AU Blogspot

              Thanks to Mzelle Biscotte for permission to use this Photo. 

Any organization in which you find employment will have a variety of managers who have a variety of responsibilities.  A typical business will have sales, operations, financial, and other types of managers, each with a different viewpoint on what it takes for the company to succeed.  In smaller enterprises a manager may wear several of these hats.  In a large corporation managers tend to be more specialized, either as to their duties or their geographic area or product line. 

These managers speak different “languages” and sometimes the result can be a virtual Tower of Babel.  For an example of this, you might try sometime asking an accountant, a plant supervisor, and an engineer what it costs the company to make a particular product.  Having completed this course you should now be able to communicate effectively with a financial manager, and you should also know how to read and interpret financial statements, determining what they’re telling you and what they aren’t.  Armed with these skills you now have the ability to ask the right questions to make better decisions both as a manager and as an investor.  And you can appreciate why the accountant, the plant supervisor, and the engineer would look at “cost” differently.  You needn’t expect them to all agree, so long as you recognize how you need to view the cost of a product. 

Whatever profession you choose, if you’re not already tied to one, you’ll need to master its language and those of professions tied to individual departments, as well.  These could include production, purchasing, materials management, human resources, sales and marketing, and even corporate legal disciplines.  This is the purpose of a general business education such as the one you are pursuing at Ashworth University. (more…)

Consumer confidence (the term used by the Conference Board) and consumer sentiment (the label used by the University of Michigan) are not quite at their all-time lows, but they are very close to them.

This seems a little odd because two of the biggest elements of consumer attitudes, unemployment and inflation, are quite benign.

Unemployment, at 5.5 percent, is a hair below its long-run average (5.6 percent).  Inflation (all items) is 4.1 percent, only a little above its long-run average of 3.7 percent.

Why the doom and gloom? (more…)

 
          Thanks to Rob West for permission to use this Photo.

Our new Ashworth University Discussion Forum has been sparking some lively debate.  If you haven’t checked out the forum yet, what are you waiting for?—get engaged with your student community!

Ashworth University Business Student, Frederick F, states: 

I recently completed the Macroeconomics course, and all the negative things about Keynes were wrong!

I do agree with government intervention to get the economy out of recession and depression as a better solution by lowering interest rates and major government projects to get people employed and spending money.

However… I wrote projects, not programs. Programs that are started to help people don’t usually work, just enough to keep people employed and create more red tape.

As for supply and demand side economics, I side with Jean-Baptiste Say whom said “Demand creates it’s own supply”

Keynes basically said that excessive saving can lead to recession or depression, True, but today we are experiencing excessive greed which is causing our current recession. (High gas prices and the mortgage crisis.)

Ashworth University Technical Services Supervisor And Resident Economist, John Ash, responds:

Well, Keynes’ ideas look dynamite on paper, but they suffer from the minute flaw of not actually holding up in the real world. I know, I know, we should ignore that and just let the beauty of his carefully constructed theories suffer no detractors, but those of us who are actually studying economics to understand the world better and use that knowledge to improve our own lives (i.e., make more money) can’t allow such intricate economic fallacies to remain unmolested.

Keynes’ theories were gospel for the economic advisors of the 60s and 70s, and it is generally believed (among economists anyway) that strict adherence to his policy recommendations led to the stagflation of those decades (stagflation is when the economy is in a recession but inflation is increasing, two things which are supposed to be mutually exclusive by Keynesian standards). Keynes is a good starting point for understanding economics, but modern post-industrial economies are far too complex to be modeled with it. Don’t fall into the trap of trying to find one unifying principle which will explain everything; it’s never going to happen. There are a lot of variables, and usually no single one is going to accurately predict the movement of the economy. (more…)

                   Thanks to J. Parks for permission to use this Photo. 

The most important phase of property valuation is also the most controversial and least known.  This procedure is called the rate of capitalization.  It is used to determine a market rate of capitalization.  Through this rate, estimated future net income can be converted into a sum of present value.  The rate of capitalization acts as a lever which pushes income into a height of value.  Here is how the lever works.  The lower the rate of capitalization is, the higher the value per dollar of income is.  Thus, the value of a particular property will also be higher.  The opposite is true if the rate is higher.  The higher the rate of capitalization is, the lower the value per dollar of income is.  Thus, the value of a particular property will also be lower. 

If speculation or motives other than investment buying are prime reasons for purchase, the sale price of the property in relation to its income is of little aid to an appraiser in search of applicable market rates of capitalization.  In fact, such sales may prove highly misleading as indicators of prevailing yields on real estate investments.  You can see why I stated earlier that the rate of capitalization procedure is very controversial.  This procedure has the potential to yield misleading results. 

Most appraisers would find themselves at a loss if the application of the income approach and the selection of a rate of capitalization had to be sustained solely by analysis of investment sales in their community.  You may wonder why this is true.  Well, real estate transactions are traditionally private in nature and factual income data is often difficult to obtain.  Thus, it is very difficult to select sales which could be usefully employed for statistical income analysis.

Although real estate as a commodity is local in character, the financing and purchase of real estate, both for investment and speculative purposes, have the distinct characteristics of a national market.  The mobility of credit and the flexibility of investment buying with income reserves and surpluses have channeled funds into community areas where the investment returns in relation to capital markets are the highest.  The existence of a national real estate investment market makes national income and rates of return statistics, compiled by investment firms and real estate analysts, available for real properties.  These national indices of investment yields, when adjusted for community and regional risks for given classes of real properties, can be used as effective guides in judging the reasonability of rates of capitalization secured from market analyses of comparable sales.  

Bob Chaapel
Real Estate Appraisal Instructor
Ashworth University

 
                   Thanks to PQZ for permission to use this Photo.

