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Entrepreneurial Finance: Fundamentals of Financial Planning and Management for Small Business by M. J. Alhabeeb

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CHAPTER 17 OPERATIONS, BUDGETING, AND TAXES

Operations

The term “operations” or “operating system” means the process of converting inputs to outputs. It is to say, transforming material, labor, capital, energy, and other inputs into goods and services. Since those goods and services are meant to serve and benefit consumers, we can say that the operating system is the set of productive activities that would yield certain outputs of some value to consumers. In other words, it is the value producing system of the business. Operations management would then be the planning and control of that conversion process. Depending on what kind of value is needed, or what type of product consumers need, the inputs would be identified, and the process would be determined. There would be so many inputs to the production process but we can generally say that all inputs can be in one way or another identified by the major categories: people, capital, material, energy, and time. People would cover physical labor and mental capacity such as intelligence, knowledge, skills, and information. Capital would include money, equipment, building, technological systems, and the like. Energy would mean natural or artificial energies (excluding people's energy) such as electricity, gas, solar, wind, water, nuclear, and the like. Material includes all physical goods necessary for production, and finally time includes the actual and perceived time. The production process would transform a set of inputs into ...

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