 18,750 15,000
Payments:
20% month of purch. 4,500
80% month follow 18,000
Total Disbursements for Purch.
20250 12750 18000
Cash Budget
June, July, August, 19XX
June July August
Beg. Cash Balance $ 6,000 6000 7050
Add: Receipts 22,000 24500
Total Cash Available 28,000 30500
20,250 12750
Less: Disb. for Purch.
Selling & Admin.
Interest
Dividends
Capital Expenditures
Taxes
Total Disbursements
31,500 23450
Cash Excess / (Deficiency) (3,500)
Min. Cash Balance Desired
Borrowing Required
Surplus Cash
Ending Cash Balance $6,000 7050

Lecture 11
2:31 PM
- Marketing
○ Place
 Implications of using marketing intermediaries
□ Demand-backward pricing
□ Push vs pull promotion
- Finance
○ Objective, goals, tradeoff
○ Budgeting - advantages, negative aspects
○ Format and process of cash budget
Keys to Cash Budget
- 3 Possibilities
1. Deficiency
a) Borrow for deficiency + minimum
b) Ending balance = minimum req'd
2. Excess > minimum
a) Surplus available to repay borrowing
b) If do… ending balance >/= minimum req'd
c) If don't… ending balance = total excess
3. Excess < minimum
a) Borrow to = minimum req'd
b) End balance = minimum req'd
EBIT Analysis
EBIT Analysis
- To determine the best mix of debt and equity in the form's capital structure
- Objective is to maximize shareholder wealth
- Measured by EPS…
- Earnings per share ( of common stockholders )
= earnings available to common stockholders

= net income - preferred dividends
# shares of common stock

Earnings Before Interest and Taxes - EBIT
- Interest
Earnings Before Taxes - EBT
- Taxes
Net Income = EAT
- Preferred Dividends
Earnings Available to Common Stockholder
/ # shares of Common Stock
Earnings Per Share - EPS
– ex: ABC Company requires an additional $4 million

in external long-term financing
– earnings before interest and taxes are assumed to be
$6 million next year, and ABC’s tax rate is 50%
– the existing capital structure consists of:
• $5,000,000 in 10% bonds
• $3,000,000 in 6% preferred stock
• 1,000,000 shares of common stock at $10/share
• $500,000 in Retained Earnings
– ABC has 2 alternatives with which to raise the
money:
• $3,000,000 in 11% bonds, and $1,000,000 in 7% preferred stock
• $2,000,000 in 8% preferred stock, and $2,000,000 in common stock at
$10/share
– Need to know the effect that each element of the

capital structure has on EPS…
• Debt
– Interest
= $ debt x % interest rate
• Preferred stock
– Preferred dividends
=$ preferred stock x % dividend rate
• Common stockLecture Notes Page 124
– Need to know the effect that each element of the
capital structure has on EPS…
• Debt
– Interest
= $ debt x % interest rate
• Preferred stock
– Preferred dividends
=$ preferred stock x % dividend rate
• Common stock
– # shares
= $ common stock / price
– Existing…
• $5 000 000 bonds x 10% = $500,000 interest
• 3000000 preferred stock x 6% = 180 000 dividend
• 1 000 000 shares of common stock
– Alternative #1…
• 3 000 000 bonds x 11% = 330 000 interest
• 1 000 000 preferred stock x 7% = 70 000 dividend
– Alternative #2…
• 2 000 000 preferred stock x 8% = 160 000 dividend
• 2 000 000 common stock /$10 = 200 000 shares
common
All Numbers in First Row must be Same!!
ABC Company If Given anything other then EBIT work

EBIT Analysis (000‟s) backward through existing structure and
project through all alternatives
Existing Alternative
Structure #1 #2
EBIT $6000 6000 6000
- Interest 500 830 500
EBT 5500 5170 5500
- Taxes 2750 2585 2750
EAT 2750 2585 2750
- Pref. Dividends 180 250 340
Earnings Avail. C/S 2570 2335 2410
/ # shares of C/S 1000 1000 1200

EPS 2.57/sh 2.34125
Lecture Notes Page 2.01
All Numbers in First Row must be Same!!
ABC Company If Given anything other then EBIT work

EBIT Analysis (000‟s) backward through existing structure and
project through all alternatives
Existing Alternative
Structure #1 #2
EBIT $6000 6000 6000
- Interest 500 830 500
EBT 5500 5170 5500
- Taxes 2750 2585 2750
EAT 2750 2585 2750
- Pref. Dividends 180 250 340
Earnings Avail. C/S 2570 2335 2410
/ # shares of C/S 1000 1000 1200

EPS 2.57/sh 2.34 2.01
- Choose the option which results in the highest EPS while realizing that there is always a tradeoff
between risk and return
- RISK - comes from leverage... what happens when you have more debt than equity in your capital
structure
- Should be able to determine the degree of leverage
(5 000 000 + 3 000 000) debt

(3 000 000 + 1 000 000) pref + 10 000 000 common + 500 000 retained earnings
= 8 000 000 / 14 500 000 = 0.55:1 AVERAGE
- Calculate interest coverage ratio…
6 000 000 / 830 000 = 7.2x
Decision
- Choose alternative #1 because

