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