1. Definition of production.- Production is a process of combining various material inputs (things) and immaterial inputs (plans, knowledge) to make something for consumption (output).

    2. Classification of productive activities.-

      1. According to the segment where the product is directed.-

        1. Production by order.- The product has been manufactured because the client has ordered it

        2. Production for the market.- The product has been manufactured for the market in general.

      2. According to the degree of differentiation of the product.-

        1. Series production.- All products are the same

        2. Individualized production.- Each product is different

      3. According to the continuity of the production process.-

        1. Continuous process.- The activity doesn’t stop

        2. Discontinuous process.- The activity ends with the manufacture of the product and begins again when we make another product (eg the construction of an industrial unit)

    3. Allocation of productive resources.-

      1. Production factors. Evolution of the concept.-

        1. Classical economists.- They use the three factors that Adam Smith defined, each factor takes part in the result of production through a reward set by the market:

          1. Land (which is rewarded by rent)

          2. Work (which is rewarded by wage)

          3. Capital (which is rewarded by interest)

        2. Neoclassical economists.- They use only capital and labor

        3. Current economy.-

          1. Earth.- (More and more changed by human intervention). Today the land is considered a component of capital or a component of a broader natural factor (natural resources or natural capital)

          2. 4th factor of production.- In the economy of knowledge and business development produced since the end of the 20th century, people consider that technology and science (what has been called R + D - Research and Development - or even R + D + i –Research, Development and Innovation-) is a 4th factor of production that characterizes more and more production in industrialized countries. At the same time, to the concept of physical capital or financial capital is added the concept of human capital or intellectual capital, even social capital, as a way of explaining the improvement in productivity that isn’t due to the other factors.

          3. New factors of production.-

            1. Natural capital

            2. Physical capital

            3. Material work

            4. Intangible capital (knowledge, organization, non-physical but computable assets, intangible work, knowledge economy)

          4. Training.- Investment allows the volume of production factors to increase. Training can be considered a form of investment, because it increases the capacities of workers and production

    4. Relationship between families and companies.-

    1. Relationship between families and companies and the public sector.-

    1. Productivity of a factor.- Productivity of a factor = Quantity produced of a product : Incoming quantity of a factor

      1. Example.- Calculate labor productivity if the company needs 20 man/hours to produce 100 chairs

    1. Global productivity.-

      1. Restrictions.-

        1. As we refer to all production, where different types of products can exist, and to all factors, we can’t work only with quantities, but we must mix them, in monetary terms, through their prices.

        2. Normally, we compare the productivities of different years so we must use constant prices (the prices of the base year) to avoid inflation.

      2. Example.-

































        1. Overall productivity for the base period.-

        1. Global productivity for the next period.-

        1. Global productivity index.-

        1. Global productivity rate.-

    1. Project management model; PERT.-

      1. PERT model.-(click here to learn more about PERT)

        1. Functioning.-

          1. Critical path.- The PERT describes the critical path. It’s the path that takes the longest time to complete. In this path we can’t admit delays.

          2. Several.- It’s possible to have several critical paths








1. Start


Wash the lettuces


2. Sink 1


Wash the tomatoes


3. Sink 2


Chop the lettuces


5. Countertop


Chop the tomatoes


5. Countertop


Boil the eggs


4. Vitroceramic


Chop the eggs


5. Countertop




6. Salad bowl

        1. Graph.-

        1. Explanation.- In this example, activities A and C admit a delay of six minutes ((8 + 2) - (1 + 3)), because we need the lettuces after cooking and chopping the eggs (which lasts ten minutes). Activities B and D allow a delay of five minutes. Activities E, F and G don’t admit any delay because they’re on the critical path.

        2. Critical path.- The critical path is EFG.

        3. Duration.- We finish the salad in twelve minutes.

      1. Gantt chart.-

        1. Precedent.- It’s a precedent of the PERT method.

        2. Salad.- The Gantt chart of the salad would be:

        1. Problem.- Activities C and D follow activities A and B but we don’t know if activity C follows activity A or activity B.

        2. Six minutes.- This method allows you to know how the process is. So if we want to know how the process is when the time is six minutes:

          1. Completed activities: A, B, C and D totally and E (75%)

          2. Activities that haven’t started yet: E (25%) and F and G fully

    1. Competitiveness and quality.-

      1. How can we achieve competitiveness? .- We must achieve the costs that allow us to have good prices, but there’re two problems:

        1. The market sets the prices, not the company

        2. We can’t reduce costs by reducing quality

      2. The quality.-

        1. How can we measure it? .- Through the degree of adjustment to the production program and seeing if we have the attribute or attributes that satisfy the needs of consumers in the best way

        2. Total quality.- All the departments of the company have the responsibility of achieving quality

        3. How can we achieve quality? .- We must establish a standard and we must establish controls


    1. 4th factor of production.- In the economy of knowledge and business development produced since the end of the 20th century, people consider that technology and science (what has been called R + D -Research and Development- or even R + D + i –Research, Development and Innovation-) is a 4th factor of production that characterizes more and more production in industrialized countries. At the same time, the concept of physical capital or financial capital is added to the concept of human capital or intellectual capital, even social capital, as a way of explaining the improvement in productivity that isn’t due to other factors.

    2. Ways to obtain technology.-

      1. We can buy it from other companies or countries.- In this way we depend technologically on others and we can’t develop freely

      2. We can discover new technologies.- We need R + D + i departments. These departments are expensive and only large companies can have them

    3. The technological matrix.- The technological matrix helps us decide the best technology for our company and also indicates us whether we should buy it or invest in an R + D + i department.

    4. Technological innovation, intellectual property and consumer protection.- States create norms that defend technological innovation, that is why states create norms that defend intellectual property

    5. Main forms of intellectual property.-

      1. Patents.- A patent is a set of exclusive rights granted by the state (the national government) to an inventor or their assignment for a limited period of time (in Spain 20 years) in exchange for a public disclosure of an invention.

      2. Utility model.- A utility model is very similar to a patent, but usually has a shorter time (in Spain 10 years) and less strict patentability requirements

      3. Trademarks.-

        1. Definition.- A trademark is a distinctive sign or indicator used by an individual, a business organization, or other legal entities to identify that the products or services for consumers with which the trademark appears originate from a single source, and to distinguish your products or services from those of other entities.

        2. Maintenance.- Trademark rights must be maintained through the current and legitimate use of the trademark. These rights will cease if a trademark isn’t actively used for a period of time, normally 5 years in most jurisdictions (in Spain 10 years).


    1. Definition of costs.- It’s the value of the production factors that we have been spending to produce something

    2. Types of costs.-

      1. According to the way in which they are loaded to the project or the product.-

        1. Direct costs.-

          1. Definition.- They’re those for activities or services that benefit specific projects, eg. salaries for project personnel and materials required for a particular project. Because these activities are easily mapped to projects, their costs are usually charged to projects on an individual basis.

          2. Costs usually charged directly.- Project staff, consultants, project supplies, publications, travel, training, etc.

        2. Indirect costs.-

          1. Definition.- They’re those for activities or services that benefit more than one project. Its precise benefits to a specific project are often difficult or impossible to locate. For example, it can be difficult to determine precisely how the activities of an organization's director benefit a specific project.

          2. Costs usually assigned indirectly.- Utilities, rent, audit and legal, administrative staff, rental equipment, etc.

          3. Costs either charged directly or assigned indirectly.- Price of phone, computer use, project office staff, postage and printing, assorted office supplies, etc.

        3. Direct/Indirect.- It’s possible to justify the treatment of almost any type of cost as direct or indirect. Labor costs, for example, can be indirect, as in the case of maintenance personnel and official executives; or they can be direct, as in the case of project staff members. Similarly, materials such as miscellaneous supplies purchased in bulk - pencils, pens, paper - are typically treated as indirect costs, while materials required for specific projects are charged as direct costs.

      2. According to its dependence on the volume of activities.-

        1. Fixed costs.- These are business expenses that aren’t dependent on business activities. They tend to be related to time, such as wages or rent paid by the month.

        2. Variable costs.- They’re related to volume (and are paid by quantity)


    1. Overview.- In economics and business, specifically cost accounting, the break even point is the point where costs or expenses and income are equal: there is no net loss or profit. A profit or loss hasn’t been made, although the opportunity costs have been paid, and the capital has received a risk-adjusted return.

    2. Example.- If a business sells less than 200 tables each month, it will make a loss, if it sells more, it will make a profit. With this information, the manager will then need to see if they expect to be able to make and sell 200 tables per month.

    3. Graph.-

    1. Implementation.- If they think they can’t sell that much, to ensure viability they could:

      1. Fixed costs.- Try to reduce fixed costs (renegotiating the rent for example, or maintaining better control of telephone bills or other costs)

      2. Variable costs.- Try to reduce variable costs (the price you pay for tables by finding a new supplier)

      3. Price.- Increase the sale price of your tables.

      4. Either.- Any of these would reduce the break even point. In other words, the business wouldn’t need to make as many tables to ensure that it could pay its fixed costs.

    2. Calculation.- In the linear model of cost, volume and profit analysis, the break even point in terms of units sold (Q) can be directly calculated in terms of total revenue (I) and total costs (TC) as:

      1. where:

        1. CF are the fixed costs

        2. P is the price of the unit sold, and

        3. CVu is the unit variable cost

      2. The amount (P - CVu) is of interest in its own right, and is called the Unit Contribution Margin: it is the marginal benefit per unit


    1. Inventory costs.-

      1. Acquisition and production costs.-

      2. Fixed costs of entry into the warehouse.- Transportation costs, order costs, processing, etc.

      3. Storage costs.- Warehouse rental, internal movement of goods, control and maintenance

      4. Technical costs.-

        1. Obsolescence.- Technical obsolescence can occur when a new product or technology replaces the old one, and it becomes preferred to use the new technology instead of the old one. Historical example of replacement technologies causing obsolescence include CD-ROM on floppy disk which allowed for greater storage capacity and speed.

        2. Opportunity cost.- It’s the best choice available to someone who has chosen between several mutually exclusive choices

        3. Financial cost.- It’s the interest that I have to pay for the loan that I have requested to pay the warehouse

    2. The cycle of renovation of the warehouse and the safety stock.-

      1. Out of stock.- When we don’t have merchandise

      2. S = Order volume

      3. T = Replenishment time (time between two orders)

      4. S/T = Average depletion of stock (number of units sold per day)

      5. Sm= Stock level to place a new order

      6. d = Delivery period, in days, used by suppliers = (Sm- Ss): S/T

      7. Ss= Safety Stock (allows you to continue working when there’re delays in delivery days)

      8. Average warehouse stock = Ss + ½ S

      9. Example.- Knowing that the order volume is 500 chairs, the replacement time is five days, the safety stock is 300 chairs and the delivery time used by the suppliers is three days. Calculate: the average stock depletion, the stock level to place a new order and the average stock in the warehouse

      10. Solution.-

        1. Average depletion of stock = S/T = 500/5 = 100 chairs per day

        2. If we sell 100 chairs per day, the delivery time used by the suppliers is three days and the safety stock is 300 chairs; the stock level to place a new order will be: (100 x 3) + 300 = 600 chairs

        3. Average warehouse stock = Ss + ½ S = 300 + ½ 500 = 550 chairs

    1. Wilson Model.- (click here to learn more about the Wilson Model)

      1. Economic order quantity.- It’s the inventory level that minimizes total inventory maintenance costs and order costs.

      2. Variables.-

        1. Q = order quantity

        2. Q * = optimal order quantity

        3. D = quantity of annual demand for the product

        4. P = purchase cost per unit

        5. S = fixed cost per order (not per unit, in addition to unit cost)

        6. H = annual cost of ownership per unit (also known as cost of ownership or cost of storage) (warehouse space, refrigeration, insurance, etc. usually not related to unit cost)

      3. Formula.-


    1. Definition of externality.- An externality (or surplus transaction) is a cost or benefit, not transmitted through prices, incurred by a party that doesn’t agree with the action causing the cost or benefit. A benefit in this case is called a positive externality or external benefit, while a cost is called a negative externality or external cost.

    2. Prices don’t reflect the total costs/benefits.- In these cases in a competitive market, prices don’t reflect the total costs or benefits of producing or consuming a product or service, producers and consumers may or may not bear all the costs or not collect all the benefits of economic activity, and too much or too little of the merchandise will be produced or consumed in terms of overall costs and benefits for society. For example, manufacturing that causes air pollution imposes costs on the whole of society, while fire prevention at home improves the fire safety of neighbors.

    3. Overproduction/underproduction.- If there are external costs such as contamination, the merchandise will be overproduced by a competitive market, since the producers won’t take into account the external costs when they produce the merchandise. If there are external benefits, such as in areas of education or public safety, too little of the merchandise would be produced by private markets as producers and buyers don’t take into account external benefits for others. Here, the total cost and benefit to society is defined as the sum of the benefits and the economic costs for all parties involved.

