Business Economics - Handbook

Content
1. Trade...............................................................................................................................5
1.2. Factors influencing terms of trade in developing countries ......................................................... 7
2. The Production Theor......................................................................................................11
2.1. Production in the Short Run ...........................................................................................14
2.1.1. Factor‐Product Relationship ‐The Three Stages of Production ........................................... 16
2.1.2 Product‐product relationship. ............................................................................................. 20
2.1.3. Factor – Factor Relationship ................................................................................................ 23
3. The Enterprise ..............................................................................................................28
3.1. Business life cycle ...................................................................................................... 33
4. Financial structure of a company .........................................................................................39
4.1. Assets of a company ....................................................................................................41
4.2. Liabilities and equity ................................................................................................. 43
4.3. Depreciation ......................................................................................................... 46
5. Capital structure of thecompany........................................................................................................ 58
5.1. Forms of business financing .................................................................................................... 61
5.2. The relationship between the assets and the sources of its coverage ................................... 65
5.3. The total working capital need ................................................................................................ 68
6. The optimal capital structure..........................................................................................73
6.1. Cost of Capital........................................................................................................74
6.1.1. Cost of Debt‐ rd .....................................................................................................74
6.1.2. Cost of equity‐re.....................................................................................................76
7. Capital structure theories .............................................................................................. 80
8. The theory of costs .................................................................................................. 92
8.1. Economic versus accounting cost concept .................................................................................. 94
8.2. Type breakdown of costs ..................................................................................................95
8.3. Production costs in the short‐run ..........................................................................................98
8.4. Development of costs according to volume .............................................................................. 101
9. Profit and the Break – Even Analysis ..........................................................................................107
9.1. Profit .........................................................................................................................107
9.2. Revenue .................................................................................................................... 109
9.3. Economic vs. accounting profit ..........................................................................................110
9.4. Break even analysis .......................................................................................................111
10. Cash flow analysis ..........................................................................................................118
10.1. Statement of Cash Flows ................................................................................................119
10.2. Cash Flow Patterns and the Financial Health of a Company ................................................. 125
10.3. Global Cash Flow Analysis ...........................................................................................126
11. Circular economy........................................................................................................................... 135
11.1. Linear vs. Circular economy............................................................................................138
12. Business performance and return on investments ....................................................................... 142
12.1. Investment definitions.....................................................................................................144
12.2. Investment efficiency method evaluation ............................................................................ 147
13. Business objectives and theories of the firm ................................................................................ 159
13.1. Neoclassical economic theory ............................................................................................... 160
13.2. Managerial theories of firm................................................................................................... 163
13.3. Behavioural models ........................................................................................................168