- It has least dilutive impact on EPS
- While having acceptable risk as measured by the interest coverage ratio
- Therefore :
- Maximizing shareholder wealth
- While balancing risk and return
Practice Question
– XYZ needs an additional $8,000,000 in external long-

term financing. It’s EBT next year are projected to by
$4,000,000, and it’s tax rate is 50%.
– XYZ’s existing financial structure consists of
• $15,000 in current liabilities
• $1,000,000 in 10% bonds
• $150,000 in preferred stock at a 5% dividend rate
• $2,100,000 in common stock at $15/share
• $750,000 in retained earnings
– XYZ has three alternatives with which to raise the
financing:
1 $6,000,000 in 12% bonds + $2,000,000 in pref. stock at 7%
Practice Question
– XYZ needs an additional $8,000,000 in external long-

term financing. It’s EBT next year are projected to by
$4,000,000, and it’s tax rate is 50%.
– XYZ’s existing financial structure consists of
• $15,000 in current liabilities
• $1,000,000 in 10% bonds
• $150,000 in preferred stock at a 5% dividend rate
• $2,100,000 in common stock at $15/share
• $750,000 in retained earnings
– XYZ has three alternatives with which to raise the
financing:
1 $6,000,000 in 12% bonds + $2,000,000 in pref. stock at 7%
2 $2,000,000 in 9% bonds + $4,000,000 in pref. stock at 6% +
$2,000,000 in common stock at $20/share
3 $5,000,000 in common stock at $16/share + $3,000,000 in
11% bonds
Int. cov. 5x
– Choose alternative #1, leverage 1.4:1, int.
cov.5x

Midterm
2:43 PM
Friday February 26th 6:00pm - 9:30pm
Look at slides.

Lecture 12
Monday, March 01, 2010
2:29 PM
- EBIT Analysis
○ Keys - finding EBIT, adding in present financing
○ Decision criteria and justification
 Maximize shareholder wealth - "least dilutive impact"
 Balance risk and return
□ Measure risk - interest coverage ratio - looking for "acceptable" risk => 3x
Ratio Analysis
- Ratio analysis is a tool used for:

○ Analyzing accounting information to help make better decisions - about other firms, or about our
firm by outsiders
○ Analysis the results of those decisions
- A ratio is a mathematical comparison using information from the financial statements
- It detects crude trends/overall problems that require further investigation
Ratio Analysis - 3 Steps
1. To assess overall financial well-being, look at all 5 types of ratios:

- Liquidity
 Ability to meet short term debts and obligations
- Stability
 Ability to meet long term debts and obligations
- Profitability
- Growth
 Rate of change
- Marketability
 Value of stock is holding, shareholders are happy?
2. Compare the ratio to something else
- Same ratio of other firms in industry
- Industry average
- 'rule of thumb'
 General rules, not accurate, starting point
- Same ratio for series of past years in same company
- Another ratio
3. Pull apart the numerator and denominator into component parts to see where problem lies
Liquidity
- Measure a company's ability to meet its current/short-term obligations - short-term viability

- Assess the adequacy of a firm's working capital management
- Assess whether net working capital provides a sufficient cushion to meet current debts as they come
due.
Net working Capital
= current assets -current liabilities
- Objective?
- What is sufficient? - depends on:
- Speed of working capital cycle
- Knowledge of / ability to predict WCC

Faster the cycle, less net working capital.
Current Ratio
= Current assets / current liabilities

- 'Rule of thumb' > 2:1 for risk, < 4:1 (risk too low, too low return)
- Suggests that NWC should be at least as large as current liabilities
- CA(2) - CL(1) = NWC(1) = CL
Acid Test /Quick Ratio
= current assets - (inventories + supplies + prepaids)

Current liabilities
- 'rule of thumb' > 1:1
Receivable Ratios
1. Average collection period
= avg. (closing) accounts receivable x 365 days

Annual (credit) sales
- Compare to credit terms ex : 2/10, net 30 vs. 59 days
○ 2% discount in 10 days, or full in 30 days
- Check industry terms, discount, penalty, credit granting procedures
- Why so important to take advantage of discount?
○ Adds up in a year
2. Accounts Receivable Turnover
How many times do we collect our accounts receivable
= annual (credit) sales / avg. closing A/R

- Tradeoff?
○ If it's slow
 Risky
○ If it's too fast
 Not getting interest
 Limit market
3. Inventory Turnover
= cost of goods sold / average inventory
OR sales /average inventory
Tradeoff? - need to achieve a balance - not too slow, not too fast.

- Tradeoff? - need to achieve a balance - not too slow, not too fast.
○ Risk
 No inventory left and others go to another company
Theory in Use…
"Raiding a company's Hidden Cash"

- What are the short and long term benefits of operating without a net working capital balance?
- What is the key to operating without net working capital
Stability
- Measure company's ability to meet its long-term obligations by measuring the relationship between
components of a firm's capital structure
○ Long term viability
- Shows results of financing decisions
Debt to Equity or Debt to Net Worth
= total debt / shareholders' equity (net worth)
= current liabilities + long term liabilities
Common stock + pref. stock + retained earnings
- 'rule of thumb' for industrial firm <1:1

- Investors/shareholders?
○ Shareholders are fine with debt
 Firm using other money to make money
 As long as does not risk viability
 Earn a better return using equity
 Does not dilute their interest
Leverage
= long-term debt / sh. Equity (net worth)
- Measures the degree to which a company has locked itself into fixed financial costs
- Implies that a given change in sales will result in a greater change in profit
- 'rule of thumb' < .5:1 low