    4. Types of externalities.-

      1. Negative externality.- A negative externality is an action of a product on consumers that imposes a negative secondary effect on a third party. Many negative externalities (also called "external costs" or "external diseconomies") are related to the environmental consequences of production and use.

      2. Positive externalities.- An example could be a beekeeper raising bees for his honey. A secondary effect or externality associated with its activity is the pollination of surrounding crops by bees. The value generated by pollination may be more important than the value of the honey collected.

      3. Positive externalities.-

        1. Position externalities.- Position externalities refer to a special type of externality that depends on the relative ranks of the actors in a situation. Because each actor is trying to "be better" than the other actors, the consequences are unforeseen and financially inefficient.

        2. Example.- An example is the phenomenon of “over-education” (referring to post-secondary education) in the North American labor market. In the 1960s, many young middle-class Americans prepared for their careers by completing a bachelor's degree. However, in the 1990s, many people from the same social background were completing master's degrees hoping to “be better” than other competitors in the job market, pointing to their highest quality as potential employees. By 2000, some jobs that had previously only required bachelor's degrees, such as political analyst positions, were requiring master's degrees. Some economists argue that this increase in educational requirements was above what was efficient,

        3. Solution.- A solution to such externalities is the regulation imposed by an external authority. The government could pass a law against companies requiring master's degrees unless the job actually required these advanced skills.

      4. Possible solutions.-

        1. Criminalization.-As with prostitution, addictive drugs, business fraud, and many types of environmental and public health laws.

        2. Civil tort law.- For example, a class action lawsuit against smokers, multi-product liability lawsuits.

        3. Government provision.- As with lighthouses, education and national defense.

        4. Taxes and subsidies.- Impose taxes or give subsidies that are equal in value to the negative externality.

        5. Agreement.- However, the most common type of solution is tacit agreement through the political process. The agreement is mutually beneficial.



    1. Market concept.- The market concept is any structure that allows buyers and sellers to exchange any type of merchandise, services and information. Market participants consist of all buyers and sellers of a commodity who influence its price. The market facilitates trade and enables the distribution and allocation of resources in a society. Marketplaces allow any tradable item to be evaluated and priced.

    2. Types of markets.-

      1. According to the type of goods.-

        1. Market of goods and services.-

        2. Factor market.- A factor market refers to a market where the production factors are bought and sold.

          1. Labor market

          2. Capital market

      2. According to government intervention.-

        1. Free market.- A free market is a market without intervention and economic regulation by the government except to respect property "property rights" and contracts.

        2. Controlled market.- In a controlled market the government regulates how the means of production, goods and services are used, priced or distributed

      3. According to the number of buyers and sellers.-







        Perfect competition (homogeneous, tomatoes)

        Monopoly competition (different, restaurants)

        Low prices

        Oligopoly (oil)

        High prices

        Monopoly (Seville-Aracena buses)

        High prices (if not regulated)


        Oligopsony (companies that sell to hypermarkets - assuming there were only hypermarkets)

        High prices

        Bilateral oligopoly (fencing equipment)

        Limited monopoly (a company that produces a very expensive machine that only a few hospitals can afford)


        Monopsony (companies that produce hubcaps for the sole automobile company)

        Low prices

        Limited monopsony (companies that sell, to the sole aerospace company, components for their space shuttles)

        Bilateral monopoly (a company that produces a new good that only the single aerospace company needs)

      4. According to the knowledge of the conditions of purchase and sale.-

        1. Transparent market.- A market is transparent if a lot is known by many about: what products, services or fixed assets are available, at what price, where, etc.

        2. Market not transparent.-

      5. According to the product.-

        1. Perfect market.- Products are homogeneous

        2. Imperfect market.- Products are different

      6. According to the participants.-

        1. Open market.- An open market refers to a market that is accessible to all economic actors. In an open market, as defined, all economic actors have the same opportunity to enter that market.

        2. Protected market.- In a protected market, entry is conditional on certain financial and legal requirements or is subject to tariff barriers, taxes, or state subsidies that effectively prevent some economic actors from participating in them

      7. According to the degree of elaboration of the product.-

        1. Unprocessed product market

        2. Manufactured products market

      8. According to the buyer's links with the distribution channels.-

        1. Wholesale markets

        2. Retail markets

      9. According to the number of buyers and sellers and the product.-

        1. Perfect competition.- Many buyers and sellers and homogeneous products

        2. Imperfect competition.-

          1. Monopoly Competition - Many different sellers and products

          2. Oligopoly.- Few sellers and few differences in products

          3. Monopoly.- A seller and there is no substitute for the product

      10. According to the type and applications of the product.-

        1. B2C Markets (Consumer Markets) .-

        2. B2B Markets (Industrial Markets) .-

    3. The main characteristics of the B2B sales process are:

      1. One to one.- Marketing is, in itself, one to one. It’s relatively easy for the seller to identify a potential customer and build a face-to-face relationship.

      2. Several decision makers.- Highly professional and trained people in purchasing processes are involved. In many cases two or three decision makers have to be considered in purchasing industrial products.

      3. Value.- High value considered purchase

      4. Buying team.- The buying decision is typically made by a group of people (“buying team”) not by one person.

      5. Complex.- The buying/selling process is often complex and includes many stages (for example, request for expression of interest, request for supply, selection process, award of supply, contract negotiations and signing of the final contract).

      6. Long processes.- Sales activities involve a long process of prospecting, qualifying, attracting, making representations, preparing supplies, developing strategies and contract negotiations.

    4. The main characteristics of the B2C sales process are:

      1. From one to many.- Marketing is, in itself, one to many. It’s not feasible for sellers to individually identify potential customers or meet them face-to-face.

      2. Value.- Lower purchase value.

      3. Impulsive decision.- The purchase decision is often, in itself, impulsive (stimulated for the moment).

      4. Confidence.- Greater confidence in the distribution (buying in places of sale to the public).

      5. Mass marketing.- More effort put into mass marketing (one to many).

      6. Brands.- More confidence in brand techniques.

      7. Media.- Increased use of major media (television, radio, print media) advertising to build the brand and achieve brand awareness

    5. The behavior of organizations.-

      1. How is the purchase decision of the organizations? .- Normally it’s the result of a long process

      2. How is the demand of the organizations? .- The demand of the organizations depends on the demand of other minor buyers (derived demand)

      3. How do price fluctuations influence organizations? .- They have little influence on the demand of these companies (they have inelastic demand)

      4. Is it easy for other organizations to enter the market?.- In closed markets, demand is highly concentrated, making it difficult for other organizations to enter

      5. How is the volume of purchases of the organizations? .- It’s very high and involves a formula for customer selection

      6. How is the final purchase decision made in organizations?.- The final purchase decision is usually collegiate, that is, it isn’t the responsibility of a single person

    6. Perfect competition.-

      1. Definition.- In neoclassical economics and in microeconomics, perfect competition describes the perfect being of a market in which there are many small companies, all producing homogeneous goods

      2. Features.-

        1. Many buyers/many sellers.- Many consumers with the will and the ability to buy the product at a certain price. Many producers with the will and the ability to offer the product at a certain price.

        2. Low entry and exit barriers.- It’s relatively easy for a company to enter or exit in a perfectly competitive market.

        3. Perfect information. For both consumers and producers.

        4. The objective of companies is to maximize profits.- The objective of companies is to sell where marginal costs meet marginal revenue, where they generate the greatest profit.

        5. Homogeneous products.- The characteristics of any given market good or service don’t vary across suppliers.


    1. Objective of market research.- Market research is any organized effort to gather information about markets or customers

    2. Steps that a company could take to analyze the market.-

      1. Provide secondary and/or primary data.- If necessary

      2. Analyze the economic Micro and Macro data.- Supply and demand, price change, economic growth, sector/industry sales, interest rates, Consumer Price Index, social analysis, etc.

      3. Put into practice the concept of the marketing mix.- Which consists of: place, price, product, promotion, people, process, physical evidence and also political and social situation to analyze the global situation of the market

      4. Analyze market trends, growth, size, share and competition.- Drivers of customer loyalty and satisfaction, brand perception, satisfaction levels, current analysis of the competitor-channel relationship, etc.

      5. Determine the market segment, the target market, market projections and market positioning.-

      6. Formulation of market strategy and also investigate the possibility of association/collaboration.-

      7. Combine those analyzes with the business plan/business model analysis.- Business description, business process, business strategy, revenue model, business expansion, return on investment, financial analysis (History of the company, financial assumption, cost/profit analysis, projected profit and loss, cash flows, balance sheet and company ratios, etc.)

    3. Types of data for market research.-

      1. Primary data.- Primary data are collected by the researcher conducting the research.

      2. Secondary data.- Secondary data is data collected by someone other than the user. Common sources of secondary data for the social sciences include censuses, studies, organizational records, and data collected through qualitative methodologies or qualitative research.

    4. Ways to obtain primary data.- (click here to learn more about how primary data is obtained)

      1. Surveys.-

        1. Telephone.-

        2. Mail.-

        3. Online surveys.-

        4. Personal survey at home.-

        5. Personal surveys intercepting in a shopping center.-

      2. Observation.- Observation is an activity consisting of receiving knowledge of the outside world through the senses, or the recording of data using scientific instruments. The term can also refer to any data collected during this activity.

      3. Experimentation.- The results are observed in a laboratory environment.

    5. Consumer panels.- (click here to learn more about consumer panels)

      1. Definition.- Consumer Panels are a research technique to measure markets that uses the same sample of people who respond on an ongoing basis.


    1. Commercial (marketing).- Design the product, assign prices and choose the most appropriate distribution channels and communication techniques to launch a product that will truly meet the needs of customers. These techniques are also called Grundy's four pess: product, price, distribution or location, and advertising or promotion.

    2. Marketing plan.- A marketing plan is a written document that details the necessary actions to achieve one or more marketing objectives. It can be for a product or for a service, a brand or a product line. Marketing plans cover one to five years. A marketing plan can be part of an overall business plan. A solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a firm strategic foundation is of little use.

    3. Types of utilities.-

      1. Shape utility.- It’s to give the product a more practical presentation. For example, a packaged product might be more useful than one that isn’t.

      2. Time and space utility.- It’s to sell the product at the right time and place. For example, it’s selling snow chains at a gas station located just before a mountain pass.

      3. Possession utility.- It’s to facilitate the customer's possession of the product now. For example, through deferred payment

        1. Prestige utility.- It’s having a product that could be dispensed with outside of a certain social group. For example, owning a luxury car

    4. What should companies do in the face of the external environment?.-

      1. Faced with technological innovations.- The firm must be informed about the innovations and must invest in them to be competitive.

      2. Faced with the intervention of the government and associations.- The company must face political interference from the government and pressure from consumers and other associations

      3. Given the evolution of the population.- The company must have information on this issue so that it can better adapt to changes in ages, ways of thinking, etc.

      4. Given the economic situation of the population.- The company must adapt to each type of consumer by offering them the product they need. This can be achieved through market segmentation.

      5. Given the position of the competition.- The company must have information about the competition to know what others offer

    5. Main role of the market.- Allow buyers and sellers to exchange any type of goods, services and information

    6. Competitor Analysis.- A common technique is to create detailed profiles of each of your main competitors. These profiles give an in-depth overview of the competitor's fund, finances, products, markets, facilities, staff, and strategies.

    7. Market Segmentation.-

      1. Definition.- Market segmentation is a concept in economics and marketing. A market segment is a subset of a market made up of people or organizations that share one or more characteristics that cause them to demand a similar product and/or service based on the qualities of those products such as price or function.

      2. Characteristics.- A true market segment meets the following characteristics: 1) is different from other segments (different segments have different needs), 2) is homogeneous within the segment (sample needs common); 3) it responds similarly to a market stimulus, and 4) it can be reached by a market intervention.

      3. Quantities.- The term is also used when consumers with the same product and/or service need to be divided into groups so that different amounts can be charged. These can be widely seen as positive or negative applications of the same idea, dividing the market into smaller groups.

      4. Segmentation criteria.-

        1. Geographical.- The same boats are not used in the Mediterranean as in the Cantabrian

        2. Demographic.- Attending to sex, age, religion, race, etc.

        3. Psychographic.- It depends on the personality of each consumer.

        4. Socioeconomic.- It depends on social class, income, etc.

        5. Behavioral.- Day and time when you usually make the purchase, loyalty to your brand, etc.

      5. Business advantage.- While there may be theoretically ideal market segments, in reality each organization committed to a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments. Market segmentation and the corresponding product differentiation strategy can give a temporary business advantage to the company.

