Business Studies

Annotations:

• A sales contract is a legal binding agreement between a buyer and a seller to exchange goods or services for money

1. Legal components of invoices

   Annotations:

   • under 150€: name & address of the seller; issuing date of invoice; delivery date; quantity/discription; total amount incl. VAT; VAT rate above 150€: buyer; seller; running invoice number; date of delivery; date of invoice; VAT rate; quality; quantity; VAT without announce; total invoice; VAT registration number
   1. Price
      1. fixed price
      2. non-price binding statements
         1. Purchasing on the basis of a certain qualitiy
         2. Cost fluctuation clause
         3. Index clause
      3. Price reductions/deductions
         1. Discounts
            1. Quantity discount
            2. Cumulative quantit discount
            3. Trade discount
         2. Cash discount
            1. Allowance for interest
            2. Risk premium
            3. Allowance for administration
2. Terms of delivery
   1. INCOTERMS
   2. shipping documents
3. Terms/Forms of payment
   1. Cash in advance; cash with order
   2. Down payment

      Annotations:

      • A percentage of the whole sum is paid in advance the rest is paid when it's due
   3. Earnest money

      Annotations:

      • A percentage of the whole sum is paid in advance the rest is paid when it's due. However when the seller cannot fulfill the contract he has to return the double of the amount paid in advance
   4. Documentary credits

      Annotations:

      • Differences D/C and L/C D/C: 1.Step->exporter->shipps risks: Exp-> non-acceptance imp: faulty goods Adv: imp: payment is linked to shipment role of banksf: tranfer documents L/C 1.Step. buyer-> goes to bank and opens a L/C in favour of the seller Adv: exp: no risk of non-acceptance and no other risks imp: no risks; payment is linked to shipment and other contractual requirements (e.g. expert certificate, certificate of origin) he can obtain longer credit terms Exp: sell L/C like a B/->means of finance role of banks: check the documents
      1. Letter of credit

         Annotations:

         • Are the most secure method of payment. 1-2: After agreeing on a sales contract, the importer asks his bank to open a credit in the exporter's favour. 3-4: the importer's bank then contacts the exporter's bank, which sends the L/C to the exporter. The L/C lists the export documents which the seller must give to his bank for inspection before they pay him. 5-6: the documents usually show that the goods have been dispatched and include the invoice, bill of lading and certificate of insurance. Thus the goods have to be named, insured and on board ship before the exporter can receive payment. 7-11: then the documents are forwarded to the issuing bank which reimburses the exporter's bank, debits the importer and releases the documents to him 12: The importer can then use the documents to receive delivery of the goods
      2. Documentary Collections
         1. Documents against Acceptance
         2. Documents against payment
   5. Open account

      Annotations:

      • Based on mutual trust. The buyer pays the bills after a period of time; e.g. quaterly, monthly
   6. Promp payment
   7. Cash on delivery
   8. Credit sale
   9. Direct debit

      Annotations:

      • Used to pay regularly a different amount to the same receiver. Telefon costs
   10. Standing order

       Annotations:

       • Used to pay the same amount regularly to the same receiver
   11. B/E
   12. Credit card
4. packaging

   Annotations:

   • Gross weight Net weight Tare
5. means of transport
6. consequences of late delivery or late payment
7. Insurance
8. Guarantee/warenty
   1. Periods of liability

      Annotations:

      • 1 year: second hand 2 years: current assets 3 years: fixed assets 30 years: fraudulently concealed defects
   2. Shifting the birdon of proof

      Annotations:

      • The birdon of proof of demages accuring within the first 6 months does not remain with the buyer. Rather the seller must proof that he sold the goods according to the s.c. After this period (6 months - 2 years) the buyer must proof that the defect was already there when the goods wre delivered. Under commercial law the buyer has to inspect the goods as soon as the proper run of the biz. allows it. And he must inform the seller within an acceptable period of the detected defect
9. How to conclude a s.c.?
   1. in writing
   2. orally
   3. inplied by non-verbal actions
   4. in silence
   5. Steps to a sales contract
      1. Who made the first step?

