Chapter 8 Vocabulary Review

General Partnership This is the most common. In this case, all partners are responsible for operations, management, and finances of the business.

Charter This occurs once the corporation is given permission by the government to operate. It states a company’s name, purpose, address, and any other features of its business.

Bonds A written promise to pay borrowed money back at a later date, with interest.

Principal This is the part of a bond that represents the initial amount borrowed by the company, government, school district, etc.

Sole Proprietorship Business owned and operated by a single individual. *They make up only about 4% of sales, but earn about 10% of all profits.

Limited Partnership At least one partner is not active in the daily running and responsibilities of the partnership. May not be obligated to the debts either.

Dividends If the company is profitable, ______________can be issued. These are corporate earning sent back to the shareholders in the form of cash.

Inventory This is a stock of finished goods and parts in reserve—to satisfy customers or to keep production flowing smoothly. Because of limited financial capital, the proprietor may not be able to hire enough personnel or stock enough inventory to operate the business efficiently.

Cash flow This is the sum of net income and noncash charges such as depreciation. It is a more comprehensive measure of a firm’s profits. The more cash that is freed up in a business, the more that cash can be re-invested in that business to allow for growth.

Limited Life This is another disadvantage of a Sole Proprietorship. This means that the firm legally ceases to exist when the owner dies, quits, or sells the business.

Common stock With this type of stock, each stockholder receives a vote for each share of stock owned. These shareholders can elect members of the board of directors, who determine company policies, and hire management.

Unlimited Liability If anything happens, it’s your fault. You bear all the responsibilities of losses and debts. This is a disadvantage of a sole proprietorship.

Depreciation Some assets within a business lose value over time. Capital goods, such as machinery, vehicles, and electronics, wear down and becomes less effective. This must be recorded as these items still hold value, and is included even in the sale of a company. This is known as _________________________.

Corporations A form of business organization recognized by law as a separate legal entity, with all the rights of an individual.

Franchisee This is the investor who rents or leases the business name and model.

Double Taxation This is the first disadvantage of a corporation. Profits are taxed the first time when the corporation pays income taxes. The profits are taxed a second time when shareholders pay taxes on their dividends.

Stock The charter also specifies the number of shares of, or _______ ownership certificates in the firm. These shares are then sold to investors in order to raise funding to help the corporation. This makes the investors “owners” in the company.

Interest The is the part of a bond the borrower will pay back, on top of the principal amount. The higher the interest, the more valuable the bond.

Franchise A temporary business investment that involves renting or leasing another business firm’s successful business model.

Preferred Stock Owners of this type of stock are nonvoting shareholders. These shareholders do not get a say in company leadership or policy. However, they receive dividends first, and will receive their investment back first if the company goes out of business.

Multinational When a company operates it’s businesses in several countries, then it is considered to be ________________.

Net Income Tracking the flow of money through a business is the key to understanding it’s health. Once you understand it’s debts, and expenses, you can tally its ________________. (income after taxes and expenses).

Cooperative, or co-op A common type of nonprofit organization is a______________________ These are voluntary organizations that are formed to carry on some sort of economic activity that will benefit its members. The three main categories are:

Better Business Bureau Some business organizations benefit the consumers. The __________________ is a nonprofit organization sponsored by local businesses, that provides information on companies, and maintains records of consumer inquiries and complaints.

Franchisor The is the actual owner of the business name, model, and concept, etc.

Incubators Many entrepreneurs learn business basics through “or places where someone can go to learn accounting, engineering, and management skills. Universities have often filled this role, and even entered agreements with companies to foster this type of an environment.

Credit Unions These are a financial service that accepts deposits and makes loans to its members.

Mergers Companies growing by joining up with others into one legal entity.

Stockholders Shares of a corporation are sold to investors, called _______________________. They own a part of the corporation. The money gained from the sale of stock is used to set up the corporation or pay for expansion.

Horizontal Merger Firms that produce the same good or service join together. Ex: JP Morgan joining Chase Manhattan to for JP Morgan Chase.

Vertical Merger Firms that perform different stages of the business (manufacturing, advertising, marketing, sales, research and development, etc.) joining together.

Collective bargaining Labor unions use _____________________ to negotiate with management on issues such as, pay, benefits, safety standards, health-care, and vacation time.

Income Statement An income statement includes a business’s sales, expenses, net income, and cash-flows for period of time.

Conglomerate When companies grow so big through mergers and acquisitions, that they have about four or more businesses in different industries, they are considered a _______________.

Venture Capitalists A financial provider willing to risk investment into an unknown, possibly in exchange for future ownership.

Chamber of commerce Businesses also organize to promote their collective interests. Most communities have a local _________________________ which promotes education programs and lobbies favorable legislation that benefits its member businesses.

Using social networking to appeal to potential investors. Crowdfunding Using social networking to appeal to potential investors.

Angel Investor They like to support start-ups of close family or friends who would not receive help otherwise. These investors usually have a greater interest in seeing the business become successful.

Nonprofit Organizations An organization that works in a business like way to promote the collective interests of its members, rather than seek financial gains for its owners.

Labor Unions Are cooperatives that organize and represent their member’s interests in employment matters.