      6. Segmentation of industrial markets versus segmentation of consumer markets.- Industrial market segmentation is quite different from consumer market segmentation but both have similar objectives

      7. Profits.-

        1. Opportunities.- Sellers are in a better position to locate and compare marketing opportunities

        2. Programs.- Sellers can easily and effectively formulate and implement marketing programs

        3. Adjustments.- Sellers can make better adjustments to their products and marketing communications

        4. Evaluation.- Competitive strengths and weaknesses can be effectively evaluated

        5. Utilization.- Segmentation leads to a more effective use of marketing resources


    1. Elements of the marketing mix.- The elements of the marketing mix are often referred to as the “four pes”: product, price, place and promotion.

    2. The product.-

      1. Components of the total product.-

        1. The basic product.- It is the natural essence of the product

        2. Formal and tangible aspects.-It’s the added value that the product has thanks to the brand, quality, style, design, packaging, etc.

        3. Increased aspects.- Each additional service that the company gives to the client: after-sales service, financing, guarantee, etc.

      2. The brand.-

        1. Definition.- A brand is the identification of a specific product or service. A brand can take many forms, including a name, a sign, a symbol, a color combination, or a slogan. The word brand started out simply as a way of naming one person's cattle from another's by means of a hot iron stamp. A legally protected brand is called a trademark. The word brand has continued to evolve to encompass identity - it affects the personality of a product, company or service.

        2. Types of brand names.-

          1. Acronym.- A name made from initials such as UPS or IBM

          2. Descriptive.- Names that describe a benefit of the product or a function such as Airbus

          3. Alliteration and rhythm - Names that are fun to say and hit the mind like Reese's Pieces or Dunkin 'Donuts

          4. Evocative.- Names that evoke a relevant and vivid image such as Amazon or Crest

          5. Neologisms.- Completely invented words like Wii or Kodak

          6. Foreign words.- Adoption of a word from another language such as Volvo or Samsung

          7. Founder's names.- Using real people's names like Hewlett-Packard or Disney

          8. Geographical.- Many brands are named for regions and well-known places such as Cisco and Fuji Film

          9. Personification.- Many brands take their names from myths like Nike or from the minds of advertising executives like Betty Crocker

        3. Approaches to branding techniques.-

          1. Company name.-In this case a very strong brand name (or company name) is made the vehicle for a range of products (for example, Mercedes-Benz or Black & Decker) or even a range of subsidiary brands (such as Cadbury Dairy Milk, Cadbury Flake or Cadbury Fingers in the United States).

          2. Individual branding technique.- Each brand has a separate name (such as Seven-up or Nivea Sun (Beiersdorf)), which can even compete against other brands of the same company (for example, Persil, Omo, Surf and Lynx are all owned by Unilever).

          3. Derivative brands.- In this case the supplier of a key component, used by a number of suppliers of the final product, may wish to secure its own position by promoting that component as a brand in its own right. The most frequently given example is Intel, which secures its position in the personal computer market with the slogan "Intel Inside".

          4. Brand extension.- The existing strong brand name can be used as a vehicle for new or modified products; for example, many fashion and design companies extend brands in fragrances, shoes and accessories, home textiles, home decor, luggage, sunglasses, furniture, hotels, etc.

          5. Multi-brands.- Alternatively, in a market that is fragmented among a number of brands, a supplier may deliberately choose to launch entirely new brands in apparent competition with their own existing strong brand (and often with identical product characteristics); simply to absorb some of the market share that goes to minority brands anyway. The rationale is that having 3 out of 12 brands in such a market will have a greater total share than having 1 out of 10 (even if much of the share of that new brand is taken from the existing one). In its most extreme manifestation, a pioneer supplier in a new market that believes it will be particularly attractive may immediately choose to launch a second brand in competition with its first, to get ahead of others entering the market.

          6. Own marks.- With the emergence of strong retailers, private labels, also called private labels or warehouse brands, also appeared as a main factor in the market. Where the retailer has a particularly strong identity (such as Marks & Spencer in the UK apparel sector) this 'own brand' must be able to compete against even the strongest leading brands, and can outperform those products that otherwise, they have strong marks

      3. The label.-

        1. Definition.- A label is a piece of paper, polymer, cloth, metal or other material attached to a container or item, on which a legend, information regarding the product, addresses, etc. is printed. A label can also be printed directly on the container or article.

        2. Uses.- Labels have many uses: product identification, name tags, advertising, warnings, and other communications.

        3. Types.- Special types of labels or labels called digital labels (printed through a digital printer) can also have special structures such as radio frequency identification and security printing.

      4. Phases in the life of a product.-

        1. Introduction.- People begin to know the product and it doesn’t give benefits yet

        2. Growth.- The product is slowly having more market share

        3. Maturity.- The market share of the product stabilizes

        4. Decline.- The product is losing market share

    3. Physical distribution.-

      1. Definition.- It’s an organization or group of organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the client or user.

      2. The distribution channel.-

        1. Definition.- Chain of intermediaries, each passing the product further down the chain to the next organization, before it finally reaches the consumer or end user .... This process is known as the "distribution chain" or the " channel". Each of the elements in these chains will have their own specific needs, which the producer must take into account, in addition to those of the all-important end user.

        2. Available channels.-

          1. Long channel (for consumer markets) .- The manufacturer, the agent, the wholesaler, the retailer and the final consumer

          2. Short channel (mainly for industrial markets) .- The manufacturer, the wholesaler or the industrial agent and the industrial consumer intervene in the industrial markets; in consumer markets the manufacturer, the retailer and the final consumer are involved (multiple choice questions refer to consumer markets)

          3. Direct sale.- The manufacturer, the seller and the final consumer

        3. Hotels.- Distribution channels may not be restricted only to physical products. They can be just as important in moving a service from producer to consumer in certain sectors, since both channels, direct and indirect, can be used. Hotels, for example, can sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourism councils, centralized reservation systems, etc.

        4. Innovations in service distribution.- For example, there has been an increase in franchising and rental services - the latter offering anything from televisions to tools. There has also been some evidence of service integration, with services linked together, particularly in the travel and tourism sectors. For example, links now exist between airlines, hotels, and car rental services. There has also been a significant increase in retail outlets for the service sector. Retail outlets such as real estate agencies are driving traditional grocery stores out of major commercial areas

      3. It is the responsibility of the management.

        1. Decision on the channel.- The decision about the channel is very important. In theory at least, there is a form of trade-off: the cost of using intermediaries to reach a wider distribution is supposedly lower. Indeed, most manufacturers of consumer goods could never justify the cost of selling directly to their consumers, except by mail order. Many suppliers seem to assume that once their product has been sold in the channel, at the beginning of the distribution chain, their job is done. Even the distribution chain is simply assuming a part of the responsibility of the suppliers; and, if they have any aspiration to go to the market, their work should really be extended to direct the whole process involved in this chain, until the product or service reaches the end user. This can involve a number of decisions on the part of the provider:

          1. Channel members

          2. Channel motivation

          3. Monitor and direct channels

        2. Channel Marketing Types.-

          1. Intensive distribution.- Where most resellers sell the product (with ready-made products, for example, and particularly brand leaders in consumer goods markets) price competition may be evident.

          2. Selective distribution.- This is the normal pattern (in both consumer and industrial markets) where the appropriate reseller sells the product.

          3. Exclusive distribution.- Only specially selected resellers or authorized dealers (typically only one per geographic area) are allowed to sell the product.

        3. Channel motivation.- It’s quite difficult to motivate direct employees to provide the necessary sales and support service. Motivating the owners and employees of an independent organization in a distribution chain requires even more effort. There are many resources to achieve such motivation. Perhaps the most common is the incentive: suppliers offer a better margin, to encourage channel owners to promote the product more than their competitors; or a compensation is offered to the distribution sales staff, so that they are encouraged to promote the product.

        4. Supervising and directing channels.- Almost in the same way that the sales and distribution activities of the organization need to be supervised and directed, so it will be with those of the distribution chain. In practice, many organizations use a mix of different channels; in particular, they can complement a direct sales force, with agents, covering small and potential clients. These channels show the marketing strategies of an organization. Effective management of the distribution channel requires making and implementing decisions in these areas.

      4. Types of intermediaries.-

        1. Sales representatives.- Or they link manufacturers and wholesalers or wholesalers and retailers and are paid a commission based on sales

        2. Wholesalers.- They buy from manufacturers and sell to retailers

        3. Retailers.- They buy from wholesalers and sell to the final consumer

      5. Role of intermediaries.- They reduce the number of contacts needed to sell the products (for example, without any intermediary, three manufacturers would need thirty contacts to sell their products to ten final consumers, but with an intermediary they would need only thirteen)

      6. Choice between direct distribution and indirect distribution.-

        1. Direct distribution costs = Fixed costs + Variable costs; DDC = FC + VC

        2. Indirect distribution costs = Variable costs; IDC = VC

        3. Example.- If the fixed direct distribution costs of a manufacturer are €150,000, the sellers commission is 12% and the intermediaries' margin is 26%, with a sales amount of €630,000. What type of distribution is the best?

          1. DDC = 150,000 + (0.12 x 630,000) = €225,600

          2. IDC = 0.26 x 630,000 = €163,800 (this is the best)

    4. Promotion.-

      1. Definition.- Promotion is the communication link between sellers and buyers with the purpose of influencing, informing or persuading the purchase decision of a potential buyer.

      2. Types of promotion.-

        1. Promotion on the line.- Promotion in the media (eg TV, radio, newspapers, internet, mobile phones, and historically illustrated songs) in which the advertiser pays an advertising agency to place the ad

        2. Promotion below the line.- All the rest of the promotion. Much of this attempts to be subtle enough for the consumer to be ignored that the promotion is taking place. Examples: sponsorship, appearance of products in movies or series, sales promotions, merchandising, direct mail, personal selling, public relations, trade shows

      3. Advertising.-

        1. Definition.- Advertising is a non-personal form of communication that tries to persuade an audience (viewers, readers or listeners) to buy or take some action on products, ideals or services. It includes the name of a product or service and how that product or service could benefit the consumer, to persuade a target market to buy or consume that particular brand. These brands are usually paid for or identified through sponsors and views on various media.

        2. Code.- Advertisers, advertising agencies and the media agree to a code of advertising standards that they intend to uphold. The general objective of such codes is to ensure that any advertisement is "legal, decent, honest and truthful."

        3. Goals.-

          1. Inform about the new product

          2. Persuade the consumer to buy the product

          3. Remember that the product exists

        4. Advertising prohibited.-

          1. Misleading advertising

          2. Advertising that damages the dignity of the person

          3. Subliminal advertising

          4. Unfair advertising

      4. Sponsorship.- Sponsoring something is supporting an event, an activity, a person or an organization financially or through the provision of products or services.

      5. Product placement.- Or embedded marketing, is a form of advertising, where branded goods or services are placed in a context that usually lacks advertisements, such as movies, the plot of television shows, or new programs. Product placement is often undisclosed at the time the good or service is offered. Product placement became common in the 1980s.

      6. Sales promotion.- Marketing communication media and non-media are used for a predetermined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples include: a temporary price reduction, a loyalty reward program, coupons, etc.

      7. Merchandising.-

        1. Definition.- Merchandising are the methods, practices and operations used to promote and sustain certain categories of commercial activities. In the broadest sense, merchandising is any practice that contributes to the sale of products to a retailer.

        2. Examples.- The distribution of the products in the store, the place to put the products on the shelves, the light, the colors, the music, the temperature, etc.

      8. Direct mail.- Also known as advertising mail or junk mail, it is the sending of advertising material to mailboxes

      9. Public Relations (PR).- Public Relations is a field concerned with maintaining the public image for commercial companies and organizations. Common activities include speaking at conferences, working with the media, crisis communications, social engagement with the media, and communicating with employees.

      10. Trade fairs.- A trade fair or expo is an exhibition organized so that the company in a specific industry can showcase and demonstrate its latest products or services, study the activities of rivals, and examine recent market trends and opportunities.

      11. Personal sale.-

        1. It is a sale through a direct deal with the buyer

        2. One type of personal selling is telemarketing (selling using the phone, fax or internet)

    5. The price.-

      1. Price strategies.-

        1. Prices based on competition.- Establish the price based on the prices of similar competing products.

        2. Cost-based pricing.- Cost-based pricing is the simplest method of pricing. The company calculates the cost of producing the product and adds a percentage (profit) so that this price gives us the sale price. This method, while simple, has two shortcomings: it does not take demand into account, and there is no way to determine whether potential customers will buy the product at the calculated price.

        3. Skim.- Selling a product at a high price, sacrificing high sales to earn a high profit, yet skimming the market. Usually used to reimburse the cost of the original research investment in the product - commonly used in electronic markets when there is a new range, such as DVD players, they are first shipped on the market at a high price

        4. Limit price.- A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries

        5. Hook item.- This pricing strategy is illegal under EU and US competition rules No market leader would want to sell low unless this is part of their overall strategy

        6. Market oriented price.- Set a price based on the analysis and compiled research of the target market

        7. Penetration price.- The price is deliberately set at a low level to win the interest of customers and establish market positioning

        8. Price discrimination.- Establish a different price for the same product in different segments for the market. For example, this can be for different ages or for different opening hours, such as movie tickets.