With regard to marketing your residential property, it is imperative to remember that first impressions can be made only once.  That is why curb appeal is so important.  Renters want a clean, attractive, safe, and comfortable environment.  When you provide that environment, potential renters will leave with a positive image of your complex.  

You have 30 seconds to make a positive impression on the prospective renter.  Be polite, positive, and interested in their specific needs when you’re touring prospective tenants through the property.  “Read” the customer to see what he or she is interested in when renting.  If you can find out what interests renters, you can gear your presentation to their needs. 

Marketing is essential for the success of the property.  Most residential properties lease units for a term of one year.  Even though many residential renters continue to rent the same unit, there is still the possibility that each unit could become vacant if the existing renter does not renew.  With that in mind, you need to be prepared to fill a vacancy at almost any time.

When preparing your budget, look over the past year’s expenses to get an understanding of what the needs of the property are.  However, never simply take last year’s expenses and add a percentage to predict the next year’s expenses.  Properties age differently, and you must perform periodic inspections to determine what fixtures and components are starting to wear out and when they will need to be replaced.Some properties host excellent tenant social functions that the renters love.  Give them entertainment and a way to mingle with each other, and you can create a very solid community of people who will stay year to year even when the rental rates increase.  Remember, some groups of people like apartments for their social life, and capitalizing on that could reap your owner excellent financial returns.

Chuck Perme
Property Management Instructor
Ashworth University

                  Thanks to Mattia for permission to use this Photo.

We’ve been fortunate enough to share the insightful perspectives of economist and entrepreneur Bill Conerly with our student community since this blog first launched in 2007.  Mr. Conerly is not only a contributing blogger, but someone we consider a friend of the greater Ashworth University community as well.  He was recently interviewed on the Small Business Advocate Radio Show on the topic of business planning after the recession.  The issues covered are of vital importance to anyone one with small business aspirations, so I highly recommend listening to this very informative podcast interview.  You can also visit Bill’s Businomics Blog to show your appreciation for his efforts on behalf of our Ashworth Blogspot readers.  Thanks everyone.

Ryan Rode
Ashworth University

  
               Image courtesy of Stanley Donwood/Radiohead.

Monday’s Wall Street Journal  had columns by Hillary Clinton and Barack Obama’s advisors.  In a post last week I chided Mitt Romney for glib generalities.  Now Clinton gives us the opposite extreme:  government by laundry list.  Remember some of the awful State of the Union speeches, in which the President (pick any recent president you wish) says: “There’s a problem with X; I have a new program.  There’s a problem with Y; I have a new program.  There’s a problem with Z; I have a new program.”  Well, that’s Hilary’s column.  I liked the internal consistency of her message at first, in that she presented a broad area of concern, then specified action steps to deal with the area.  That appeals to my analytical side.  But she shows no real philosophy about how government should operate, merely that for every conceivable problem there should be a new government program.  Gag.

If you don’t like laundry lists of specifics, then Obama is your man.  He apparently believes in content-free leadership.  His major theme: bringing people together.  Ending the divisive partisanship that infects Washington DC.  I’m not sold that a) he can end partisanship, and that b) we’ll get better policy without partisanship.  He has not made that case (it would require specifics, which Obama isn’t in to).  I confess that I really miss the Bill Clinton administration, when gridlock prevented action and we were all focused on that blue dress.  Remember, the economy was strong and the budget was in surplus while Congress was gridlocked.  Sigh. (more…)

 
                    Thanks to Dusdin for permission to use this Photo.

Fixed assets are an important part of every company.  These include the long-term assets that you do not plan to use up in under a year.  These items are dealt with slightly differently, and include Plant, Property and Equipment as the main categories.  Many times a company will have the CPA deal with these items, but you will be all the more valuable if you know how to account for them also!  Check this website for more information:  http://www.fixedassetinfo.com/

Misty Hand
Computer Accounting Instructor
Ashworth University School Of Business 

In updating my economic forecast for the new year, I surprised myself.  I walked into the spreadsheet moderately gloomy (I thought) and plugged in conservative numbers.  Out came the fairly pleasant forecast that is pictured above.

There’s weakness in the current (fourth) quarter, and then things look better.  I did put some dreadful numbers in for housing construction, but that sector is now only 4.5 percent of total GDP.  I clobbered housing starts, but that doesn’t have a huge impact on GDP.  I brought down the growth rate of consumer spending for a couple of quarters, and kept inventory growth down to near zero in the first half of 2008.What’s keeping the forecast up?  Export growth will remain strong, and import growth will weaken.  Nonresidential construction, though it will decelerate, still grows at a nice pace.  Late in 2008 I see business spending on equipment and software recuperating.  Defense spending grows at the recent pace, then the growth rate slows.  I have less confidence in this area.

Why the disconnect between my economic outlook and the news reports?  I think it’s a weighting issue.  For instance, when the housing starts numbers come out and they are rotten, that fact is seized on by the press.  Same thing for falling home prices. (more…)

Paul Krugman is simultaneously one of the most respected and controversial economists in the world.  Named by The Economist as “the most celebrated economist of his generation,” Krugman’s provocative opinion pieces in the New York Times often set the tone of political debates that appear across the cable/network television and talk radio wire.  It’s not uncommon for Meet The Press’s Tim Russert to relentlessly grill Presidential candidates on Krugman’s latest “op-ed”, so it’s clear that he does project quite a lot of political influence whether you agree with his analyses or not.  In this video, which you can view by clicking on the image above, you’ll watch Paul Krugman’s recent presentation at Google Headquarters.  Enjoy the video.  I look forward to hearing your perspective.

Ryan Rode
Interactive Services Manager
Ashworth University