Glossary of Economics of Product Development Terms
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- cash generation
- realization of cash from what you do, where everyone is involved
- what is the purpose of business?
- to create a customer
- return on investment
- a profit from an investment expressed as a percentage of your return
- financial measures are...
- a way of understanding your financial state, a calculation between data sets
- cash flows and time value of money are notions that have ____ as their major factor
- finance and economics are the study of...
- how we represent and manage resources in the pursuit of growth
- net margin
- total revenue minus direct and indirest costs
- sales, general, and administrative
- net present value
- takes into account cash flows and time value of money to determine whether an investment makes sense
- innovation is...
- wide in focus, large scale adoption; something newly created that is widely adopted
- invention is...
- narrow in focus; an idea
- measures of value and efficiency
- sales forecast
- estimate of demand
- why do sensitivity analysis?
- to answer what if questions by calculating the NPV vs changes in various dimensions
- 6 nuclei of business
- 1. cash generation, 2. margins, 3. return on assets, 4. velocity, 5. growth, 6. customers
- capacity to satisfy demand
- cash flow statements
- a document that tracks your in-flow and out-flow of cash
- cash flows are...
- a pattern of income and expenses that exist for a given economic situation
- key challenge: moving from a cost-based mindset
- to an investment-based mindset
- for customers, you must...
- develop an empathy so that your offering resonates
- turn; the speed at which value is delivered
- reflection of value created over time
- profit margin
- measure of value
- spreadsheets are a...
- tool to build numeric models that give you a sense of the dynamic behavior of a situation
- gross margin
- total revenue minus direct costs
- time value of money
- a notion that states if you design the way you appropriate your investments, you will have more today than you would otherwise
- What does Drucker say profit is?
- NOT the purpose of business; it is a measure, a test of validity
- to spend or devote resources for a future advantage
- an investment-based mindset is focused on...
- FUTURE benefits and the time value of money
- true measure
- cash flow exist to...
- work with the time value of money
- sensitivity analysis
- gives you a sensitivity to key assumptions in your financial model
- cost-based mindset is focused on...
- the now
- marketing is a...
- full life cycle activity
- ramp-up costs
- costs incured up front to start a project
- return on assets
- ratio of return over assets employed (including fixed)
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