.5 : 1 - 1: 1 average
>1 : 1 high
- Advantage
○ Long term debt is a cheapest source of capital because interest is tax deductible, dividends are
not, therefore higher return
- Disadvantage
○ Higher long term debt means higher interest payments which are a legal obligation whereas
dividends are not, therefore a greater risk of insolvency
• ex: presently each firm has $1,000,000 in common

stock outstanding, and each needs to finance an
additional $1,000,000…
A B
10% bonds equity with
10% div.
EBIT 1 000 000 1 000 000
-interest 100 000 0
EBT 900 000 1 000 000
- taxes @ 50% 450 000 500 000
• ex: presently each firm has $1,000,000 in common
stock outstanding, and each needs to finance an
additional $1,000,000…
A B
10% bonds equity with
10% div.
EBIT 1 000 000 1 000 000
-interest 100 000 0
EBT 900 000 1 000 000
- taxes @ 50% 450 000 500 000
EAT 450 000 500 000
Interest cost 100 000 - tax savings 50 000
= real interest 50000 / 1000000 debt

= 5%, not 10% -- lowest cost of capital
If return on capital is 15%

- A 15% return - 5% cost = 10% overall
- B 15% return - 10% cost = 5% overall
But what about B's greater net profit?

Additional equity : SHARED
Summary
- Low leverage :
Lowest risk but higher cost of capital

= lower return
- High leverage
Higher risk but lower cost of capital

= higher return

Lecture 13
2:53 PM
Keys Points for The Plan/Presentation/Pitch
- PLAN
○ Cater to reader - embedded images vs appendix
○ Get someone to read it - make sure they understand
○ Contingency shows ability to be flexible
- PRESENTATION
○ They need to believe in idea, potential, and you
 Over-communicate what and why
 Communicate your vision
 Be passionate
○ Be confident
○ Present what is important - exec summary as guide, high level financials
○ Rehearse
○ Script, memorize, practice, know
○ Work on flow - transitions between speakers
○ Beginning - wow factor - remember you in a 'professional' way
○ Attire suitable to idea
○ Know your plan - Q&A
 Have slides ready with details not included in presentation
 Don't BS
- PITCH
○ Pain statement 0 problem trying to solve
○ Gain/value proposition - how does your idea solve it
○ Why yours is best way
○ How easy/fast will it be to get to market
○ How much do you need and what will they get
○ Tell them your idea again - SELL it
○ Succinct, easy to understand, appeal to their greed *WIFM), irrefutable - don't leave them with
more questions than answers
- Ratio Analysis - steps, comparisons

- Liquidity concepts
 Sufficient level of net working capital
 Working capital cycle and effect on NWC
 Risk vs. Return
 Ratios for measuring management of WCC and interpretation
- Stability concepts
 Advantages/disadvantages of debt and equity
 Ratios for measuring and interpretation
Interest Coverage Ratio
- = EBIT / Annual Interest

- Helps assess the risk inherent in being highly levered
- 'rule of thumb' for industrial firm > 3x, but should look at long-run trend in earnings, and variability in
earnings

Profitability
- Gross Profit Margin (GPM)
= gross profit / sales (net)
- Net Profit Margin (NPM)
= net profit / sales
- Check components of income statement
- ROI
= net income / shareholder's equity (net worth)

- Most important profitability ratio for investor
– ex:
A B
Sales 10 000 000 10 000 000
Net Income 500 000 1 000 000

NPM 5% 10%
Sh. Equity 1 000 000 5 000 000

ROI 50% 20%
Growth
- Measures the rate of growth of any balance sheet or income statement account
= present yr's "----" - past yr's "----"

Past yr's "----"
Marketability
- Earnings per Share (EPS)
= Earnings available for common stockholders

= net income - preferred stock dividends

- Calculate fully diluted if P/S convertible

Price /earnings Ratio
= market price / share

EPS
- Helps gauge stock value and growth prospects

- If high P/E ratio - why would people bit up price relative to earnings available?
- Low price/earnings not growing, high payout
Yield
= dividends/share
Price/share ( your investment )
Payout
= dividends /share
EPS
- Relationship to P/E ratio?

Lecture 14
2:36 PM
- Stability
○ Risk of leverage - interest coverage ratio
- Profitability
○ Margin vs ROI
- Marketability
○ EPS - fully diluted
○ Price/earnings vs payout
○ Importance of dividend decision
Operations
- Production vs. Operations

 Service vs manufacturing
- Types of operations
 Processes used
- Responsible & decisions
- Trends- sustainable operations
- Modern tools & techniques
- Quality control
Service vs. Manufacturing
- Focus on performance
- Focus on process and outcome
 Manufacturing
□ How to make
 Service
□ How it tastes
□ Are facilities clean?
- Focus on service characteristics
 Intangibility
 Customization
□ Unlimited customization for service
 Unstorability
□ Can't store a service
- Focus on customer-service link
- Focus on service quality
Types of Operations
Classified by processes used
- Transformation 'technology'
□ Transforming a raw material
□ Services take person and make them happy
 Chemical
 Fabrication
 Assembly
 Transport
Clerical

 Clerical
- Analytic vs. Synthetic System
□ Material build into product (synthetic)
□ Analytic (breaking down a product to retrieve product) like a gas
- Extent of customer contact
□ Either high or low
Responsibilities
3 major foundational concerns:
- Product Design
 Form and function (trade off)
 Techniques
◊ Match voice of customer to voice of engineer
◊ Standardization
◊ Prototyping
 Technologies
◊ CAD (COMPUTER ASSISTED DESIGN)
◊ CAM (COMPUTER ASSISTED MANUFACTURING)
◊ Must be communication with each other
 Research and development
Examples
- Waiting lines
- Assembly lines
- Inventory systems
◊ Minimize sitting
Decisions
- Make or buy
- B/E (break even)
- Optimal operating levels
- Quality management
Tools/Techniques
- Flowcharts
- Simulation (process prototype)
- ERP - Enterprise resource planning
- TQM - total quality management
Supply Chain Management
- Seamless from raw material to giving to customer
Trends - Sustainable Operations
- The next industrial revolution

