Business & Finance · Kindergarten–Grade 8 · Quick reference
Business & Finance(K–8 · Money · Markets)
Work, scarcity and opportunity cost, specialization and trade, supply and demand, the story of money from barter to fiat, banks and inflation, the six stakeholders, labor and capital, honest rules, the entrepreneur, break-even and the pitch, double-entry bookkeeping and the three statements, saving, interest, investing and giving.
1Work, Trade & Economic Thinkingunits 1 and 3 · why people trade
First ideas
- Work is good: God made us to work (Genesis 2:15); a vocation is a calling. Goods are things made, services are work done for others; a producer makes, a consumer uses.
- Needs (food, clothing, shelter) come before wants.
- Scarcity: there is never enough of everything, so every choice gives something up: the opportunity cost is the next-best thing you did not choose.
- Marginal thinking: decide one more at a time; a sunk cost is already spent and should not decide what you do next.
- Incentives move people; rules have unintended consequences (Plymouth’s common field, 1623).
Specialization and trade
- Division of labor: Adam Smith’s pin factory (1776): ten workers splitting the job made thousands of pins a day; alone, each made a handful. Productivity = output per worker per hour.
- Comparative advantage: each side should make what costs it least to give up, then trade; both gain even if one is better at everything.
- Trade routes: Phoenician ships, the Silk Road, the spice routes; imports come in, exports go out.
Comparative advantage Worked
Markets and prices
- A market is buyers and sellers meeting. Demand: lower price, more wanted. Supply: higher price, more offered. Where they meet is the market price.
- A price too low makes a shortage; too high, a surplus. Prices are signals that tell people what is scarce.
- Competition among many sellers serves customers; a monopoly is one seller; a cartel agrees not to compete; guilds limited entry.
- Structures: perfect competition (wheat), monopolistic competition (restaurants), oligopoly (cars), monopoly; monopsony is one buyer. Who decides? market, command (planners: shortages) or mixed economy; public goods and spillovers are the hard cases.
2The Story of Moneyunit 2 · from barter to banknotes
| Job | Meaning |
|---|---|
| medium of exchange | everyone takes it, so no double coincidence of wants is needed |
| unit of account | prices are counted in it |
| store of value | it keeps its worth until you spend it |
| When | What |
|---|---|
| before money | barter: trading goods for goods; Abraham weighed silver (Genesis 23) |
| about 600 B.C. | first coins in Lydia (electrum); King Croesus; a mint stamps them |
| 1000s | China’s jiaozi, the first paper money |
| 1200s–1400s | the Florentine florin; the Medici bank; bills of exchange |
| 1600s | goldsmiths’ receipts become banknotes; fractional reserves |
| 1800s–1933 | the gold standard: paper redeemable in gold |
| 1944–1971 | Bretton Woods; Nixon closes the gold window: fiat money, legal tender by law |
Banks
- A deposit is money left with the bank; the bank keeps reserves and lends the rest (fractional-reserve banking). Lending creates new deposits: the money multiplier.
- A bank run happens when everyone wants cash at once; deposit insurance (FDIC, 1933) calms it.
- Interest is the price of borrowing: the bank pays savers less and charges borrowers more.
- A central bank (the Fed, 1913) issues the currency and sets interest rates.
Inflation
More money chasing the same goods makes prices rise: inflation; purchasing power falls. Debasement (less silver in the coin) and printing money caused it; Weimar Germany (1923) and Zimbabwe show hyperinflation. Gresham’s law: bad money drives out good.
| Coin | Worth |
|---|---|
| penny | 1¢ |
| nickel | 5¢ |
| dime | 10¢ |
| quarter | 25¢ |
| half dollar | 50¢ |
| dollar | 100¢ = $1 |
| bills | $1, $5, $10, $20, $50, $100 |
Money is a promise
Coins carried gold or silver; banknotes were promises of gold; fiat money is a promise backed by law and trust. Honest money keeps its promise: “a false balance is abomination to the LORD” (Proverbs 11:1).
3Great Businesses & Fair Rulesunits 4–5 · stakeholders, labor and capital, honest markets
The six stakeholders
A great business serves its six stakeholders: the financiers who lend or invest, the risk-takers who start and own it, the builders who design and make the product, the workers, the customers and the community around it (suppliers, neighbors, the town).
| Business | Lesson |
|---|---|
| Medici Bank | branches, partnerships, bills of exchange; trust and risk |
| Wedgwood | marketing: royal endorsement, showrooms, catalogs, guarantees |
| Ford’s Model T | mass production, the moving assembly line, the $5 day |
| Ford vs. General Motors | market segmentation, product lines, installment credit |
| Hershey | perseverance, a company town, a charitable trust |
| Fuggers of Augsburg | collateral, lending to kings, vertical integration |
| LEGO | core business, complexity cost, turnaround |
| McDonald’s | the business model: value proposition, franchise, cost structure |
Capital and labor need each other
- Capital (tools, buildings, money) makes labor (work) more productive; productivity raises real wages and the standard of living (the Industrial Revolution).
- A wage is agreed in a contract; fair pay honors the agreement (the workers in the vineyard, Matthew 20).
- Child labor ended by Factory Acts and compulsory schooling (Shaftesbury); fire codes, workers’ compensation and food labels followed real tragedies (the Triangle fire, 1911; the Jungle, 1906).
- Robert Owen showed decent conditions and profit can go together.
