5.3
Describe one advantage of a vertical merger
One advantage is that it increases efficiency because there are and a combination of multiple firms.
Explain the disadvantages of incorporations
One of the most prominent disadvantages of incorporation is that company profits are often double taxed. Then business owners are also taxed on any salary or dividends they receive. Therefore, a larger business income and profit are often required to make up for the double taxation on the business profits.
certificate of incorporation
license to form a corporation issued by state government
Stock
A share of ownership in a corporation.
closely held corporation
corporation that issues stock to only a few people, often family members
dividend
The portion of corporate profits paid out to stockholders
List 4 advantages of incorporating
-Protect Your Personal Assets -Have Easier Access to Capital -Enhance Your Business' Credibility -Perpetual Existence
Corporation
A business that is owned by many investors.
Bond
A financial security that represents a promise to repay a fixed amount of funds
multinational corporation
An organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management
Explain how corporations raise capital
Corporations raise capital through stocks and bonds. They make more money by others investing in their company and getting bonds in their company.
Explain when a multinational corporation opens a new factory in another country, what economic responsibilities must eat meet?
If a company open their factory in another country, they most likely do it in order to cut down the cost of their production (since they can pay their workers cheaper compared to the workers from their country of origin).
Describe in your own words what a publicly held corporation is and what it has
It is a corporation that is open to other investors investing in them. It has stock owned by the public.
Explain why the government may be more likely to allow a corporation to form a conglomerate then allow it to horizontally merged with another company.
The government is more likey to do this because while a corporate conglomerate canresult in even more competition, since the corporation would enter several markets with subsidiaries, becoming a direct competitor of the firms that are already in said markets, a horizontal merger is likely to decrease competition.
What is a potential disadvantage of a multinational corporation
They are subject to more laws and regulations than other companies. Certain countries do not allow a company to run its business the way it operates in other countries, and each country has different labor and business laws.
Explain how in order to do business, corporations must follow what regulations
They must be equal with their investors, they or fair with profit between other stockholders, etc.
Explain one way that a corporation is different from a sole proprietorship
Unlike a sole proprietorship or partnership, forming a corporation requires filing articles of incorporation with the state where the corporation will conduct business. A corporation is a legal entity that is separatefrom its owners, called shareholders. ... As a separate legal entity, corporations pay taxes on profits.
conglomerate
a group of diverse companies under common ownership and run as a single organization
Limited liability corporation
a type of business with limited liability for the owners, with the advantage of not paying corporate income tax
publicly held corporation
a type of corporation that sells stock on the open market
horizontal merger
the combination of two or more firms competing in the same market with the same good or service
vertical merger
the combination of two or more firms involved in different stages of producing the same good or service
