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Chapter 3: business organization

sole proprietorship/ proprietorship
a business owned and run by one person
unlimited liability
owner is personality and fully responsible for all losses and debts of business
inventory
a stock of finished goods and parts in reserve
business sense
time to oversee the orderly growth of the company
fringe benefits
employee benefits such as paid vacations, sick leave, retirement and health or insurance
limited life
the firm legally ceases to exists when the owner dies, quits or sells the business
partnership
a business jointly owned by two or more persons
general, limited
2 types of parnership
general partnership
one in which all partners are responsible for the management and financial obligations of the business
limited partnership
at lease one partner is not active in the daily running of the business, and whose liability for the partnership’s debts is restricted to the amount invested in the business
bankruptcy
a court- granted permission to an individual or business to cease or delay debt payments
corporation
a form of business organization recognized by law as a separate legal entity having all the rights of an individual
charter
a government document that givers the permission to create a corporation
stock
ownership certificates in the firm
stockholder/ shareholder
person who buys or sells securities for investion
dividend
a check representing a portion of the corporate earning
common, preferred
2 types of stocks
common stock
basic ownership of a corporation, the owner of it usually receives one vote for each share stock
preferred stock
represents nonvoting ownership of corporation. these stock holder receive dividend before common holder receive theirs
bond
a written promise to repay the amount borrowed at a later date
principal
amount borrowed
interest
the price paid for the use of another’s money
double taxation
feature of taxation that allowed stockholders’ dividends to be taxed both as corporate profit and as personal income
sole proprietorship, partnerships, corporation
3 main forms of business organizations in the economy
merger
a combination of two or more business to forma a single firm
income statement
a report showing a business’s sales, expenses, and profits for a certain period
net income
measure of business profits determines by subtracting all expenses, including taxes, from revenues
depreciation
a non-cash charge the firms takes for the general wear
non cash charge
the money is never paid to anyone else
cash flow
the sum of net income and non cash charges such as deprecuation
bottom line
the concept of cash flow is…
bottom line
real measure of profits for the business
horizontal merger
takes place when two or more firms that produce the same kind of products join forces
vertical merger
combination of firms involved in different steps of manufacturing or marketing
conglomerate
a firm that has at least four business, each making unrelated products, none of which is responsible for a majority of its sales
diversification
one of the main reason for conglomerate mergers
multinational
corporation that has manufacturing or service operation in a number of different countries
nonprofit organization
operates in a businesslike way to promote the collective interests of its members rather than to seek financial gain for its owners
cooperative/ co-op
example of nonprofit organization, a voluntary association of people formed to carry on some kind of economic activity that will benefit its members
credit union
a financial organization that accepts deposits frim and makes loans to, employees of a particular company or government agency
labor union
an organization of workers formed to represent its members’ interests in various employment
collective bargaining
process of negotiation between union and management representatives over pay, benefits and job related matters
professional association
a group of people in a specialized occupation that works to improve the working conditions
chamber of commerce
non profit of organization of local businesses whose purpose us to promote their interests
better business bureau
a nonprofit organization sponsored by local business to provide general information on companies
public utilities
investor or municipal-owned companies that offer important products to the public: water, electric service
incorporate
form a corporate
consumer, service, producer
3 major classes of cooperative
consumer corperative
a voluntary association that buys bulk amount of goods on behalf of its members
service cooperative
insurance, credit, baby sitting to its members rather than goods
producer cooperative
helps member promote or sell their products
AFL-CIO
the largest labor union in us
direct role of government
gov agencies produce and distribute good s and services to consumers
indirect role of government
government acts as an umpire to make sure the market economy operates smoothly and efficiently
market extension merger
related products in different markets
revenue
price*quantity sold
net income
revenue – cost
net income
profit
revenue
sales
cash flow
net income – depreciation
cash flow
bottom line
company
decides what to do with the bottom line (reinvest or not)
reinvestment, merger
2 types of economic growth
merging
which cause faster growth?
product extension merger
different products in the same market

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