        9. Premium price.- Premium pricing is the practice of keeping the price of a product or service artificially high to encourage favorable perceptions among buyers based solely on price. The practice is intended to exploit the (not necessarily justifiable) tendency for shoppers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.

        10. Predatory price.- Aggressive pricing planned to drive competitors out of the market. It is illegal on some sites

        11. Price based on the contribution margin.- The price based on the contribution margin maximizes the benefit derived from an individual product, based on the difference between the price of the product and the variable costs (the contribution margin of the product per unit), and on one's assumptions regarding the relationship between the price of the product and the number of units that can be sold at that price. The contribution of the product to the total profit of the company (eg operating income) is maximized when a price is chosen to maximize the following: Contribution margin per unit x Number of units sold.

        12. Psychological price.- Price designed to have a positive psychological impact. For example, selling a product for $3.95 or $3.99, more than $4.

        13. Dynamic price.- A flexible pricing mechanism made possible by advances in information technology, and used for the most part by internet-based companies. Responding to market fluctuations or large amounts of data collected from customers - varying from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the price of identical goods so that corresponds to the client's willingness to pay. The aviation industry is often cited as a dynamic pricing success story. In fact, it employs the technique so cleverly that most passengers on a given plane have paid different ticket prices for the same flight.

        14. Pricing leadership.- An observation made in the behavior of the oligopoly in which one company, usually the dominant competitor among several, leads the way in determining prices, followed by the others soon

        15. Target price.- Pricing method through which the established price of a product is calculated to produce a particular rate of return on investment for a specific volume of production. The target price method is most often used for essential utilities, such as electric and gas companies, and companies with high capital investment, such as car manufacturers.

        16. Absorption price.- Pricing method in which all costs are covered. The product price includes the variable cost of each item plus a proportional amount of the fixed costs. A form of cost-based pricing

        17. Price based on marginal cost.- In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of production. Under this policy, a producer charges, for each unit of the product sold, only the addition to the total cost resulting from materials and direct labor. Businesses often set prices near marginal cost during periods of poor sales. If, for example, an item has a marginal cost of $1 and a normal selling price is $2, the firm selling the item might want to lower the price to $1.10 if demand has languished. The business would choose this proposition because the increased 10-cent profit from the transaction is better than selling nothing.

    6. Marketing strategy.- Marketing strategy is a process that can allow an organization to focus its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centered on the key concept that customer satisfaction is the main goal.


    1. Possible analytical frameworks for marketing ethics.- (None of these frameworks allows, by itself, a convenient and complete categorization of the great variety of topics in marketing ethics)

      1. Value-oriented framework.- Analyzing ethical problems on the basis of the values ​​that they infringe (eg honesty, autonomy, privacy, transparency)

      2. Shareholder-oriented framework.- Analyzing ethical problems on the basis of who they affect (eg clients, competitors, society as a whole).

      3. Process-oriented framework.- Analyzing ethical issues in terms of the categories used by marketers (eg research, price, promotion, location).

    2. Specific topics in marketing ethics.-

      1. Market research.- Dangerous ethical points in market research include: invasion of privacy and cataloging.

      2. Market audience.- Dangerous ethical points include: targeting the vulnerable (eg children, the elderly) and excluding potential customers from the market (homosexuals, ethnic minorities and obese)


    1. Electronic commerce.-

      1. Definition.- Electronic commerce, commonly known as e-commerce or eCommerce or e-business consists of buying and selling products or services through electronic systems such as the internet and other computer networks. The amount of electronically conducted commerce has grown dramatically with the spread of internet use. The use of commerce is conducted in this way, encouraging innovations in electronic funds transfer, supply chain management, internet marketing, online transaction processing, electronic data exchange, inventory management systems and collection systems. automatic data. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction life cycle,

      2. B2C.- Electronic commerce that is conducted between companies and consumers, is called business-to-consumer or B2C.

      3. B2B.- Electronic commerce that is conducted between companies is called business-to-business or B2B.

    2. Internet Marketing.-

      1. Definition.- Also called i-marketing, web-marketing, online-marketing, Search Engine Marketing (SEM) or e-Marketing, it’s the marketing of products or services through the internet.

      2. A broader scope.- Internet marketing is sometimes considered as having a broader scope because it does not refer only to the Internet, email and wireless media, but also includes the management of digital customer data and management systems of the customer relationship.

      3. Also refers.- Internet marketing also refers to the placement of media through many different stages of the customer engagement cycle through a search engine marketing (SEM), a search engine optimization ( SEO), banners on specific websites, email marketing and web 2.0 strategies

      4. Email Marketing.- It’s a form of direct marketing that uses email as a means of business communication or fundraising messages to an audience. In its broadest sense, every email sent to a potential or current customer could be considered email marketing.



    1. Structures.- Patrimony is made up of an economic structure, goods and rights (Assets) and a financial structure, obligations (Equity and Liabilities).

    2. Equality.- The Assets must be equal to the Equity plus the Liabilities because what the company has bought (Assets) has been paid by someone (Equity and Liabilities)

    3. Profitability.- The profitability of the Assets must be greater than the financial cost of the Equity and Liabilities


    1. Definition. - Investment is the dedication of money or capital to buy financial instruments or other assets to earn a profitable return in the form of interest, income or appreciation of the value of the instrument.

    2. Types.-

      1. According to the object of the investment.-

        1. Industrial equipment

        2. Raw material

        3. Trucks, cars, boats, planes, etc.

        4. A company or shares

      2. According to their function in the company.-

        1. Renovation

        2. Expansion

        3. Improvement and modernization

        4. Strategic

      3. According to who makes the investment.-

        1. Private

        2. Public


    1. Main characteristics of an investment.- Liquidity, profitability and security

      1. Investment selection methods.-


Initial payment



















      1. Payback period.- The payback period in investment selection refers to the period of time required for the return of an investment to return the sum of the original investment. For example, a $1,000 investment that is returned at $500 per year would have a payback period of two years. The time value of money isn’t taken into account. The payback period instinctively measures how long it takes for something to pay for itself. If all else is equal, shorter payback periods are preferable to longer ones. The payback period is widely used due to its ease of use despite its recognized limitations. It’s generally agreed that this investment decision tool should not be used in isolation. (years= a; months = m; days = d)

PB1= 1 a, 10 m and 20 d1st

PB2 = The project doesn’t recover 3rd

PB3 = 1a, 11 m and 4d 2nd

      1. Net Present Value (NPV).- (ex. The discount rate is 2%)

        1. Definition.- The Net Present Value of a time series of incoming/outcoming cash flows, is defined as the sum of the current values of the individual cash flows.

        2. Reduced.- Each incoming/outgoing flow is reduced to its current value. Then they are added. Therefore, the NPV is the sum of all the terms

        3. Selection.- If there is a choice between two alternatives, the greater is the better




      1. The internal rate of return (IRR) .-

        1. Definition.- The internal rate of return of an investment is the interest rate at which the costs of the investment match the benefits of the investment. This means that all returns on the investment are inherent in the time value of money and that the investment has a net present value of zero at this interest rate.

        2. Acceptable.- An investment is considered acceptable if its internal rate of return is greater than the cost of capital.

if x = 1 + r

x = 1.0348; so r = 0.0348 = 3.48% 2nd

x = 0.8090; so r = -0.191 = -19.1% 3rd

        1. I3 (more or less 8% through trial and error) = - 300 + 157.41 + 120.03 + 15.88 + 7.35 = 0.671st


  2. Definition.- Company financing is an area of finance that deals with the financial decision-making of companies' business and the tools and analysis used to make these decisions.


    1. Types of financing.-

      1. According to its origin.-

        1. Internal financing or self-financing.-

          • Definition.- Internal financing is the name for a company using its profits as a source of capital for new investments, instead of: a) distributing them to the owners of the company or other investors and b) obtaining capital elsewhere.

          • They are.- They are amortizations and reserves

        2. External financing.-

          • Definition.- External financing consists of new money from outside the company brought in for investment.

          • They are.- They are the capital and liabilities

      2. According to who is the owner of the resources.-

        1. Own resources.-

          • Definition.- Equity is the asset minus the liability

          • They are.- They are the capital, amortizations and reserves

        2. Third-party resources.- They are the liability

    2. Internal financing or self-financing.-

      1. Inexpensive.- Internal financing is generally thought to be less expensive for the company than external financing because the company doesn’t have to incur transaction costs to obtain it, nor does it have to pay the taxes associated with paying dividends.

      2. Determinant.- Many economists debate whether the availability of internal financing is an important determinant of the company's investment or not. A related controversy is whether the fact that internal financing is empirically correlated with investment implies that firms are obligated to credit and therefore depend on internal financing for investment.

      3. Financial options.- There are several options for a company to finance itself without external help:

        1. Amortization.- Deduction of the value of the asset, reduces the profit before taxes

        2. Building reserves.- Eg pension reserves

        3. Retained earnings.- The earnings aren’t paid to the owners of the company

        4. Change asset.- Selling real estate or other tangible assets owned by the company

      4. Advantages of internal financing.-

        1. Capital is immediately available

        2. No interest payments

        3. No control processes with regard to solvency

        4. Replacement credit line

        5. No influence of third parties

      5. Disadvantages of internal financing.-

        1. Expensive because internal funding isn’t tax deductible

        2. No capital increase

        3. Not as flexible as external financing

        4. Losses (capital reduction) are not tax deductible

        5. Limited in volume (the volume of external financing is also limited but there is more capital available outside - in the markets - than within the company)

      6. Types of internal financing or self-financing.-

        1. Maintenance self-financing.- They cover the depreciation of assets (amortizations and provisions)

        2. Enrichment self-financing.- Increase the company's assets (reserves)

    3. Depreciation.- Depreciation is the reduction in the value of an asset used for business purposes during a certain amount of time due to use, over time, wear and tear, technological age or obsolescence, depletion, insufficiency, decay, oxidation, deterioration or other factors

    4. Annual amortization fee.- For example, a vehicle that depreciates over 5 years, is purchased at a cost of $17,000, and will have a residual value of $2,000, it will depreciate at $3,000 per year

    1. Composition of external financing.-

      1. Capital.-

      2. Passive.-

        1. Operating credits.- They’re short-term credits and finance current assets.

        2. Financing credits.- They’re long-term credits and finance non-current assets

    2. Social capital. The shares.-

      1. Nominal value.-

        1. Definition.- It’s the value of a share in the title

      1. Market value.- Share price:

        1. Below par.- MV <NV

        2. At par.- MV = NV

        3. Above par.- MV> NV

      2. Theoretical value.-It’s the price of a share according to objective criteria

    1. Types of shares.-

      1. According to the form of representation.-

        1. By means of a title

        2. By means of an account entry

      2. According to the type of contribution.-

        1. Monetary contribution

        2. Contribution in kind

      3. According to its ownership.-

        1. Related to the name of a person (nominative)

        2. Bearer shares

        3. The shares must be registered:

          • As long as they are not fully paid

          • If the shareholders have agreed in the company bylaws that several shareholders should give something to the company

          • If the shareholders have agreed in the company bylaws that the shares can’t be freely sold

          • When determined by law

      4. According to the political rights of the shares.-

        1. With the right to vote

        2. Without voting rights (they have a guaranteed minimum dividend of 5% or another higher according to the company's bylaws, they will also have the ordinary dividend of such shares)

      5. According to the privileges that the shares have.-

        1. Ordinary

        2. Privileged (the law doesn’t admit as a privilege to have an interest rate, to change the number of votes per share and the subscription right)

    2. Shareholders' rights.-

      1. To receive dividends

      2. To participate in the patrimony after liquidation

      3. To have a subscription right

      4. To vote

      5. To receive information

      6. To challenge the agreements of the company

    3. Types of shares according to the relationship between their issue value and their nominal value.-

      1. Shares issued with a premium or above par.-

        1. The issue value is greater than the nominal value

        2. Premium = Issue Value - Nominal alue

      2. Shares issued at par.- The Issue Value is the same as the Nominal Value

      3. Shares issued below par (partially or fully released shares) .-

        1. The Issue Value is less than the Nominal Value or they’re given free of charge to former shareholders

        2. Society pays the difference using its reserves

    4. Capital increase and subscription rights.-

      1. Definition.- The subscription right is the right of former shareholders to acquire newly issued shares, issued by a company in a correct issue, a usual but not always public offering.

