MBUS 3000: Final Exam

CourseStructure object (207808) - University of Georgia

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in gnucash, what are the three main placeholder accounts?	1. assets 2. liability 3. equity
what kind of account is the agency escrow account?	current asset
what kind of an account is inventory?	current asset
what kind of an account is petty cash?	current asset
what kind of an account is Athens First Checking?	current asset
what kind of an account is the Ford E150 van?	fixed asset
what kind of an account are credit cards?	current liability
what kind of an account are unearned performance fees?	current liability
what kind of an account is the Athens First Loan?	long term liability
what kind of an account is merchandise sales?	income
what kind of an account are soft goods?	merchandise sales
cwhat kind of an account are performance fees?	income
what kind of an account is soft goods?	cost of goods sold
what kind of an account is agent's commission?	expense
what kind of an account is management's commission?	expense
what kind of an account are guaranteed payments?	expense
what kind of an account are GP Frank, Max, & Robert?	guaranteed payments
what kind of an account are fuel, per diems, supplies, tolls, parking, travel, lodging, vehicle depreciation, repair and maintenance?	touring and performing expenses
what kind of an account is Frank Capital?	equity
what kind of an account is Frank contributions?	Frank capital account
what kind of an account is Frank distributions?	Frank capital account
what kind of an account are opening balances?	equity
what is the formula for future value?	FV= PV * (1+i)^n i= interest rate for specified period n= number of time periods
calculate the value of a sum of $1800. Interest rate is 7% a year. The time period is one year. (The interest rate is only calculated once).	FV= 1800 * (1+.07) FV= 1926
calculate the future value of a sum of $4000. Interest rate is 4.5% a year. The time period is one year. (The interest rate is only calculated once).	FV= 4000 * (1+0.45) FV= 4180
what is the formula for present value?	PV= FV/(1+i)^n i= interest rate per period n= number of periods
what does interest rate represent?	the market expectation of inflation + risk
what is the formula for expected value?	E(X)= x1p1 + x2p2 + ... + xkpk
you have 1 in 10 chances of winning $100. the other 9 chances you win 0. calculate expected value.	E(X)= $1001/10 + $09/10 = $0 = $10
roll one dice. you win $1 for a 1. $2 for a 2, etc. etc. probability for each event is 1 in 6 or 1/6. calculate expected value.	E(X)= $11/6 + $21/6 + $31/6 + $41/6 + $51/6 + $61/6 E(X)= 3.5
what do higher interest rates mean in terms of risk and inflation?	higher interest rates= higher risk higher inflation
subprime, or more risky, borrowers pay (higher/lower) interest rates?	higher
who pays higher interest rates, Greece or Germany?	Greece
as the interest rate increases, PV (increases/decreases).	decreases
as the interest rate decreases, PV (increases/decreases).	increases
as the interest rate increases, FV (increases/decreases).	increases
as the interest rate decreases, future value (increases/decreases).	decreases
as the risk increases, PV (increases/decreases).	decreases
as the risk decreases, PV (increases/decreases).	increases
from the perspective of the record company, how do you calculate implied interest rate?	100%-artist royalty rate= implied interest rate
what kind of implied interest rate might a high risk new artist have?	100%-10%= 90% implied interest rate
what kind of implied interest rate might a lower risk, established artist have?	100%-20%= 80 % implied interest
what are the 3 principles of long tail/long volatility strategy?	1. the bleed 2. wildness 3. low overhead
in long tail/long volatility strategy, what is the bleed?	many small "bets" that rarely pay out
in long tail/long volatility strategy, what is wildness?	payouts or "upside" must be virtually unlimited. payouts must exhibit a "wild" variation. payouts more than make up for all the small losses.
in long tail/long volatility strategy, what is low overhead?	"bets" are inexpensive or acquired free in the course of other activities
what is a nickname for long tail/long volatility strategy?	"harvesting luck"
does Mixerman agree or disagree with Lowery's long tail/long volatility view of the music business?	he agrees
what is a perverse incentive?	a perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. perverse incentives are a type of unintended consequences.
what is an example of a perverse incentive?	paying medical professionals and reimbursing insured patients for treatment, but not prevention, encourages leaving medical conditions until they require treatment
what is the main perverse incentive in the music business?	managers and agents have the incentive to send artists on tour, profitable or not, because they are paid a % of gross live revenues
who all benefits from touring activity?	managers agents business managers record labels publishers merchandisers
what is the sophomore slump?	the tendency for second or "sophomore" albums to perform worse than an artist's abut album
what is the main reason for the sophomore slump?	generally the artist has there entire life to write their first album, but only 12-18 months to create their second album
what are the first three hidden incentives of managers to disregard the long term?	1. most artists have their greatest success on their first album 2. most management contracts are short (1-3 years) 3. most performing groups are unstable and rarely last more than 5 years
what are the second three hidden incentives of managers to disregard the long term?	4. it's less work (but often pays the same) to manage an artist for the short term 5. many of the big "commissionable" events happen at the start of an artist's career 6. the sophomore slump
what is the first traditional rule of management?	no meetings!
