Intro to Business: Chp 5

Describe the terms franchisee and franchisor p. 141

A franchisor permits a franchisee to market and sell its products under its brand name, in return for a fee.

Describe a corporate charter

1. name and address of the corporation 2. corporate objectives 3. type and amount of stock to issue 4. expected life of the corporation 5. financial capital at the time of incorporation 6. provisions for transferring shares of stock among ownership 7. provisions for regulation internal corporate affairs 8. address of the business office registered with the state of incorporation 9. names and addresses of the initial board of directors 10. name and addresses of the incorporators

What is an S corporation?

A corporations that do not pay corporate taxes on profits; instead, profits are distributed to shareholders, who pay individual income taxes.

Know what is included in a business plan.

A typical plan includes -executive summary which briefly answers the who, what, where, when, why, and how questions for the business -introduction that includes a general statement of the concept, purpose, and objectives of the proposed business. -separate financial and marketing sections that describe the firm's target market and marketing plan. -resumes of principles-- especially in plans written to obtain financing.

What percentage of small businesses have gone out of business within 10 years? (Fig 5.2)

About 82 percent have folded by the 10-year mark.

Partnership

Association of two or more persons who operate a business as co-owners by voluntary legal agreement.

What are the benefits and problems of franchising?

Benefits to the franchisor include opportunities for expansion and greater profits. Benefits to the franchisee include name recognition, quick start-up, support from the franchisor, and the freedom of small-business ownership. The drawbacks for the franchisor include mismanagement and failure on the part of any of its franchisees, overexpansion, and loss of absolute control over the business. Drawbacks for the franchisee include an initial outlay of expenses, problems due to failure on the part of the franchisor or other franchisees, and restrictive franchise agreements.

Sole proprietorship

Business ownership in which there is no legal distinction between the sole proprietor's status as an individual and his or her status as a business owner.

Employee-owned

Business ownership in which workers own shares of stock in the company that employs them.

What is franchising?

Contractual business arrangement between a manufacturer or other supplier, and a dealer such as a restaurant operator or retailer.

What is a limited liability company LLC?

Corporation that secures the corporate advantage of limited liability while avoiding the double taxation characteristic of a traditional corporation.

Collective Ownership

Establishes an organization referred to as cooperative, who owners join forces to operate all or part of the functions in their firm or industry.

Family-owned

Family-owned firms are consider by many to be the backbone of american business.

What impact has corporate downsizing played in this trend?

Has created a demand for other business to perform activities previously handled by in-house employees. These support businesses may become an industry themselves.

Which business sectors are most likely to be a small firm?

Home builders, florists, hair salons, auto repair shots, and funeral homes.

Differentiate between a merger and acquisition p. 151

In a merger, two or more firms combine to form one company. In an acquisition, one firm purchases the property and assumes the obligations of another. Acquisitions also occur when one firm buys a division or subsidiary from another firm.

How does the Small Business Administration define is a small business?

Indepent business with fewer than 500 employees, not dominant in its market.

Are small businesses more or less able to innovate by developing new and better goods? Explain

Innovation is often the entire reason for the founding of a new business. In a typical year, small firms develop twice as many product innovations per employee as larger firms.

What is a business plan explain why it is a foundation for success?

It is a written document that provides an orderly statement of a company's goals, methods, and standards.

Corporation

Legal organization with assets and liabilities separate from those of its owners.

Describe a business incubator.

Local programs designed to provide low-cost shared business facilities to small start-up ventures.

What opportunities exist for women and minorities in small business?

Many women feel they can achieve more as small-business owners and can balance family and work more easily if they own their own firms. Minority business owners can receive special assistance from programs such as the SBA's 8(a) Business Development program.

What is venture capital?

Money invested in a business by another business firm or group of individuals in exchange for an ownership share.

Explain how new industries and innovations are created by small businesses trying to adapt to provide needed services to the larger companies.

New industries can be created when small businesses adapt to shifts in consumer interests and preferences.

Public Ownership

Occurs when a unit or agency of government owns and operates an organization.

Not-for-Profit

Organization whose goals do not include pursuing profit

What is preferred stock? What is common stock? Which shares have voting rights? Pg. 150

Preferred stock is shares that gives owners limited voting rights, and the right to receive dividends or assets before owners of common stocks. Common stocks are shares that give owners voting rights but only residual claims to the firm's assets and income distributions.

Explain the contributions your text small businesses make.

Small businesses make tremendous contributions to the U.S. economy and to society as a whole. One impressive contributions is the number of new jobs created each year by small businesses.

Explain the 3 forms of private business ownership. P. 143-145

Sole proprietorship, partnership, and corporations.

What are the 5 levels of management in a corporation? Figure 5.7 pg 150

The 5 levels are stockholders, board of directors, top management, middle management, and supervisory management.

Who elects the board of directors? What are the duties of the Board of Directors? P. 150

The board of directors are elected by the board.

What is the Small Business Administration? What assistance can the SBA give firms?

The small business administration is the principal government agency concerned with helping small U.S. firms. The assistance that the SBA gives firms is financial assistance.

What 3 reasons are given for "Why Small Businesses Fail?" What was the primary reason? p. 133

The three main causes of small-business failure are management shortcomings, inadequate financing, and difficulty complying with government regulations.

Understand small businesses generate more than half of the nation's GDP creating 2 of 3 new jobs created.

These companies account for $65 billion in exports, shipping more than 13 percent of all exported goods overseas each year.

Explain a vertical merger, horizontal merger, conglomerate merger and a joint venture p. 152

Vertical merger combines firms operating at different levels in the production and marketing process. Horizontal merger joins firms in the same industry for the purpose of diversification, increasing customer bases, cutting costs, or expanding product lines. Conglomerate merger combines unrelated firms, usually with the goal of diversification, spurring sales growth, or spending a cash surplus in order to avoid a takeover attempt.