Operations Management
What are the four factors of production?
Land, labor, capital, and entrepreneurship
What is capital-intensive production?
This method relies heavily on machinery and automation.
What is the main focus of lean production?
Eliminating waste and maximizing efficiency
What is cash flow?
The movement of cash inflows and outflows in an organization
What does negative working capital indicate?
The business cannot meet its short-term liabilities
What is job production?
This production method involves highly customized, one-off products.
What is batch production?
This production method is commonly used for food or clothing in batches.
What does the Just-in-Time (JIT) method emphasize?
Materials and components arrive only when needed, reducing inventory costs and waste.
Why is cash flow more critical than profit for a new business?
A business needs sufficient cash flow to cover operational costs, even if it is profitable on paper
Name one example of a current liability.
Overdrafts, trade creditors, or short-term loans
Name one advantage and one disadvantage of mass production.
Advantage: BIg sales. Disadvantage: Lack of flexibility
What is the main disadvantage of job production?
High costs due to skilled labor and limited economies of scale
Name the lean production method that involves ongoing, incremental improvements.
continuous improvement (Kaizen)
Explain the difference between cash flow and profit.
Cash flow is the movement of cash in and out of a business, while profit is revenue minus costs
What is the purpose of the working capital cycle?
To measure the time between paying production costs and receiving cash from sales
What is productivity?
This term measures how well a business transforms inputs into outputs.
Which production method has no flexibility and relies on homogeneous output?
mass production
What is the "Cradle to Cradle" design philosophy?
Products are designed to be reused, recycled, or composted at the end of their life
What does it mean if a business has positive cash flow but experiences a financial loss?
Cash inflows may not cover long-term expenses, or profit calculations differ from cash flow timing
What does positive working capital indicate about a business?
It shows the business can pay its short-term liabilities quickly
Which production method combines mass production efficiency with personalized options?
mass customization
What is the key advantage of mass customization?
It allows for economies of scale while meeting individual customer preferences
Name one impact of Total Quality Management (TQM) on organizations.
Enhanced customer satisfaction through higher quality products and consistent service
Name one example of a current asset.
Cash, stock, or debtors
Explain the difference between current ratio and acid test ratio.
The acid test ratio excludes stock from current assets, focusing on more liquid assets