Business Unit 2: Overview and CFO Roles
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Questions and Answers

What is one of the primary responsibilities of a Chief Financial Officer (CFO)?

  • Financial reporting (correct)
  • Product development
  • Customer service management
  • Market research

How can a CFO help in adapting to changing business environments?

  • By capitalizing on new opportunities (correct)
  • By avoiding any form of digital technology
  • By focusing exclusively on cost-cutting measures
  • By interpreting historical business trends only

What is a characteristic of a mixed economy?

  • No government intervention in the economy
  • Full privatization of all industries
  • Some allocation of resources by the market and some by government (correct)
  • Complete government control over resources

What does privatization involve with respect to crown corporations?

<p>Selling crown corporations to reduce government’s role (B)</p> Signup and view all the answers

Which competency is NOT considered valuable for a CFO?

<p>Exclusively traditional accounting skills (B)</p> Signup and view all the answers

What is a primary advantage of entering global markets?

<p>Opportunity to expand customer base (A)</p> Signup and view all the answers

Which of the following is NOT a strategy to enter global markets?

<p>Retail Expansion (D)</p> Signup and view all the answers

Which method of entering global markets allows for the least commitment and risk?

<p>Licensing (B)</p> Signup and view all the answers

What role does the Canada Border Service Agency (CBSA) play in imports?

<p>They monitor imports to ensure compliance with safety standards. (D)</p> Signup and view all the answers

Why might small businesses be more effective in foreign markets compared to multinational corporations?

<p>They are quicker to react to market changes. (C)</p> Signup and view all the answers

What is the primary goal of free trade?

<p>To trade without political or economic obstruction (D)</p> Signup and view all the answers

How does comparative advantage affect international trade?

<p>It leads countries to export what they produce most efficiently. (A)</p> Signup and view all the answers

What is a consequence of trade protectionism?

<p>It limits the variety of products available to consumers. (C)</p> Signup and view all the answers

Which agreement removed 98% of tariffs between Canada and the EU?

<p>CETA (B)</p> Signup and view all the answers

What is a common outcome of trade agreements like NAFTA?

<p>Improved working conditions and fair competition. (B)</p> Signup and view all the answers

What do tariffs specifically refer to in trade?

<p>Taxes on imported goods. (A)</p> Signup and view all the answers

What is the purpose of an import quota?

<p>To protect domestic products by restricting the quantity of imports. (B)</p> Signup and view all the answers

Which of the following is NOT considered a trade barrier?

<p>Enhancing comparative advantage (B)</p> Signup and view all the answers

What is a significant drawback of licensing as a business strategy?

<p>Loss of trade secrets (B)</p> Signup and view all the answers

Which of the following describes franchising?

<p>Licensing rights to use a business name (A)</p> Signup and view all the answers

What advantage does contract manufacturing provide?

<p>Testing new markets with lower costs (A)</p> Signup and view all the answers

Which of the following is a key benefit of a joint venture?

<p>Shared resources and expertise (D)</p> Signup and view all the answers

What characterizes a strategic alliance?

<p>A long-term partnership without shared risks (B)</p> Signup and view all the answers

What is one of the challenges of foreign direct investment (FDI)?

<p>Compliance with multiple regulations (D)</p> Signup and view all the answers

What is a potential risk associated with exporting?

<p>Difficulty in finding global customers (A)</p> Signup and view all the answers

Why do local governments encourage foreign investment?

<p>To enhance local job creation (B)</p> Signup and view all the answers

What is a common reason for small business failure related to financial management?

<p>Starting with too much capital without care (B)</p> Signup and view all the answers

Which critical element of business management focuses on understanding customer preferences?

<p>Understanding your Customers (A)</p> Signup and view all the answers

What can be a consequence of failing to complete accurate records in a business?

<p>Poor decision-making (A)</p> Signup and view all the answers

Which factor does NOT contribute to small business failure?

<p>Careful financial planning (A)</p> Signup and view all the answers

What is the primary advantage of globalization for consumers?

<p>Increased options available (A)</p> Signup and view all the answers

Which statement best describes the relationship between importing and exporting?

<p>They work together to create a balance of trade. (D)</p> Signup and view all the answers

What is one important action businesses should take when borrowing money?

<p>Plan how and when to repay it (C)</p> Signup and view all the answers

What problem does a business face when it mistakes independence with freedom?

<p>Poor financial management (D)</p> Signup and view all the answers

Why might small businesses need to appeal to foreign markets?

