Business Finance Homework Help

This week’s reading included chapters five, six, and seven. Chapter five is all about Investment Decisions, and what factors businesses and individuals take into consideration when investing their money. It describes investing as being willing to trade money today, for money in the future, and if done correctly, it will more than likely be more money than what you put in. People are hesitant to invest for multiple reasons including the risk factors, and the initial payment. Not everyone has enough for an initial investment, which is very important in the process. The chapter continues by talking about the break-even point. You find this point from dividing fixed costs by the contribution point (Hilton, 2019). Companies use this formula to decide if what they’re doing or plan to do is profitable. If they are expecting to make more than the break even point, than what they are doing is profitable, and they should continue to do it.

Chapter six explains pricing, and how businesses decide what to charge the consumer for their products. Business is all about supply and demand, and the relationship between the producer and the consumer. Two factors they use is Marginal Revenue (MR) and Marginal Cost (MC). If MR is more than MC than they should reduce the price and increase quantity. This is because consumers will buy more and demand more as the price is reduced. If it is the other way around than they should increase price and reduce quantity (Helton, 2019).

The final chapter of this week’s reading was chapter seven, which explained economies of scope and scale. Economies of scale are all about a company and how they vary from the short run to the long run. Factors that are fixed in the short run, but turn to variable in the long run are an example of this. There are constant returns to scale, decreasing returns of scale (diseconomies of scale, and increasing returns to scale (economies of scale). A business aims for economies of scale, where their average cost decreases with the output.

1. I am still very new in the department that I work in at University of the Cumberlands. This past week we purchased a brand-new camera for our photographers to take pictures during sporting events. With every investment and purchase, there is an opportunity cost. This camera cost around $1,500 with all the lenses and other accessories that came with it. In this scenario, the opportunity cost would be what we could’ve spent that $1,500 if we did not buy the camera. We could’ve invested this money in something else, however, we decided to spend it on the camera to increase the quality of pictures taken. This quality increase also betters our website and social media pages where we put the photos, we take on display. The better our content is as a department; the more people will like and talk about it. This will make the college look good, and then we might get more money for the department. This is how this purchase is an investment to make money in the future.

Resources

Hilton, Ronald W. (2019). Managerial accounting + connect access card: Creating value in a dynamic business environment. MCGRAW-HILL EDUCATION.