INTRINSIC AND MARKET VALUE
INTRINSIC VALUE
an estimate of a stock's "true"
value based on accurate risk
and return data
can be estimated, but not
measured precisely
IV > MP=
UNDERVALUED
MARGINAL INVESTOR
an investor whose views
determine the actual stock price
PERCEIVED RISK
what public believes without
data
ACTUAL RISK
if high, the IV is lower
EXAMPLE:
REAL ESTATE BUSINESS
Perceived Risk: higher
Actual Risk: lower (cause it gain
earnings in the future)
MP: lower
IV: higher
=UNDERVALUED
MARKET PRICE
the stock value based on
perceived but possibly incorrect
information as seen by the
marginal investor
IV <MP=
OVERVALUED
EQUILIBRIUM
situation in which the actual
market price equals the intrinsic
value
when investors are indifferent
between buying and selling
stocks
FINANCIAL
MARKETS
financial markets
FINANCIAL MAREKTS
place where BUYERS and
SELLERS of FINANCIAL ASSETS
meet
INVESTOR BUYER
INVESTOR SELLER
FINANCIAL ASSETS
assets that would represent
CLAIMS
2 TYPES OF CLAIMS
CLAIMS OF
OWNERSHIP
EQUITIES such as stocks
can be found in EQUITY
MARKET (general) or
STOCK MARKET
(specific)
ownership in the form of
SHARE ON EARNINGS
and SHARE ON THE NET
ASSETS
EXAMPLE:
PLDT issued 1,000/shares
stocks
INVESTORS OWNS:
1,000,000 shares
DIVIDEND:
3/SHARE = 3M
CLAIMS FOR FIXED
FUTURE PAYMENTS
INTEREST PAYMENTS
PRINCIPAL PAYEMNTS
DEBT/DEBT
MARKET(general)
BOND/BOND MARKET
(specific)
REAL ESTATE MORTGAGE
(REM) or COLLATERIZED
LOAN
BONDS- "Bond Indenture"
/ "Contract"
LOAN- "Promissory Note"
REM- "Real Estate
Collateral"
FINANCIAL
financialINSTITUTIONS
institutions
financial institutions are
financial intermediaries
2 TYPES OF CAPITAL ALLOCATION
DIRECT
business sells its stocks or bonds
directly to savers without going
through any financial institutions
GOING PUBLIC
the act of selling stock to the
public at large by a closely held
corporation or its principal
stockholders
INITIAL PUBLIC OFFERING (IPO)
the market for stocks of
companies that are in the process
of going public
PRIVATE MARKETS
transactions ae worked out
directly between two or more
parties
PUBLIC MARKETS
which standardized contracts are
traded on organized exchanges
INDIRECT
business sell their securities to
investment banks (intermediaries)
and the latter sell the securities to
the savers
UNDERWRITER
facilitates the issuance of securities
PUBLICLY OWNED CORPORATION
owned by a relatively large
number of individuals who are not
actively inolved in the firm's
management
FINANCIAL MARKETS AND FINANCIAL
INSTITUTIONS BOTH FACILITATES THE
FLOW OF INCOME
FINANCIAL STATEMENTS, CASH
FLOW, AND TAXES
BALANCE SHEET/ STATEMENT OF
FINANCIAL POSITION
shows what assets the company owns and
who has claims on those assets as of a
given date (December 31, 2018
INCOME STATEMENT/ STATEMENT OF
COMPREHENSIVE INCOME
shows the firm's sales and costs (profit)
during some past period (2018)
STATEMENT OF CASH FLOWS
shows how much cash the firm began the
year with how much cash it ended up with
what it did to increase/decrease its cash
STATEMENT OF STOCKHOLDER'S EQUITY
shows the amount of equity the
stockholders had at the start of the year
the items that increased or decreased
the equity at the end of the year
STOCKHOLDER'S EQUITY
amount that stockholders paid to the
company when they bought shares from
the company sold to raise capital in
addition to all the earnings the company
has retained over the years
also thought as a residual (ASSETSLIBAILITIES)
RETAINED EARNIINGS
represent the cumulative total of all
earnings kept by the company during its
life
ASSETS
order by its liquidity ( quickest to convert
to cash)
LIABILITIES
order of maturity (to be paid first)
PREFERRED STOCK
part of total equity
Common Stocks and Retained Earnings
REVENUE - EXPENSES= NET INCOME
(GENERAL RULE)
EFFICIENT MARKET HYPOTHESIS
implies that whenever new information
enters the market, stock prices react right
away
WEAK FORM
market already reflects the historical
information
not beat market return
TECHNICAL ANALYSIS
identify trading opportunities in price
trends and patterns seen on charts
SEMI-STRONG FORM
the prices on the market already reflects
all public information (WALL STREET
JOURNAL)
STRONG FORM
all private as well as public information
are already reflected in the market
DEPRECIATION
wear and tear of tangible assets
NET INCOME/ EARNINGS AFTER TAX (EAT)
A. EARNINGS PER SHARE
B. DIVIDENDS PER SHARE
C. BOOK VALUE PER SHARE
"common" implies
"something in
common"
"ication" suggests
"understanding"
"communication as the process
of creating and sharing meaning
by using verbal and nonverbal
symbols in varied contexts
PROCESS OF COMMUNICATION
SOURCE -the sender
MESSAGE- the information
ENCODING- the process of
converting
CHANNEL- manner of
message conveyance
DECODING- processing of the
received message
RECEIVER- who will get the
message
FEEDBACK-receiver's
response
CONTEXT- situation
ELEMENTS OF COMMUNICATION
SENDER
MESSAGE
CHANNEL
RECEIVER
EFFECT
KEY PRINCIPLES OF
COMMUNICATION
INTERPERSONAL COMMUNICATION IS:
INESCAPABLE- not possible for
humans to not communicate
IRREVERSIBLE- "once a word goes
out your mouth, you can never
swallow it again"
COMPLICATED- a word does not
have just one meaning
-nonverbal symbols
are more vague than words
-there's at least six
people involve
CONTEXTUAL- does not happen
in isolation
Psychological- who you
are; what state you are in
Relational- your reaction to
other people based on
relationship
Situational- psycho-social
"where you ae
communicating"
Environmental- physical
"where you are
communicating"
Cultural- includes all
learned behaviors and
rules that affect
interactions
DIFFERENCE BETWEEN MORALS
AND ETHICS
both ensure discipline
among us
MORALS- personal codes
-our own set of rules
ETHICS- societal codes
-imposed upon everyone
ETHICS IN COMMUNICATION
MUTUALITY- needs of both sender and
receiver should not be neglected
INDIVIDUAL DIGNITY- don't use
communication to taint someone's
dignity
ACCURACY- everything someone has to
the right to know and they need to know
shall be shared in an accurate manner
ACCESS TO INFORMATION- everyone are
COMMUNICATION AND
GLOBALIZATION
GLOBALIZATION
process of bringing people
together and making them interact
and exchange ideas across
traditional borders (Nowaczyk,
2017)
the world, driven largely by
advances in technology, has
become inextricably
interconnected across distances
and other boundaries (Downing,
2007)
increasing economic, political, and
cultural integration and
interdependence of diverse
cultures (Gamble and Gamble,
2003)
GLOBAL VILLAGE- one world
allowed to communicate with each other,
interconnected by an electronic
not exclusively to you
ACCOUNTABILITY- be accountable for
nervous system (Marshall McLuhan,
the words you're going to say
AUDIENCE- both sender/receiver should
fully understand what's being
communicated
RELATIVE TRUTH-allow others to respectfully
disagree to your opinion
ENDS VS. MEANS-make sure that both your
goals and ways are ethical
USE OF POWER-take advantage of your power
to influence others in a best way possible
RIGHTS VS. RESPONSIBILITIES-not every right
are ethical; make sure to distinguish whether
it's ethical or not and always choose what's
right
The Gutenberg Galaxy, 1962)
the process of globalization (flattening
