Transcript LDR/520 Organizational Ethics

Week 1
Dr. Jenne Meyer
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Discuss syllabus
Groundrules
Introductions
 Who are you?
 Where do you work?
 Experience with Statistics, Economics, or Finance?
 Expectations of this course?
 Fun fact
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Understand and construct basic financial statements such as
balance sheets, income statements, and cash flow
statements.
Identify, calculate, and interpret key financial ratios.
Examine quantitative tools such as spreadsheets and
probability analysis in making business decisions.
Employ basic algebra to solve problems involving equation
manipulation, ratios, graphing, and exponents.
Analyze quantitative economic, accounting, and financial
problems that arise in activities such as budgeting, economic
break-even analyses, pricing with elastic demand and
assessing capital investments.
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money
finance
inflation
financial market
security
stock
bond
liquidity
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finance
 activities involved with saving, investing, and using
money by individuals, businesses, and governments
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financial system
 financial relationships between people, businesses and
governments
▪ saving
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spending
paying taxes
earning interest
receiving a salary
buying investments
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Your role as a consumer.
 Purchasing
 Saving
 investing
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Businesses sell the goods and services which they produce.
 pay operating expenses
 earn a profit
 borrow money
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The government provides and maintains community
services.
 collects taxes and fees
 borrows money
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Economic Conditions
1. Interest Rates - determined by supply and
demand
2 Consumer prices
▪ Inflation - rise in the general level of prices
▪ consumer price index (cpi)
3 Money supply
▪ the amount of money in circulation in an economy
affects spending and borrowing
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Governments create regulations for fairness
in financial transactions.
Securities and Exchange Commission (SEC)
 promotes clear and full investment information
 protects investors against fraud and deception
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trade surplus
 when a country exports more than it imports
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trade deficit
 when a country imports more than it exports
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foreign exchange rate
 the value of a country’s currency in relation to the
value of the money in another country
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market
 a place where something is bought or sold
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financial market
 a location where buyers and sellers of financial
products meet to conduct business
Securities
 an investment issued by a corporation, government or
other organization representing ownership or debt
Stock
 a security representing ownership in a corporation
Bond
 a debt that is borrowed by a company or a government
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Money markets
 financial markets where short-term debt securities
(less than one year) are bought and sold
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Capital markets
 financial markets where debt and equity securities are
issued for more than a year
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Debt securities
 borrowing by companies or governments
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Equity securities
 represent ownership
 stock
1. Supply and Demand
 when a stock is in demand, the value of the stock increases
 when demand for a stock goes down, the value of the stock decreases
2 Future cash flows
 expected return - amount of future cash flows
 rate of return (yield) - the relationship between the amount received and
the cost of an investment
3 Risk - Changing economic conditions, political uncertainty, and shifting
consumer buying preferences
4 Liquidity - the ease and speed with which an investment can be converted
into cash
5 Interest Rates - the cost of money
The risk return relationship is of primary
importance.
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Higher-risk investments are connected
with higher potential returns.
 Although a person has the opportunity to
make more money, there will often be a loss.
Goals
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Explain the personal financial planning
process.
Describe common personal financial
decisions.
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In what ways are personal and business
financial activities similar?
Describe possible differences between
personal financial planning activities and
financial decision made by businesses?
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Scarcity - requires that you make financial
decisions
Personal financial planning - the process of
managing your money to achieve personal
economic satisfaction
Financial plan - a formal report with a
summary of your current financial situation
along with plans for future financial activities
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Personal Life Situation
 Over the course of a lifetime, spending habits will
change in support of and in reaction to lifestyle
changes.
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Economic Factors
 Personal financial planning will be impacted by
external forces including inflation, interest rates,
and unemployment.
As you implement the financial planning
process, you will make decisions in five areas.
1. Obtaining financial resources
2. Planning the use of those resources
3. Saving and investing decisions
4. Borrowing activities
5. Managing financial risk
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Business Financial Activities
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source of funds
 inflow of cash that
can be used for
paying various
expenses
▪ revenue
▪ investor funds
▪ borrowing
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use of funds
 outflow of money by a
company
 current expenses
▪ involves expenses
consumed within a year
 capital expenditures
(capital projects)
▪ involves expenses
consumed over multiple
years
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Government plays a significant role in every
economic system.
