BUSINESS GROWTH AND OTHER ORGANIZATIONS

GROWTH Businesses can grow through using revenue to reinvest in technology Income statements illustrate this by showing sales, expenses and profits for a period Businesses record total sales and determine net income = income – expenses Also must calculate depreciation of capital good in net income. The result is your cash flow. Businesses decide how cash flow will be spent, some to owners for investing and some are reinvested in the company Reinvested cash flows that outweigh depreciation can result in greater future net income

MERGERS When firms merge, one gives up its own legal identity, but often names reflect both; Why might companies merge? -some want to be the biggest; eliminate competition; efficiency; change reputation; grow fast - government can block some mergers Horizontal mergers –firms that produce the same thing merge Vertical mergers – when firms that produce different steps of manufacturing join together Conglomerates – firm with at least four businesses who make unrelated products; no one business is responsible for the majority of sales; diversification helps protect conglomerates in case one has financial problems Multinationals – corporations operate in several different countries

DIFFERING ORGANIZATIONS Cooperatives (co-op) association of people formed to carry on economic activity that benefits its members - consumer cooperatives – often buys bulk goods on behalf of its members, the members dedicate time to the organization and get cheaper prices -service cooperatives – like a credit union that accepts deposits and makes loans to certain people, usually people who work for a company -producer cooperatives – the people who produce the goods, sell directly to consumers; farmers; Nonprofit organization – operates like a business to promote collective interests rather than seek financial gain for owners; What are examples? -No stock, no dividends, no income tax -Often surplus after expenses are used to further the work of their institutions

Labor Unions - Organizations of workers that promote the interests of its members; use collective bargaining Professional Association – people who have a specialized occupation who work to improve working conditions, improve perception, set standards for these jobs; Examples? AMAAMA Business Association – organizations of businesses to promote their interests -chamber of commerce promotes business and the community; -Better Business Bureau – not for profit organization sponsored by local business to provide information about businesses and keep them honest

GOVERNMENT Direct Role of Government – Some government agencies provide services that compete with private business -Example: Tennessee Valley Authority (TVA) – supplies power to southeast U.S.; competes with some private businesses -Federal Deposit Insurance Corporation (FDIC) – insures deposits in banks -U.S. Postal Service *They operate like businesses; revenue goes back into business; if they fail, funds are provided by Congress -Fire department, Police, Schools – directly provided by government

INDIRECT ROLE OF GOVERNMENT Acts as a mediator to make sure the market runs smoothly Regulation of public utilities who provide public services like water, gas; Makes sure there are reasonable rates due to lack of competition