of the world) allows individuals to
communicate "from anywhere to
anywhere" (Thomas Friedman, 2005)
"flattening" of the world is achieved
through globalized trade, outsourcing,
supply-chaining and political
liberalization
COST
costACCOUNTING
accounting
CHAPTER 1- INTRODUCTION TO
COST ACCOUNTING
expanded phase of general or financial
accounting
informs management promptly with
the cost of rendering a particular
service, buying and selling a product
and producing a product
field of accounting that measures,
records, and reports information about
cost
FINANCIAL ACCOUNTING
use of accounting information for
reporting to external parties
(investors/creditors)
primarily concerned with financial
statements
based on historical transaction data
MANAGERIAL ACCOUNTING
focuses on the needs of parties within
the organization
information may be current or
forecasted, quantitative or qualitative,
monetary or not, and timely the data
are futuristic
COST ACCOUNTING
intersection between financial and
managerial accounting
provides information to external
parties
provides information to internal
parties for planning and controlling
MERCHANDISING OPERATIONS
normally buys a product that is ready
for resale
only special package or display are
need to be done
Beginning Merchandise Inventory
Plus: Total Purchases
Cost of Goods Available for Sale
Less: Ending Merchandise Inventory
Cost of Goods Sold
xxxx
xxx
xxx
xxx
xxxx
the only expenditure occurs when
salable goods are purchased
any item unsold at year end make up
the ending inventory balance
subtracting the ending inventory
balance from the total beginning
inventory balance and purchases
during the period
COST OF UNSOLD ITEMS (Merchandise
Inventory, End)
- BALANCE SHEET
COST OF SOLD ITEMS (Cost of Goods
Sold)
-INCOME STATEMENT
MANUFACTURING OPERATIONS
has three inventory accounts
-MATERIALS INVENOTRY
-WORK IN PROCESS INVENTORY
-FINISHED GOODS INVENOTRY
purchased materials unused during the
production process make up the
ending MATERIALS INVENTORY
BALANCE
COST OF MATERIALS USED, COST OF
LABOR SERVICES, and FACTORY
OVERHEAD are transferred to the WORK
IN PROCESS INVENTORY when used in
production process
when completed (goods),all
manufacturing cost assigned are
moved to the FINISHED GOODS
INVENTORY account
partly completed units cost belong to
WORK IN PROCESS INVENTORY ending
cost attached to unsold items at year
end make up the ending balance in the
FINISHED GOODS INVENTORY account
all costs related to units sold are
transferred to the COST OF GOODS
SOLD account and reported to the
INCOME STATEMENT
USES OF COST ACCOUNTING DATA
basis for determining product cost
aids management in planning and
controlling operations
DETERMINING PRODUCT COST
should be high to cover the cost of
production, pay a portion of marketing
and administrative expenses, and
provide a profit
MEETING COMPETITION
to know if selling price must be reduced,
manufacturing cost must be reduced, or
product must be eliminated
BIDDING ON CONTRACTS
bid price must cover costs to be incurred
and provide profit
must not be set so high to be able to
compete with other bidders
ANALYZING PROFITABILITY
concentrating efforts on those items that
are most profitable
PLANNING
process of establishing objectives for the
firm and determining the means to
achieve them
STRATEGIC PLANNING
setting long range goals/objectives to
determine the overall direction of the
company
TACTICAL PLANNING
concerned with short range plans and
emphasizes plans to achieve the
strategic goals
OPERATIONS PLANNING
the day-to-day implementation of
tactical plans
emphasizes the coordination of major
factors of production (materials, labor,
facilities)
TWO BASIC PRODUCT-COSTING SYSTEMS
JOB ORDER COSTING
allocating costs to group of unique products
making one-of-a-kind or special-order
products
direct materials, direct labor, and factory
overhead costs are assigned to specific
batches of production
computing unit cost, the total manufacturing
cost for each job order are divided by the
number of units produced for that order
ex. making ships, airplanes, large machines
and special orders
CHARACTERISTICS:
collects all manufacturing costs and assigns
them to specific batches of products
measures cost for each completed job rather
than for a set time periods
uses one WORK IN PROCESS INVENTORY
CONTROL account in the general ledger
more costly
PROCESS COSTING
CHAPTER 2- CONCEPTS AND
used to make a large number of similar
CLASSIFICATIONS
products or maintain continuous production
flow
COST
account for product related cost for a period
the cash or cash equivalents value
of time
sacrificed for goods and services that are
unit cost are computed by dividing total
expected to bring a current or future
manufacturing cost assigned to a particular
benefit to the organization
department by equivalent unit of production
if product is routed through four
EXPIRED COST
departments, then four unit cost amounts
called expenses
are added to find the product's total unit
LOSS
cost
cost that expires without producing
ex. companies producing paint, oil and gas,
any revenue benefit
automobiles, bricks, soft drinks
CLASSIFICATION OF COSTS
CHARACTERISTICS:
I. RELATION TO A PRODUCT
manufacturing costs are grouped by
A. MANUFACTURING COST/PRODUCTION
department
COST
emphasizes weekly or monthly time period
uses several WORK IN PROCESS INVENTORY
DIRECT MATERIALS
CONTROL account, one for each department
basic ingredients that are transformed
in the manufacturing process
has less record keeping
into finished goods
through the use of direct labor and factory
HYBRID COSTING
overhead
require a costing system which
can be traced to the finished goods
incorporates ideas from both job order
and process costing systems
DIRECT LABOR
OPERATIONS COSTING
a hybrid costing used in repetitive
manufacturing where finished goods
have common as well as distinguishing
characteristics
the amount paid as wages to those
working directly on the product
can be conveniently and economically
traced to end products
FACTORY OVERHEAD
cannot be classified as direct materials or
direct labor
cannot be practically traced to end
products
manufacturing overhead, factory burden,
indirect manufacturing cost
indirect materials/indirect labor
FORMULAS
DIRECT LABOR + DIRECT MATERIALS=
PRIME COST
DIRECT LABOR + FACTORY OVERHEAD=
CONVERSION COST
DM + DL + FO=
TOTAL MANUFACTURING COST
SHUTTING DOWN PRODUCTION
no products
loss of sales and profit
BUYING TOO MANY
can lead to high storage cost
B. NON-MANUFACTURING COSTS/PERIOD
COST
MARKETING/ SELLING EXPENSES
all costs necessary to secure customers
orders and get the finished
product/service into the hands of the
customers
marketing as "order-getting" or "orderfilling" costs
advertising, shipping, sales travel, sales
commission, sales salaries and expenses
ADMINISTRATIVE or GENERAL EXPENSES
include all executive, organizational and
clerical expenses
executive compensation, general
accounting, secretarial, public relations
II. COST AS TO VARIABILITY
FIXED COST
items of cost which remains constant in
total
irrespective of the volume of production
not related to activity within the relevant
range
ex. salaries of production executives,
depreciation (straight line), periodic rent,
insurance
COMMITTED FC- long term (dep.)
