Vertical integration is an economic term that describes the merging of two different types business into one or the merging of two different lines of production within one business. What makes this type of merging, or integration, vertical is the fact that one of the businesses or lines of production is different from the other. This tactic is often an industry response to sharing limited or scarce resources.Know More
Usually the difference between the businesses that causes vertical integration is their level of production, but sometimes supply and demand starts the process. Vertical integration occurs any time company productivity increases following a merger of departments or businesses. Vertical integration is not always a change in the way companies do business or the work they perform. For example, an orange juice manufacturer may decide to buy their supplier in order to cut costs without changing the day-to-day operation of either business.
Before a business attempts a vertical merger, they need to know that the process is relatively expensive and often difficult to reverse. Vertical integration is an aggressive move to edge more profits from resources and customers. Other types of integration, like forward integration, that involve growing are similar to vertical integration.Learn more in Financial Calculations
The difference between simple interest and compound interest is that simple interest builds only on the principal amount, while compound interest builds on both the principal and previously earned interest. Because of this, compound interest always yields greater profits.Full Answer >
Accounting Tools from CPA Steven Bragg indicates that the formula for net credit sales is sales on credit in a given period minus sales returns and sales allowances. If a company has $100,000 in net credit sales but experiences $34,000 in returns and allowances, its net credit sales are $66,000.Full Answer >
To calculate marginal revenue, evaluate total revenue and the revenue change at the instance of producing an extra unit. The marginal revenue equates to the prices of all new units produced, after considering revenue change.Full Answer >
According to Dr. Ray Batina of Washington State University, zero economic profit is the profit maximization point. At this point, price is equal to marginal cost. This scenario only applies to a perfectly competitive market.Full Answer >