IF you have a meeting, what should you do?	-set a timer for meeting -invite as few ppl as possible -always have a clear agenda -begin with a specific problem -meet at the site of the problem -end with a solution and someone responsible for implementing it
what does P.O.L.C.A. stand for?	planning organizing leading controlling adapting
planning in POLCA	process of setting goals, developing strategies, and outlining tasks and schedules to accomplish the goals
organizing in POLCA	arranging elements into a purposeful order or structure; assembling required resources to obtain objectives
leading in POLCA	positively influencing others to achieve mutually satisfying goals
controlling in POLCA	the formal, information-based routines and procedures used to maintain or alter patterns in activities
adapting in POLCA	to make suitable to changing requirements or conditions; adjust or modify fittingly
what is planning in the music industry?	strategic- new record release strategy tactical- routing the tour with agent
what is organizing in the music industry?	arranging and having proper amplifiers on hand
what is controlling in the music industry?	not what you think it is very specific- "information based routines and procedures" examples- timecards and stage plots
what is leading in the music industry?	leading= positively influencing others to achieve mutually satisfying goals key word is "positively"
what is Lowery's view on adapting in the music industry?	you can't teach people this
when demand increases and supply remains the same, prices (rise/fall).	rise
when supply increases and demand remains the same, prices (rise/fall).	fall
in the music business, does demand directly increase prices for recorded music?	no- there is a virtually unlimited supply
in the music industry, does demand increase prices for live music?	yes, there is a limited supply
what were Felix Salmon and the president of StubHub's reactions to the LCD Soundsystem case?	the overwhelming majority of tickets went to brokers, and few if any were actually sold at face value on the public on-sale date
what is Lowery's stance on the LCD Soundsystem case?	he doesn't entirely agree another possibility is that James Murphy was paid a more than sellout fee, but in exchange the promoter was allowed to sell the tickets however they wanted. the secondary market acme the profit center for the promoter
what does the LCD Soundsystem case suggest for concert promoters?	good news- concert promoters only have a limited upside, making their business much tougher & skill is a lot more obvious and luck is not quite as important if they could hack into the secondary market and auction tickets to highest bidders, their upside isn't strictly limited (on a sh…
what are "black swans"?	promoters and venues profit from these
long volatility	-fail most of the time -lots of small losses and occasional big wins -scalable -luck
short volatility	-succeed most of the time -lots of small wins with occasional big losses -non-scalable -skill
what is a downside of short volatility careers?	certainty is overpriced-- you will have to buy certainty (aka pay a lot for an artist that you know will sell tickets)
what can a short volatility engineer become in order to make his career long volatility?	mix engineer or producer
what can a short volatility sideman musician become in order to make his career long volatility?	songwriter or recording artist
what can a short volatility concert promoter or tour manager become in order to make his career long volatility?	manager
what are the first three elements of a creative organization?	1. meaningful and challenging work accomplished by individuals to whom survival of the organization is important 2. employees have the freedom to engage in high levels of interpersonal interaction and take initiative unencumbered by rules 3. ideas and change initiatives are supported an…
what are the second three elements of a creative organization?	4. a trusting environment supports risk taking without fear of reprisal and ridicule if ideas fail 5. open debate occurs in an atmosphere characterized by equality, harmony, friendliness, and a disregard for prestige 6. opportunities exist for concrete experimentation and risk taking in…
what is chaos theory in the music industry?	chaos theory frames organizations as self-organizing, self-sustaining systems capable of creating high levels of effectiveness and efficiency. the systematic thinking that dominates this orientation can be described by four principles: a. process is the focus b. parts of the system cont…
what is insourcing?	doing things yourself that normally you would have other people do
in incsourings, progress moves self-sufficiency to what?	specialization
in insourcing, progress moves poverty to what?	wealth
in insourcing, progress moves low productivity to what?	high productivity
in insourcing, progress moves protected markets to what?	global markets
in insourcing, progress moves low technology to what?	high technology
if insourcing is done right, there is a net increase in what?	productivity
what is an example of insourcing?	Bandzoogle.com
what is Lowery's definition of insourcing?	big companies doing things for little companies or individuals
with successful insourcing, is there an overall gain or loss of productivity?	gain- the productivity loss form doing some things yourself is less than the productivity gain from the efficiency of a big company
what kinds of jobs in the most industry are non-scalable?	-performing live music -promoting concerts -engineering by the hour -short volatility
