Business Economics

• 26 hrs lectures
• 26 hrs exercises

The aim of the course is to introduce students to the basic theoretical knowledge of business economics and the interdependence of relationships in business practice. The economic aspect of the subject is emphasized in the lectures and the emphasis is placed on the acquisition of professional terminology. Students acquire professional knowledge and skills in business economic management, which are divided into six blocks and complement each other. Upon completion of the course, students will:

• can define a business, business, understand the business environment, business objectives, understand the business life cycle,
• can define the asset and capital structure of an enterprise and the factors that influence them;
• can explain the nature of financing and investing in an enterprise;
• can explain the concepts of revenue, costs, profit and loss, value added;
• can explain production and supply activities,
• can explain the nature and importance of financial analysis, including the measurement of business performance;
• can explain the nature of value management;
• be able to prepare cost and price calculations;
• define and analyse the turning point;
• define the basic control tools of economic management of an enterprise.

On the basis of the knowledge and skills acquired, students should be able to practically apply knowledge of business economics to lower functions in the enterprise or in the business itself. The course provides a comprehensive view of business economics and forms the basis for the teaching of related vocational subjects in the upper years of study.

Secondary school knowledge and skills.

1. Basic categories of business economics.

• Business (legal form of business, function of business) and stakeholders of the business.
• Characteristics of business objectives. System of managing strategic objectives of the business.
• Life cycle of the business.

2. Asset and capital structure of the business.

• Business assets (long-term and short-term assets).
• Factors influencing the asset structure.
• Enterprise capital (equity and debt capital). Overcapitalization and undercapitalization.
• Optimal capital structure (average cost of capital – WACC).
• Enterprise balance sheet.

3. Production activities of an enterprise.

· Revenues and costs, operating results and their interrelationships.

· Economy, economic efficiency, economic effectiveness.

· Cost functions of a company.

· Basic methods for determining the cost function of a company.

· Compiling a start-up budget.

4. Economic decision-making.

· Cost management (classification of costs by type and purpose).

· Calculation of costs. Calculations.

· Classification of costs depending on production volume.

· Managerial approach to costs. Relationship between profit, production volume, price, and costs.

· Sensitivity analysis of individual parameters.

5. Production and supply activities of the company

· Determination of production capacity.

· Modeling of the basic production process.

· Compilation of individual types of material stocks.

· ABC and JIT inventory management methods.

6. Financial and investment decision-making in the company.

· Basics of company financing (external and internal financing sources).

· Working capital management (cash conversion cycle, net working capital analysis).

· Cash flow management.

· Inventory and receivables management.

· Investment decision-making (time value of money).

· Evaluation of the economic efficiency of investments.

7. Performance measurement and enterprise value management.

· Financial analysis methods (analysis of absolute indicators, analysis of differential indicators, analysis of ratio indicators). Pyramid systems of indicators.

· Enterprise value management. Economic value added.

8. Control tools for economic management.

• Financial accounting.
• Analyses.
• Budgets.
• Controlling and internal audit.
• Human resources.

1. Test questions and fill-in-the-blank exercises practicing basic concepts of business economics such as business, entrepreneur, entrepreneurship, legal forms of business, business objectives, shareholders and stakeholders, business environment, classification of businesses according to individual categories. Practice of individual phases of the business life cycle. Case studies focused on determining the basic characteristics of a specific model business according to individual categories of business classification, division of entities into shareholders and stakeholders and their placement in the business environment, determination of the phase of the life cycle in which the business is located.

2. Numerical examples focused on compiling the components of a company's assets according to the structure of assets and liabilities in the balance sheet, determining the value of total assets, fixed and current assets, and their share of total assets. Determining the value of total liabilities, equity, and external sources and their share of total liabilities. Calculation of undercapitalization and overcapitalization indicators. Calculation of the optimal capital structure using the WACC indicator.

3. Numerical examples focused on compiling the components of a company's costs and revenues according to the structure of the profit and loss statement, determining the value of the company's pre-tax profit and loss for the current accounting period. Calculation of EBIT, EBT, and EAT indicators. Examples focused on cost functions. Model example of compiling a start-up budget.

TEST I. Verification of knowledge of the material lectured and practiced in blocks 1–3 using numerical examples.

4. Numerical examples focused on the calculation of full own costs (standard calculation formula; calculation by division – simple calculation by division, step-by-step calculation, calculation with ratios; mark-up calculation). Numerical examples focused on calculating incomplete own costs (single-stage, two-stage). Numerical examples focused on break-even point analysis and determining the minimum volume, minimum price, maximum variable costs, and maximum fixed costs of a product at which a company achieves zero profit.

5. Numerical examples focused on production and supply activities. Model example of a basic production process. Examples of the ABC method. Case study of the JIT method.

6. Numerical examples focused on the analysis of net working capital, cash conversion cycle, and capital requirements for financing current assets. Numerical examples focused on discounts and interest. Numerical examples focused on calculating present and future value. Numerical examples focused on methods of evaluating the economic efficiency of investments.

7. Numerical examples focused on calculating operating ratios (cost of revenue, productivity) and profitability ratios. Calculation of economic value added. Numerical example focused on the financial analysis of a specific business model using methods such as absolute indicator analysis, differential indicator analysis, ratio indicator analysis, and pyramid indicator systems.

TEST II. Verification of knowledge of the material presented and practiced in blocks 4–7 using numerical examples.

There is the oral examination. Skills of the student are tested on two tests.
Two tests:
TEST I (7.- 8. week): 20 points
TEST II (11-12.week): 20 points
Minimum number of points to get the credit: 25 points.
The grade is given on the basis of two control tests and oral examination.

The checking during the semester is based on the completion of two tests. In the case of excused absence from seminars, teacher can, in justified cases, set a alternative condition - usually the procession of the alternative