MANAGED FC- short term (advert.)
cost per unit decreases as volume of
production increases
cost per unit increases as volume of
production decreases
VARIABLE COST
vary directly in total, in relation to volume
of production
if activity increases, total variable cost
increases
cost per unit remain constant as volume
changes within a relevant range (dm. dl.
royalties, commission)
as activity changes, total variable cost
increases/decreases but unit variable cost
remains the same
MIXED COST
cost with fixed and variable components
vary to the level of production, though not
in direct relation to it
part of the cost is fixed while the rest is
variable
Semi-variable Cost
fixed portion represents a minimum fee
the variable is the cost charged for actual
usage of the service (electricity, cellphone
plan)
Step Cost
fixed part changes abruptly at various
activity level (supervisor's salary)
COMMON COST
cost of facilities or services employed in
two or more accounting period
JOINT COST
cost of materials, labor and overhead
CAPITAL EXPENDITURE
intended to benefit more than one
accounting periods and recorded as an
asset
REVENUE EXPENDITURE
will benefit current period only
recorded as an expense
DIRECT DEPARTMENTAL CHARGES
costs that are immediately charged to a
particular manufacturing department
that incurred the cost
INDIRECT DEPARTMENTAL CHARGES
costs that are originally charged to other
department but transferred to another
department that indirectly benefited the
cost
STANDARD COST
predetermined cost of dm, dl, and fo
accumulated past data
OPPORTUNITY COST
the benefited given up when one
alternative is chosen over another
not rewarded in accounting system
DIFFERENTIAL COST
present under one alternative but absent
in whole in under another alternative
INCREMENTAL COST
increase in cost from one alternative to
another
DECREMENTAL COST
decrease of cost
MARGINAL REVENUE
revenue that can be obtained from
selling one more unit of product
MARGINAL COST
cost involved in producing one more unit
of product
either fixed or variable
RELEVANT COST
future cost that changes across the
alternatives (cogs, advert., commissions,
dep.)
OUT-OF-POCKET COST
requires the payment of money as a
result of their incurrence
SUNC COST
future decision, not differential cost
should be used in analyzing future
course of action
CONTROLLABLE COST
if that level has power to authorize the
cost (management level)
VARIABLE COST
if activity increases by 20%, total variable
cost increases by 20% also
cost per unit remains constant as volume
change within a relevant range
when activity doubles from 10 to 20 units,
total variable cost doubles from 1,000 to
2,000; however, the variable cost per unit
remans the same as activity changes
as activity changes, total variable cost
increases/decreases proportionately with
the activity change, but unit variable cost
remains the same
sa fixed cost- total fixed cost ang dili
machange
sa variable cost- variable cost per unit
ang dili machange
HIGH-;LOW POINT METHOD
VARIABLE RATE=( highest point cost - lowest
point cost) / (highest output - lowest output)
FIXED COST
highest cost- (variable rate x highest output)
or
lowest cost- (variable rate x lowest output)
TOTAL COST
FIXED COST + VARIABLE COST
or
FIXED COST + (VARIABLE COST PER UNIT x
ACTIVITY LEVEL)
COST PER UNIT= TOTAL PRODUCTION COST
/ TOTAL UNIT PRODUCED
COGS= COST PER UNIT x UNITS SOLD
EXPENSES= COGS + PERIOD COST
NET INCOME= REVENUE - EXPENSES
VARIBALE MANUFACTURING COST
PER UNIT= DM + DL+ FO (PER UNIT)
under variable cost
VARIABLE COST PER UNIT= DM + DL+
FO+ PERIOD COST (PER UNIT) under
variable cost
FULL MANUFACTURING COST PER
UNIT= VARIABLE MANUFACTURING
COST PER UNIT + FIXED
MANUFACTURING COST PER UNIT
FULL COST TO MAKE AND SELL PER
UNIT= VARIABLE COST PER UNIT +
FIXED COST PER UNIT
LEAST SQUARE METHOD
summation of y= na + b
(summation of x)
summation xy= summation of x
(a) + b (summation of x2)
y= a + bx
CHAPTER 3- COST ACCOUNTING
CYCLE
MANUFACTURING INVENTORY ACCOUNTS
MATERIALS INVENTORY
WORK IN PROCESS INVENTORY
FINISHED GOODS INVENTORY
MATERIALS INVENTORY
also known as MATERIALS INVENTORY
CONTROL account
made up of the balances of materials and
supplies on hand
sa MERCHANDISE INVENTORY, idebit na
diritso ang COST OF GOODS SOLD og
credit ang MERCHANDISE INVENTORY
sa MANUFACTURING, idebit or itransfer
sa WORK IN PROCESS INVENTORY
ACCOUNT og credit MATERIALS
INVENTORY
WORK IN PROCESS INVENOTRY
all manufacturing cost incurred and
assigned to products being produced
no counterpart in merchandising
accounting
issuance of materials production begins
the production process
DIRECT LABOR earned by factory
employees are also PRODUCT COST
OVEREHAD COST are also PRODUCT
COST that must be assigned to specific
products
FACTORY OVERHEAD CONTROL
where accumulated and accounted
overhead costs are under
when products are completed, they are
transferred to finished goods storage
area and then transferred from WORK IN
PROCESS INVENTORY to FINISHED
GOODS INVENTORY
balance remaining in WORK IN PROCESS
INVENTORY account represents the
costs that were assigned to products
partly completed and still in process at
the end of the period
debit ang FINISHED GOODS INVENTORY
og credit and WORK IN PROCESS
INVENTORY
FINISHED GOODS INVENTORY
when products are sold, COST OF GOODS
SOLD are transferred from FINISHED
GOODS INVENTORY to COST OF GOODS
SOLD account
at the end of the period, the balance in
FINISHED GOODS INVENTORY are made
up of the completed goods but not yet
sold
debit COST OF GOODS SOLD and credit
FINISHED GOODS INVENTORY
MERCHANIDSE INVENTORY
MANUFACTURING COST FLOW
TRANSFER THE MATERIALS INVENTORY,
FACTORY PAYROLL, AND FACTORY
OVERHEAD CONTROL (CREDITS) AND
DEBIT IT TO WORK IN PROCESS
INVENTORY
WHENEVER THERE'S FINISHED
PRODUCTS, TRANSFER /DEBIT IT TO THE
FINISHED GOODS INVENTORY
WHEN PRODUCTS ARE SOLD,
TRANSFER/DEBIT IT TO THE COST OF
GOODS SOLD
COST OF GOODS SOLD STATEMENT
MANUFACTURING INVENTORY
COST OF GOODS MANUFACTURED
STATEMENT
prepared to summarize the
manufacturing activity of the period
COST OF GOODS MANUFACTURED=
PURCHASES (merchandising)
summary of dm, dl, fo and work-in-place
account
ELEMENTS OF MANUFACTURNING COST
DIRECT MATERIALS
DIRECT LABOR
FACTORY OVERHEAD
LAW ON SALES
LAW ON SALES
INTRODUCTION
SOURCES OF OUR LAW ON SALES
admixture of civil law and common law
CHAPTER 1: NATURE AND FORM
OF THE CONTRACT
Article. 1458
By the contract of sale, one of the
contracting parties obligates himself
to transfer the ownership of and to
deliver a determinate thing, and the
other to pay a price certain in money
or its equivalent.