         Annotations:

         • unsolicited or demanded offer
      2. Binding or non-binding offer

         Annotations:

         • Acknowledgement of an order is not necessary but if it was: a non-bindig offer the order differs considerably from the offer the order was palced verbally it was an online order
         • legally binding: from one specified person to another the contents are clearly definded the person who makes the offer is willing to sell it is not declared as a non binding offer
         • not binding if it says Prices are subject to change without notice Only while stocks last Offer is valid as long as stocks last This offer is not binding
   6. Conditions to a s.c
10. legal basis
    1. ABGB
    2. UGB
    3. KSchG
    4. PHG
11. Irregulaties when fulfilling a s.c.

    Annotations:

    • Defect goods = not according to the contract
    1. Seller
       1. Delivery of defect goods
       2. incorrect invoice
       3. delay in delivery
       4. non-delivery
    2. Buyer
       1. delay in accepting the goods
       2. delay in demand of delivery
       3. delay in specification

          Annotations:

          • The buyer has to be reminded. 1)the seller can: decide on the quality of the delivered goods himselfe BUT he has to inform the buyer about his plans and allow him an additional priod to accept this or to specify the quantity required 2)allow an additional period; cancel the contract and claim compensation for non-fulfillemnt of the contract
       4. delay of payment
       5. non-payment
    3. System of remedies
       1. Primery remedies

          Annotations:

          • repair or replacement failing this secondary remedies
       2. Secundary remedies

          Annotations:

          • reduction in price or if major foult cancellation of the s.c.
       3. Complaint
12. Goods
    1. non-fungible goods

       Annotations:

       • Every piece has different characteristics e.g. Unikate
    2. fungible goods
13. Special sales
    1. Sale by sample
    2. Sale on approoval
    3. Trial Purchase
    4. Lump-sum purchase
    5. Purchase on specifications
    6. Delivery by instalments / multiple delivery
    7. Purchase with delivery on demand
14. Business objectives
    1. SMART
15. Other contract agreements
    1. General agreements
    2. Reservation of ownership
    3. Penalty
    4. Cancellation fee
    5. Right to exchange goods

1. Sole trader

   Annotations:

   • owned by one person not neccesarily registered in the company register Advantages: -capital -  only a small amount is needed to set up a biz. - control and decision making -profits -privacy: business affaires can be kept private aport form the need to make a yearly tax decleration Disadvantages: -unlimited liability -raisning capital: might be difficult -lack of continuity: death -no divison of labour: he has to run th biz.
2. Co-operatives (Gesellenschaft)
3. Partnerships
   1. Corporations

      Annotations:

      • Advantages: -Shareholders have ltd. company -seperate legal entity (company concludes contracts) -it is easier to raise capital (than in a partnership -continuity of existence (shareholders can sell thier shares but the company contienues to operate -possibility to employ shareholders Disadvantages: -relatively high costs of formation (compared to partnerships) -low creditwothiness (banks often require a personel guarentee from shareholders) -taxes: the corporation  pay corporation tax (KöSt 25%) and the shareholders pay capital gain tax (KESt 25%) on their share of the profit
      1. Public limited company

         Annotations:

         • is owned by shareholders and has to be registered in the register of companies it has it own legal entity it is split into parts --> shares All shares --> sharecapital (Grundkapital) 70.000€ minimum face value per share when floating a company is 1€ Not allowed to issue shares below their par value. Above is allowed. The difference is called agio. It is used to cover cots of setting up and any remaining amount is transfered on the account legal reservs until this account equals 10% of the share capital
         1. Bodies of a public ltd. company
            1. AGM

               Annotations:

               • at least once a year all shareholders are invited approve of the financial statements decide distribution of profits decide the discharge of the managers, from legal responsibility decide confering procuration
            2. Supervisory Board

               Annotations:

               • mandatory only for "big" companies: -sharecapital over 70.000 -more than 50 shareholders -more than 300 employees Functios: -supervise the managing directors -approve the annual financial statements before they are released to the AGM -they savegard the shareholders interset
            3. Executive Management Board

               Annotations:

               • =Vorstand is repsonsible for the management and the representation of the company
               1. Powers of attorney
      2. Private limited company

         Annotations:

