Growth Through Reinvestment An income statement is a report that shows a business’s sales, expenses, net income, and cash flow for a period of time. Depreciation is a noncash charge for the general wear and tear on capital goods. A company’s cash flow is a comprehensive measure of its profits because it represents the total amount of after-tax income generated by the company operations. Reinvesting cash flow into a business allows the business to produce new or additional products, which may generate additional sales and even larger cash flow.

Growth Through Mergers Merging is a combination of two or more businesses to form a single firm. The two types of mergers are horizontal and vertical mergers. Reasons for merging include faster growth, synergy, economies of scale, diversification, elimination of rivals, or changing or losing a corporate identity that is associated with errors or problems. Conglomerates are firms that have at least four businesses that make unrelated products, none of which is responsible for a majority of sales. Multinational corporations can move resources, goods, services, and financial capital across national borders.

Entrepreneurial Funding for Start-Ups Start-up incubators are places within states and universities where potential entrepreneurs can get training in accounting, engineering, and managerial skills, as well as potential financing. Venture capitalists lend investment funds to new or unproven businesses in exchange for a share of ownership (equity). Angel investors are people who lend start-up money informally and are typically more interested in helping the individual survive than in getting a substantial return on their investment. Crowdfunding, or crowdsourcing, involves using social networking to appeal to potential investors.