Article. 1445
A contract of sale may be absolute
or conditional.
CONTRACT OF SALE
an agreement whereby one of the
parties (seller) obligates himself to
deliver something to the other
(buyer) who, in his part, binds
himself to pay therefor a sum of
money or its equivalent (price)
CHARACTERISTICS OF A CINTRACT
OF SALE
CONSENSUAL
perfected by mere consent
without any further act
BILATERAL
both of the contracting parties are
bound to fulfill correlative obligations
towards each other
(the seller delivers; the buyer pays)
ONEROUS
the thing sold is conveyed in
consideration of the price and vice
versa
COMMUTATIVE
the thing sold is considered the
equivalent of the price paid and
vice versa
however, the contract may be
ALEATORY as in the case of the
sale of a hope ( e.g., sweepstakes
ticket
NOMINATE
it is given a special name or
designation in the Civil Code
namely, " SALE"
PRINCIPAL
it does not depend for its existence
and validity upon another contract
ESSENTIAL REQUISITES OF A
CONTACT OF SALE
1. CONSENT
or the meeting of the minds
consent to the part of the seller to
transfer and deliver and on the part of
the buyer to pay
3 DIFFERENT KINDS OF SALE UNDER THE
LAW
ORDINARY EXECUTION OF SALE
JUDICIAL FORECLOSURE OF SALE
EXTRA-JUDICIAL FORECLOSURE SALE
SALE OF CONJUGAL PROPERTY
requires the consent of both the
husband and wife
absence of consent means sale is
NULL or VOID
2. OBJECT or SUBJECT MATTER
refers to the determinate thing which
is the object of the contract
the thing must be determinate or at
least capable of being made
determinate
subject matter may be personal or
real property
3. CAUSE or CONSIDERATION
refers to the "price certain in money or
its equivalent" (check, promissory note)
NATURAL ELEMENTS OF A
CONTACT OF SALE
inherent/presumed
which are deemed to exist in certain
contracts (warranty against eviction,
warranty against hidden defects)
ACCIDENTAL ELEMENTS OF A
CONTACT OF SALE
which may be present or absent
depending on the stipulation of the
parties
(conditions, interests, penalty, time or
place)
2 KINDS OF CONTRACT OF SALE
ABSOLUTE
sale is not subject to any conditions and
where title or ownership passes to the
buyer upon the delivery of the thing sold
CONDITIONAL
sale is subject to certain conditions
usually the FULL PAYMENT of the
purchase price
the delivery of the thing sold does not
transfer ownership until the
CONDITION is FULFILLED
1.
REQUISITES CONCERNING OBJECTS
THINGS
A. DETERMINATE
B. LICIT or LAWFUL/LEGAL
not be contrary to law, morals, good
customs, public order and public policy
if the subject is illicit, the contract is
VOID and cannot be ratified
KINDS OF ILLICIT THINGS
Illicit per se (of its nature)
Illicit per accidens (because of some
provisions of law declaring it illegal)
C. NOT IMPOSSIBLE
within the commerce of man
2. RIGHTS
all rights which are not
INTRANSMISSABLE or PERSONAL may
be the object of sale
EFFECTS OF ABSENCE OF
PRICE/NON-PAYMENT OF PRICE
no sale without a price
non-payment of the purchase price is a
RESOLUTORY CONDITION which the
remedy is either RECISSION or SPECIFIC
PERFORMANCE
failure to pay price in full within a fixed
period does not, by itself, dissolve a
contract of sale in the absence of any
agreement that payment on time is
essential
an action to declare a contract void or
inexistent does not prescribe
RIGHT OF VENDOR TO TRANSFER
OWNERSHIP
ONE CAN SELL ONLY WHAT HE OWNS
for a sale to be valid, the seller must be
the OWNER or at least must be
AUTHORIZED by the owner of the thing
sold
nobody can dispose of that which he
does not have
SUFFICIENT IN RIGHT EXISTS AT TIME OF
DELIVERY
it is sufficient if he has the right to sell
the thing at the time when the ownership
is to pass
SUBJECT MATTER MUST BE DETERMINATE
WHEN THING IS DETERMINATE
when it is particularly designated or
physically segregated from all others
of the same class
identified by its individuality
(the watch i'm wearing, my car)
SUFFICIENT IF SUBJECT MATTER IS
CAPABLE OF BEING MADE DETERMINATE
the thing is determinable or capable of
being made determinate without the
necessity of a new further agreement
between the parties
if it cannot be known what may have
been sold; the contract shall be NULL
or VOID
SALE OF THINGS HAVING POTENTIAL
EXISTENCE
future thing not existing at the time the
contract is entered into but has a
potential or possible existence
ownership will be vested upon the
buyer when it comes into existence
it must be owned already by the
vendor at the time
SALE OF HOPE OR EXPECTANCY
refers to an "expected thing" which is
not yet in existence
VALID unless the hope or expectancy is
VAIN, in which case the sale is VOID
GOODS WHICH MAY BE THE OBJECT
OF SALE
A. EXISTING GOODS OWNED OR POSSESSED
BY THE SELLER
B. FUTURE GOODS
goods to be manufactured, raised or
acquired
SALE OF FUTURE GOODS
valid only as an EXECUTORY CONTRACT
to be fulfilled by the acquisition and
delivery of the goods specified
SALE OF UNDIVIDED INTEREST IN A THING
BY SOLE OWNER
may sell the entire thing or only
specific portion thereof
designate as an aliquot making the
seller and buyer co-owner of the thing
BY CO-OWNER
owner of the undivided interest
can dispose his share even without the
consent of the co-owner
FUNGIBLE GOODS
refer to interchangeable goods such as
grains, oil etc. that allow one to be
replaced without loss of value
if the quantity (number, weight measure) of
the mass is MORE THAN the quantity sold,
the parties shall become co-owners
if the quantity (number, weight measure) of
the mass is LESS THAN the quantity sold,
the buyer becomes the owner of the mass
CONTRACT OF AGENCY
a person binds himself to render some
service or to do something in
representation or on behalf of another,
with the consent or authority of the latter
IN SALE
buyer receives the
goods as owner
buyer has to pay the
price
buyer cannot return
the object sold (gr)
seller warrants the
thing
buyer can deal with
the thing as he
pleases
AGENCY
agent receives/ owner
is principal
agent only account
proceeds
can return the objects
makes no warranty
must deal with the
object as per
instructions to him by
the principal
CONTRACT OF PIECE OF WORK
the contractor binds himself to execute a
piece of work for the employer in
consideration of a certain price
IN SALE
manufactures for the
general market
within the statute of
fraud
PIECE OF WORK
manufactured
specially for he
customer upon his
order
not for the general
market
not within the statute
of fraud
before delivery, risk is
borne by the
contractor
CONTRACT OF BARTER
one of the parties binds himself to give
one thing in consideration to other's
promise to give another thing
IN SALE
if the monetary
consideration is
MORE THAN or
EQUAL to the value of
the thing given as
part of the
consideration
BARTER
if the value of the
thing given as part of
the consideration
EXCEEDS the
monetary