- Eco-effectiveness : "cradle to cradle" design
- Vs. eco-efficiency : "cradle to grave" systems
- Biomimicry
- Product stewardship
Sustainability through servicing

- Sustainability through servicing
- Sustainability of the supply chain
Cradle-to-Cradle Design
- Intelligent design can eliminate the concept of waste

- Products developed for closed loop systems
- Biological and technical nutrients
◊ Recycle into similar material
- Eco-effective vs eco-efficient design
- Based on nature's design principles - "waste equals food"
C2C can certify C2C products
Biomimicry
- Sustainable innovation inspired by nature -- "biologically inspired engineering"

- Based not on what we can extract from organisms and ecosystems, but what we can
learn from them.
Product Stewardship
- The responsible and ethical management of the health, safety, and environmental
aspects of a product throughout its total life cycle
- The concept of extended producer responsibility - accounting for the impact of a
product during use and after disposal
Sustainability through Servicing
- Increased efficiency and creation of environmentally benign product and processes

necessary but not sufficient
- Gains may eventually be countered by increases in consumption
- Change business model from selling products to providing services
- Turn demand for reduced material use into a strategic opportunity
- Services more difficult to imitate - competitive advantages
- Xerox
- Products becoming commoditized
- 1994 -" the document company " - help companies improve efficiencies in
document intensive business processes
- Increase productivity and reduce costs - better customer relationships - not
likely to change suppliers , other product opportunities, attract new customers
Sustainability of the Supply Chain
- Management of raw materials and services from suppliers to manufacturer/service

provider to customer and back with improvement of the social and environmental
impacts explicitly considered
- Outsourcing business operations doesn't mean outsourcing responsibilities or risks in
today's global economy - sustainable supply chain management is key to the integrity
of the brand.

Lecture 15
3:39 PM
- Operations
○ Service vs manufacturing
○ Type of operations
○ Responsibilities
○ Trends - sustainability
 Cradle to cradle design
 Biomimicry
 Product stewardship
 Sustainability through servicing
 Sustainability of the supply chain
Sustainability of Supply Chain
Wal-Mart
- Pilot program with suppliers of seven common items - to measure and reduce the amount of energy
used in making and distributing them
Home Depot
- Gives marketing and store display preference to EcoOptions line of environmentally friendly products
and favours suppliers that come up with new categories of green products
Starbucks
- Before it launched a new line containing cocoa

○ Sources primarily regions in west Africa that rely on forms of child labour - invested in rural
communities
Timberland
Organic materials
Decisions
- Location - cost, proximity, convenience

○ Cost implications - rent, land
○ Close to labour pool
○ Convenience is service based
- Lay out
○ Assembly-line/product - design layout based on product
○ Process - focus on processes for unique products
○ Modular/cellular - sequence of creation
○ Fixed position - production cannot move, yacht, plane, go to product to produce
- Capacity - goods/high & low contact services
○ Just above demand
 Don't want to add capacity later
 Don't want to outsource
 Don't want to lose customer
○ For services
 Depends on how much contact
 Capacity at peak demand for high contact
Capacity at average demand for mid contact

 Capacity at average demand for mid contact
- Method
○ Add value
○ Speed up service "fail" points
 bottleneck
○ Limit human discretion to increase consistency
○ Worker interaction with customers
- Scheduling
○ Appointments, reservations -- service
- Control
○ Materials management - design, material flows, and inventory
○ Process control - worker training, just in time, quality
Modern Production Techniques
- Mass production technology vs. new economy

- Change vs. stable market conditions
- Customer-driven - effectiveness vs efficiency
- Customization and innovation vs repetition
Theory In Use
- "the customized, digitized, have it your way economy"

- What is mass-customization and what makes it possible?
- What implications does this 'new economy' have on a company's marketing and financing
- Economic order quantity (EOQ)

- Materials requirement planning (MRP)/MRPII
- MRPII information fed into processes
- Enterprise resource planning (ERP)
- Everyone being linked in one computer system; every area in supply chain
- Just in time inventory control (JIT)
- Materials come in just in time
- Flexible manufacturing
- Using equipment that can adapt to changing needs
- Lean manufacturing
- Manufacturing as little waste as possible
- Robotics
- Replacing humans
- Mass customization
- Effective and efficient, combination
- CAD/CAM
- Want two to work together
- CIM
- Computer integrated manufacturing, combo of above
Quality Control
- Productivity- quality connection

- Produce quality at efficient level to be productive
- Total quality Management (TQM)
- Focus on quality of everything we do
W. Edwards Deming
- Statistical Process Control

 Don't wait until your finished to check
 Check sampling
 Checking statistics
Monitor own quality every step

 Monitor own quality every step
- Quality circles
 Extension of stat, getting workers together and asking for opinion
- Benchmarking
 Use firm of highest quality and compare
- ISO
 Certifies company that quality is good
 Levels playing field
 Required to do business worldwide
- Six sigma