what kinds of jobs in the music industry are scalable?	-being a recording artist -record label -songwriter -publisher -producer -long volatility
characteristics of mediocristan	-non-scalable -normal variation -mild or type 1 randomness
three ways in which we fool ourselves into thinking the music business is not unpredictable:	1. gershing 2. the survivorship bias 3. the narrative fallacy
what is gershing?	to subtly or inconspicuously move away from an artist or project one once championed. often involves passing responsibility for artist or project to a subordinate
who is the biggest gersher in the music business?	Rick Reuben
when we engage in the narrative fallacy, what are we doing?	we are making the music industry seem more organized/less chaotic than it normally is
talent is overrated, but not ________	irrelevant
what is the survivorship bias?	the logical error of concentrating on the people or things that "survived" some process and inadvertently overlooking those that did not because of their lack of visibility
what is the Matthew Effect? secret reason record companies/publishing companies are profitable #1?	markets are bad at pricing wild variation. music sales exhibit a wild variation. generally markets underprice wild variation.
secret reason record companies/publishing companies are profitable #2?	due to a quirk of human nature, something called "risk averse/risk seeking inversion" and the related "prospect theory"- artists sell their services, sound recordings, and songs for too little, they underprice them
secret reason record companies/publishing companies are profitable #3?	musicians accept some of their compensation in non-monetary form. artists will underprice their songs and recordings in exchange for a chance ad fame and adulation!
secret reason record companies/publishing companies are profitable #4?	artists assume downside risks of touring. they are risk seeking when it comes to losses. also, touring is where they are most highly compensated with adulation
the evolution of how we model how humans behave in the economic realm:	--expected value-real value --expected utility --adjustments for risk seeking/risk aversion --prospect theory
dEaDbUg could spend spend $11 a day for rental car insurance. but loss of the vehicle costs $30,000. f they don't buy the insurance, what kind of behavior is this?	not spending the $11 a day would be risk seeking behavior towards losses
dEaDbUg could get a $60,000 advance to put out an album, or they could put it out themselves and have a 1/10 change of making $1,000,000. if they take the $60,000 advance, what kind of behavior is this?	risk adverse behavior towards gains
people are risk-seeking towards:	losses
people are risk-averse towards:	gains
when was the peak of the music business?	1999-2000, per capita US recorded music revenue was $71
what was the per capita US recorded music revenue is 2014?	$21.51 (-2.75% from 2013)
what is the innovator's dilemma?	because companies tend to innovate faster than their customers' lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers. by only pursuing "sustaining innovations" that perpetuate what has h…
what is a disruptive innovation?	an innovation that is disruptive allows a while new population of consumers access to a product or service that was historically only accessible to consumers with a lot of money or skill.
what are 3 examples of disruptive innovation?	email replaced US postal service MP3s replaced CDs home recording software replaced pro studio equipment
assets=liability + ________	owner's equity
what are some examples of current assets?	current assets are assets reasonably expected to be converted into cash or used in the current operation of the business (generally one year). examples: cash, notes receivable, accounts receivable, inventory, prepaid expenses, PayPal account, t-shirts, CDs
what are some examples of fixed assets?	fixed assets are long-lived assets used in the production of goods or services. these assets are used in the operation of the business rather than being held for sale, as are inventory items. examples: music equipment, the van, recording equipment, real estate
what are some examples of current liabilities?	these are liabilities that are due for payment within the operating cycle or one year, whichever is longer. the settlement of a current liability usually requires the use of current assets. examples: notes payable, accounts payable, accrued liabilities, withholdings, dividends payable,…
what are some examples of long term liabilities?	long-term liabilities are where funds are needed for a long-term purpose such as construction of a building. they are almost always interest-bearing and have a fixed due date. examples: long-term notes payable, mortgages payable, bonds payable, the loan for the van
what are some examples of contingent liabilities?	these are potential liabilities arising from past events. for example, when a note receivable is endorsed and transferred to another person, no liability is created. however, there is a possibility that a liability could exist in the future, because the maker of the note may not honor it.…
what are some examples of other assets? (other than long term assets)	this is essentially just a misc. category outside investments intangible assets "Goodwill"


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MBUS 3000: Final Exam

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