consideration
NO SALE IF PRICE IS NOT CERTAIN OR
ACERTAINABLE
it must be certain or capable of being
made ascertained in money or its
equivalent
WHEN PRICE IS NOT CERTAIN
the parties have fixed or agreed upon
upon a definite amount
it be certain reference to another thing
certain
the determination is left to the judgment
of a third person
IF THE THIRD PERSON REFUSES OR CANNOT
FIX THE PRICE
the contract shall become ineffective, as
if no price had been agreed upon, unless
the parties subsequently agree upon the
price
IF THE THIRD PARTY IS PREVENTED FROM
FIXING THE PRICE DUE TO A FAULT OF
EITHER OR BOTH OF THE PARTIES
can resort to rescission or fulfillment with
damages in either cases
if the innocent party chooses fulfillment,
the court shall fix the price
CONTRACT TO SELL
a formal agreement in which one agrees to
sell something to a buyer at a time in the
future and the buyer agrees to buy it;
ownership doesn't transfer automatically
until certain conditions are fulfilled
IN SALE
title passes to the
buyer upon delivery
risk of loss is on the
buyer (res perit
domino "the thing
perishes with the
owner" )
non-payment is a
negative resolutory
condition
CONTRACT TO SELL
stipulated that
ownership remains in
the seller until full
payment
risk is borne by the
seller
full payment is a
positive suspensive
condition
EFFECT OF FAILURE TO DETERMINE PRICE
WHERE CONTRACT EXECUTORY
contract is without effect
no obligation to both parties
WHERE DELIVERY HAS BEEN MADE
the buyer must pay a reasonable price
reference is the market price
SALES OF SEPARATE LOTS AUCTION ARE
SEPARATE SALES
each lot is the subject of a separate contract
of sale
RIGHTS OF THE SELLER TO BID IN THE
AUCTION
such right was reserved
notice was given that the sale is subject
to a right to bid in behalf of the seller (to
avoid puffing)
EFFECT OF GROSS INADEQUACY OF PRICE
IN VOLUNTARY SALES
does not affect a contract of
unless it may indicate a defect in the
consent
or the parties really intended a donation
or other act of contract
IF THE PRICE IS SIMULATED OR FALSE
the sale is VOID but the contract shall be
VALID as a donation
IF THE CONTRACT IS NOT SHOWN TO BE
DONATION OR ANY OTHER ACT OR
CONTRACT TRANSFERRING OWNERSHIP
contract is VOID and INEXISTENT
THE DETERMINATION OF THE PRICE CANNOT
BE LEFT TO THE DISCRETION OF ONE OF THE
CONTRACTING PARTY
WHERE THE PRICE WAS FIXED BY ONE PARTY
IS ACCEPTED BY THE OTHER, THE CONTRACT
IS PERFECTED
the right to bid by the seller is not
prohibited by law
RISK OF LOSS OR DETERIORATION
IF THE THING IS LOST BEFORE PERFECTION
seller bears the loss
LOST AT THE TIME OF PERFECTION
no effect; contract is void
LOST AFTER THE PERFECTION BEFORE
DELIVERY
buyer bears the loss (exception to res
perit domino)
LOST AFTER DELIVERY
buyer bears the loss
SALE BY DESCRIPTION
purchaser has not seen the article and
relies on the description
when "bulk of goods" are delivered but do
not correspond to the description,
contract may be RESCIND
SALE BY SAMPLE
seller warrants that the thing sold and to
be delivered shall conform with the
sample in kind, character and quality
SALE BY DESCRIPTION AND SAMPLE
the goods must satisfy all the warranties
appropriate to either kind of sale and it is
not sufficient that the bulk of goods
correspond with the sample if they do not
correspond with the description and vice
versa
OPTION MONEY VS. EARNEST MONEY
money given is
distinct from the
purchase price
applies to sale not yet
perfected
buyer pays for the
consideration to
either to buy or not
not obliged to buy
may become earnest
money when both
parties agreed
money given is part of
the purchase price
given only where
there is already a sale
when given, buyer is
bound to pay the
balance
KINDS OF INCAPACITY
ABSOLUTE:
in the case of persons who cannot bind
themselves (minor, insane person,
demented)
RELATIVE:
where it exists only with the reference to
certain persons or a certain class of
property
NECESSARIES
things which are needed for sustenance,
dwelling, clothing and medical attendance
sale to minors involving necessaries are
VALID as long that they pay a reasonable
price
the minor has the right to recover any
excess above a reasonable value paid by
him
SALE BY MINORS
when minors pretend that they are now in
adult age while in fact they are not, the
sale is VALID
they are not excused to the obligation
made by them
RELATIVE INCAPACITY OF HUSBAND
AND WIFE
CHAPTER 2: CAPACITY TO BUY
AND SELL
GENERAL RULE:
all persons, whether natural or juridical, who
can bind themselves by contract have legal
capacity to buy and sell
EXCEPTION:
when the law determines that party suffers
from either absolute or relative incapacity
they are prohibited from selling property
to each other
they are also prohibited from making
donations to each other (except moderate
gifts during occasions)
REASON FOR PROHIBITION
primarily for the protection of 3rd person
who is relying upon supposed property of
either spouse
PERSONS PERMITTED TO QUESTION SALE
the heirs/creditors of either spouse at the
time of the transfer
government
INCAPACITY BY REASON OF RELATION TO
PROPERTY
the person, because of their position and
relation with the person under their
charge or property under their control,
are prohibited from acquiring said
property under their control
CHAPTER 3: EFFECT OF THE CONTRACT
WHEN THE THING SOLD HAS BEEN LOST
EFFECT OF LOSS OF THIING AT THE TIME OF
SALE
THING ENTIRELY LOST
they are the:
at the time of perfection, the contract is
inexistent and void because there is no
GUARDIANS
AGENTS
EXECUTORS AND ADMINISTRATORS
PUBLIC OFFICERS AND EMPLOYEES
JUDICIAL OFFICERS AND LAWYERS
OTHER PERSON DISQUALIFIED BY LAW
(ALIENS, UNPAID SELLERS, OFFICER
CONDUCTING AN EXECUTION OF SALE OF
PROPERTY TO ENFORCE A COURT JUDGMENT
RENDERED AGAINST THE OWNER)
object
REASON:
to prevent fraud on the part of the
persons enumerated therein and minimize
temptations to the exertion of undue and
improper influence
PROHIBITIONS IN EXTENDS TO SALE IN
LEGAL REDEMPTION
COMPROMISE
a contract whereby the parties, by
reciprocal concessions, avoid a litigation
or put an end to one already commenced
the amicable settlement of a controversy
RENUNCIATION
a creditor gratuitously abandons his right
against his debtor
condonation or remission
THING ONLY PARTIALLY LOST
the vendee may choose between
withdrawing from the contract and
demanding the remaining part, paying its
proportionate price
WHEN A THING IS LOST
its existence is unknown or it cannot be
recovered
perishes or goes out of commerce
SALE DIVISIBLE
when it consideration is made up with
several parts
SALE INDIVISIBLE
consideration is entire and single
specific thing
ratio and proportion
CHAPTER 4: OBLIGATIONS OF
THE VENDOR
Article. 1495
The vendor is bound to transfer the
ownership of and deliver, as well as
warrant the thing which is the object
of the sale.