Lecture 16
2:28 PM
- Sustainability of the supply chain

- Decisions
○ Location, layout, capacity
○ Methods, scheduling, control
- Mass production vs new economy
○ Modern techniques
- Quality control
○ Productivity-quality connection
○ TQM, statistical process control, quality circles, benchmarking, ISO certification
Theory in Use:
- Harley Davidson
- What happened at Harley-Davidson that pushed it to the bring of bankruptcy
- What operational principles/techniques did Harley-Davidson use to turn itself around?
Human Resources
Responsibilities
- Forecasting human resource needs/planning

- Recruiting potential candidates
- Selecting the best available
- Training and developing
- Encouraging high performance
 Performance = ability x motivation
- Performance evaluation
- Compensation
- Union/management relations
Sustainability and HR
- 3 critical challenges facing HR professionals

 Recruiting and retaining top talent
□ Accenture - 60% rated ethical mgmt as important factor in job search
□ Globescan - 68% disagreed that salary is more important than a company's social and
environmental reputation when deciding where to work, and 53% said very likely
would not apply for job at company that was socially irresponsible
□ KPMG – among workers who feel their bosses lack integrity only 20% would
recommend workplace vs 80% who believed company had strong ethics would
- Enhancing critical competencies - training

 To respond to emerging demands of stakeholders
 Sustainability fosters innovative approaches and informs the way people think and act
- Creating incentives for exceptional performance
 GlobeScan – 80% of people felt greater motivation and loyalty the more socially responsible
their employers became
 MORI – 70% of staff who were committed to the values of the company said their
productivity had increased
 Incentives must be aligned with goals of sustainable development

“Does Sustainability Change the
Talent Equation?” MIT Sloan Management Review Fall „09
• Annual Sustainability Initiative Survey – collaboration

between MIT Sloan Management Review and the Boston
Consulting Group (BCG)
– When a company takes up sustainability, how does people
management change?
• Talent recruitment and retention rises

• Employee engagement and
productivity improves
• Employee expectations rise
Planning
- 1st need to do a job analysis

 Job description
□ Describes the job
 Job specification
□ Specifies characteristics of worker to do job well
- Forecasting/Planning - Stapes :
 Project future demand
□ Numbers and skills
□ Internal and external environment
 Goals
- Project future supply
 Inventory of numbers and skills
□ Currently, then how will this change?
 Adjust for future - retirement, turnover, promotions and training
- Determine net needs / "gap"
 Shortages and surpluses in numbers of skills
- Develop plan…
- Evaluate and make changes
- Contingency
 Absenteeism - develop plan - soft vs hard
 Soft approach
□ Caring and concerned about reason
 Hard approach
□ Deals with the surface
□ No fault approach
- Human Resource Plan
- Shortage options
□ Use resources better
 Increase efficiency Choice :
 Overtime - Size
 Training and transfers - Lead time
□ Decrease requirements - duration
 Change plans
 Subcontract - "out sourcing"
 Capital vs. people
□ hire
Surplus

Surplus
Layoff - Firing
- Layoff is not permanent, firing is layoff permanently

- Downsize
- Labour not always cutting workforce
- Rightsize
- Cutting to what you want to achieve
- Job sharing
- Allow people share jobs
Recruitment
Sources :
- From within - cheap, fast, good for morale

- Doesn't work for entry level positions
- Doesn't work for top top positions
Choice :
- Works if you're stable
- Budget
- Word of mouth
- Lead time
- Pre-conditioning, pre-selection
- Type of job
□ Recommend someone good (pre-selection)
□ Tell what's bad about the job (pre-conditioning) know reality of job
- Employment agencies
- Public vs. private - "headhunters"
- College/university recruitment
- Trade union / professional association
- Advertisements
- Professional contacts
- Unsolicited applications
Approaches
- Don't have to continually go through the process

- Realistic approach
Selection
- Must 1st consider 3 factors in designing selection procedures
Human Rights Legislation
- Employment equity
Validity
- Predict success/performance
Reliability
- Predicts success consistently

Lecture 17
Wednesday, March 17, 2010
1:00 PM
- Responsibilities of HR department
○ How sustainability affects HR
 Recruitment, retention, and training
 Engagement, productivity, and incentives
 Expectations
- Job analysis - what it is, importance
- H/R Planning
○ Steps, contingency - absenteeism - hard vs. soft approaches
○ Handling shortages and surpluses - application
 Downsize vs rightsize
 Layoffs, hiring freeze
 Job sharing
- Recruitment
○ Sources, application
Selection
- Validation Process - criterion validity

- Predictive and Concurrent
 Administer the selection procedure to a group of people and correlate (compare) the
results/predictor scores with performance/criterion scores
 Look for valid predictors
 Difference is in who administered to and implications :
□ Predictive
 Given procedure to applicants
 Hire them, then watch how they work, assess
 Lengthily and then make correlation
 More accurate results
□ Concurrent
 Taking current employees and comparing performance
 Quicker
 Results tainted by experience
□ Best approach is to do both
Lecture 17
Audio recording started: 1:16 PM Wednesday, March 17, 2010
Theory in Use…
"New face of work" and "diversity Works"

- What does the employment equity act require of employers
- Why should employers not covered by the act still strive for employment equity
- Methods :
 Application forms
◊ What can you ask?
► Education and experience
► "bonafide qualifications"
► Actual ability not assumptions
◊ What is it used for?
► Screen for job specifications
◊ "weighted application blank"
► 50 answer YES, 40 high performers = weight 80
Interviews