<p>To increase global connectivity (D)</p> Signup and view all the answers

Which of the following is NOT a critical element of business management?

<p>Social Networking (C)</p> Signup and view all the answers

What is the primary advantage of small businesses in Canada to the economy?

<p>They represent 98% of employer businesses. (C)</p> Signup and view all the answers

Which of the following is a disadvantage associated with sole proprietorships?

<p>Unlimited liability. (A)</p> Signup and view all the answers

What is a key characteristic of partnerships?

<p>Based on a partnership agreement. (D)</p> Signup and view all the answers

Why do businesses that are easier to start often face higher failure rates?

<p>They tend to have greater competition in the marketplace. (B)</p> Signup and view all the answers

What is a significant advantage of corporations compared to sole proprietorships?

<p>Limited liability for owners. (A)</p> Signup and view all the answers

What is one of the outcomes of increased competition brought by businesses like Air Canada?

<p>Improved efficiencies and reduced costs for consumers. (A)</p> Signup and view all the answers

Which is a common characteristic of small businesses in Canada?

<p>They usually have 1 to 99 employees. (A)</p> Signup and view all the answers

What does the term 'unlimited liability' imply for sole proprietors?

<p>They are fully responsible for business debts. (D)</p> Signup and view all the answers

How does having a corporation affect business continuity?

<p>Corporations have indefinite life. (A)</p> Signup and view all the answers

What factor contributes to the success of businesses that are harder to start?

<p>Lower competition due to barriers to entry. (C)</p> Signup and view all the answers

Which of the following is NOT an advantage of partnerships?

<p>Unlimited liability among partners. (A)</p> Signup and view all the answers

What is a common reason businesses fail after easily entering the market?

<p>They lack innovation due to market saturation. (B)</p> Signup and view all the answers

What distinguishes a corporation from a sole proprietorship?

<p>A corporation is a separate legal entity. (D)</p> Signup and view all the answers

Which of the following best describes the concept of business continuity?

<p>The ability of a business to operate indefinitely. (C)</p> Signup and view all the answers

Flashcards

CFO Responsibilities

A CFO is responsible for financial reporting, control, compliance, and aspects of operations, human resources, and information technology, focusing on how the business adapts to changes.

Business Purpose

Business is an activity undertaken for profit.

Business Challenges (Canada)

Early Canadian businesses faced challenges such as large land, low population, inadequate infrastructure, and border tariffs.

Mixed Economy

An economic system that combines market-based allocation of resources with government intervention.

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Crown Corporation

A company owned and operated by a federal or provincial government.

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Small Business Failure: Plunging In

Starting a business without first testing it on a small scale, like a pilot project, to gauge demand and refine the concept.

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Small Business Failure: Underpricing/Overpricing

Setting prices too low, leading to losses, or too high, deterring customers, both hindering profitability.

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Small Business Failure: Capital

Starting with insufficient funds, or mismanaging abundant capital, leading to financial strain and potential failure.

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Small Business Failure: Lack of Knowledge

Entering the market without understanding the industry, competition, or customer needs, leading to unpreparedness and difficulty succeeding.

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Small Business Failure: Debt Management

Borrowing money without a clear plan for repayment, increasing financial hardship and potentially leading to default.

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Small Business Failure: Setbacks & Expenses

Not accounting for unexpected expenses, like repairs or unforeseen market changes, leading to financial surprises and potential failure.

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Small Business Failure: Record Keeping

Failing to maintain accurate and comprehensive records, hindering financial tracking, decision-making, and potential tax compliance.

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Small Business Failure: Extravagance

Carrying personal spending habits into the business, leading to unnecessary expenses and financial strain.

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Small Business Failure: Business Cycles

Ignoring the natural fluctuations of the market, like booms and recessions, which can impact profitability and stability.

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Small Business Failure: Hidden Costs

Overlooking essential operational costs, such as taxes, insurance, and regulatory fees, leading to inaccurate financial planning.

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Canadian Exports: Direct vs. Intermediary

Canadian companies can export directly to foreign customers or use an intermediary like a distributor to sell their goods.

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Canadian Imports: Monitoring and Safety

The Canada Border Service Agency (CBSA) monitors goods imported into Canada to ensure they meet safety standards and regulations.

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Licensing: Least Commitment

A domestic company grants a foreign company the right to produce and sell its products in exchange for a fee.

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Foreign Direct Investment: Highest Commitment

A company invests directly in a foreign country by setting up a subsidiary or acquiring an existing business.

