Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

AFM 132 > Unit 2: Overview of Business > Flashcards

Unit 2: Overview of Business Flashcards

- Value the importance of having a strong understanding of business for senior leaders, including financial leaders - Summarize the history of business in Canada and the major forms of business ownership - Give examples of how small business can fail - Describe the impact of globalization on various stakeholders - Explain why countries trade and provide examples of supports and barriers to trade - Discuss Canada's experience in global markets through exports and imports

1
Q

where is more emphasis placed on for financial leaders today

A

more emphasis on how well they understand the business vs number crunching & spreadsheets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

how will having a better understanding of the business help accounting and finance professionals

A

help them:
- Understand the changes transforming their industry
- Anticipate future developments
- Capitalize on new opportunities
- make decisions to adapt to the changing business environment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

how has the role of CFOs evolved

A
  • responsible for more than financial reporting, control and compliance
  • additional responsibilities: company operations, human resources, information technology, etc.
  • expected to help the entire organization focus on activities that align with the company’s strategy to drive value
  • expected to be catalysts for change with a focus on driving innovation and growth
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is business

A

An activity that you intend to carry on for profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what are key skills for CFOs in the workplace

A
  • Digital Literacy: Proficiency in using digital tools and technology is vital for staying competitive
  • Entrepreneurial Mindset: Having a mindset geared towards innovation, risk-taking, and problem-solving is essential in dynamic business environments
  • Social Intelligence: The ability to navigate and collaborate effectively with diverse teams and stakeholders is crucial for successful leadership
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

why was it difficult for Canada to conduct business and trade in the beginning

A

due to:
- The large land mass of the country; made it difficult to transport goods across the country
- Low and spread out population
- Lack of infrastructure connecting the country from coast to coast

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what was trade like in the beginning

A
  • many people settled along the boarder
  • it was easier to trade to the US than east and west within the country
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

how did John A. Macdonald promote trade within the country

A

created a policy that placed high tariffs on imports from the US to protect and support Canadian business activities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what was done to improve infrastructure in canada

A

railway was built

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what kind of economy does Canada have

A

mixed economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is a mixed economy

A

An economic system where some allocation of resources are made by the market, and some are made by the various levels of government that play an active role in the economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what are crown corporations

A

Companies owned by the federal or provincial government (also referred to as publicly owned)
ex. Canada Post, LCBO

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what was the original purpose of crown corporations

A

to provide services that weren’t offered or available

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is privatization

A

The sale of a crown (publicly-owned) corporation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

when and how was the role of government reduced in the economy

A

began in the 90s, was through privatization

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what are the benefits of privatization

A
  • a source of cash for the government (to reduce debt and fund other activities)
  • increases competition
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

why is increase in competition good

A

competition drives innovation
innovation improves efficiencies
Being more efficient reduces costs for consumers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what is a small business

A

an organization that:
- They are independently owned/operated
- Not dominant in its field
- Meets certain standards of size (usually 1-99 employees)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

why are small businesses important to the Canadian economy

A
  • 98% of employer businesses are small businesses
  • 70% of the workforce works for small businesses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

what are the different forms of business ownership

A
  • sole proprietorship
  • partnership
  • corporation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what is a sole proprietorship

A
  • A business owned and operated by one person
  • exists once you start selling a product or service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what are the advantages to have a sole proprietorship

A
  • Easy to set up; only need to complete a business registration
  • Lower start-up costs
  • Freedom/control for owners; keep all profits, all decisions are made by the owners
  • Less regulatory requirements; income & expenses is reported on personal tax return
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what are disadvantages to owning a sole proprietorship

A
  • Unlimited liability
  • Business continuity; more difficult to take breaks from your business as the owner
  • Difficulty raising funds; need to put personal assets as collateral for loans
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what is a partnership

A
  • A business created with two or more people who can share knowledge and resources in launching the business
  • have a partership agreement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what are advantages to owning a partnership

A
  • Easy to form
  • Shared start-up costs (and resources)
  • Shared management & decision-making
  • Less regulatory requirements
  • Income & expenses also flow through personal tax returns
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what are disadvantages to owning a partnership

A
  • Unlimited liability
  • Potential conflict between partners
  • Business continuity (definite life); similar to sole proprietorship
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what is a corporation