 Interviews
◊ Most common but least valid
◊ Because of interviewers and questions asked
► Early bias
 First impression
► Negative influence
► Hypothesize
► Match to ideal
► Halo effect
 Some characteristics overshadow everything
► Central tendency /leniency / strictness
 Rate everyone average
 Rate everyone easy
 Rate everyone low
► Rating depending on order
 Following earlier performance could be better or worse
◊ Degree of variance and validity of questions
Solution :
Interviewers :
- Train interviewers
- Use more than one
- Give feedback
Questions :
- Use job analysis as guide for developing questions
- Validate questions
- Use "patterned" questions
 Testing
◊ Ability/aptitude
► Pen and paper or job sample
► "assessment centres"
◊ Personality
► Construct validity
- Measuring for a personality trait (construct)
- Is construct related to performance
► Types - self-report and projective
- Projective
– Psychologist projects your personality from your
response
- Self-report
– Yourself
► Interest inventories
- Use more for placement and career counseling
Compensation
- Three objectives
► Attraction - external equity
► Retention - internal equity
► Motivation - provide incentives
- External equity
► Wage survey establishes base rate
► Adjust in regards to economy, nature of company and industry, and
nature of job
- Applicants must understand adjustments
- Internal equity
► Job evaluation
- Evaluating the job to assign pay
► Job evaluation steps
- Job analysis
- Develop list of factors to rate jobs on
Rate jobs *

- Rate jobs *
- Assign pay based on relative value
– "price the pay structure"
"Point Method"
1. Universal factors
- Factors universally applicable
- Skill, effort, responsibility, job conditions
2. Subfactors, 3. degrees, 4. point values, 5. pay grades
- What factors relevant used to reward pay
- Specific to company
- 3.
- Define different amounts of subfactors
- 4.
- Score each subfactor
- Done by employees as well
- 5.
- Add point scores, ranges = paygrades
1st 2nd 3rd 4th 5th

#1 Universal Factors #3 degrees defined
Factor Degree Degree Degree Degree Degree
Skill
Knowledge #2 subfactors
14 28 42 56 70
Experience #422Point values
44 66 88 110
Initiative and Ingenuity 14 28 42 56 70
Effort
Physical Demand 10 20 30 40 50
Mental Demand 5 10 15 20 25
Responsibility
Equipment or process 5 10 15 20 25
Material or product 5 10 15 20 25
Safety of Others 5 10 15 20 25
Work of Others 5 10 15 20 25
Job Conditions
Working Conditions 10 20 30 40 50
Hazards 5 10 15 20 25
Score Range Grade

139 and under 12 #5 Pay grades
140-161 11
162-183 10…
…316-337 3
338-359 2
• Pricing the Pay Structure...

Trend Line
leave him
Pay
Rates Range
Increase pay
Pay Grades / Job Evaluation Points
Pay Equity Legislation
- Not "equal pay for equal work"

- Prohibits paying different wages to employees who work for the same firm and who
work in jobs that are different but of comparable worth to company
- Ends wage discrimination in jobs where there are few men with which to make
comparisons for equal pay
Federal government, ontario, quebec - both public and private sector

- Federal government, ontario, quebec - both public and private sector
 Required to develop and implement plans but complaint based system
 In federal law for over 30 years '77 but wage gap still exists
- Ensure paid same for jobs of equal value regardless of gender
 "systemic wage discrimination" -established compensation practices that tend
to unconsciously favour and reward work done by male workers
 Eliminate portion of wage gap that can't be explained by differences in
education, labour marker experience, or seniority.

Lecture 18
12:57 PM
Selection
Methods - issues, solutions
Compensation
External equity
Internal equity
- job evaluation process
- Pay equity legislation
Audio recording started: 1:17 PM Monday, March 22, 2010
Lecture 18
Labour Relations in Ontario
- Structure of labour movement

- Relationship between union and management
- Different types of unions
- Certification process
- Negotiations - strategy and process
- Contract administration
Primary/ Secondary Stakeholders - UNIONS
If you don't have a union

- Secondary
If you do have a union
- Primary
- Tripartite System
○ Management - represent rights of owners
○ Union - represents rights of employees
○ Government - Formulate rules
- Ontario labour relations act
- Canada labour code
□ Only federal if your job cross into another province
AFL-CIO
U.S. Headquarters
CLC or CFL
Canadian Branches
National Unions
of Internationals
Provincial Federations
of Labour
Regional Offices Lecture Notes Page 149
AFL-CIO
U.S. Headquarters
CLC or CFL
Canadian Branches
National Unions
of Internationals
Provincial Federations
of Labour
Regional Offices Regional Offices
Local Labour
Councils
Local Unions
- Parent - let locals do their own thing, they have authority and final say, help with financial trouble
○ Set policies
○ Help legal matters
○ Help strike fund
○ Help bargaining
- Local - day to day, contract bargained, grievances handled, branches of union
- Labour congress - association of many unions - promote interest of unions, lobbies with government,
settle parent disputes
AFL = American federation of labour

CIO = Congress of industrial organizations
CLC = Canadian labour congress
CFL = Canadian Federation of Labour
Union vs. Management
Union
- Threat of a strike
○ Timing
- Peak season
- Ability to carry it out
○ Strike fund
Management
- Ability to withstand a strike
○ Stockpiling
○ Subcontracting
○ Skeleton staff
- Management does work
○ "strikebreakers"
- "scabs"
- Replacement workers
○ Strike insurance
__________________________________
- Industry wide lockouts
- Employer assoc'n bargaining
○ Imbalance in size
○ Small employers band together to bargain as a group with a large employer