      2. Success of the capital increase.- For a capital increase to be successful, the issue value of the new shares must be less than the market value of the old shares, because, otherwise, buying an old share would be more beneficial to buy a new one

      3. Compensation to former shareholders.- The subscription right compensates former shareholders for the relative loss of influence within the company and for the distribution of their savings among the owners of the new shares.

      4. The purchase of the new shares and the subscription right.- To subscribe new shares we must buy the number of subscription rights according to the agreements of the company (e.g. if a company increases its capital in the proportion 1 x 3, to buy 100 shares we must buy 300 rights, in addition)

      5. The sale of subscription rights.- The owner of the old shares who doesn’t want to buy the new ones can sell their subscription rights on the market

      6. Value of the subscription right.- The value of the subscription right depends on the market but we can calculate a theoretical value with the following formula:

        1. Example: Calculate the theoretical value of the subscription right of a 2 x 5 capital increase, if the Market Value of the old shares is €2.5 and the Issue Value of the new ones is €2.2

    1. Bonds issue.-

      1. Definition.- A bond is a debt security that is a part of a loan, in which the authorized issuer owes the holders an amount and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to return the principal at a later date, maturity period. A bond is a formal contract to pay back money with interest at fixed intervals.

      2. Like a loan.- Therefore, a bond issue is like a loan: the issuer is the one who asks for the money (debtor), the holder is the one who lends money (the creditor), and the coupon is the interest. Bonds issue provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current spending.

      3. Differences between bonds and shares.- Bonds and shares are both titles, but the main difference between the two is that the shareholders have a part of the equity in the company (they are owners), while the bondholders have a part of the credit from a company (they are lenders). Another difference is that bonds usually have a defined period, or maturity, after which the bond is redeemed, while shares can be pending indefinitely.

      4. Types of bonds.- The following descriptions aren’t mutually exclusive, and more than one of them may apply to a particular bond.

        1. Fixed interest bonds.- They have a coupon that remains constant throughout the life of the bonds.

        2. Floating interest bonds.- They have a variable coupon that is linked to a referenced interest rate, such as Euribor. For example, the coupon can be defined as three months Euribor + 0.20%. The coupon rate is recalculated periodically, typically every one to three months.

        3. Bonds with zero coupon.- They don’t pay regular interest. They are issued at a substantial discount to par value, so that the interest actually reaches maturity (and is usually taxed as such). The bondholder receives the full amount of the principal on the redemption day.

        4. Bonds linked to inflation.- In which the principal amount and interest payments are indexed to inflation. The interest rate is normally lower than for fixed income bonds with a comparable maturity.

        5. Asset-backed securities.- These are bonds whose interest and principal payments are backed by underlying cash flows from other assets.

        6. Subordinated bonds.- Those that have a lower priority than other obligations of the issuer in the event of liquidation. In bankruptcy, there is a hierarchy of creditors. First the liquidator is paid, then government taxes, etc. The first bondholders queued for payment are those bondholders who are high-ranking bondholders. After they have been paid, the subordinated bondholders are paid. As a consequence, the risk is higher. Consequently, subordinated bonds usually have a lower credit rating than high-ranking ones.

    2. The stock market.-

      1. Definition.- A stock market is an entity that provides trading facilities for stockbrokers and traders, to trade stocks and other securities. Stock markets also provide facilities for the issuance and redemption of securities in addition to other financial instruments and capital events including the payment of rent and dividends.

      2. Primary and secondary markets.- The initial offer of shares and bonds for investors is by definition made in the primary market and the subsequent contracting is made in the secondary market.

      3. National Stock Market Commission.- It’s an entity that supervises, inspects and controls the Spanish stock market

      4. The role of the stock market.-

        1. Raise capital for businesses.- The Stock Market provides companies with the easea to raise capital for expansion through selling shares to the investing public.

        2. Mobilize savings for investment.- When people take out their savings and invest in stocks, it leads to a more rational allocation of resources because the funds, which could have been consumed, or put in useless deposits with banks, are mobilized and redirected to promote activities business with benefits for various economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and high levels of productivity of companies.

        3. Facilitate company growth.- Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, avoid volatility, increase their market share, or acquire other necessary business assets. A takeover offer or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or merger.

        4. Sharing benefits.- Both casual and professional investors in securities, through dividends and the increase in the price of securities that can result in capital gains, will participate in the patrimony of profitable businesses.

        5. Corporate governance.- Having a wide and varied field of owners, companies tend to improve their management standards and efficiency to satisfy the demands of these shareholders and the more rigorous rules for public corporations imposed by public securities markets and government. Consequently, it is presumed that public companies tend to have better management records than privately held companies (those companies where the shares aren’t publicly sold, often owned by the founders of the company and/or their families and their heirs, or otherwise by a small group of investors).

        6. Create investment opportunities for small investors.- As opposed to other businesses that require a huge capital outlay, investing in stocks is open to both large and small investors in securities because one person buys the number of shares that they can afford. Therefore the Stock Market provides the opportunity for small investors to own shares in the same companies as large investors.

        7. Barometer of the economy.- In the stock market, the price of shares rises and falls depending, in large part, on market forces. Stock prices tend to rise or remain stable when companies and the broader economy show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of the prices of the actions and in general of the indexes of values can be an indicator of the general tendency in the economy.

    3. The financial system.-

      1. Definition of financial system.- The financial system is the system that allows the transfer of money between savers and people who borrow. It’s made up of banks, savings banks, insurance companies, the stock market, etc.

      2. Commercial banks (typical operations) .-

        1. Passive operations (borrow money).-

          • Current accounts

          • Savings accounts

          • Deposits

        2. Active operations (lend money) .-

          • Loans.- It’s short-term or long-term external financing (if it’s for a year or less, it’s short-term and, if not, it’s long-term). The user receives the entire amount agreed from the beginning, forcing him to return this and all interest on certain days established in advance

          • Credit accounts.- It’is short-term external financing. The bank allows the customer to credit for a certain period of time and up to a certain amount, forcing the customer to pay a commission and return the desired amounts within the stipulated limit.

          • Discount of effects.- It’s short-term external financing (normally, 30, 60 or 90 days). The bank anticipates a person the amount of a bill of exchange.

      3. Guarantee.-

        1. Personal guarantees.- In financing up to five years (we must be responsible with all our personal assets)

        2. Real guarantees (mortgage or pledge).- In financing over five years

      4. Factoring.- It’s short-term external financing. The factoring is a financial transaction through which a company sells its receivables (eg. invoices) to a third party (called a factor) at an interest rate in exchange for immediate money with which to finance lasting businesses. It's expensive

      5. Confirming.- It’s short-term external financing. A financial institution manages the payments of a company to its suppliers. It’s the opposite of factoring (in which the collections of a company from its clients are managed).

      6. Leasing.- It is long-term external financing. Leasing is a process by which a company can obtain the use of a certain fixed asset for which it must pay a series of contractual, periodic, and tax deductible payments. In the end, the user has three options: buy the asset, continue with the leasing or return the asset.

      7. Renting.- It’s long-term external financing. It’s a long-term rental that includes a series of services and that you don’t have the right to purchase.

      8. Deficit in account.- It is short-term external financing. It occurs when the client withdraws more money than is in the account. They are the typical red numbers.

      9. Commercial credit.- It’s short-term external financing. It occurs when suppliers allow us not to pay you at the same time you receive the goods but a time later.

      10. Spontaneous financing funds.- It’s short-term external financing. It occurs because companies don’t pay the Corporation Tax, Social Security contributions or the remuneration of their workers on a daily basis but once a month or with another cadence; so, in the meantime, they can dispose of that money.

    4. Working capital.-

      1. Definition.- Working capital is a financial measure that represents the operating liquidity available to a company.

      2. Formulas.-

        1. Working capital = Current assets - Current liabilities

        2. Working capital = Permanent capital - Non-current assets

      3. Terms.-

        1. Non-current assets or Fixed assets = Buildings, trucks, cars, computers, etc.

        2. Current assets = Stock, customers, cash, banks, etc.

        3. Permanent capital, Permanent financing or Basic financing) = Equity (Capital, Reserves, etc.) + Non-current liabilities or Long-term debts (Long term loans, etc.)

        4. Current liabilities or Short-term debts = Suppliers, etc.

      4. Deficit.- If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit (current assets can’t pay current liabilities).

      5. Value.- Its value depends on the size and sector of the company

    1. The Average Maturity Period.-

      1. Definition.- The Average Maturity Period measures how long a company will be in need of cash if it increases its investment in resources to expand sales to customers. It’s, therefore, a measure of the liquidity risk posed by growth. However, shortening the Average Maturity Period creates its own risk: while a company could even reach a negative average maturity period by charging from customers before paying suppliers, a policy of strict charges and lax payments isn’t always sustainable.

      2. Calculation.- Average Maturity Period = Period of raw materials or Period of warehouse + Period of products in progress or Period of manufacture + Period of finished products or Period of sales + Period of pending accounts or Period of collections = Pmp + Ppc + Ppt + Pcp

      3. Raw materials period or warehouse period.-

This ratio indicates the number of times we renew the PM stock

      1. Period of products in progress or manufacturing period.-

      1. Period of finished products or period of sale.-

      1. Period of pending accounts or collection period.-

    1. Cash-flow (cash flow) .-

      1. Definition.- Cash-flow is the movement of cash entering or leaving a business, project or financial product. It’s usually measured over a specified, finite period of time

      2. Calculation.-

        1. Cash-flow = Accounting profit (net profit before taxes) + Amortizations – Taxes; the oldest is the best

          • 1st example.- If: BAIT (gross profit) = 10; Amortizations = 3; Interest = 2 and Tax = 35%

          • Accounting profit = BAIT – Interest; Cash-flow = 10 - 2 + 3 - 0.35 x (10 - 2) = 8.2

          • 2nd example.- If: Income = 15; Expenses = 7; Amortizations = 2 and Taxes = 35%

          • Cash-flow = 15 - 7 + 3 - 0.35 (15 - 7) = 8.2


    1. Debt ratio.-

      1. Definition.- The debt ratio is a financial ratio that indicates the relative proportion of the shareholders' equity and the debt used to finance the assets of a company. Closely related to leverage, the ratio is also known as Risk, Orientation or Leverage. The two components are often taken from the company's balance sheet, but the ratio can also be calculated using market values for both, if the company's debts and equity are publicly traded, or using a combination of book value for the debt and market value to equity financially.

    1. Financial structure.-

      1. Definition of financial structure.- The financial structure refers to the way in which a company finances its assets through some combination of equity, debt or hybrid securities.

      2. Optimal financial structure.- According to the traditional thesis, the optimal financial structure is the relationship between liabilities and equity that minimizes the cost of funds and maximizes the value of the company

      3. Modigliani and Miller.- According to Modigliani and Miller, an optimal financial structure doesn’t exist

      4. Josep Faus.- According to Josep Faus, it’s difficult to determine an optimal financial structure for any company and he recommends looking at the average financial structure of the companies in the sector

      5. Leverage effect.- If the benefits obtained thanks to the funds used are greater than the interest that we must pay for them, then we obtain financial profitability



    1. Concept.- It’s the set of goods, rights and obligations that belong to a natural or legal person

    2. Composition.-

      1. Liabilities.- Third-party resources (funds)

      2. Equity.- Own resources (funds)

      3. Assets.- Goods and rights in which the previous resources or funds are invested

    3. Fundamental identity of the Patrimony.-

      1. Assets = Liabilities + Equity, or

      2. Assets = Required liabilities + Own liabilities


    1. Balance sheet structure of a normal company.-

      1. The structure of a company will depend on the sector to which it belongs

      2. ENDESA will have a non-current asset greater than 20% since it needs more Fixed Assets

      3. A legal office will have a non-current asset of less than 20% since it needs less Fixed Assets


    1. Definition of patrimony element.- It’s each one of the goods, rights or obligations that make up the patrimony of a natural or legal person

    2. Account definition.- It’s the name that has a patrimony element according to the General Accounting Plan

    3. Some Asset accounts.- Land and natural assets, Constructions, Machinery, Furniture, Transport elements, Merchandise, Raw materials, Fuels, Spare parts, Finished products, Clients, Clients, trade receivables, Debtors, Cash, euros, Banks and institutions of cto.c/c, view euros, banks and institutions of cto.c/savings, view euros

    4. Some Equity accounts.- Capital, Legal reserve, Voluntary reserve

    5. Some Liability accounts.- Long-term debts with credit institutions, Long-term debts with suppliers of fixed assets, Suppliers, Suppliers of commercial bills payable, Short-term debts with credit entities, Short-term suppliers of fixed assets

    6. Definition of patrimony mass.- It’s a group of elements that have the same economic-financial meaning

    7. Classification of the patrimonial masses.-

      1. In three.- Assets, Liabilities and Equity

      2. According to its liquidity and enforceability.-

        1. Non-current assets.- Groups the different elements that remain in the company's patrimony for more than one year

          1. Intangible assets.-

            1. Rights with economic valuation that belong to the patrimony of the company for more than one year

            2. Administrative concessions, industrial property (patents, etc.), computer applications (programs), goodwill (figure in which the clientele and market position of a company are valued when it is acquired by another), etc.

