MGT 100 MIDTERM 1 STUDY GUIDE
Nature of Man - ANSWER Methods/different lenses of analyzing scenarios in
the economy and in management
4 Kinds of Profit Firms - ANSWER Sole
Proprietorship/Partnerships/LLC/Corporations
Sole Proprietorship - ANSWER Most businesses in America are sole
proprietorships. Individuals are taxed, not the company. Responsible for all
losses and debts
Partnerships - ANSWER Same characteristics of a sole proprietorship--two
people.
LLC - ANSWER Limited Liability. Individuals in the LLC are taxed. No
shareholders.
Corporations - ANSWER Limited Liability (any loans are sole responsibility of
the company) not the people. Owned by shareholders. Taxed heavily
REMM - ANSWER Every individual cares about everything (irrational).
Willing to make tradeoffs. Resourceful (can see changes in environment).
Changing preferences. Individual wants are UNLIMITED. Each individual is a
utility MAXIMIZER. If costs change, REMM man is affected.
Sociological Man - ANSWER Individuals view themselves as product of their
cultural environment; make decisions in accordance with this. Not evaluators. If
costs change, sociological man isn't affected.
Economic Man - ANSWER Only want is income. Short-run money maximizer.
(Reductive model of REMM). Reflects economists' desire for simplicity and
modeling--used as a foil by non-economists.
, Psychological Man - ANSWER Human wants are arranged in the hierarchy of
needs. Behavior determined by roles, environment, and authority. Income
effect: if income falls, consumption decreases, and vice versa
Stanford Prison Experiment - ANSWER Prime example of psychological man-
-people's actions were shaped by their roles and environment. Guards were jerks
to prisoners.
Hierarchy of Needs - ANSWER Maslow. Priorities of most important stuff
Political Man - ANSWER Unlike REMM, individual is a perfect agent who
evaluates resources, maximizes public goods over his own welfare.
Teachers vs Sumo Wrestlers - ANSWER Showed how individuals have the
incentive to cheat when their gain is great enough (REMM, debunks economic
model of man). Equity theory.
Why do Americans work more than Europeans? - ANSWER Europeans are
taxed so dad-gum much that all of their services (healthcare) are provided to
them so they have a lower incentive to work. (Hayek, socialism)
Operating Income = ? - ANSWER Revenue - Operating Costs (COS, R&D,
SGA)
Net Income = ? - ANSWER Revenue - All costs (including taxes, interest, one
time costs, etc.)
Gross Margin % = ? - ANSWER (Revenue - Cost of Sales)/Revenue
(% of money kept from sales after taking out direct costs of products sold)
Return on Assets = ? - ANSWER Net Income/Total Assets (% of money earned
for every dollar invested in assets to run the business)
Balance Sheet - ANSWER Balance Sheet is a snapshot in time of the firm's
assets, liabilities, and shareholders' equity
Nature of Man - ANSWER Methods/different lenses of analyzing scenarios in
the economy and in management
4 Kinds of Profit Firms - ANSWER Sole
Proprietorship/Partnerships/LLC/Corporations
Sole Proprietorship - ANSWER Most businesses in America are sole
proprietorships. Individuals are taxed, not the company. Responsible for all
losses and debts
Partnerships - ANSWER Same characteristics of a sole proprietorship--two
people.
LLC - ANSWER Limited Liability. Individuals in the LLC are taxed. No
shareholders.
Corporations - ANSWER Limited Liability (any loans are sole responsibility of
the company) not the people. Owned by shareholders. Taxed heavily
REMM - ANSWER Every individual cares about everything (irrational).
Willing to make tradeoffs. Resourceful (can see changes in environment).
Changing preferences. Individual wants are UNLIMITED. Each individual is a
utility MAXIMIZER. If costs change, REMM man is affected.
Sociological Man - ANSWER Individuals view themselves as product of their
cultural environment; make decisions in accordance with this. Not evaluators. If
costs change, sociological man isn't affected.
Economic Man - ANSWER Only want is income. Short-run money maximizer.
(Reductive model of REMM). Reflects economists' desire for simplicity and
modeling--used as a foil by non-economists.
, Psychological Man - ANSWER Human wants are arranged in the hierarchy of
needs. Behavior determined by roles, environment, and authority. Income
effect: if income falls, consumption decreases, and vice versa
Stanford Prison Experiment - ANSWER Prime example of psychological man-
-people's actions were shaped by their roles and environment. Guards were jerks
to prisoners.
Hierarchy of Needs - ANSWER Maslow. Priorities of most important stuff
Political Man - ANSWER Unlike REMM, individual is a perfect agent who
evaluates resources, maximizes public goods over his own welfare.
Teachers vs Sumo Wrestlers - ANSWER Showed how individuals have the
incentive to cheat when their gain is great enough (REMM, debunks economic
model of man). Equity theory.
Why do Americans work more than Europeans? - ANSWER Europeans are
taxed so dad-gum much that all of their services (healthcare) are provided to
them so they have a lower incentive to work. (Hayek, socialism)
Operating Income = ? - ANSWER Revenue - Operating Costs (COS, R&D,
SGA)
Net Income = ? - ANSWER Revenue - All costs (including taxes, interest, one
time costs, etc.)
Gross Margin % = ? - ANSWER (Revenue - Cost of Sales)/Revenue
(% of money kept from sales after taking out direct costs of products sold)
Return on Assets = ? - ANSWER Net Income/Total Assets (% of money earned
for every dollar invested in assets to run the business)
Balance Sheet - ANSWER Balance Sheet is a snapshot in time of the firm's
assets, liabilities, and shareholders' equity
