Chapter 8: Business Organization – Flashcards
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Credit Union
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nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services
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Common Stock
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a form of corporate ownership giving one vote per share for stockholders
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Labor Union
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organization that works for its members' interests concerning pay, working hours, health coverage, fringe benefits, and other job-related matters
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Preferred Stock
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form of stock without vote, in which stockholders get their investments back before common stockholders do
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Limited Life
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situation in which a firm legally ceases to exist when an owner dies or quits, or when a new owner is added
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General Partnership
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all partners are equally responsible for management and debts
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Crowdfunding
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using social networking to appeal to potential investors
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Horizontal Merger
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combination of firms producing the same kind of product
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Incubator
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place where entrepreneurs can receive the training to build a successful start-up business
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Venture Capitalist
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lender of investment funds to a start-up business in exchange for partial ownership of the business
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Which of the following is an advantage of sole proprietorship?
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There are almost no requirements to start up a sole proprietorship. The owner makes all the decisions. The owner keeps all the profits.
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Limited life applies to ____.
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sole proprietorships
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A person who wishes to incorporate a business needs to ______.
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file for permission with the government
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A business's net income is defined as _____.
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total income after expenses
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When two companies that produce the same kind of product merge, this is called a _____.
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horizontal merger
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What is the main purpose of incubators?
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providing entrepreneurs think of new business ideas
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A venture capitalist's main goal is usually to ____.
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get a good return on an investment
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Which of the following is true of both nonprofit organizations and for-profit corporations?
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They both use scarce factors of production.
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Which of the following is true about nonprofit organizations?
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They work in a businesslike way to promote member interests.
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A nonprofit organization that provides services to its members is called a _____.
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service co-op
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Comprise
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to be composed of
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Entity
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unit or being
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Sole Proprietorship
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unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States
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Unlimited Liability
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requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships and general partnerships
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Inventory
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stock of goods held in reserve; includes finished goods waiting to be sold and raw materials to be used in production
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Limited Life
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situation in which a firm legally ceases to exist when an owner dies, quits, or a new owner is added; applies to sole proprietorships and partnerships
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Partnership
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unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm
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General Partnership
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form of partnership where all partners are equally responsible for management and debts
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Limited Partnership
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form of partnership where one or more partners are not active in the daily running of the business, and whose liability for the partnership's debt is restrict to the amount invested in the business
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Corporation
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form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and to sue and be sued
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Charter
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written government approval to establish a corporation; includes company name, address, purpose of business, number of shares of stock, and other features of the business
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Stock
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certificate of ownership in a corporation; can be either common or preferred stock
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Stockholders/Shareholders
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people who own a share or shares of stock in a corporation
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Dividend
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check paid to stockholders, usually quarterly, representing portion of corporate profits
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Common Stock
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most basic form of of corporate ownership, generally with one vote per share for stockholders
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Preferred Stock
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form of stock with no voting privileges; has a higher claim on corporate income and assets than does common stock
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Bond
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formal contract to repay borrowed money and interest on the borrowed money at regular future intervals
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Principal
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amount borrowed when getting a loan or issuing a bond
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A sole proprietorship is not _____, so it is ready for business as soon as operations are set up, and the owner keeps all the _____.
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incorporated; profits
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A sole proprietorship is easy to _____, and it is _____, because the owner does not have to confer with or answer to anyone else before making a decision.
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start up; flexible
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A sole proprietor does not have to pay separate business income ____ and can ____ close down the business.
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taxes; easily
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A sole proprietor has unlimited ____ for his or her business, which means that he or she is fully responsible for all of the businesses loses and debts. A sole proprietor may also have trouble raising needed ___.
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liability; capital
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Because of ____ _____ _____, the sole proprietorship may have trouble hiring the employees it needs and carrying enough _____ to satisfy customers or to keep production flowing smoothly.
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limited financial capital; inventory
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In a ____ partnership, all partners are responsible for the business's finances and ____.
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general; management/liability
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In a ____ partnership, at least one ___ is not active in running the business and has limited responsibility and ___ liability.