          2. Inmobilized material.-

            1. Assets goods, tangible, that remain for more than one year in the assets of the company

            2. Land and natural assets, buildings, machinery, etc.

        2. Current assets.- It consists of those assets that the company uses in its activity and that, in the course of it, are usually converted into money

          1. Inventories or stock.- Finished products, merchandise, etc.

          2. Debtors or realizable.- Clients, clients, commercial bills receivable, debtors, etc.

          3. Treasury or available.- Cash, Banks, etc.

        3. Equity.- Mainly Capital and reserves

        4. Non-current liabilities.- Mainly debts of more than one year

        5. Current liabilities.- Mainly debts of one year or less. For example, Suppliers (which is an account that collects the commercial credits that they grant us) another example could be Suppliers, commercial bills to pay

      3. Definition of liquidity.- It’s the ease of transforming a patrimonial element into money

      4. Definition of enforceability.- It’s the facility that third parties have to request a payment from the economic unit

      5. Example of classification of assets.- Group elements of a company, according to its liquidity and enforceability, with the following accounts: Cash, euros (2); Capital (9); Land and natural assets (5); Suppliers (2); Merchandises (1); Reserves (6); Constructions (4); Clients (3); Banks c/a (3); Long-term debt (1) (Solution on the next page)


    1. Inventory, balances and social balance.-

      1. Definition of inventory.- It’s a detailed list of all the elements (assets, rights and obligations) duly valued, which belong to a company at a given time

      2. Definition of balance sheet.- It has the same definition as the inventory, although, in the balance sheet, the valuation of the different elements comes from the accounting and in the inventory it comes from a count and valuation outside of it

      3. The social balance.- Measures the impact of each company in the social environment where it’s inserted. In France and Germany it has a certain importance, in Spain it hardly has it

    2. Balance sheet example.-



      Non-current assets (NCA)


      Net Equity (NE)


      Land and natural assets


      Social capital






      Current assets (CA)


      Non-current liabilities (NCL)




      Long-term debts




      Current liabilities (CL)










      Cash, euros


      Banks c/a






    3. The balance sheet.-

      1. The balance sheet will include.- With due separation, the assets, liabilities and equity of the company

      2. Current assets will comprise.-

        1. Assets linked to the normal operating cycle that the company expects to sell, consume or carry out during the same

        2. Those assets, different from those mentioned in the previous paragraph, whose maturity, disposal or realization is expected to occur in the short term.

        3. Financial assets classified as held for trading, except financial derivatives whose settlement term is greater than one year

        4. Cash and equivalent liquid assets

      3. Non-current assets will understand. - Other assets

      4. Current liabilities will include.-

        1. Obligations linked to the normal operating cycle

        2. Obligations whose expiration or termination is expected to occur in the short term

        3. Financial liabilities classified as held for trading, except financial derivatives whose settlement term is greater than one year

      5. Non-current liabilities will include.- The other elements of the liability

      6. Net amount.- A financial asset and a financial liability may be presented on the balance sheet for their net amount provided that certain conditions are met.

      7. Valuation corrections for damage and accumulated amortizations.- They will reduce the asset item in which the corresponding equity element appears

      8. Research.- In the event that the company has capitalized research expenses, a specific item "Research" will be created within the Intangible Fixed Assets

      9. Real estate investments.- The land or buildings that the company uses to obtain rental income or possesses in order to obtain capital gains through its disposal, outside the ordinary course of its operations, will be included in Real estate investments.





        A) EQUITY

        I. Intangible assets

        A-1) Own funds

        II. Inmobilized material

        A-2) Adjustments for change in value

        III. Investment Property

        A-3) Subsidy, donation, and legacies received

        IV. Long term investments in businesses of the group and associated


        V. Long term financial investments

        I. Long term provisions

        VI. Deferred tax assets

        II. Long term debts


        III. Long term debts with businesses fo the group and associated

        I. Non-currents assets held for sale

        IV. Deferred tax liabilities

        II. Stocks

        V. Long term accruals

        III. Trade debtors and other accounts to collect


        IV. Short term investments in businesses of the group and associated

        I. Liabilities related to non-current assets held for sale

        V. Short term financial investments

        II. Short term provisions

        VI. Short term Accruals

        III. Short term debts

        VII. Cash and other equivalent liquid assets

        IV. Short term debts with businesses of the group and associated

        V. Commercial creditors and other accounts to pay

        VI. Short term accruals




    1. Accounting objective.- To inform about the economic and patrimonial situation of the company. To do this, study the patrimony and its variations

    2. Accounting duties of the company.-

      1. Keep an orderly accounting

      2. Keep a book of Inventories and Annual Accounts and a Journal

      3. The mercantile companies will also keep a minute book

      4. Fill out the books in the Mercantile Registry

      5. Keep the books, correspondence, documentation and supporting documents concerning your business duly ordered for six years

      6. Formulate the annual accounts at the end of the year

      7. Value assets in accordance with generally accepted accounting principles

    3. The reliable picture.-

      1. The annual accounts must be written clearly, so that the information provided is understandable and useful for users when making their economic decisions, and must show a reliable picture of the assets, financial situation and results of the company, in accordance with legal provisions.

      2. In those exceptional cases in which such compliance is incompatible with the reliable picture that the annual accounts must provide, such application will be considered inadmissible.

    4. The Journal.- In it, the operations related to the activity of the company are recorded day by day

      1. It is one of the compulsory books

      2. Example.- The entry that we would make in the Journal if we buy goods on credit for 2,000 euros would be the following:


        Merchandise purchases




    5. The General ledger.- The movements of each account on the different dates are recorded in it.

      1. It is optional

    6. General ledger example.-

Banks and credit institutions





    1. The inventory book and annual accounts.-

      1. Trial balances or sums and balances.- Its purpose is to verify that the items recorded in the Journal have been correctly transferred to the Geneal ledger

        1. It is necessary to do one every quarter

        2. Example of balance of sums and balances.-


          Amounts Debt

          Sums credit

          Balances Debt

          Credit balances

          Social capital






          Long term debts



          Lands and natural goods















          Cash, euros




          Banks c.a.




          Purchases of merchandise



          Leases and royalties






          Merchandise sales



          Another financial income








      2. The annual accounts.-

        1. Documents that make up the annual accounts.-

          1. The balance sheet, the profit and loss account, the statement of changes in equity, the cash flow statement and the memory. These documents form a unit and must be written in accordance with the existing regulations.

          2. When a balance sheet, statement of changes in equity and an abbreviated report can be formulated, the statement of cash flows will not be compulsory.

        2. Formulation of the annual accounts

          1. Periodicity.- Every twelve months

          2. Who formulates them and within what period? .- They’re formulated by the employer or managers, who will answer for their veracity, within a maximum period of three months, counting from the close of the financial year.


    1. Taxes. Elements and definitions.-

      1. Taxable event.- It’s the reason for which the tax obligation appears

      2. Tax base.- It’s the quantification of the taxable event

      3. Net base.- It’s the taxable base less deductions, reductions and compensations

      4. Tax rate.- It’s the percentage that is applied to the Net base to calculate the tax quota

      5. Tax quota.- It’s the result of applying the tax rate to the Net base

      6. Tax debt.- It’s the tax rate plus surcharges and less bonuses

    2. The Value Added Tax.- The VAT is an indirect tax on consumption, that is, financed by the final consumer. An indirect tax is the tax that isn’t received by the treasury directly from the taxpayer. VAT must be collected by companies at the time of any sale of products (transfer of goods and services). Companies have the right to be reimbursed the VAT that they have paid to other companies on purchases made in exchange for invoices (tax credit), subtracting it from the amount of VAT charged to their customers (tax debit), having to deliver the difference to the treasury. End consumers are obliged to pay VAT without the right to reimbursement,

    3. The Corporation Tax.-

      1. Definition.- It’s a periodic, proportionate, direct and personal tribute. Taxes the income of companies and other legal entities

      2. Scope of application.- It’s applied throughout the Spanish territory, with the exception of the Basque Country and Navarra (by means of a concert)

      3. Taxable event.- It’s the obtaining of income by certain taxpayers (legal persons and other entities without personality).



    1. It collects the result of the year, consisting of the income and expenses thereof, except when their direct allocation to equity is appropriate.

    2. Income and expenses will be classified according to their nature




      1. Net amount of turnover

      2. Variation in finished and in process of manufactures product inventories.

      3. Work made by the company for its assets

      4. Supplies

      5. Other operating income

      6. Staff expenses

      7. Other operating expenses

      8. Amortization of Fixed Assets

      9. Allocation of subsidies for non-financial fixed assets and others

      10. Excess provisions

      11. Damage and result from Fixed Assets sales


      12. Financial income

      13. Financial expenses

      14. Variation in fair value of financial instruments



      17. Income tax



    1. Mission.- The Memory completes, expands and comments on the information contained in the other documents that make up the annual accounts.

    2. Content of the summarized Memory.-

      1. Activity of the company.- Corporate purpose of the company and the activity or activities to which it is dedicated

      2. Basis of presentation of the annual accounts.-

        1. Reliable picture.-

          1. The company must make an explicit statement that the annual accounts reflect the reliable picture of the assets, the financial situation and the results of the company, as well as in the case of preparing the statement of cash flows, the veracity of the flows incorporated

          2. Exceptional reasons why, to show a reliable picture legal provisions haven’t been applied in accounting matters with an indication of the legal provision not applied and qualitative and quantitative influence for each fiscal year

        2. Non-mandatory accounting principles applied.-

        3. Critical aspects of valuation and estimation of uncertainty.-

        4. Information comparison.-

          1. Exceptional reasons that justify the modification of the structure of the balance sheet, the profit and loss account, the statement of changes in equity and, if prepared, the statement of cash flows of the previous year

          2. Explanation of the causes that prevent the comparison of the annual accounts for the year with those of the previous one

          3. Explanation of the adaptation of the amounts of the previous year to facilitate the comparison and, if not, the exceptional reasons that have made it impractical to restate the comparative figures

        5. Items collected in various items.-

        6. Changes in accounting criteria.-

        7. Error correction.-

        8. Results application.-

        9. Registration and valuation standards.-

        10. Property, plant and equipment, intangible assets and real estate investments.-

          1. Analysis of the movement during the fiscal year of each of these headings of the balance sheet and of their corresponding accumulated amortizations and valuation corrections for damage accumulated

          2. In any case, all the information about the transfers or reclassifications between the different categories of financial assets that have occurred in the year must be provided.

          3. Finance leases and other operations of a similar nature on non-current assets

        11. Financial assets.- The book value of each of the categories of financial assets will be disclosed.

        12. Financial liabilities.- The book value of each of the categories of financial liabilities will be disclosed.

          1. Information about:

            1. The amount of the debts that mature in each of the five years following the end of the year and the rest until their last maturity

            2. The amount of the debts with real guarantee, indicating their form and nature

            3. The amount available in the discount lines, as well as the credit policies granted to the company with their respective limits, specifying the part used

          2. In relation to loans pending payment at the end of the year, the following will be reported:

            1. Details of any non-payment of principal or interest that has occurred during the year

            2. The book value at the year-end date of those loans in which there had been a default due to non-payment, and

            3. If the non-payment has been remedied or the loan conditions have been renegotiated, before the date of preparation of the annual accounts

        13. Equity.-

          1. The number and nominal value of each class of shares shall be indicated, distinguishing by classes, as well as the rights granted to them and the restrictions they may have. Also, if applicable, the pending disbursements will be indicated for each class, as well as the due date.