PRINCIPAL OBLIGATION OF THE
VENDOR
to transfer the ownership of
to deliver the determinate thing
to warrant the thing
to preserve the thing with proper
diligence
pay for the expenses of the
execution and registration of the
deed of sale
NOTE:
The seller has no right to demand for
payments if he failed to to deliver the
determinate thing at the fixed time
period and when the time is the essence
of the contract
The vendee may cancel or resort to
resolution
OBLIGATION TO TRANSFER AND DELIVER
OWNERSHIP BY VENDOR AT THE TIME
OF PERFECTION IS NOT ESSENTIAL
as long that at the time the thing is going to
be delivered, the seller is already the owner
of the thing sold
TRANSFER NOT ESSENTIAL TO
PERFECTION OF CONTRACT
but if the seller does not deliver at the time
stipulated, the buyer may ask for recession
or fulfillment of the contract
NO OBLIGATION TOA MAKE DELIVERY
DURING PERIOD OF REDEMPTION
RIGHT OF VENDEE TO TRANSFER OF
CERTIFICATE TITLE
RIGHT OF BUYER TO RECOVER THE PRICE
PAID
JUDGMENT DEBTOR
not required to deliver the property right
away
has one year period to redeem he
property
the buyer should not take actual physical
possession to the property within the
period
Article. 1496
The ownership of the thing sold is
acquired by the vendee from the
moment it is delivered to him in any
ways specified in Art. 1457 to
Art.1501
EXCEPTIONS:
when seller and buyer agreed that
the ownership shall remain in the
seller until the full payment of the
purchase price
cost of sell
sale on approval, trial and
satisfaction
implied reservation of ownership
GENERAL RULE:
THE PAYMENT OF THE PURCHASE IS NOT
ESSENTIAL TO THE TRANSFER OF
OWNERSHIP AS LONG THAT THE PROPERTY
SOLD IS DELIVERED
Article. 1497
The thing sold shall be understood as
delivered when it is placed o the actual
control and possession of the vendee
KINDS OF DELIVERY
REAL or ACTUAL DELIVERY
the thing sold is under the control
and possession of the vendee
CONSTRUCTIVE DELIVERY
equivalent to actual delivery
KINDS OF CONSTRUCTIVE DELIVER
LEGAL FORMALITIES
through public instrument
SYMBOLICAL TRADITION/ TRADITIO
SYMBOLICA
symbol represents the thing sold
(key of a house)
QUASI- TRADITION
delivery of rights, credits,
incorporeal property
placing title of ownership by the
hand of a lawyer
allowing the buyer to make use of
the right
PUBLIC INSTRUMENT
a document prepared by a notary public
in the presence of the parties who sign it
before the witnesses
CONSTRUCTIVE DELIVERY REQUIRES 3 THINGS
BEFORE OWNERSHIP MAY BE TRANSMITTED
SELLER MUST HAVE CONTROL OVER HE
THING
BUYER MUST BE PUT UNDER CONTROL
THERE MUST BE INTENTION TO DELIVER
THE THING FOR THE PURPOSE OF
OWNERSHIP (not merely to allow
inspection)
TRADITIO LONGA MANU
occurs by mere consent and
agreement
by pointing
TRADITIO BREVI MANU
the vendee already has the
possession of the thing sold
(lessee bought the property his
renting)
TRADITIO CONSTITUTUM
POSSESSORIUM
opposite of tradition brevi manu
vendor continues to be in
possession of the thing sold not as
an owner but in other capacity
(owner sold his property and rent it)
Article. 1499
deals with traditio longa manu and
traditio brevi manu
speaks about MOVABLE property
Article. 1500
speaks of traditio constitutum
possessorium
basis is consent
seller continues to occupy the land as
tenant, the possession by fiction of law,
is deemed to be constituted in the buyer
Article. 1501
deals with the delivery of INCORPOREAL
PROPERTY through:
CONSTRUCTIVE TRADITION
execution of public instrument
QUASI- TRADITION
placing titles of ownership in the
possession of the buyer, or use by the
buyer of his rights, with the seller's
consent
INTERMEDIATE ACCCOUNTING
LIABILITIES
a PRESENT OBLIGATION of an entity to
TRANSFER OF AN ECONOMIC RESOURCE
as a RESULT OF PAST EVENTS
the payor must be identified
the payee is not necessary to be
identified
not recognized until it is incurred
ECONOMIC RESOURCE
the asset that represents a right
has the potential to produce economic
benefit
pay cash, transfer non-cash assets,
provide service at the future
LEGAL OBLIGATION
legally enforceable as a consequence of
binding contracts and statutory
requirement ( accounts payable)
CONSTRUCTIVE OBLIGATION
you're the one who made the obligation
to maintain good business relations
CASH DIVIDEND- there is an accounting
liability
SHARE DIVIDEND- no accounting liability
(because shares is NOT AN ASSET but rather
an EQUITY)
OBLIGATING EVENT
past events that lead to a legal or
constructive obligation
creates a present obligation
EXAMPLES OF LIABILITIES
Accounts Payable
Amounts Withheld
Accruals
Cash dividends declared not paid
Deposits and Advances from customers
Debt obligations for borrowed funds
Income Tax Payable
Unearned Revenue
MEASUREMENT OF CURRENT LIABILITIES
conceptually, all liabilities are measured
initially at PRESENT VALUE and
subsequently at AMORTIZED COST
CURRENT LIBILITIES/ SHORT TERM
OBLIGATIONS
measured, recorded, and reported at
FACE VALUE
Reason:
because the value between the face
value and present value is not material
NONCURRENT LIABILITIES
NON-INTEREST BEARING
