Business (A) Flashcards
(10 cards)
PESTLE analysis
A structured tool that can be used to
learn about the political, economic, social,
technological, legal, and environmental trends that
can influence or impact the goals, processes, or
employees of the organization
These trends are often indicators of process
improvement needs or some other type of impending
change and can help an organization prepare to
embrace anticipated opportunities or mitigate
potential risks.
Cost-benefit analysis
Aims to detail the projected labor,
equipment, material, time, and other
costs of the initiative in juxtaposition to the
expected positive outcome
A cost-benefit analysis that shows that long term
benefits will outweigh upfront and sustaining
costs is a persuasive tool to use when proposing
a new initiative or desiring stakeholder buy-in.
Balance sheet
A snapshot of the companies’ assets, liabilities,
and owners’/stockholders’ equity at a specific
moment in time
Human Resources should pay particular attention
to wages payable, works in progress, and
capitalized expenses.
Wages payable, works in progress, and capitalized expense
• Wages payable: an account liability that
shows employee salaries to be paid and
can be used to influence staffing decisions
• Works in progress: labor hours spent
transforming raw materials to a finished
product that has a greater value than its
individual parts
• Capitalized expense: can include labor,
involves specific situations that depreciate over
a period greater than one year
Budget
TADA
During its creation, Human Resources
should be involved in making decisions.
Staffing is often the largest part of any business
budget. HR should ensure that the business is
staffed adequately based on strategic objectives.
When looking at labor costs, there should be
allocations for salary increases to ensure that
top talent is attracted to and retained by the
organization.
Cash flow statements
Important for a business to recognize when
they receive money from sales of goods
This is different from the sales numbers, since some
sales are paid over a length of time rather than
upfront. How money enters the business can affect
immediate hiring and staffing decisions as well as how
a company manages growth. HR professionals should
be aware of salary expenses proportionate to business
income to ensure correct staffing levels.
Profit and loss statements
Show the company’s revenue minus expenses
to reveal profit over a period of time
This is helpful when determining the cost of goods
sold and net income. The largest expense is typically
labor costs, which is critical for HR to be aware of.
Since profit and loss statements are a required report
for many businesses, they are a good way to compare
labor costs between one business and another.
Value added
Consists of the enhancements a company
makes to a product so that it has more value
than the cost of production
This could be the value of the brand name or
logo on the product if it increases the customer’s
perceived value. It could also be lifetime
customer support services for the product.
Return on Investment (ROI)
A formula consisting of the initial value of
investment minus the final value investment,
then dividing that by the cost of investment and
multiplying the result by 100
This is a useful metric that gives a snapshot of
a potential investment’s return and allows easy
comparison of multiple investments. While helpful, it
doesn’t take the rate of return into account, which
should also be considered for any investment.
Expected utility
When a company, individual, or investor
group is trying to find the likeliest outcome to a
variety of unknown variables
They take a weighted average of outcomes based
on their likelihood. Expected utility is a useful
metric that can consider the risk aversion of the
decision maker.