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Strategies for Global Markets: From Least to Most Commitment

Various strategies exist for entering global markets, ranging in commitment and control, from licensing to foreign direct investment.

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What is free trade?

Free trade is the exchange of goods and services between countries without political or economic barriers, aiming for mutual benefit.

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Comparative Advantage

Countries specialize in producing what they do best (most efficiently) and trade with others to get what they need.

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Trade Barriers

Government actions designed to limit or restrict international trade, often to protect domestic businesses.

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Tariffs

Taxes imposed by a government on imported goods, making them more expensive for consumers.

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Import Quotas

A limit on the quantity of specific products that a country can import.

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Embargo

A complete ban on trade with a specific country or for specific products, often due to political or cultural reasons.

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Non-Tariff Barriers

Rules and regulations that make it difficult for foreign goods to enter a market, even if there are no tariffs.

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CETA (Canadian-European Union Comprehensive Economic Trade Agreement)

An agreement between Canada and the EU to remove most tariffs on goods traded between them, boosting trade.

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Small Business Definition

A small business is independently owned and operated, not dominant in its field, and typically has 1 to 99 employees.

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Small Business Importance

Small businesses play a crucial role in the Canadian economy. They account for 98% of employer businesses and employ 70% of the workforce.

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Sole Proprietorship

A sole proprietorship is a business owned and operated by one person. The owner is personally liable for all debts and obligations of the business.

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Partnership

A partnership is a business owned by two or more people. The partners have a partnership agreement that addresses important aspects of the business, including financial contributions, profit sharing, decision-making, and dispute resolution.

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Corporation

A corporation is a separate legal entity with its own liabilities. It can have an unlimited number of owners called shareholders.

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Advantages of Sole Proprietorship

Sole proprietorships are easy to set up, have lower start-up costs, offer freedom and control for the owner, and have fewer regulatory requirements.

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Advantages of Partnership

Partnerships are easy to form, have shared start-up costs and resources, allow for shared management, and have fewer regulatory requirements.

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Advantages of Corporation

Corporations offer limited liability, business continuity, greater access to financing, possible tax advantages, and the ability to transfer ownership easily.

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Disadvantages of Sole Proprietorship

Sole proprietorships have unlimited liability, a limited lifespan, difficulty raising funds, and business income is taxed on the owner's personal tax return.

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Disadvantages of Partnership

Partnerships have unlimited liability, potential conflicts between partners, a limited lifespan, and business income is taxed on the partner's personal tax returns.

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Disadvantages of Corporation

Corporations have higher start-up costs, greater regulatory requirements, and business income is taxed separately from the owner's personal income.

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Business Failure Reasons

Not all business closures are failures. Some may be due to retirement, ownership changes, or other factors.

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Easy Entry, High Failure

Businesses that are easy to start often face greater competition, higher supply, and lower prices, leading to higher failure rates. They may lack the potential for significant growth.

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Hard Entry, High Success

Businesses that are harder to start often have lower competition, lower supply, and can charge higher prices, leading to higher success rates and profitability. They usually require specialized knowledge or significant investments.

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Competition Benefits

Competition can benefit consumers by leading to innovation, improved efficiencies, and lower prices.

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Licensing

A company grants another company the right to use its brand, technology, or product for a fee.

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Exporting

Selling products to another country.

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Franchising

A company (franchisor) sells the rights to use its brand name and sell its product/service to another company (franchisee).

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Contract Manufacturing

Outsourcing production to foreign manufacturers who create your product and attach your brand or trademark.

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Joint Venture

Two or more companies partner for a large project, sharing resources and expertise.

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Strategic Alliance

A long-term partnership between companies to support each other and gain market advantages. No sharing of costs, risks, or profits.

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Foreign Direct Investment

Investing directly in a foreign country, often by setting up a subsidiary company.

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Why do governments encourage foreign investment?

Foreign investment boosts local economies, creates jobs, introduces new technologies, and generates tax revenue.

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Study Notes

Unit 2: Overview of Business

  • Understanding Business as a Financial Leader:
    • Chief Financial Officer (CFO) responsibilities: Financial reporting, control, compliance, operations, human resources, information technology (e.g., digitization, cybersecurity)
    • Emphasize business understanding for better decision-making in adapting to changing business environments
    • Importance of understanding changing trends and anticipating future developments to capitalize on opportunities
    • Expected to help align activities with company strategy for value, innovation, and growth

Introduction to Business

  • Business is an activity intended for profit
  • Challenges of Canadian business: large land, low population density, infrastructure gaps, tariffs with the US to protect Canadian businesses
  • Canada's mixed economy: some resources allocated by the market and some by various levels of government
  • Crown Corporations: federally or provincially government-owned/operated companies (e.g., CBC)
  • Privatization of some businesses.