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limited; partner; financial
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A _____ may be formed with a handshake, formal ___ papers are usually drawn up to make the business arrangement official.
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partnership; legal
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Partnerships are easy to start and, because each partner brings a different area of expertise, generally easy to ___; they have an easier time attracting ____ than does a sole proprietorship.
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manage; capital
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One downside to a general partnership is that all partners are ___ for the acts of all other partners and have unlimited ____ for the business's debts and losses.
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responsible; liability
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In a ____ partnership, each partner is liable for only the amount of his or her original ___ in the business.
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limited; investment
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The potential for ____ between partners is a disadvantage of partnerships, as is its limited ___ -the partnership must be dissolved and reorganized if any partners leave or die.
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conflict; life
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A business must get a legal ___ before it can be formed into a corporation that may issue ____ and bonds.
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charter; stocks
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The true owners of a corporation are its ____, who may also be paid a ____ from the profits of the corporation.
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shareholders/stockholder; dividends
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Owners of common stock can ____ for a board of directors, but owners of ____ stock cannot.
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vote; preferred
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Advantages of a corporation are that it can raise capital by selling ____ and its owners and managers have little ____ for its actions or debts.
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bonds; liability
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As its own entity, a corporation has an unlimited ____ and ownership can easily be _____.
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life; transferred
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It is more ____ to start a corporation than other forms of business, and corporations are subject to more ____ than are most other types of business.
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difficult; regulation
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A ____ often pays thousands of dollars to run the business sold by the ______.
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franchise; franchisor
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Owning a franchise gives the businessperson brand-name _____, known quality products, and a regional or nationwide ____ system to improve the chances of success.
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recognition; support
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There is a substantial cost if a franchise wants to ____ the franchise before the end of the contract, and at the end of the contract, all the franchisee has is the right to ___.
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terminate; renew
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True/False:
The easiest type of business to start is a sole proprietorship.
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True
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True/False:
Unlimited liability is one of the main advantages of a sole proprietorship.
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False
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True/False:
Partnerships are the most numerous form of business organization in the United States.
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False
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True/False:
Corporations have most of the rights of an individual, according to the law.
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True
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True/False:
If a corporation goes out of business, common stockholders get their investment back before preferred stockholders do.
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False
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The government document that grants permission to establish a corporation is called a ____.
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charter
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A business run by a single person is a ___.
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sole proprietorship
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In a retail business, the stock held in reserve is called ___.
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inventory
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Which of the following phrases best defines the term limited partnership?
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a partnership in which at least one partner has less responsibility in the business operations and less liability for business losses
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A document certifying ownership of part of a corporation is a ____.
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stock certificate
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Merger
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combination of two or more business enterprises to form a single firm
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Internally
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existing or occurring from within
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Income Statement
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report showing a business's sales, expenses, and profits for a certain period, usually three months or a year
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Net Income
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measure of business profits determined by subtracting all expenses, including taxes, from revenues
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Depreciation
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gradual wear on capital goods
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Cash Flow
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total amount of new funds the business generates from operations; broadest measure of profits for a firm because it includes both net income and noncash charges
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Horizontal Merger
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combination of firms producing the same kind of product
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Vertical Merger
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combination of firms involved in different steps of manufacturing, marketing, or sales
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Conglomerate
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firm with four or more businesses making unrelated products, with no single business activities are located in several different countries
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Multinational
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corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries
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Incubators
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places where entrepreneurs can receive the training to build a successful start-up business
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Venture Capitalist
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provider of investment funds to a start-up business in exchange for partial ownership of the business
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Angel Investors
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informal and usually affluent investors who provide funds to less-promising start-ups
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Crowfunding
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using social networking to appeal to potential investors
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Its income ____ shows a business's sales, expenses, and _____ income, or the amount it has as profit after expenses have been deducted.
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statement; net
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A firm's _____, or cash flow, is its profits after deductions for all expenses, including _____, or wear and tear on capital goods such as machinery.
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bottom line; depreciation
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A corporation with a _____ cash flow may give some of that money to its investors in the form of _____.