Craft vs. Industrial Unions
Craft - same skill
- Workers with same skill
- Also called trade/labour unions
- Power
○ Create monopoly over scarce resource (skill) +
 Limit access, limit apprenticeship
 Because of sequential nature of work, if one trade is gone, nothing is done.
- Tactics
○ U- Withdraw, jobs at other sites, info. Picket
○ M - industry-wide lockout
 Only thing they can do.
- Strike characteristics
○ Little violence
○ Resolved quickly
Industrial
- Same industry/company
- Power
○ Strength in numbers
 Can be replaced, but makes it difficult to replace
- Tactics
○ U - control physical access through picket line
 Get angry people there to intimidate
○ M - withstand strike
- Strike characteristics
○ Can be violent
○ Can be very long
Collective Bargaining Process Union Certification
- To gain the right to bargain for a group of employees, the union must first demonstrate to OLRB
that the employees want the union as their exclusive bargaining agent
1. Voluntary recognition
- Certification process - through OLRB
□ Organizing/membership drive
□ Certification hearing
Certification Process
Organizing/Membership drive
- Gather proof that the employees want the union
 Signed union card
- Management must not interfere - undue influence - SPIT
 SPY, PROMISE, INTERROGATE, THREATEN = BAD.
Certification Hearing
- "appropriate" bargaining unit
 Desires of U and M
 Desire not to split into too many bargaining units
 Splitting office and production workers
 Removing management from group
 "community of interest" of workers
◊ Nature of work, conditions of employment, and skills

- "appropriate" bargaining unit --
 List of names to management
 Management has 2 days to challenge names
- Determine if union has support of bargaining unit
#signed union cards

# in bargaining unit
< 40% application dismissed

> 40% representation vote
 Within 5 days of mgmt checking list

Lecture 19
Wednesday, March 24, 2010
1:20 PM
- OLRA vs. Canada Labour Code

- Structure of labour movement
○ 3 levels
 Identifying them, relationship between them, and roles
- Union/management power struggle
○ Sources of power
- Craft vs. industrial unions
○ Membership - power source - tactics used - strike characteristics
- Union certification
○ Membership drive - undue influence
○ Certification hearing - bargaining unit, representation vote
Lecture 19
Audio recording started: 1:25 PM Wednesday, March 24, 2010
Contract Negotiations
resistance points
Mgmt.‟s Range of Acceptable Union‟s

Initial Initial
Outcomes
Offer Demands
Mgmt. won? Union won?
• true „winner‟
• greater „power‟
- Standard strategy - 'positional' bargaining

○ Argue position
○ Soft vs. hard
- Distributivevs. Integrative bargaining
○ Distributive
 Limited resources
 Win/lose
○ Integrative
 Cooperative, mutual
 Work together
- Principled negotiations
○ Developed at the Harvard Negotiation Project
○ Criteria for judging negotiation
 Produces a wise agreement
 Efficiently
 And amicably
Improves/doesn't damage relationship

□ Improves/doesn't damage relationship
"Principled Negotiation"
4 basic points
- Separate the people from the problem Amicable
 Attacking the problem together
- Focus on interests, not positions WISE
 Focus on underlying interests
 Interest is why you want what you want
- Generate a variety of options before deciding what to do WISE
- Insist that the result be based on some objective criteria WISE
= EFFICIENT
HIGH
Concern
for My Competing/Forcing Collaborating
Interests Hard Positional Principled/Integrative
WIN/LOSE WIN/WIN
Compromising
Distributive
WIN A LITTLE/LOSE A LITTLE
Accommodating
Avoiding Soft Positional
LOSE/LOSE LOSE/WIN
HIGH
LOW
Concern for Their Interests
Negotiating Strategy
- based on situational considerations
Forcing Accommodating Compromising Avoiding Collaborating
Issue high low medium low high

Importance
Relationship low high medium low high
Importance
Relative Power high low equal-high equal-high low-high
Time med-high med-high low med-high low
Constraints
Stages of Negotiations
- Opening statements
 Reactive vs. proactive approach
- Typically management would present proposal first
- Set agenda and take control
- Not be wise if you don't know what union wants
- Take reactive if you don't know and wait…
- If you're reactive you don't set tone; get sense where other side is at
Explain nature of proposal and necessity for acceptance vs. detailed justification

If you're reactive you don't set tone; get sense where other side is at
 Explain nature of proposal and necessity for acceptance vs. detailed justification
- Middle stage
 Offer counterproposals
 Present detailed information to support or refute proposals - identifies range
 Tradeoffs - concessions
- Do this integrative way
- Final stage
 Weigh costs and gains of proposed settlement relative to costs of no settlement
- Take proposal back to bargaining unit
- Issues
 Form of recognition / union security
- (open shop)
 Not available in Ontario
 Union has no security
 Have to collect their own dues
 No assistance
 No security in terms of management
- Voluntary Check-off of Dues
 Everyone in union gets dues taken off paycheck by management
- Rand Formula /Agency Shop
 Everyone in bargaining unit pays dues get it taken off pay check
- (maintenance of membership)
 Status quo
 Keep membership at certain size, if you join you stay a member, you quit, you
lose job.
Least to most secure - Union Shop
 After a period of time you have to join
 Only if you are permanent you have to join
- Closed shop
 Have to be a union member
 Automatic
 Not legal in USA
 Duration and Renewal
- Contract for at least 1 year (3 year more normal)

- Renegotiate anything
- If both agree
- Seniority - "superseniority"
- Every union vote for someone as a union rep.