          2. Specific circumstances that restrict the availability of reserves

          3. Number, nominal value and average acquisition price of the shares held by the company or by a third party acting on its behalf

        14. Fiscal situation.-

        15. Incomes and expenses.-

          1. Purchases and changes in inventories will be broken down

          2. Social charges will be broken down

          3. The item "Other operating expenses" will be broken down.

          4. The amount of the sale of goods and provision of services produced by barter

          5. The results originated outside the normal activity of the company

        16. Subsidies, donations and bequests.-

        17. Operations with related parties.-

        18. Other information.-

          1. The average number of people employed in the course of the year, expressed by categories

          2. The nature and business purpose of the agreements of the company that don’t appear in the balance sheet and on which information hasn’t been incorporated in another note of the report, as well as their possible financial impact, provided that this information is significant and of help in determining the financial position of the company

  3. STATEMENT OF CHANGES IN EQUITY.- It has two parts:

    1. Statements of recognized incomes and expenses.- It includes the changes in equity derived from:

      1. The result of the financial year of the profit and loss account

      2. Income and expenses that must be charged directly to the company's equity

      3. The transfers made to the profit and loss account




        A) Profit and loss account result

        Incomes and expenses charged directly to equity

        I. By valuation of financial instruments

        II. For cash flow hedges

        III. Subsidies, donations and heritages received

        IV. For actuarial gains and losses and other adjustments

        V. Tax effect

        B) Total incomes and expenses charged directly to equity

        Transfers to the profit and loss account

        VI. By valuation of financial instruments

        VII. For cash flow hedges

        VIII. Subsidies, donations and heritages received

        IX. Tax effect

        C) Total transfers to the profit and loss account


    2. Total statement of changes in equity.- Reports all changes in equity derived from:

      1. The total balance of recognized income and expenses

      2. Variations originated in the equity due to operations with the partners or owners of the company when they act as such

      3. The remaining variations that occur in equity

      4. Adjustments to equity due to changes in accounting criteria and corrections of errors will also be reported (see PGC)

  4. STATEMENT OF CASH FLOWS.- Reports on the origin and use of monetary assets representing cash and other equivalent liquid assets. Cash and other equivalent liquid assets are understood as cash, banks current account and saving account and fixed-term deposits of no more than three months. Occasional overdrafts may also be included as a component of cash when they form an integral part of the company's cash management.




1. Profit for the year before tax

2. Result adjustments

4. Other cash flows from operating activities

5. Cash flows from operating activities (+/- 1 +/- 2 +/- 3 +/- 4)


6. Payments for investments (-)

7. Collections for divestments (+)

8. Cash flows from investing activities (7-6)


9. Collections and payments for equity instruments

10. Collections and payments for financial liability instruments

11. Payments for dividends and remuneration of other equity instruments

12. Cash flows from financing activities (+/- 9 +/- 10-11)

D) Effect of changes in exchange rates

E) NET INCREASE/DECREASE IN CASH OR EQUIV. (+/- 5 +/- 8 +/- 12 +/- D)

Cash or equivalent at the begining of the exercise

Cash or equivalents at the end of the year

  1. INTERPRETATION OF THE ANNUAL ACCOUNTS.- When interpreting the annual accounts, we compare the situation of the company in different years. The auditor must indicate whether the alterations to the information are justified or not and if they aren’t, issue a report with qualifications.


    1. Equity analysis.-

      1. Valuation of the company as a whole.-

      1. Valuation of the patrimonial masses.-

        1. Assessment criteria.-

          1. Historical cost or cost.- Of an asset is its acquisition price or production cost. Of a liability is the value that corresponds to the consideration received or that will be received in the future in exchange for incurring the debt

          2. Fair value.- It will be the price quoted in an active market. Transaction costs that may be incurred in its sale will not be deducted

          3. Net realizable value.- An asset is the amount that the company can obtain from its sale by deducting its costs. From raw materials and products in progress, the estimated costs to complete their production, construction or manufacture

          4. Present value.- It’s the value of the disbursements and reimbursements updated

          5. Value in use.- It’s the current value of the expected future cash flows, through their use or their sale, taking into account their current status.

          6. Selling costs.- These are those that the company wouldn’t have incurred had it not made the decision to sell, excluding financial expenses and taxes on profits. Legal expenses necessary to transfer ownership of the asset and sales commissions are included.

          7. Amortized cost of a financial instrument.- It’s the amount which was initially rated a financial asset or financial liability, minus repayments of principal that have occurred, more or less, as appropriate, the portion allocated to the profit and lesss and minus any impairment reduction

          8. Transaction costs attributable to a financial asset or liability.- Those that wouldn’t have been incurred if the company hadn’t carried out the transaction

          9. Book value.- It’s the net amount for which an element is recorded on the balance sheet once, in the case of assets, its accumulated depreciation and any accumulated value correction for damage that has been recorded has been deducted.

          10. Residual value.- It’s the amount that the company estimates that it could obtain at the current moment from its sale

        2. Inmobilized material.-

          1. Initial valuation.- Assets included in property, plant and equipment will be valued at their cost, whether this is the acquisition price or the production cost. Acquisition price.- Includes all expenses until its start-up. Production cost.- It’s the industrial cost (Raw material + Direct labor + General manufacturing expenses directly attributable to the product + General manufacturing expenses not directly attributable to the product). Swaps: Of a commercial nature = fair value + money given in exchange, Of a non-commercial nature = book value + money given in exchange (with the limit of the fair value of the good). Non-cash capital contributions = Fair value

          2. Subsequent valutation.- For their acquisition price or production cost minus accumulated depreciation and, where appropriate, the cumulative amount of damage losses recognized at the end of the year ( there will be a loss for damage of an element of the property, plant and equipment when its book value exceeds its recoverable amount, understood as the higher amount between its fair value less costs to sell and its value in use)

          3. Land.- Normally they have an unlimited life and, therefore, aren’t amortized

        3. Intangible assets.-

          1. Initial valuation.- Same as Inmobilized material

          2. Subsequent valuation.- If it has an indefinite useful life, it won’t be amortized, although its eventual deterioration must be analyzed. The useful life of an intangible asset will be reviewed each year to determine if there are facts or circumstances that allow continuing to maintain an indefinite useful life for that asset.

          3. Goodwill.- Will not be amortized

          4. Amortization and valuation correction.- Intangible assets must be subject to both

        4. Credits (for commercial or non-commercial operations) .-

          1. Initial valuation.- Fair value = Transaction price + transaction costs. However, credits for commercial operations with a maturity of not more than one year and that don’t have a contractual interest rate may be valued at their nominal value when the effect of not updating the cash flows isn’t significant.

          2. Subsequent valuation.- At its amortized cost

          3. Damage of value.- At the end of the fiscal year, valuation corrections will be made

        5. Debits (for commercial or non-commercial operations) .-

          1. Initial valuation.- Fair value = Transaction price + transaction costs. However, debits for commercial operations with maturity not exceeding one year and that don’t have a contractual interest rate may be valued at their nominal value.

          2. Subsequent valuation.- At its amortized cost

        6. Stocks.-

          1. Initial valuation.- For its acquisition price or production cost. The acquisition price includes the amount invoiced by the seller after deducting any discount, price reduction or other similar items as well as the interest incorporated into the face of the debits, and all additional expenses that occur until the goods are located for sale. The production cost is the industrial cost

          2. Value assignment methods.- Generally the WAP, also accepting the FIFO

          3. Operation.- (In all cases we sell 700 units at 300 euros each)

          4. Weighted average price.- Exits are made at the average price of existing units using the following formula:
















































          1. FIFO (first in, first out).-

            1. First entry, first exit. Exits are made at the price of the first entries

            2. If there is strong inflation, the FIFO overvalues the stock (€ 90,000)































































          1. LIFO (last in, firs out) .-

            1. Last entry, first exit. Exits are made at the price of the last entries

            2. If there is strong inflation, the LIFO undervalues the stock (€83,000)































































          1. Subsequent valuation.- When the net realizable value of inventories is less than their purchase price or cost of production, appropriate valuation adjustments recognized as an expense shall be made in the profit and loss

        1. Changes in accounting criteria, accounting errors and estimates.-

          1. They will respect the principle of uniformity and will be applied retroactively.

          2. The income or expense corresponding to previous years derived from said application will motivate a change in a reserve item

        2. Events after the close of the financial year.- Those that reveal conditions that didn’t exist at the close of the financial year won’t entail an adjustment in the annual accounts. However, if they aren’t of importance, they will be included in the memory.

      1. Patrimony situations and balances.-

        1. Position 1.-NCA + CA = E; L = 0

          1. There are no debts

          2. Maximum financial stability

        2. Position 2.- NCA + CA = L; E = 0

          1. There are no own funds, everything is debts

        3. Position 3.- NCA + CA = E + L; being CA>CL and resulting in positive working capital

          1. It’s the normal balance

        4. Position 4.- NCA + CA = E + L; being CA<CL and resulting in negative working capital

          1. The company would be in what was previously called suspension of payments (if the situation is temporary) or bankrupt (if it is permanent)

      1. Dynamic analysis of patrimony.-

        1. With this analysis it is intended to study the patrimonial variations over time

        2. The basic document for the elaboration of this analysis is the state of origin and application of funds

        3. Example.-






















+ 10
























        1. The increase in non-current assets has been due to decreases in inventories, realizable and available

        2. The decrease in non-current liabilities was due to an increase in current liabilities

    1. Financial analysis of patrimony. Main economic-financial ratios.- Data from the balance sheet on page 86, taking into account the structure of the Balance Sheet of a normal company on the same page to calculate the ideal values

      1. Treasury ratios.-

        1. Immediate availability (immediate treasury) .-

Normal ≥ 0.17; Ideal = 0.17

        1. Treasury (acid-test) .-

Normal ≥ 1.67; Ideal = 1.67. If it were lower than this value, it would mean that a suspension of payments could occur since the company would have to temporarily disregard its payments

      1. Solvency and financial autonomy ratios.-

        1. Cash-flow = Accounting profit + amortizations – taxes; the larger the better

          1. Example 1.- If: Profit before interest and taxes (BAIT) = 10; Amortization = 3; Interest = 2 and Tax over profit = 35%

          2. Accounting profit = BAIT – Interest; Cash-flow = 10 - 2 + 3 - 0.35 x (10 - 2) = 8.2

          3. Example 2.- If: Income = 15; Expenses = 7; amortization = 3 and Tax over profit = 35%

          4. Cash-flow = 15 - 7 + 3 - 0.35 x (15 - 7) = 8.2

        2. Liquidity or current solvency.-

Normal ≥ 2.67; Ideal = 2.67

        1. Total liquidity.-

Normal between 1 and 2; Ideal = 2

        1. Total guarantee, structural guarantee or bankruptcy distance.-

Normal ≥ 1, if it were less, it would be bankrupt; Ideal = 2.5

        1. Financial autonomy.-

Normal ≥ 1.5; Ideal = 1.5. The higher it is, the less dependence it will have on external financing

      1. Debt ratios.-

        1. Total indebtedness.-

Normal ≤ 0.67; Ideal = 0.67

        1. Long term indebtedness.-

Normal ≤ 0.17; Ideal = 0.17

        1. Short term debt.-

Normal ≤ 0.5; Ideal = 0.5

      1. Capital availability and immobilization ratios.-

        1. Immobilization.-

Normal ≤ 1; Ideal = 0.29

        1. Availability of own funds.-

Normal ≥ 0.83; Ideal = 0.83. The higher the value of the ratio, the more availability of own resources will be

        1. Basic financing ratio.-

Normal = 1; Ideal = 1. This ratio should be very close to unity, which will indicate that the financing is correct


    1. Example.- Taking into account that the earnings before interest and taxes (BAIT) have amounted to 4, the interest on the debts to 1, the value of the production of the period has been 2 and the total sales of the period have amounted to 5. The income tax amounts to 2

    2. Economic profitability.-

the higher the ratio the better

    1. Other ratios associated with the analysis of economic profitability.-

      1. Production cost.-

the higher the better

      1. Profitability of immobilizations.-

the higher the better

      1. Profitability on sales.-

the higher the better

    1. Financial profit.-

the higher the better

Net profit = BAIT - Int - Imp



    1. Company concept.- A company is a set of human, material, financial and technical factors organized and driven by management, which tries to achieve objectives in accordance with the purpose previously assigned

    2. Theories about the company.-

      1. Neoclassical or marginalist theory.-

        1. It takes place from the middle of the 19th to the beginning of the 20th centuries

        2. Its main authors were Jevons, Menger, Walras and Marshall

        3. According to this theory, the mission of companies is simply to produce

        4. This theory doesn’t explain the real operation of companies since they aren’t only concerned with producing but with other things, such as achieving social needs

      2. Social theory.-

        1. The objective of companies shouldn’t only be to maximize profits but also have to cover social needs

        2. The way in which the company achieves social needs is reflected in the Social Balance

        3. Areas of the Social Balance.-

          1. Internal.- It collects labor relations and the management style of the company

          2. External.- It collects the costs and social benefits that occur as a result of its activity, specifically with its suppliers, clients, the environment and with the community where it carries out its activities.

      3. Theory of transaction costs.-

        1. Its main authors were Coase and Williamson

        2. According to this theory, a company will grow (through vertical integration) until it is more expensive for it to carry out this phase of the production process itself than to entrust it to other companies (for example: SEAT will manufacture its car tires if i’is cheaper than buying them from MICHELIN )

    3. The company as a system.-

      1. Definition of system.- A system is a set of elements interrelated with each other and with the global system, which has objectives

      2. Characteristics of the company as a system.-

        1. The company is an open system.- Since it’s interrelated with its environment

        2. Synergy occurs in the company.- Synergy consists of a team achieving more than the sum of what all its components would have achieved individually.