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provide public services
protect people and businesses
regulate financial activities while promoting
competition
provide information and assistance
purchase goods and services
hire public employees
raise revenue
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Federal Government
 oversees the activities that involve two or more
states or other countries
 regulates foreign trade
 regulates interstate commerce
▪ business transactions involving companies in more
than one state
Government Finance
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State Government
 regulates business activities within own boundaries
 intrastate commerce
▪ transactions involving companies that do business in only
one state
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Local Government
 county boards
 city or town councils
 services for an orderly society
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Taxes pay for government services.
Income taxes
 levied on the income of individuals
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Corporate income taxes
 based on business profits
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Property tax
 based on the value of land and buildings
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Sales tax
 a state or local tax on goods or services that is collected
by the seller
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Governments often borrow money by selling
bonds.
 The government pays interest on the bonds.
 U.S. savings bonds
 Treasury bills
 Treasury notes
 Treasury bonds
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Why must personal financial planning begin at an
early age?
What is a major financial downfall for many
individuals and families?
How can future goals motivate people to prepare
financial plans?
Why should a speech about “Personal Finance”
include examples that are relevant for the
audience?
Research is…
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systematic, controlled, empirical, and critical
investigation of hypothetical propositions about the
presumed relations among phenomenon. (University of
Phoenix (Ed.). (2001). Statistics and research methods for
managerial decisions [University of Phoenix Custom
Edition e-text]. Cincinnati, OH).
systematic, controlled, empirical, and critical
investigation of phenomenon of interest to decision
makers. (book definition).
systematic process of collecting and analyzing data or
information in order to increase our understanding of the
phenomena about which we are concerned or interested.
(Leedy and Ormrod, 2001)
Research is…
a systematic, controlled, empirical, and
critical investigation of hypothetical
propositions about presumed relations among
phenomenon.
 What happened
 How it happened
 Why it happened
(give meaning)
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Business research is the primary means of
gathering data for decision making
Understanding of the research process can
lead to better decisions
Research helps make better decisions
Understanding the process can help you ask
the right questions
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Identify and effectively solve minor problems in the work setting.
Know how to discriminate good from bad research.
Appreciate and be constantly aware of the multiple influences and
multiple effects of factors impinging on a situation.
Take calculated risks in decision making, knowing full well the
probabilities associated with the different possible outcomes.
Prevent possible vested interests from exercising their influence in
a situation.
Relate to hired researchers and consultants more effectively.
Combine experience with scientific knowledge while making
decisions.
Research (traditional research) vary in complexity and
duration, however, research typically has 8 distinct
characteristics…
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originates with a question or problem
requires a clear articulation of a goal
follows a specific plan of procedure
divides the main problem into subproblems
guided by the specific research problem, question or hypothesis
accepts certain critical assumptions
requires the collection and interpretation of data in an attempt
to resolve the problem
 by nature cyclical or helical
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Should an organization create research
testing for all problems confronting the
business? Explain.
When should research be utilized?
Can decision making be accomplished by
using only descriptive research? Why or why
not?
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Identifying a problem
Proposing or establishing a hypothesis
Gathering relevant data
Analyzing and interpreting the data to
confirm or deny the hypothesis
5. Scientific method is a systematic process of
inquiry for solving decision-making
problems
In a nutshell, the research process..
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Define the Issue
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Design the Study
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Collect the Data
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Compile the Stats
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Interpret the Results
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Decide on a Course of Action
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Act
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Assess the Effects
Good Research generates dependable data, being driven by
practices that are conducted professionally and that can be
used reliably for managerial decision making.
Characteristically:
 Purpose clearly defined (define the scope, limitations, and precise
meanings)
 Research process detailed
 Research design thoroughly planned ( to avoid bias)
 High ethical standards applied
 Limitations frankly revealed
 Adequate analysis for decision maker’s needs
 Findings presented unambiguously
 Conclusions justified
 Researcher’s experience reflected
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Is an activity- and time-based plan
Is always based on the research question
Guides the selection of sources and types of
information
Is a framework for specifying the relationship
among the study’s variables
Outlines procedures for every research
activity
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“any situation where a gap exists between
the actual and the desired ideal states”
“a clear, precise, and succinct statement of
the question or issue that is to be
investigated with the goal of finding an
answer or solution”
Identify the symptoms from the root problem
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A variable is anything that can take on differing or
varying values. The values can differ at various times for
the same object or person, or at the same time for
different objects or persons. Examples of variables are
production units, absenteeism, and motivation.
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Key learnings?
Next weeks assignments.