A
  • An incorporated business that’s considered a separate legal entity apart from its owners - Shareholders of the corporation are not personally liable for debts or acts of the corporation
  • ownership of the company is shared through capital
  • shareholders can have different positions and involvements
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

what are the advantages of a corporation

A
  • Limited liability; personal assets are separate from company’s assets
  • Business continuity (indefinite life); business can continue to run without the original owner; ownership can be transferred
  • Has the advantage of greater access to financing
  • Possible tax advantages
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

what are the disadvantages of a corporation

A
  • Higher start-up costs (to incorporate); needs a lawyer to help with incorporation and bylaws
  • Greater regulatory requirements (complexity in managing records); filing separate tax returns, regular reports to the government, and more
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

about how many businesses survive past their 5th year of operations

A

50%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

what are possibilities of “exits” from businesses

A
  • failure
  • retirement
  • transfer of ownership
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

which businesses are more likely to be successful

A

businesses that are harder to enter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

why is businesses with easier entries more likely to fail

A
  • more competition
  • larger supply (of the good/service) in the marketplace
  • lower prices
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

why is businesses more likely to succeed if it is harder to enter

A
  • less competition
  • lower supply
  • can charge higher prices
  • usually require expertise/significant investments (professional training like dental practices)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

what is the main cause of small business failures

A

poor management and execution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

what are three main areas that cause small businesses to fail

A
  • money
  • decisions
  • lack of knowledge
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

how could money cause failure in small businesses

A
  • if there is not enough
  • if there is a lack of planning how it is used
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

how could decisions cause failure in small businesses

A
  • if goods/services are over or under priced (underpriced - is it enough to keep the business running? may be associated with low quality)
  • lack of record keeping, which impacts decision making
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

how could lack of knowledge cause failure in small businesses

A

not understanding the business; the industry/market, business cycles, costs of doing business, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

what are examples of large businesses that have also failed

A

sears & target canada

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

why did sears fail

A
  • was a former retail giant
  • started with catalogue purchases (buying things through mail + phone) with delivery to home
  • then shifted to selling in retail stores
  • which caused them to fail
  • they only had infrastructure to support online sales
  • did not have the proper distribution/delivery network
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

why did Target fail in Canada

A

from a consumer perspective
- limited selection
- lack of deals
- high expectations not met
- located stores in areas where it didnt set them up for success
from a business perspective
- underestimated the complexity of the canadian market & geography
- led to higher prices and inventory management issues
- they had more competition than they thought (ex. walmart)
- rushed into things

41
Q

what are the 3 key stakeholders that have perspectives in globalization

A
  • consumer
  • employee
  • owner of a business
42
Q

what is the perspective of globalization for a consumer

A
  • get what we need/want when we want
  • better quality of products
  • ex. getting oranges in winter
43
Q

what is the perspective of globalization for an employee

A
  • global connections & employment opportunities (learning business etiquette around the world)
  • more options for raw materials, products, etc
44
Q

what percent of small businesses make up total Canadian exporters

A

90%

44
Q

what is the perspective of globalization for an owner of a business

A
  • access to global customers & suppliers around the world
  • outsourcing to improve efficiency
45
Q

what does it mean when you are participating in a global market

A

can have international consumers & suppliers while operating domestically

46
Q

what can small businesses do in the global market

A

small businesses can do more in the global market to grow and succeed with help from the government agencies

47
Q

what issues/trends will businesses have to manage post-pandemic

A
  • “slowbalization”; when global disruptions occur
  • businesses need to rethink long & complex supply chains
  • to manage supply chain risk to help get ahead of future global challenges (also consider sustainability)
    ex. having operations closer to you to speed up the process, keep up with trends, be more sustainable (less pollution from shorter transportation)
48
Q

why do we trade

A

due to different resources, environmental conditions, populations, knowledge, and expertise

49
Q

what is importing

A

the purchase of goods and services from another country

50
Q

why do we import

A
  • when goods/services can’t be produced (for certain reasons: seasons, efficiency)
  • Increases the quality of life for consumers, satisfying our wants and needs, and enriching our culture
51
Q

what is exporting

A

The sale of goods and services to another country

52
Q

why do we export

A

we have excess of the goods/services that are being sold (ex. natural resources)

53
Q

what is the balance of trade

A

The relationship between importing and exporting

54
Q

what does it mean to have a favourable balance of trade

A
  • trade surplus
  • when exports are greater than imports
55
Q

what does it mean to have an unfavourable balance of trade

A
  • trade deficit
  • when imports are greater than exports
56
Q

what is free trade

A
  • the ideal
  • When you can trade goods/services that are mutually beneficial for both countries without any political or economic obstruction
57
Q

why is free trade hard to have

A
  • every country wants to maximize their revenues and protect their workers
  • Those that have more access to resources have higher bargaining power
58
Q

what is the theory of comparative advantage

A
  • Producing what we can the most efficiently and exporting
  • And purchasing what we can’t (importing)
  • Works best in a free market economy
58
Q

what is a free market economy

A

where the market determines what goods and services to produce and who gets them without government intervention

59
Q

does the free market economy theory work?

