Statistics and Risk
Management
Fiscal Stability
Video URL:
jukebox.esc13.net/untdeveloper/Videos/Fiscal%20Stability.mov
Vocabulary List:
Change Management: The process of assessing and responding to
innovations or disruptions in an organization's environment or fiscal stability.
Bankruptcy: A legally determined state, in which a debtor is declared
insolvent, allowing certain debts to be discharged or restructured.
Acquisition: The process of coming into ownership of an entity, through sale,
take-over, merger, or other means of taking ownership.
Leveraged Buy Out: The acquisition of an entity by using both debt and
equity to fund the purchase of the entity.
Stock Swap: Acquisition of a company by exchanging shares of the stock of
the organization being bought with stock shares of the company taking
ownership.
Hostile Takeover: The acquisition of a company against the will of the
organization.
Poison Pill Strategy: A policy or management technique put in place to
discourage a hostile takeover by lowering value of stock that would be
acquired.
Financial Derivatives: Contracts between parties that represent the value of
a financial instrument, such as stocks, bonds, commodities, or other assets.
Copyright © Texas Education Agency, 2012. All rights reserved.
1
Resources:
Business Ownership Types
You may operate your business or organization under any one of several
organizational structures. Each type of structure has certain advantages
and disadvantages that should be considered. The descriptions of the
structures below are provided to assist applicants and are not intended
to be legal definitions with the force of law. You should contact an
attorney, accountant, financial advisor, banker, or other business or legal
advisors to determine which form is most suitable for your business or
organization.
Read more at http://www.sos.wa.gov/corps/registration_structures.aspx
http://www.sos.wa.gov/corps/registration_structures.aspx
Anticipation Change: Staying Current with Your Business Plan
This podcast by the Small Business Administration discusses the
importance of anticipation and planning for change as a part of running a
successful business. The types of changes discussed include revenue,
disasters, succession strategy, and successful growth.
http://www.sba.gov/content/anticipating-change-staying-current-withyour-business-plan
Leading and Managing Change
This article discusses the simple and often forgotten rules of leading and
managing a change within a business. It provides an easy step by step
process for managing business changes.
http://gbr.pepperdine.edu/2010/08/leading-and-managing-change/
Copyright © Texas Education Agency, 2012. All rights reserved.
2
Fiscal Stability Practice Test
Name:_____________________
1. Which of the following would be a benefit of a merger? a.
b.
c.
d.
More expertise to draw from Reduced competition Reduced costs since they are now combined All of the above Change equals instability in business. Give an example of the following types of change. Think of businesses that you or your family frequent. 2. Change in the market: 3. Change in cost of doing business: 4. Change in technology: MATCHING:
a.
b.
c.
d.
e.
f.
Merger
Acquisition
Leveraged Buy Out
Stock Swap
Hostile Takeover
Poison Pill
_____5. The purchase of an asset such as a plant, a division, or even an entire company
_____6. Various methods to avoid takeover bids
_____7. A takeover which goes against the wishes of the target company's management and board of directors
_____8. A decision by two companies to combine all operations, officers, structure, and other functions of business
_____9. A business takeover or acquisition in which the acquiring company uses its own stock to pay for the
acquired company
_____10. The use of a target company's asset value to finance most or all of the debt incurred in acquiring the
company
11. A financial derivative is a risk management tool. Derivatives are financial products, such as futures contracts,
options, and mortgage-backed securities. Example: An airline wants to hedge their rising fuel costs. They decide to
purchase a huge derivative contract to keep the fuel prices at the current price. If prices continue to rise, then they
have protected themselves against the rising costs. BUT, if prices drop, they could lose substantially. Think about
this and give your opinion in at least three complete sentences. Copyright © Texas Education Agency, 2012. All rights reserved.
3
Fiscal Stability Practice Test KEY
1. D
2. Changing customer base
3. Energy prices, food prices
4. Computers, online sales
5. B
6. F
7. E
8. A
9. D
10.
C
11.
Answers will vary
Copyright © Texas Education Agency, 2012. All rights reserved.
4
Student Assignment
14.1a Understanding Fiscal Stability
Name:_____________________
You have heard of the Mortgage Crisis of recent times, how did
mortgage derivatives contribute to the crisis?
Explain what a mortgage backed derivative is and why its use or over
use caused the Mortgage Melt-down.
Copyright © Texas Education Agency, 2012. All rights reserved.
5
Student Assignment
14.2a Understanding Ownership Changes
Name:_____________________
The Oil industry has a been a hot bed of acquisitions/mergers
Exxon and Mobil
Amoco, British Petroleum,
ARCO
Conoco and Phillips
Chevron and Texaco
Pick one of these four groups and see what you can find out about when,
how, and why they merged.
Did these mergers need government approval?
Overall, what does the literature say about these mergers and the price
of Gasoline?
Copyright © Texas Education Agency, 2012. All rights reserved.
6
Explore Activity:
Embracing Change – Some companies today have been successfully
producing basically the same products or services for decades. Other
companies have gone through fairly dramatic changes in what they produce
and are successful today, but bear little resemblance to their original
functions. Find an example of each and make a poster to show how each
company adapted to change (laws, technology, etc.) in order to remain
successful. Your poster should include the following for each company:
 Name and location.
 A description of the original product or service and what they are
known for today.
 A description of the changes the company went through and reasons
for the changes.
 Pictures and images of the company logo and products or services.
Then prepare a short (2-3 minute) oral presentation of your poster for your
class.
Copyright © Texas Education Agency, 2012. All rights reserved.
7