Reducing the Role of Government

  • Reducing the role of government through the sale of crown corporations (e.g., Air Canada)
  • Reducing government debt, increasing competition, and improving efficiencies and reducing costs for consumers
  • Emphasis on the importance of small businesses (98-99% of employers)
  • Significance of small business to the Canadian workforce (70%).

Forms of Business Ownership

  • Sole Proprietorship: Owned and operated by one person.

    • Advantages: easy setup, low start-up costs, freedom for owner

  • Partnership: A partnership agreement that outlines the business's nature, financial contributions, how profits are shared, decision-making process, dispute resolution, and partnership termination.

    • Advantages: easy setup, shared start-up costs, shared management, less regulatory requirements

  • Corporation: A separate legal entity with an unlimited number of owners.

    • Advantages: limited liability, business continuity, and possible tax advantages
    • Disadvantages: higher start-up costs, more complex regulatory requirements to manage records

Learning from Failure: Why Small Businesses Fail

  • Factors contributing to small business failures:
    • Easy entry to the marketplace leads to greater competition and lower prices
    • Difficulties in charging competitive prices for businesses that are harder to start due to lower supply
    • Insufficient research and planning
    • Insufficient capital (too little or too much)
    • Lack of knowledge or experience
    • Poor financial management
  • Importance of testing and refining business models

Going into Business

  • Starting a business with limited knowledge about market/industry
  • Not planning for unexpected expenses
  • Not maintaining accurate records
  • Habits of personal extravagance affecting business
  • Confusion between freedom and liberty in business
  • Importance of good business planning and strategy.

Impact of Globalization on Stakeholders

  • Benefits of globalization to businesses: more options, global connections with customers, clients or partners, potential global sourcing of resources and marketing more options
  • Small businesses having potential to reach more customers with access to internet and technology
  • Large companies outsourcing
  • Every country's different resources, environmental conditions, populations, knowledge, and expertise
  • Exporting and Importing: advantages of each
  • Trade surplus/deficit: Relationship between imports and exports
  • Free Trade: benefits of mutually beneficial trade without political/economic obstacles

Challenges

  • Each country wants to maximize revenues and protect workers, leading to trade barriers and potential greater bargaining power

  • Importance of comparative advantage (exporting what is produced effectively)

  • Theory of comparative advantage is prevented by governments protecting domestic industries

  • Free Trade and the flow of goods from one country to another

  • Trade Agreements (CETA, NAFTA): Agreements that support trade, such as removing tariffs, but may raise issues for specific industries.

  • Understanding trade protectionism: tariffs, import quotas, embargoes.

Entering Global Markets: Canada's Perspectives

  • Expanding customer base, additional profit potential from entering global markets
  • Costs and risks of entering global markets
  • Selling directly to international customers vs intermediaries (e.g., foreign distributors)
  • Small businesses can tailor products to meet customer needs in global markets.
  • MNCs manufacturing products in countries where they have physical presence.

Strategies to Enter Global Markets

  • Licensing (least commitment; foreign company makes your products)
  • Exporting (selling products to another country)
  • Franchising (selling the rights to use a business name and service)
  • Contract Manufacturing (outsourcing production)
  • Joint Venture (partnership of 2 or more companies to start a project)
  • Advantages and disadvantages of different strategies.

Foreign Direct Investment (FDI)

  • Benefits of FDI: Jobs, revenue, knowledge and technology transfer to local communities and country
  • Challenges of FDI: Regulations, legal considerations, political instability in host country, maintaining local control over resources, competition from other businesses
  • Governments' role: encouraging FDI (jobs, revenue)
  • Criticism of FDI: profit going to home country, potential lack of local innovation, possible conflict with local community interests

Future Opportunities and Challenges

  • Potential of emerging markets for Canadian businesses (e.g., BRICS nations)
  • Importance of building and cultivating relationships with other businesses

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Unit 2: Overview of Business Notes PDF

Description

This quiz explores the overview of business concepts, focusing on the role of a Chief Financial Officer (CFO) and the various responsibilities involved in financial leadership. It also highlights the unique challenges faced by Canadian businesses and the mixed economic structure of the country. Test your understanding of these key concepts to enhance your business acumen.

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