I:PRESENT VALUE
S: AMORTIZED COST
INTEREST BEARING
I:FACE VALUE
S: FACE VALUE
CURRENT LIABILITIES
expects to settle within the entity's
OPERATING CYCLE
held primarily for the purpose of TRADING
due to be settled within 12 months AFTER
reporting period
does not have an unconditional right to
defer settlement
TRADE PAYABLES , ACCRUALS for employee
and OTHER OPERATING COST are classified as
current liabilities even if settled more than 12
months after reporting period because they
are WORKING CAPITAL
HELD FOR TRADING
incurred with an intention to repurchase
them in the near term
NONCURRENT LIABILITIES
liabilities not classified as current
residual definition
EXAMPLES OF NONCURRENT LIABILITIES
Noncurrent portion of long-term debts
Finance lease liability
Deferred Tax liability
Long-term obligation to officers
Long-term deferred revenue
liability which is due to be settled within
twelve months after the reporting period is
classified as current even if:
a. original term was for a period longer than
twelve months
b. an agreement to refinance or reschedule
the payment on a long term basis is
completed after the reporting period but
before the financial statements are authorized
to be issued
if before reporting period, it will be just an
adjusting and it will be noncurrent
it will still be noncurrent if the entity has
the discretion to refinance even if it would
due to a shorter term
if the entity has the unconditional right to
extend the payment date, it will still be
noncurrent
REFINANCING AGREEMENT (if current daan)
naa kay utanag daan- nangutang ka og
bag'o para ibayad saimong daan ng utang
mu take effect siya kung when nahitabo
ang agreement sa pagrefininace
if naay discretion ma noncurrent siya
basta at least 12 months
current siya if after reporting period
nahitabo ang agreement sa refinancing
current siya bisan before sa reporting
period pero ang term is less than 12
months
noncurrent if before reporting period og at
least 12 months
GR: Liabilities to be settled beyond 12 months
are considered noncurrent except:
there's a breach of contract
if naay covenant or condition ang lender and
na breach sa entity, mahimong payable on
demand ang liability (current)
Exception:
mubalik pagka noncurrent if ang lender
magprovide og grace period of 12 months
after the reporting date on or before the
end of reporting date
(ang grace period kay beyond one year dapat;
so if ang on or before end of reporting date
kay Dec. 31,2020, dapat ang maturity date kay
Jan. 1, 2022)
kung giwaive sa lender ang breach sa
covenant on or before the end of reportng
date (as if wala nahitabo ang
breach/giforgive sa lender)
if noncurrent daan dayun naay refinancing
nahitabo after the reporting period,
noncurrent gyapon siya still (gr)
if 2021 karon then imong utang mag due sa
2030, and nahitabo ang breach sa 2021,
ang noncurrent mahimong current
if noncurrent sa 2021 then nabreach sa
2022 pero before sa issuance sa fs mahimo
siya nga current sa view sa 2022 pero sa
pagrecord sa 2021, noncurrent gyapon kay
wala nahitabo ang brecah sa 2021
sa 2021 noncurrent daan and nahitabo ang
breach sa 2021 nahimong current pero if
sa 2021 gyapon nahitabo ang grace period
mubalik ra siya pagka noncurrent
sa 2021 noncurrent daan and nahitabo ang
breach sa 2021 nahimong current pero if sa
2022 nahitabo ang grace period (before sa
issuance sa fs) current gyapon ang
pagrecord kay 2021 man magbase, so kay
current man sa 2021 and sa 2022 paman
siya na noncurrent tungod sa grace period,
CURRENT ang pagrecord
kung noncurrent sa 2021 and nahitabo ang
breach sa 2022 pati ang grace period
(before issuance sa fs), NONCURRENT ang
irecord kay noncurrent man siya sa 2021
and 2021 man magbase (idisclose lang
dayun ang nahitabo sa 2022)
ESTIMATED LIABILITY
obligation which exists at the end of the
reporting period although their amount is
not definite
either current or noncurrent
for premiums, awards points, warranties,
gift certificates and bonus
ACCOUNTING ENTRIES
"LIABILITY METHOD"
DR: CASH
CR: UNEARNED INCOME
DR: UNEARNED INCOME
CR: INCOME
"INCOME METHOD"
DR: CASH
CR: INCOME
DR: INCOME
CR: UNEARNED INCOME
GIFT CERTIFICATE
a voucher given as a present that is
exchangeable for a specified cash value of
goods or service from a particular place of
business
don't have an expiry date made by DTI
current liability
DEFERRED LIABILITY OR UNEARNED INCOME
income already received but not yet
earned
Sold: C-GCP
realizable within one yea or more than one
Redeemed: GCP-Sales
year
Not Sold:GCP-ForfeitedGC (income account)
if realizable within one year, it is CURRENT
REFUNDABLE DEPOSIT
LIABILITY
consist of cash or property received from
customers but which are refundable after
CURRENT LIABILITIES EXAMPLE:
compliance of a certain condition
1.
UNEARNED INTEREST INCOME
Ex: deposits of bottles, drums, barrels
2.
UNEARNED RENTAL INCOME
ACCOUNTING ENTRIES
3. UNEARNED SUBSCRIPTION REVENUE
SOLD: C- CONTAINER'S DEPOSIT
PAGBALIK SA CONT.- CONT. DEP- C
NONCURRENT LIABILITIES EXAMPLE:
WALA GIBALIK- CONT. DEP- CONTAINER
1.
LONG-TERM SERVICE CONTRACTS
2.