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positive; dividends
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Businesses may take the positive cash flow and ____ by expanding its product line, increasing ______, or upgrading its machinery or technology.
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reinvest; production
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A _____ merger is when two companies that produce the ____ type of product join together to form a single company.
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horizontal; same
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A _____ merger is when two companies involved in different steps in ____ and marketing join together.
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vertical; manufacturing
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Merged companies enjoy greater economies of ____ as their cost per unit of production _____.
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scale; decreases
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One company may merge with another to _____ and acquire new ____ line.
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diversify; product
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A company is called a _____ when it as merged with at least four other companies making ____ products.
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conglomerate; unrelated
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A _____ company has operations in many different ____ around the world.
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multinational; countries
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Multinational corporations ca efficiently move ____, transfer technologies, and create _____ in many nations.
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resources; jobs
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Some states and universities run new business ______ that help _____ entrepreneurs in the skills they need to run a successful business.
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incubators; train
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A ____ capitalist invests money in a new and promising, though unproven, start-up company, even though this investment carries a lot of ____.
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venture; risk
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A friend neighbor, family member, or club may act as an ____ investor to provide ____ money to a promising start-up.
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angel; seed
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Online social ____ provide a platform for ____ which allows interested individuals to invest in a promising enterprise.
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networks; crowdfunding/crowdsourcing
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Cash Flow
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total amount of new after-tax income generated from business operations
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Income Statement
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report showing a business's sales, expenses, net income and cash flow
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Horizontal Merger
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combination of firms producing the same kind of product
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Vertical Merger
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combination of firms involved in different steps in manufacturing or marketing
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Net Income
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funds left over after expenses
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To get a picture a business's overall expenses and profits, you should look at its _____.
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income statement
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Which of the following is a noncash charge?
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depreciation
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Most mergers take place to improve a company's performance in the eyes of ____.
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the shareholders
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A company with four or more businesses that make unrelated products is called a ______.
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conglomerate
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Which of the following is an advantage of a multinational?
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they produce tax revenue for the countries where they do business
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Analyze
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to break down into parts and study how each part relates to one another
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Devote
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give time or attention
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Nonprofit Organization
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economic institution that may operate like a business but does not seek financial gain; schools, churches, and community-services organizations are examples
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Cooperative
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nonprofit association performing some kind of economic activity for the benefit of its members
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Credit Union
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nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services
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Labor Union
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organization that works for its members' interests concerning pay, working hours, health coverage, fringe benefits, and other job-related matters
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Collective Bargaining
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process of negotiation between union and management representatives over pay, benefits, and job-related matter
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Chamber of Commerce
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nonprofit organization of local businesses whose purpose is to promote their interests
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Better Business Bureau
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business-sponsored nonprofit organization providing information on local companies to comsumers
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The results of the actions of nonprofits are difficult to ____, but they are important contributors to our ____ system.
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analyze; economic
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A cooperative is a _____ association that benefits its ____.
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voluntary; members
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A ____ cooperative buys food or other goods in bulk so that members pay ___ prices for the products.
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consumer; lower
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A ____ union is a type of service ____ that provides financial services to its members.
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credit; co-op
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Most producer co-op members are ___ who provide their products directly to ____.
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farmer; consumers
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Some workers belong to ___ unions that engage in ___ bargaining with management for better pay and working conditions for their members.
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labor; collective
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Doctors, lawyers, and other professionals may belong to professional ____ that work to ___ policies that benefit their professional membership.
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associations; promote
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Business associations, such as local chambers of ___, work to create a favorable environment for member ____.
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commerce; businesses
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The Better Business ____ provides general information on companies and maintains records consumer inquires and _____.
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Bureau; compaints
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Many government agencies produce and distribute goods and services to ___, giving the government a ___ role in the economy.
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consumers; direct
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The Tennessee Valley Authority supplies ___ to customers and is in direct ___ with private utility companies.
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electricity; competition
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State and local government provide police, fire fighting, and other ___ services ____ to consumers.
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public; directly
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The government has an _____ role when its actions help to make the ____ economy run more smoothly.
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indirect; market