         • Can be set up for any purpose apart from insurance  company Minimum share capital is 35.000 the half of it has to be paid in cash before registration. Minimum share value per share: 70€ Shares are called business share. They cannot be traded publicly on the stock exchange. If an investor wants to sell his/her share all other investors have to agree. It must keep a register of shareholders and must be registered in the company register.
      3. Rights of a shareholder

         Annotations:

         • 1: right to subscribe new share in relation to how much shares the shareholder has already 2: Get a dividend 3: right to get a rediual value in case of bankrupsy 4: right to vate and get informations at the AGM
   2. Gesm.b.H & Co KG

      Annotations:

      • Combination of GmbH & KG Advantages: No natural person is fully liabel. The fully liable part takes a own legal entity Potential drawbacks: When it comes to financing keep an eye on the fact that a limited partner does not end up with unlimited liability which occures after: signing a B/E; give a personell guarantee; or secure a loan with an privatly owned premesis
   3. Partnerships

      Annotations:

      • Is a assoziations of two or more people traiding as one firm
      1. General partnership

         Annotations:

         • OG: only unlimited partners Advantages: -more cpital will be available -divison of labour -more ideas will be brought into the biz. -specialisation can occur -losses are shared Disadvantages: -unlimited liability -disagreements of minds continuity in case of death -profits are shared
      2. Limited partnership

         Annotations:

         • KG at least one limited and one unlimited partner
      3. Silent partnership

         Annotations:

         • Sleeping partners invest capital in a partnership or in a sole trader. They have no management and representative right. Thei are entitled to a share of a profit -sleeping partners increase the equity of a company without the need to share management activities
4. Things to think about before choosing a typ of biz.
   1. raising capital
   2. control
   3. share of profit/loss
   4. liability
   5. decisiton making
   6. continuity
   7. fiscal issues
   8. Company law

Annotations:

• Features: -high employment of fixed and current assets e.g. machinery; plant; equipment; raw material; cash/bank; accounts receivables; half finished goods; finished goods -high fixed costs: employment of machines and technical equipment is highly organised. Divison of labour with predetermind workflow (assembly lines) -large scale production for an anonymous markes -high demand of labour (blue collar workers)

1. Business functions
   1. Purchasing & inventory control
   2. Production

      Annotations:

      • How to produce Job production--> tailor made goods Batch (Stappel) production --> Same machinery for one product. Flow production --> A product that is constructed in different steps (Assembly line) Project production --> Components from different companies are used e.g. Buildings
      1. Capacity

         Annotations:

         • -Capacity cushon -over capacity -insufficient capacity -underutilisation -lead time -stepped fixed costs
         • TQM - Total quality management it is affected by external considerations: -governmental regulations -trade union agreements -copability of suppliers and internal considerations: -training and motivation of work force -capablity and reliablity of the equipment -control of materials and quality -capability of the management
         1. Economies of scale

            Annotations:

            • Financial: it is easier to borrow money, lower interest rates, benefit from bulk purchases Technical: lower unit costs; use of loarge slash Risk-bearing: innovation is possible with the support of other successfull lines marketing: expenisve advertising and marketing is affordable Managerial: top managers can be employed
         2. Diseconomies of scale

            Annotations:

            • Decision-making: slowness in decision making due to bureaucratic growth Managerial: too many middle managers blurring lines of communication and corntroll Diversification: to operate in too many different sections at the same time Geographical: head office and branch offices are too far away from each other Staff: employees may feel remote from a large organisation. Leading to lower morale and less loyalty
   3. Distribution
   4. Site of a plant

      Annotations:

      • -supply with raw material -energy & labour -real estate -transport -environmental effects & or regulations -taxes and grants/ subsidies -political stability -competition/consumers -social costs/benefits
   5. Factors of production
      1. Capital

         Annotations:

         • assets used in the procution of goods or services: -tengible fixed asstes problem of long-terms character uncertenty of future development capacity fixed costs increase capacity depreciation the provision of tengible assets causes fixed costs (depreciation; interests; maintenance -intengible fixed assets --> patents; licenses
      2. Labour

         Annotations:

         • human capital typical feature of manif. companies division of labour blue collar worker
         1. People in business
            1. Maslow
            2. Hertzberg
         2. Working Coditions
         3. Remuneration

1. Other possibilities of financing
   1. Factoring

      Annotations:

      • A factor enables you to receive cash within a few days of invoicing by taking on the ongoing responsibility for collecting your short-term debt. In some cases the factor will also take on a percentage of the risk of default
   2. Forfeiting

      Annotations:

      • For larger projects and involves a bank buying 100% of the invoice value of an export transaction at a discount. You are then free fom financial risk in the transaction and liable only for the quality and reliability of the goods or services provided
   3. Counter trade

      Annotations:

      • Tauschhandel
   4. Leasing
2. Equity vs debt financing
3. Internal
4. External

1. Internal Sources
   1. Retained profits
   2. Redeployment of assets
   3. Provisions
   4. Stock reduction
2. External Sources
   1. Capital and investment financing
   2. Debt financing
3. Fixed assets
4. Tangible assets
5. Intangible assets
6. Current assets
7. Stocks
8. Debtors or receivables
9. Cash
10. Financial assets or Investments

1. take deposits
2. give loans
3. services
4. Collateral
   1. Real security
   2. Personal securities
   3. Credit against assignment of receivables
      1. undisclosed
      2. disclosed
5. Loans
   1. Overdraft facility
   2. Mortgage loan
      1. Landregister
6. Overdraft facility
7. Dicount credit with the B/E
8. Guarantee credit
9. Rating of Credit worthiness
   1. Static rating
   2. Dynamic rating
10. Islamic banking
    1. Profit and loss system

1. Cash flow
3. Labour turnover
4. Debt/ gearing ratio
5. Equity ratio
6. Cover of non-current assets 1/2
7. Liquidity ratios
   1. Cash
   2. Acid-test ratio
   3. Current ratio
   4. Working capital
8. Return on owner's equity
9. Return on Capital Employed
10. Return on sales
11. Capital turnover
    1. Period of capital turnover
12. Receivables turnover
    1. Debt collection period
13. Payables turnover
    1. Payables turnover period
14. Average expenditure on personnel
15. Sales margin
    1. Mark-up on costs
    2. Mark-up on retail
16. Ratios to evaluate shares
    1. Yield
    2. Price/earrnings ratio
    3. Dividend yield

1. Purchasing forms
   1. Centralised
   2. Decentralised
   3. Principles of procurment
      1. Long terms stocking up
      2. Idividual buying
      3. Just in time
   4. ABC analysis
2. Stock
   1. LiFo
   2. FiFo
   3. Average costs
   4. Original costs
3. Inventory control
   1. Costs
      1. Stock holding costs
      2. Order costs
      3. Cash is tied up
   2. Stock levels
   3. Time of reordering
   4. Reorder system
      1. Periodic review system
      2. Two bin system
      3. Order points system
4. Inventory turnover ratios
   1. Rate of inventory turnover
   2. Replacement period

1. PEST-Factors

1. Marginal cost accounting
   1. Direct Costing
   2. Short term price floor
   3. Make-or-buy-descision
   4. Plan the marketing or production plan
2. Full cost accounting
3. Breakeven-analysis
4. Types of costs
   1. Fixed costs
      1. Degression of fixed costs
      2. Stepped fixed costs
   2. Semi-Variable costs
   3. Variable costs
      1. Progressive/ degressive variable costs
5. Costs and Expanses

1. Product portfolio analysis
   1. Product life cycle
   2. Ansof matrix
   3. Options for descion makers
   4. Poters's 5 forces
2. Marketing mix
   1. AIDA
   2. 4 P's
3. Functions of marketing
4. Ojectives of marketing

1. Methods of growth
   1. Internal methods
   2. External Methods
      1. Mergers
      2. Takeovers
         1. Friendly
         2. Hostile
         3. Ailing Companies
            1. Internal Causes
            2. External Causes
            3. Reconstruction
               1. Moratorium
               2. Chapter 11
               3. Informal reduction of debts
               4. Reorganisation measures with self administration
               5. Reorganisation measures without self administration
            4. Dissolution
            5. Rating of claims
      3. Franchising

1. Types of investment
2. Static method
   1. Cost comparison calculation
   2. Accounting rate of return method
   3. Payback period method
3. Dynamic method
   1. Net present value
   2. Dynamic pay-off period method
   3. Intrnal rate of return