Settled history
The course teaches the labor-capital story as settled history: both are needed, honest rules protect both, and productivity is what lifts wages.
Keeping markets honest
- Just weights and measures (Leviticus 19:36); standard units; inspectors.
- Property, promises, inventions: deeds, contracts, patents and copyrights protect what is yours.
- Antitrust (Sherman Act, 1890; Standard Oil, 1911) breaks up trusts that crush competition; natural monopolies (water pipes) are regulated.
- After the 1929 crash: the FDIC, the SEC, disclosure and the prospectus.
- When rules backfire: price ceilings make shortages and black markets (Diocletian’s edict, 301); rationing; government failure.
4Entrepreneurship & Salesunit 6 · seeing a need and taking a risk
The entrepreneur
- Sees a need, takes a risk for a reward, and invests time and money (often with a partner).
- Test the idea: prototype → feedback → survey → test market → improve (iteration).
- Business model: who is the customer, what is the value proposition, how does money come in (revenue stream), what does it cost (cost structure).
- Financing: bootstrapping (your own money), debt (a loan, paid back with interest) or equity (selling a share; dilution).
Honest selling
Wanamaker’s fixed price tags and money-back guarantee (1860s); no deceptive advertising; tell the truth about what you sell; a sign and a smile; customer service makes repeat customers. Consultative selling (Patterson): ask open questions, find the need, answer objections.
Break-even
Fixed costs do not change with sales (a booth fee); variable costs rise with each unit (cups, lemons).
break-even units = fixed costsprice − variable cost per unit
Lemonade stand Worked
Count the cost first
“Which of you, intending to build a tower, sitteth not down first, and counteth the cost?” (Luke 14:28). Plan, cost it, then sell.
| Part | Say |
|---|---|
| hook | the problem, in one line |
| solution | what you make and why it is better |
| live test / proof | show it working |
| the numbers | price, cost, break-even, profit |
| the ask | what you need and what you offer in return |
Run a real business (unit 9)
- Choose and plan: a one-page plan, target customer, goal, permit, partnership agreement.
- Make it and cost it: quality standard, cost sheet, cost per item, waste.
- Sell it honestly: sales ledger, making change, receipts.
- Close the books: profit, lessons learned, give the firstfruits.
5Bookkeeping & Accountingunit 7 · Pacioli, 1494
The accounting equation
What you own = what you owe + what is yours. Net worth = assets − liabilities.
Assets = Liabilities + Owner’s Equity
Double entry
Every transaction is written twice, a debit and a credit of equal size, first in the journal (by date) then in the ledger (by account). Debits increase assets and expenses; credits increase liabilities, equity and revenue. The books must balance.
DEAD CLIC
Debits increase Expenses, Assets, Drawings; Credits increase Liabilities, Income, Capital.
| Statement | Answers | Lines |
|---|---|---|
| Income statement | Did we make money this period? | revenue − expenses = profit (net income); profit margin = profit ÷ revenue |
| Balance sheet | What do we own and owe today? | assets (cash, inventory, receivables) · liabilities (loans, payables) · owner’s equity (retained earnings) |
| Cash flow statement | Where did the cash go? | operating, investing, financing |
A simple month Worked
Honest books
- Audit: an outsider checks the books (the Drapers’ Guild syndics; Enron, 2001, showed why).
- Internal controls: receipts for everything, two people count the cash, segregation of duties.
- Ratios: current ratio = current assets ÷ current liabilities; debt-to-equity; net profit margin; return on equity.
- Nonprofits and churches use fund accounting and report restricted gifts (George Müller’s orphan houses).
- A credit report (Tappan’s Mercantile Agency, 1841) records whether you pay what you owe.
6Saving, Investing & Givingunit 8 · stewardship
The three jars
Give, save, spend: the tithe first (10%), then savings, then a budget for needs and wants. Joseph stored grain in the seven fat years (Genesis 41). Build an emergency fund; avoid debt; a credit card is a loan that charges interest every month it is not paid off.
Simple interest
$200 at 5% for 3 years: 200 × 0.05 × 3 = $30.
I = P × r × t
Compound interest
$200 at 5% for 3 years: 200 × 1.05³ = $231.53. Interest earns interest.
A = P(1 + r)t
Rule of 72
Years to double ≈ 72 ÷ interest rate. At 6%, money doubles in about 12 years; at 9%, in 8.
| Kind | What it is | Risk and reward |
|---|---|---|
| savings account | a deposit paid interest | very safe, low return |
| bond | a loan to a company or government; pays a coupon, returns principal at maturity; yield | safer; credit risk |
| stock (share) | a piece of a company; may pay a dividend | higher risk and reward |
| index fund | a basket of many stocks; low expense ratio | diversified |
| a business of your own | your time and money at work | highest risk, highest reward |
Time value of money
A dollar today is worth more than a dollar next year because it can be invested. Future value = P(1 + r)t; present value = FV ÷ (1 + r)t. Manhattan’s $24 (1626) at 7% would be worth more than the island today.
Insurance and risk
Many pay a small premium so the few who suffer a loss are paid; the underwriter prices the expected loss; you pay the deductible first. Mutual insurers are owned by the insured.
The parable of the talents
Matthew 25: the servants who put the master’s money to work were praised; the one who buried it was not. Stewardship: everything is God’s; we manage it. John Wesley’s rule: earn all you can, save all you can, give all you can. Beware lifestyle creep.