Module 1
The formula for net income
What is: revenue-costs
Definition of platform markets
markets that match buyers and sellers
Three ways to solve the corporate governance problem
transparency, decision rights, accountability
Leftover profit after paying dividends
Theory of creative destruction
entrepreneur lead innovation is the force that keeps capitalist economies vital, incumbent firms are replaced with innovative new firms
difference between one tier and two tier model
one tier: shareholders elect directors
two tier: shareholders elect a supervisory board which then are responsible for hiring/firing the managment board
Internal rate of return, the interest rate that sets the NPV to zero
Pareto efficiency
it is impossible to make one party better off without making another party worse off---maximum efficiency
Name 3 types of governance
market centered, bank centered, state influenced, relationship based, family and owner dominated
What is the fundamental fact of business strategy?
profit variability, profit varies across and within industries
Name the market failures
1. Market power
2. Externalities
3. Moral hazard
4. Adverse selection
5. Transaction costs
Freeman's perspective
firms require social license from the public to operate, so managers have to consider all stakeholders
Definition of business strategy (looking for 3 key phrases)
concise, internal plan on how the firm with create/capture economic value
Definition of economies of scale
average cost of production declines as the quantity produced rises (high fixed costs low variable costs)
Name 3 organizational/structural contributors to unethical conduct
1. ill conceived goals/high powered incentives
2. motivated blindness
3. indirect blindness
4. slippery slope
5. overvaluing outcomes