LONG-TERM LEASEHOLD ADVANCES
BONUS
a financial compensation that is above and
beyond the normal payment expectations of
its recipient
PERCENT OF INCOME BEFORE BONUS
AND BEFORE TAX
B= %(NET INCOME)
SHORTCUTS
CASE 2 : B= BR x NI
1 + BR
PERCENT OF INCOME AFTER BONUS AND
BEFORE TAX
B= %(NET INCOME- BONUS)
PERCENT OF INCOME AFTER BONUS AND
AFTER TAX
B= %(NI-B-T) ; T=%(NI-B)
PERCENT OF INCOME AFTER TAX AND
BEFORE BONUS
B= %(NI-T) ; T=% (NI-B)
CASE 3: B= BR x NIAT
1 x BRAT
CASE 4: B= BR x NIAT
1 - (BR x TR)
INTERNATIONAL BUSINESS AND
TRADE
BUSINESS
also known as firm or enterprise
organization involved in the trade
of goods, services or both to
consumers
for profit or non-profit
INTERNATIONAL BUSINESS
comprises all commercial
transactions (private and
governmental. sales, investments,
logistics and transportation)
take place between two or more
countries or regions
transactions such as transfer of
goods and services, technology,
managerial knowledge, capital to
other countries
INTERNATIONAL BUSINESS EXAMPLE
FOREIGN RETAIL STORE IN
ANOTHER COUNTRY
OPERATING A MANUFACTURING
PLANT OVERSEAS
EXPORTING PRODUCTS TO OTHER
COUNTRIES
IMPORT PRODUCTS FROM OTHER
COUNTRIES
INVEST IN BUSINESS IN ANOTHER
COUNTRY
MICHAEL H. MOFFET
international business is the process
of focusing on the resources of the
globe and objective of the
organization on globe opportunities
and threats and in order to produce ,
buy and sell or exchange of
goods/services world wide
MICHAEL R. CZINKOTA
international business consists of
transactions that are devised and
carried across national borders to
satisfy the objectives of individuals,
companies, and organizations
ROGER BENNET
international business involves
commercial activities that cross national
frontiers
concerns the international movement of
goods, capital service, employees and
technology
comprises exporting and importing of
intellectual properties
SCOPE OF INTERNATIONAL BUSINESS
PRIMARY TYPES
IMPORTING AND EXPORTING OF
TANGIBLE GOODS (MERCHANDISE)
IMPORTING AND EXPORTING
INTANGIBLE GOODS (SERVICES)
DIRECT FOREIGN INVESTMENT
SECONDARY TYPES
LICENSING AND FRANCHISING
ROLE OF SCIENCE IN TECHNOLOGY
to have a large scale production
IB, POLICY MAKER AND BUSINESS
EXECUTIVE SHOULD CONSIDER:
how ideas, goods/services will fit in
international trade
enter through trade or investment
get supply domestically or
internationally
product adjustments
possible threats
CLASSIFICATION OF INTERNATIONAL
BUSINESS
TRADING
MANUFACTURING/ MARKETING
GLOBAL SOURCING FOR
PRODUCTION
LICENSING
process of permitting new party in
foreign country in order to produce
or sell goods under trademarks,
patents or copyrights in lieu of some
fees
FRANCHISING
distributing products or services
involving a franchisor, who
establishes the brand's trademark or
trade name and a business system,
and a franchisee, who pays a royalty
and often an initial fee for the right to
do business under the franchisor's
name and system.
FOREIGN INVESTMENT
involvement of funds abroad in
exchange for financial return
DIMENSIONS OF INTERNATIONAL
TRADE
INTERNATIONALIZATION OF MARKET
PRESENCE
INTERNATIONALIZATION OF SUPPLYCHAIN
INTERNATIONALIZATION OF CAPITAL
BASE
INTERNATIONALIATION OF
CORPORATE MINDSET
OBJECTIVES OF INTERNATIONAL
BUSINESS
PROFIT ADVANTAGE
GROWTH OPPORTUNITIES
REMOVING DOMESTIC CONSTRAINS
EARN FOREIGN EXCHANGE
SPREAD BUSINESS RISK
GET BENEFIT FROM THE GOV'T
REASONS FOR ENTERING INTERNATIONAL
BUSINESS
I. PULL/ PROACTIVE ATTRACTIVENESS OF
THE FOREIGN MARKET
PROFIT ADVANTAGE
LOW WAGES & CHEAP LABOR
GROWTH OF REGIONAL BLOCKS
DUE TO FREE TRADE REGIME
BUSINESS EXPANDED
II. PUSH/ REACTIVE FORCES
SATURATION OF DOMESTIC DEMAND
SCALE OF ECONOMIES AND
TECHNOLOGICAL REVOLUTION
DOMESTIC RECESSION
COMPETITION AS A DRIVING FORCE
IMPROVING IMAGE OF THE
COMPANY
GOVERNMENT POLICIES AND
REGULATIONS
STRATEGIC VISIONS
IMPROVING PROFIT MARGINS
COST SAVINGS
NEW SALES
NEW TALENTS
DIVERISFYING
FOREIGN INVESTMENT
NATURE OF IB
transactions of more than one country
done by ind. orgs. gov't
transfer of knowledge, skills, people,
tech, capital info, other resources
large in scale
satisfy customer
has significant influence to economic,
social and political life,
BENEFITS OF INTERNATIONAL
BUSINESS
MARKET EXPANSION
NON-AVAILABILITY OF A PRODUCT
IN A NEW MARKET
COST ADVANTAGE
PRODUCT DIFFERENTIATION
ECONOMIC RECESSION IN ONE'S
OWN COUNTRY
LOSS OF DOMESTIC MARKET SHARE
GROWTH IN DEMAND IN OTHER
MARKET
EXCESS CAPACITY OF PRODUCTION
ECONOMIES OF SCALE
PURCHASING POWER
GLOBALIZATION
spread of the flow of financial
products, goods, technology,
information and jobs across national
borders and cultures
in economic terms, an
interdependence of nations around
the globe fostered through free
trade
social, cultural, political, and legal
phenomenon
SOCIALLY
leads to greater interactions among
various population
CULTURALLY
exchange of ideas, values, and artistic
expressions among cultures
POLITICALLY
shifted attention to intergovernmental
organizations like the UNITED
NATIONS and the WORLD TRADE
ORGANIZATION
UNITED NATIONS
maintain international peace and
security, develop friendly
relations among nations, achieve
international cooperation and be
a center for harmonizing the
actions of nations
WORLD TRADE ORGANIZATION
regulates and facilitates
international trade
to establish, revise and enforce
rules in international trade
LEGALLY
altered how international law is
created and enforced
ADVANTAGES OF GLOBALIZATION
enhance productivity
benefits of transfer of technology,
capital and knowledge
increase trade
increase employment
opportunities
promote newly industrialized
economies
DISADVANTAGES OF GLOBALIZATION
threats to socio-cultural values
inequitable distribution of benefits
and resources
erosion of national sovereignty
insecurities in job and income
environmental degradation
rise of unfair competition
TWO TYPES OF ECONOMIES
PROTECTIONISM
protecting one's economy from
foreign competition by creating
trade barriers
North Korea- limited trade
agreement
TRADE LIBERALIZATION
reducing trade barriers to make
international trade easier between
countries
TRADE BARRIERS/ TARIFFS
required fees on import/export
goods
FREE TRADE
trades without tariff and taxes
CANADA AND KOREA
TRADE BLOC
agreement to reduce or eliminate
trade barriers
NAFTA, ASEAN
OUTSOURCING
manufacturing jobs transfer from
developed nations to developing
nation to reduce cost of prodcts
MULTINATIONAL CORPORATION
a company that has business
operations in at least one country
other than its home country.
TRANSNATIONAL CORPORATION
do not have subsidiaries companies
just many companies
has its own system
VERICAL FOREIGN DIRECT
INVESTMENT
when a multinational acquires an
operation that either acts as a
supplier or distributor.
investment is made within the
supply chain, but not directly in the
same industry.
Ex: Hersheys, a US chocolate
manufacturer, may look to invest in
cocoa producers in Brazil.
HORIZONTAL FOREIGN DIRECT
INVESTMENT
a company initiates a similar
operation or business model in
another country
expands its domestic operations to
a foreign country
Ex: McDonald's opening
restaurants in Japan