- "superseniority" applies to union rep. and treated as if they are there longest.

Lecture 20
1:06 PM
- 10 multiple choice
- Chapter 8,9,11,12,14, and 20 as indicated on course outline - material not covered in class
- 60 marks short answer
○ Finance, operations, HR and labour relations
 Less emphasis on finance
- 30 marks problems
○ 3 questions - cash budget, EBIT analysis, ratios - statements and formula sheet attached
- More detailed breakdown and review Wednesday
- Negotiation strategy
○ Resistance points, range of acceptable outcomes
○ Positional/distributive vs principled/integrative bargaining
 Situational considerations
- Stages in negotiations
- Issues in negotiations
○ Union security
○ Superseniority
Union Security
Clause 1. (same as present agreement) Each month the company will deduce from the pay cheque of
each employee in the bargaining unit, whether a member of the union or not, an amount equivalent
to monthly Union dues as specified in the Union Constitution and will promptly transmit such
deductions to the secretary-treasurer of the union
Clause 2 : The company agrees that all employees who are or who become members of the Union shall
remain dues-paying members as a condition of continuing employment.
Settlement
- if agreement - ratification vote

 If employees want to ratify the contract (permanent)
□ Contract in effect at end of existing or "retroactive"
- If no agreement …
 Conciliation - before strike/lockout
 Mediation
 Arbitration
- Potential costs of a strike
Conciliation Process
Audio recording started: 1:22 PM Monday, March 29, 2010
FINAL EXAM
Conciliation Officer Paid for by government

- 14 days maximum
Report
Conciliation Board Strip both teams down to 1 representative and make suggestion
Strikers ask for these “No Board Report” - strike could be averted and hopefully they settle
- strike cannot be averted - 30 days maximum
Report 2 days for mailing

14 day „cooling off‟ period
2 days to mail report
7 day „cooling off‟ period Government saying you should not strike. 9 days
strike/lockout legal
on 17th day strike/lockout legal
on 10th day
If you are not in legal strike position - wildcat strike.
Meditation

Meditation
- After conciliation process exhausted

- No effect on legal timing of strike
- Voluntary - cost borne equally
- Like conciliation officer or board, can only make suggestions
Arbitration
- Voluntary - critical both sides agree to it.

- Compulsory for essential services ("interests" arbitration) or if gov't intervenes
- Decision final and binding
 Here decision gets made
- 3 types
 Final offer - total package selection
 Final offer - issue by issue selection
□ Compromise
 Conventional arbitration
Voluntary/CompulsoryBinding/Non-BindingEffectonStrike
Conciliation Voluntary Legal strike position
M ediation Voluntary
Arbitration Voluntary
If Government forces it
Binding Ends the strike
For essential
Contract Administration
- Both sides watch that the other lives up to the terms of the agreement
- If not… Grievance Procedure
○ Resolve conflicting interpretations of contract
○ Procedure outlined in contract, but elements same…
 Statute of limitations
 Escalation to higher levels
 Time limits
 Arbitration at end
□ Culminates in "rights" arbitration
Next Class
Final exam review

- Study guide on course website
Remember to do your
- Presentation peer evaluations
- TA evaluations

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Business 121 Lecture Notes

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Lecture 0

Thursday, December 24, 2009

Critical Success Factors

- Achieving financial performance

Lecture Notes Page 1

Lecture Notes Page 2

- The financial position at a given point in time

Ex buy car for 15000 with 5000 down

Lecture Notes Page 3

Lecture Notes Page 4

Key Points from Last Class

- Managerial vs. Financial accounting

A = L + OE / DOUBLE ENTRY ACCOUNTING

- Sell $1mm inventory for $1mm cash

Lecture Notes Page 37

- Capital (fixed) Assets

= historic cost - salvage value

Salvage value = what you expect to sell it for

Purchased machinery for 160000 Jan 1/04

($160000-40000) / 12 years = $10000 per year

Machinery & Equipment $160 000

Lecture Notes Page 38

= Liabilities + Owners' Equity

Lecture Notes Page 39

Key Points from Last Class

= Liabilities + Owners Equity

Current liability Dec 31/08

When is it due? CURRENT LIABILITY

Still owing 160000-64000 = 96000 $

- How much is due within a year?

= $16000 Loan Payable

Example: Interest Payable

Lecture Notes Page 40

- Due > 1 year

Example : long term portion of loan payable on Dec. 31/08

- Long term interest Payable?

Paul Jones, Capital = total of all components

Peter Brown, Capital

1st year's rent pd. Sept. 1/08

Lecture Notes Page 41

Example: Amortization Expense

= $10,000 Amortization Expense

Format - Merchandising company

Cost of Goods Sold

Lecture Notes Page 42

*COMBINED PROBLEM ON EXAM ON MERCHANDISING NOT MANUFACTURING

Lecture Notes Page 43

Key points from Last Class

Lecture Notes Page 44

Lecture Notes Page 45

Lecture Notes Page 51

Lecture Notes Page 52

Lecture Notes Page 53

Lecture Notes Page 54

I/S Operating Expense

Selling & Distri (90%)

Lecture Notes Page 55

Selling and distribution (90%)

Lecture Notes Page 56

B/S Current Asset

Lecture Notes Page 57

Investment 6750 (75%)

Lecture Notes Page 58

- Beginning Inventory $3000