        3. The company is a global system.- Any influence on one of its elements has repercussions on the others and on the system as a whole

        4. The company is a self-regulating system - The company controls itself

      3. Subsystems that can be distinguished in the company.-

        1. The system of physical flows.- Through which raw materials, products in progress, finished products, etc. circulate.

        2. The financing system.- It transforms savings into investment. It’s made up of the financing and investment subsystems

        3. The management system.- It acts on the other two and which, in turn, is functionally formed by the planning, organization, management and control subsystems.

    4. Company and entrepreneur.-

      1. Theories on the concept of entrepreneur.-

        1. Capitalist entrepreneur or business owner.- Early 19th century

        2. Innovative entrepreneur (Shumpeter) .- He’s capable of launching a new business opportunity taking advantage of an invention or an unexploited idea (it isn’t who invents it but who exploits it)

        3. Entrepreneur who assumes risks (Knigth).- He has expenses that he will recover or not

        4. Galbraith's technostructure.- In the new large companies, those who actually hold business power aren’t the partners of the company but the senior managers who control it

      2. Concept of employer according to the Workers' Statute.-

        1. An entrepreneur is any natural or legal person or community of goodss that receives, on a voluntary basis, the provision of paid services from those who work for others and within the scope of the organization.


    1. Company functions.-

      1. Directive.- Decides how the objectives of the company will be achieved through planning, organization, coordination and control

      2. Technical or production.- Performs activities for the manufacture of goods or the provision of services

      3. Research and development.- Improvement of methods and programming and launch of work plans

      4. Financial.- Gets the necessary financial resources

      5. Human resources management.- Selects, hires, trains, motivates and promotes staff

      6. Purchases.- Acquisitions

      7. Commercial.- Sales

      8. Administrative.- Control the documentation

    2. Objectives.-

      1. Economic or profitability.- Maximum profit

      2. Growth.-

        1. Intensive.- In a new area (SEAT enters Russia); a very similar product (SMART)

        2. Integrated.- In another phase of the same production process

          1. Backwards.- CALVO - Fishermen

          2. Forwards.- CALVO - HIPERCOR

          3. Horizontal.- CONTINENT AND PRYCA IN CARREFOUR

        3. Diversified.- Another activity (BMW produced aircraft engines and began to manufacture cars)

      3. Social.- Cover social needs (ecology, security, help to the poors, etc.)

    3. Definition of competitive advantage.- It’s the value that a company is capable of creating for its buyers. It’s the disbursement that buyers are willing to make for the products or services that a company provides them (eg home delivery of purchases from a supermarket)


    1. Technical capital.- It’s the set of items of a material or immaterial nature, not intended for sale, that a company has to produce goods and services. It refers to Tangible Fixed Assets (Land and natural assets, Constructions, Transport elements, Machinery, etc.) and Intangible Fixed Assets (Industrial Property, Computer applications, Goodwill, Administrative concessions, etc.). All this will be seen in detail in topic 10 (Assets and balance sheet)

    2. Human element.- Refers to workers. We will see all this expanded in topic 6 on Human Resources Management

    3. Tangible items. - It refers to tangible fixed assets but also to the part of current assets that we can touch, that is to say, goods (merchandise, raw materials, finished products, semi-finished products, containers, packaging, etc.). We will see all this in more detail in topic 10 (Assets and balance sheet)

    4. Intangible elements.- Refers to intangible fixed assets but also to the part of current assets that we cannot touch, that is, to rights and obligations (clients; clients, commercial bills receivable, debtors; debtors, commercial bills receivable; short-term debt; long-term debts; suppliers; suppliers, commercial bills to be paid; etc.). We will see all this better in topic 10 (Assets and balance sheet).

  4. FUNCTIONS THAT DEVELOP WITHIN THE GENERAL ECONOMY.- Companies are the economic agents that make decisions about the production and distribution of goods and services


    1. Internal growth.- It’s the increase in size that is produced by the new investments of the company. This growth is in the medium or long term since investments take time to be made

    2. External growth.- It’s the one that occurs as a result of the mergers or takeovers of the company

    3. Merger and acquisition strategies.-

      1. Equal merger.- Two companies of a similar size come together, creating a new company. Both lose their legal personality (Continente and Pryca gave rise to Carrefour)

      2. Merger by absorption.- A larger company acquires a smaller one that loses its legal personality (El Corte Inglés absorbed Galerías Preciados)

      3. Merger by spin-off.- A company disappears, distributing its assets in several companies. The old one loses its legal status (at first, Rover SUVs were owned by Ford, the Mini was owned by BMW and the rest of the cars were owned by a company that has been incorporated with the former workers)

      4. Participation of capital without merger.- A company acquires shares of another to dominate it. It doesn’t lose its legal personality (Renault has acquired a significant package of Nissan shares to dominate it)

      5. Holding.- A parent company acquires all or a significant part of the capital of other companies to dominate them. It doesn’t lose its legal personality. In pure holding companies, the parent company has as its social objective to dominate the others (example: RUMASA), in mixed holding companies it also has its own objective (example: La Caixa)

    4. Cooperation between companies.-

      1. Trust.- Vertical concentration (different phases of the production process) through capital participation of some companies over others

      2. Cartel.- Horizontal concentration to agree prices, distribute the market, etc. (they are illegal in the European Union)

      3. Temporary unions of companies.- To carry out a specific work or service. They don’t have their own legal personality. Unlimited and joint liability (Example: The union of the Utrera road with the SE30 has been built by a joint venture made up of two companies)

      4. Economic Interest Groups (AIE) .- Several companies that share a common good. For example: several driving schools create an AIE to repair their cars. It has its own legal personality. Joint and unlimited liability

    5. Association with another company.-

      1. Commercial concession.- The concession company undertakes to market the products supplied by the transferor firm, in exchange for a commission.

      2. The franchise.- There are two types:

        1. One in which the franchisee manufactures or markets products and services under the name and brand of the franchisor, from which they can receive assistance, equipment and some control in their management

        2. Another, the same as the previous one, but the franchisor's products aren’t manufactured or marketed, but any other


    1. Commercial.- They buy and sell products without transformation

    2. Industrial.- Transform products

    3. Of services.- They provide services


    1. Primary sector companies.- Extractive activities (agriculture, livestock, fishing, mining, etc.)

    2. Secondary sector companies.- Industry and construction

    3. Tertiary sector companies.- Services


    1. By number of workers.-

      1. Microenterprise.- From one to five workers

      2. Small business.- From six to fifty workers

      3. Medium-size company.- From fifty-one to five hundred workers

      4. Large company.- More than five hundred workers

    2. Other criteria to measure the size of companies.-

      1. Equity

      2. Assets

      3. Production volume

      4. The sales figure

      5. The use of production factors (in addition to the number of employees)

      6. The profits

      7. One multi-criteria value (using several at the same time)

    3. The business location.-

      1. Objectives to be achieved with a good business location.-

        1. Minimize production and/or distribution costs

        2. Optimize market access to ensure regular supplies

        3. Reduce storage costs, and

        4. Increase business volume

      2. The industrial location.-

        1. Factors that influence the industrial location.-

          1. The availability of land and its price

          2. Access to raw materials and other supplies (for example, refineries are often built by the sea)

          3. The availability of labor

          4. The existence of auxiliary industry (repairs, transportation, parts, etc.)

        2. Land uses and urban location.-

          1. Industrial companies are usually located on the outskirts of cities for the following reasons:

            1. Good communication and transportation systems

            2. Close to markets

            3. Existence of skilled and abundant workforce

            4. Municipal services with the capacity to serve companies

          2. Industries must be located on land for industrial use and need a municipal license to do so

        3. Commercial and services location.-

          1. The radius of action.-

            1. It’s the market area to which the influence of an establishment or point of sale reaches a certain good or service

            2. It’s different depending on the type of product

            3. Those that are acquired daily (bread, newspapers, etc.) have a small radius of action, those that are acquired occasionally usually have a greater radius of action (shoes, clothes, etc.)

            4. It also depends on the price; the most expensive have a greater radius of action than the cheapest

            5. The business radius can be expanded by offering any extra service to the customer (financing, transportation, free assembly and installation, etc.)

          2. The break-even point.- It’s the minimum dimension that a market must have for a store or point of sale to be viable. If the market is below the break-even point, a business installed in it won’t be able to survive.

          3. Measures that favor access to a point of sale.-

            1. Site visibility

            2. Ease of communications

            3. Situation on traffic sidewalks

            4. Location in areas with complementary activities

            5. Well decorated premises with a comfortable stay and transit

          4. Location of the points of sale according to the type of activity to which they’re dedicated.-

            1. Activities of a primary nature (bakeries, bars, grocery stores, etc.) are usually found spread over residential areas

            2. Activities with a somewhat larger radius of action would be concentrated in a part of the same residential areas

            3. In large cities, business activities are concentrated in business areas

            4. Industrial activities would be concentrated in the periphery of cities

            5. Hypermarkets are also located on the outskirts of cities

    4. The dimension of the companies.-

      1. Dimension and productive capacity.-

        1. Production capacity.-

          1. It is the value of production achievable when all resources are in full employment

          2. The production capacity is closely related to the size of the company, since the larger the size is, the larger the production is

        2. Idle capacity.-

          1. It’s the difference between the production capacity and the production actually obtained

        3. The degree of underutilization.-

          1. It is the percentage of the production capacity that isn’t used

      1. The microeconomic theory and the business dimension.-

        1. The most convenient dimension according to the general doctrine.-

          1. It’s one in which average total costs are minimized

          2. This point is called the optimum of exploitation.

        1. The most convenient dimension according to the "law of proportional effect" .-

          1. This thesis maintains that there is no optimal dimension that guarantees minimum costs to companies, since the long-term average cost curve doesn’t have a minimum, but is parallel to the abscissa axis.

          2. According to this law, companies don’t grow to seek greater profitability but to:

            1. Seek power and the effort to monopolize the market

            2. The desire of professional managers to increase their influence

            3. Diversification of activities


    1. Public owned companies.- The capital is in the hands of the State

    2. Private owned companies.- The capital is in the hands of people

    3. Mixed.- Part of the capital is in private hands and part is of the State


    1. Local.-

    2. Nationals.-

    3. International.-


    1. The individual entrepreneur.-

      1. Definition.- He’s the natural person who, having the necessary legal capacity, regularly exercises a business activity independently

      2. Concepts to take into account.-

        1. Emancipated.- A minor who has been married or who, being over sixteen years of age, his parents or guardians have allowed him to live outside the family home and without financially depending on them

        2. Legal capacity.- Abstract possibility of being the holder of rights and obligations. The natural or physical person acquires it at birth; the legal person with its constitution or creation in accordance with legal regulations

        3. Capacity to act.- Possibility of exercising by yourself the rights and obligations of which you’re the owner. The natural or physical person acquires it with the age of majority or with emancipation; the legal person, as well as the legal capacity

      3. The capacity to contract of the individual entrepreneur.-

        1. Adults and emancipated minors can personally hire people or sign contracts

        2. Non-emancipated minors can be entrepreneurs and hire people or sign contracts, through a legal representative

      4. Features.-

        1. Unlimited liability

        2. Registration in the Mercantile Registry isn’t mandatory but is convenient (since later it won’t be able to sign any document)

        3. Minimum capital: Doesn’t have

    2. Individual Limited Liability Companies (EIRL) .-

      1. Concept.- They’re legal persons, formed exclusively by a natural person, with their own assets and different from that of the owner, who carry out activities of a purely commercial nature (not second category activities). The EIRL are subject to the rules of the Commercial Code, whatever their purpose, being able to carry out all kinds of civil and commercial operations, except those reserved by law for Public Limited Companies.

      2. Particularities.-

        1. Identification.- The owner must give, at least, his name and surname, and may also have a fantasy name, added to that of the economic activities or business. This name must be closed with the phrase "Individual Limited Liability Company", or use the abbreviation "EIRL".

        2. Constitution.- By public deed, the extract of which is registered in the Commercial Registry and published in the Official Journal.

        3. Duration.- It can be determined or indefinite.

        4. Type of person.- The generation of an EIRL allows to give life to a legal person, always of a commercial nature.

        5. Liability.- The owner of the individual company responds with his patrimony and only with the contributions made or that he has agreed to incorporate. For its part, the company responds for its obligations generated in the exercise of its activity with all its assets

        6. Special publicity.- Formality and special publicity must be given to the contracts that the individual company has with its owner, when the latter acts within their personal patrimony

        7. Administration.- Corresponds to its owner; however, it can give general or special powers to a manager or agent.

        8. End.- To put an end to the company, the will of the businessman, the end of its duration or the death of the owner stand out.

        9. Inheritance.- In the event of the death of the businessman, his heirs can continue with the company.

        10. Transformation.- The individual company can be transformed into a limited company and a limited company can become an individual company. In the latter case, the rights of the disappearing society must be brought together in the hands of a single natural person.

        11. Applicable regime.-