A
  • no
  • governments impose trade barriers to protect domestic businesses & industries
  • these additional costs on imports inhibit free trade & the flow of goods
60
Q

what are some of canada’s current trade agreements

A
  • USMCA
  • CETA
61
Q

what are the barriers to trade

A
  • trade protectionism
  • tariffs
  • import quotas
  • embargoes
  • non-tariff barriers
62
Q

what is trade protectionism

A
  • Limits the imports of goods/services through government regulations
  • Allows domestic producers to survive & grow
  • Inhibits free trade = reducing market competitiveness = reduction in innovation
63
Q

what are tariffs

A
  • Taxes on imports
  • Ex. tax of 300% on import of dairy products from another country
  • Makes imported goods more expensive
  • Makes domestic products look cheaper
64
Q

what is an import quota

A
  • Limit on the quantity that is imported
  • Ex. limit on how much softwood can be imported
  • Ensures domestic production can take place and be competitive
  • While allowing imports to happen, meeting the needs of people, and providing more options
65
Q

what is an embargo

A
  • Ban on import or export of specific products
  • Ex. Ban on sale of seal products (because the practice can be considered inhumane)
  • Can also be stopping trade with a particular country for political reasons
  • Ex. stopping trade with North Korea in hopes they would abandon their weapons and mass destruction programs
66
Q

what are non-tariff barriers

A
  • Regulations and restrictive standards that hinder trade
  • Ex. requirement to be ISO certified or specific requirements in food labels
  • Makes it more difficult for foreign business wanting to enter the Canadian marketplace
  • Would need to incur additional costs to meet requirements
67
Q

what is the purpose of barriers to trade

A

To protect domestic workers and key domestic industries

68
Q

what are the intentions of a trade war

A
  • when a country raises barriers to trade (like tariffs) as a form of trade protectionism in retaliation of another country
  • Restrict imports in attempt to boost and protect domestic business (protectionism measures)
69
Q

what are the impacts of a trade war

A
  • Reduce competition
  • Increase prices
  • reduction in demand
  • reduction in production
  • innovation drops
70
Q

who can be impacted in a trade war

A
  • Local manufactures
  • factory workers
  • farmers
  • consumers
71
Q

what are the impacts of going international

A
  • there are costs & risks
  • also rewards (ex. expanding consumer base, additional profit potential)
72
Q

how did Canada Goose succeed in the global market

A
  • Started as a small family company
  • Decided to have a presence globally
  • While keeping their values and what they want to promote
  • Making sure it’s made in Canada (marketing the Canadian identity)
  • Now it’s a high-end outerwear company
73
Q

how do canadian companies export

A
  • sell directly to foreign customers
  • Sell through intermediary (foreign distributor)
  • small companies & multinational corporations can export
74
Q

how can small businesses have an advantage in global markets

A
  • can react faster to changes in the market and meet the new needs of consumers (don’t need to inform multiple operating factories)
  • can also provide more tailored and customized attention
75
Q

what are multinational corporations

A
  • Manufacture and market their products in many different countries where they also have a physical presence
  • ex. lululemon
76
Q

how can canadian companies import

A
  • directly purchase from foreign suppliers
  • Indirectly through intermediaries (foreign distributors)
77
Q

what companies in canada import

A
  • Many companies in Canada import materials they need to produce their goods/services (ex. Equipment and machinery like smartphones, computers, and construction equipment)
  • Most are manufactured in countries around the world and imported to Canada for use
  • Imports are monitored by the Canada Border Services Agency (CBSA) to keep the country and citizens safe
78
Q

what are the strategies to enter global markets (from least to most)

A
  • licensing
  • exporting
  • franchising
  • contract manufacturing
  • international joint ventures & strategic alliances
  • foreign direct investment
    all have varying levels of commitment, control, risk & profit potential
79
Q

what is licensing

A

When the domestic company (licensor) allows a foreign company (licensee) to make its products in exchange for a fee (usually royalty; % of profits)
Ex. Disney licenses with companies to make products related to their movies or shows

80
Q

what are the benefits to licensing

A
  • Licensors have the ability to generate additional revenues
  • Foreign licensee is in charge of all costs to produce or promote their product, which gives the licensors product exposure with little additional investment
81
Q

what are some problems with licensing

A
  • Granting licensing rights for a product for an extended period
  • Only get a portion of profits (royalty fees) if the product experiences remarkable growth in the foreign market
  • Risk of loosing trade secrets if the foreign licensee copies them and starts selling a competing product
  • Difficult to control quality of product since licensor is not directly involved in the business (can tarnish the licensor’s reputation)
82
Q

what is exporting (in the context of entering global markets)

