Comprehensive Guide to Business Management & Accounting
Business Management
Inventory Management
Stock Types
- Raw Materials: Items requiring processing to become finished goods.
- Semi-finished Goods: Manufactured products requiring further processing.
- Finished Goods: Products ready for sale without further transformation.
Stockout
Stockout: The cost incurred by a company when inventory runs out.
Inventory Management Techniques
- Inventory Control: Requires monitoring minimum, maximum, and safety stock levels.
- Reorder Point: The inventory level at which new orders must be placed.
- Wilson Model: Determines the optimal order quantity to minimize warehousing costs.
- ABC Analysis: Classifies inventory based on relative importance:
- A Items: High investment value, small proportion of inventory.
- B Items: Moderate investment value, moderate proportion of inventory.
- C Items: Low investment value, large proportion of inventory.
Accounting
Fundamentals of Accounting
Accounting: The science of reflecting a company’s assets, determining its results, and providing necessary information.
Company Equity: The group of properties and rights owned by a company, along with its obligations.
Balance Sheet: An accounting document reflecting assets (what a company owns) and liabilities (what a company owes).
General Accounting Plan: Effective January 2008, requires companies to maintain accounts compliant with the law.
Accounting Principles
- Principle of Registration: Accounting events are recorded when they occur.
- Principle of Prudence: Only actual benefits and losses are recorded, not anticipated ones.
- Principle of Acquisition: Goods and rights are recognized at their acquisition cost.
- Accrual Principle: Revenues and expenses are accounted for when earned or incurred.
Chart of Accounts
Chart of Accounts: Contains the accounts to be used, coded, and organized into groups (e.g., Assets, Liabilities, Fixed Assets).
Annual Accounts
Annual Accounts: Include the balance sheet, profit and loss statement, and notes to the accounts.
Valuation Rules
Valuation Rules: Guidelines for valuing company assets, including depreciation.
Depreciation: The decrease in the value of an asset over time.
Account Management
Asset Account: Reflects increases and decreases in assets.
Liability Account: Reflects increases and decreases in liabilities.
Accounting Books
- Journal: Records daily accounting entries.
- Ledger: Collects journal entries for each account.
- Inventory Book: Records stock movements.
- Annual Accounts Book: Contains the company’s balance sheet and profit and loss statement.
Financial Ratios
Ratio: A relationship between two magnitudes.
Working Capital: The difference between current assets and current liabilities (should be positive).
Debt Ratio: The percentage of a company’s debt to its total liabilities.
Solvency: A company’s ability to meet its long-term obligations.
Liquidity: A company’s ability to meet its short-term obligations without selling assets.
Total Solvency: A company’s ability to meet all its obligations.
Treasury Plan
Treasury Plan: A projection of monthly cash inflows and outflows.
Production
Production: The process of creating products from resources to satisfy needs.
Production Yield: The ratio of output to input.
Production Costs
- Fixed Costs: Costs that are independent of production level.
- Variable Costs: Costs that are proportional to production level.
- Average Costs: The relationship between total cost and quantity produced.
- Unit Variable Cost: Total variable cost divided by quantity produced.
Break-Even Point
Break-Even Point: The production level at which a company starts to make a profit.
Investment
Investment: An outlay of resources with the expectation of future returns.
Investment Appraisal Methods
- Payback Method: Calculates the time it takes to recover the initial investment.
- Net Present Value (NPV): Considers the time value of money.
- Internal Rate of Return (IRR): Considers the time value of money.
Business Entities
Commercial Company: A legal entity formed for business purposes.
Tax System
Tax System: The set of measures used to collect taxes to fund public spending.
Types of Taxes
- Fees: Charges for specific services (e.g., garbage collection).
- Special Contributions: Taxes levied on specific benefits.
- Direct Taxes: Taxes levied on income and wealth (e.g., income tax).
- Indirect Taxes: Taxes levied on consumption (e.g., VAT).
Elements of a Tax
- Taxable Event: The economic event that triggers the tax liability.
- Tax Base: The economic value of the taxable event.
- Taxable Amount: The tax base minus deductions.
- Tax Rate: The percentage applied to the taxable amount.
Value Added Tax (VAT)
VAT: An indirect tax levied on the consumption of goods and services.
Income Tax
Income Tax: A direct tax levied on income from labor and capital.
Corporate Income Tax
Corporate Income Tax: A direct tax levied on the profits of corporations.
Marketing
Marketing Cycle
Marketing: The process of developing a business strategy to place products on the market.
Product Life Cycle
- Introduction: The product is launched, but sales are low and competition is limited.
- Growth: Sales start to grow rapidly and competition increases.
- Maturity: Sales stabilize and competition is intense.
- Decline: Sales decline and the product may be withdrawn from the market.
Pricing Strategies
Prestige Pricing: Setting a high price to create a perception of high quality.