3. B. Advantages = 1. ease of start-up 2. ease of management B. Advantages = 1. ease of start-up 2. ease of management 3. all profits go to owner 4. business itself pays no income taxes 5. taxes paid only on the owner’s personal income 3. all profits go to owner 4. business itself pays no income taxes 5. taxes paid only on the owner’s personal income 6. psychological satisfaction of owning one’s business 7. ease of closing business 6. psychological satisfaction of owning one’s business 7. ease of closing business

4. C. Disadvantages = 1. owner has unlimited liability 2. hard to raise financial capital 3. owner may not be able to hire enough personnel or stock enough inventory to operate efficiently 4. owner may have limited managerial experience 5. hard to attract qualified employees 6. business has limited life and legally stops existing when the owner dies or sells the business

6. A. A partnership is a business jointly owned by two or more persons 1. least numerous among business organizations 2. second smallest proportion of sales and net income 3. generally a little bigger than a sole proprietorship 2. second smallest proportion of sales and net income 3. generally a little bigger than a sole proprietorship

7. General partnerships B. General partnerships are a type of business in which all partners are involved all partners are involved in the management and finances. 2. this partner may have helped finance the business… sometimes called a “silent” partner Joint Venture – a temporary partnership 3. Joint Venture – a temporary partnership set up between individuals or companies for a specific purpose and for a short period of time. Joint Venture – a temporary partnership 3. Joint Venture – a temporary partnership set up between individuals or companies for a specific purpose and for a short period of time.

8. D. Advantages= C. Articles of the partnership document spell out how the partners divide up the profits or losses. C. Articles of the partnership document spell out how the partners divide up the profits or losses. 1. ease of start-up 2. ease of management 3. no special taxes on a partnership (taxed as an individual) 4. easier to raise capital through bank loans, if established, or new partner 3. no special taxes on a partnership (taxed as an individual) 4. easier to raise capital through bank loans, if established, or new partner 5. larger size aids efficient operations 6. easier to attract skilled employees 5. larger size aids efficient operations 6. easier to attract skilled employees

9. E. Disadvantages= 1. partners are responsible for acts of each and every partner, except in a limited liability partnership 1. partners are responsible for acts of each and every partner, except in a limited liability partnership 2. limited life of partnership ends if a partner leaves 3. potential for partner conflict 3. potential for partner conflict

11. charter, or government permission to B. Receive charter, or government permission to create a corporation create a corporation, which includes details about stock ownership B. Receive charter, or government permission to create a corporation corporation, which includes details about stock ownership C.Investors who buy common or preferred stock in a corporation become owners of the firm C.Investors who buy common or preferred stock in a corporation become owners of the firm

12. D. Advantages = 1. ease of raising capital D. Advantages = 1. ease of raising capital 4. business life is unlimited 5. easy to transfer ownership 4. business life is unlimited 5. easy to transfer ownership

13. E. Disadvantages =

14. A.Federal and state governments regulate interest rates and utility rates. B.State governments may offer industrial development bonds to help industries relocate or tax credits to draw investments.

16. A.Business revenue can be used to invest in factories, machinery, or new technologies. B. Before reinvesting, a business must estimate its cash flow. 1.business records total sales and then subtracts all expenses, taxes and depreciation 2. result = net income

17. C. Depreciation is added back to net income to get cash flow, or the bottom line—the real measure of business profit. D. Business owners then decide whether part of the cash flow should be reinvested in the business to generate additional sales and more profits. D. Business owners then decide whether part of the cash flow should be reinvested in the business to generate additional sales and more profits.

18. II. Growth Through Mergers: When firms merge, one gives up its separate legal identity.

19. A. A company may merge with another to grow faster; 1.become more efficient; 2.acquire or deliver a better product; 3.eliminate a rival; 4.or change its image

21. E. A multinational (MNC) is a large corporation that produces and sells its goods and services throughout the world and are subjected to each nation’s business regulations. E. A multinational (MNC) is a large corporation that produces and sells its goods and services throughout the world and are subjected to each nation’s business regulations.

23. I.Government in the US provides public goods and services, redistributes income (wealth), protects property rights, and resolves market failures A.Government plays a direct role in the economy when its agencies produce and distribute goods and services to consumers such as 1.TVA 2.USPS

25. C.Government plays an indirect role when it regulates public utilities or when it grants money to people in the form of Social Security and student financial aid.