A
  • Selling products to another country
  • Involves more coordination (shipping, duties (taxes), other regulations)
83
Q

what is a benefit to exporting

A

Market potential is huge without high costs of obtaining presence in the foreign country

84
Q

what is a challenge to exporting

A

Challenging to identify foreign customers when there is no home base in foreign countries (especially when they prefer local suppliers)

84
Q

What is franchising

A
  • Someone with a business concept (franchisor) sells the rights to use the business to make and sell its product/service to another party (franchisee)
  • Offers more control than licensing
  • Have the ability to dictate certain standards and processes as part of the agreement
  • Can earn more revenue as a franchisor through franchise fees, start-up fees, and other consulting resources provided
  • Franchisors have to be willing to adapt their business to be successful in the countries franchises are operating in
85
Q

what is contract manufacturing

A
  • also known as outsourcing
  • Finding a foreign manufacture to make your product
  • Contract manufacturers don’t have the right to sell your product (different from licensing)
  • They are suppliers, you retain ownership of products made
86
Q

what is a benefit of contract manufacturing

A
  • Can allow you to test a new market in a cost-effective way (no need to invest in a new facility to have your products made)
  • If successful, you’ve established a market for your product without incurring significant capital costs to set up production facilities
  • If not, the contract relationship can just end
87
Q

what are some other things to consider with outsourcing

A

Quality control
Public image
Expanded capabilities and access to talent
Employment standards

88
Q

what business activities should never be outsourced, why?

A
  • Core human resource functions; employees are the key to success, shouldn’t have control over recruiting or managing employees going external
  • Core accounting functions; To ensure proper financial management and decision making, maintain control and understanding over your core accounting responsibilities yourself
  • Outsourcing typically means giving up some control over things like quality, so you really have to assess and trust the companies you contract with
  • You might not want to trust others to handle key processes and functions.
89
Q

what is a joint venture

A

When two or more companies form a partnership for a major project (all about sharing)

90
Q

what are benefits to a joint venture

A
  • Shared resources and risks (helps save on costs)
  • Shared expertise (foreign company can help you better understand their local market)
  • Access markets where foreign companies can’t operate in unless goods are locally produced
91
Q

what are some drawbacks to joint ventures

A
  • Becoming too large to function efficiently
  • Trade secrets being exploited by other party
92
Q

what is a strategic alliance

A
  • Similar to joint venture, but they’re not sharing
  • Two or more companies for a long-term partnership to support each other in building competitive market advantages
93
Q

what is a foreign direct investment (FDI)

A
  • Most risky, but most potentially profitable way to enter the global market
  • Buying a property (or business) and operate in a foreign country
  • An FDI usually becomes a foreign subsidiary (they operate like their parent company)
  • Large investment
  • Need to follow the legal and regulatory requirements of both the parent country and foreign subsidiary (home & host countries)
  • If relations with the host country go south, or there’s political unrest, your company’s assets can be taken by the foreign government (expropriation)
    Ex. Japanese automaker, Toyota, and their Cambridge, ON, manufacturing facility
94
Q

what is a foreign subsidiary

A

A company that is owned by a parent company located in another country

95
Q

why would local governments encourage and seek to attract foreign investment

A
  • It can bring jobs to the local community.
  • It brings additional revenue to the local community (e.g., use of local services, local taxes, etc.).
  • It can bring new knowledge and technology to the local community.
96
Q

why would critics argue against foreign investment in canada

A
  • argue that the profit generated by these entities will eventually be returned to the home country and not reinvested in the Canadian economy
  • jobs in these organizations are not always ones of innovation like research and development (R&D) (those are usually housed in the home country)
  • Profit maximization is a priority of all businesses and FDIs are not necessarily incentivized to make decisions that would be in the best interest of Canada or the local community in which they operate
97
Q

what are future opportunities for canada

A
  • look into entering emerging markets that have large populations & a growing middle class
  • currently make up 40% of worlds population in gdp
  • Biggest emerging markets - economic growth potential
  • Aim is to get better - more industrialized, support health, social spending, conserving environment
  • Canada also needs to work on these things; forming alliances with other countries
98
Q

what are risks for canada in the global market

A
  • Countries are so different - differing values, infrastructure, business practices, etc
  • Not on an equal level playing field - different positions in their journey politically, economically, and socially
  • Varying levels of risk to consider when doing business
  • Trade protectionism between the countries

AFM 132 (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions