1. Financing and Producing Goods
Economics Chapter 10
Financing and Producing Goods

2. Section 1: Investing in the Free-Enterprise System
Financing- obtaining funds, or money capital.
Personal funds
Friends or family
Financial Institution
Selling Stock

3. Cost-benefit analysis
Should you expand
1. Estimate costs of expansion
2. Calculate expected revenues, income
3. Calculate expected profits, revenues – costs
4. How much to borrow funds
5. If profits are more than expand

4. Why People are willing to Finance Investment
Savers make interest, money used to finance
Financers make interest on the loan
Businesses compete for scarce loans
Expansion costs high = less businesses expanding
Expansion costs low = more expansion

5. Section 2: types of Financing for Business Operations
Business Credit Check
Debt Financing- Borrowing money to finance a business
Three Kinds of Financing
Short-Term Financing-Taken out for a year or less. Farmers
Intermediate-term Financing- Through loans and leasing
Long-term Financing- selling of stocks and bonds

6. Choosing the Right Financing
Interest Rates- Higher rates hold off borrowing
Financial Condition of the Company
Market Climate- Right now is a bad time to expand
Control of the Company- Common stock holders may have to vote to offer more stock.

7. Section 3: The Production Process
Production- Changing resources into goods.
Consumer goods- sold directly to individuals
A. Planning- Location
Nearness to markets
Raw materials
Labor supply
Transportation facilities

8. Steps in Production Operations
B. Purchasing- Who to buy materials from.
C. Quality control- Checking products to meet company standards
D. Inventory Control
More inventory = less capital for other activities.

9. Technology and Production
Mechanization- combine labor and machines (1700s)
The Assembly Line- Ford Motor Company (Early 20th century)
Division of Labor
Automation- Machines do the work and people oversee them.
Robotics- Do all the work