1. Splash Screen

2. Chapter Menu Chapter Introduction Section 1:Section 1:Forms of Business Organization Section 2:Section 2:Business Growth and Expansion Section 3:Section 3:Nonprofit Organizations Visual Summary

3. Chapter Intro 1 You have an idea for a new product and you want to set up a company to market it. You need $5,000 to get started with production and advertising. Use what you have already learned about the factors of production to create a list of resources you will need and where to find them. Read Chapter 3 to learn about the different ways to organize a business.

4. Chapter Intro 2 1.The profit motive acts as an incentive for people to produce and sell goods and services. 2.Governments and institutions help participants in a market economy accomplish their financial goals.

5. Chapter Intro-End

6. Section 1-Preview Section Preview In this section, you will learn about the advantages and disadvantages of various forms of business organization.

7. Section 1-Key Terms Content Vocabulary sole proprietorshipsole proprietorship unlimited liabilityunlimited liability inventory limited life partnership general partnershipgeneral partnership limited partnershiplimited partnership corporation charter stock stockholder shareholder dividend common stock preferred stock bond principal interest double taxation

8. Section 1-Key Terms Academic Vocabulary comprise entity

9. A.A B.B C.C Section 1 What incentive is there for individuals to produce and sell goods and services? A.Low prices through competition B. Profit motive C. Private property rights

10. Section 1 Sole Proprietorships Sole proprietorships are easy to start, but owners have unlimited liability.

11. Section 1 Sole Proprietorships (cont.) The most common form of business organization in the U.S. is the sole proprietorship or proprietorship.sole proprietorship Business Organizations

12. Section 1 Advantages –The easiest form of business to start— few requirements –Decisions do not require approval from “higher ups.” –Keep all profits –Does not pay separate business income taxes; business is not a separate entity Sole Proprietorships (cont.)

13. Section 1 Advantages –Psychological factor of being own boss Sole Proprietorships (cont.) –Easy to get out of business

14. Section 1 Disadvantages –Owner has unlimited liability.unlimited liability –Difficult to raise capital –Size and efficiency –May hire several employees to stay open –Cost of carrying minimum inventoryinventory –Often has limited managerial skills Sole Proprietorships (cont.)

15. Section 1 Disadvantages –Difficult to attract qualified employees Sole Proprietorships (cont.) –Larger employers can offer more fringe benefits. –Limited life of businessLimited life Profiles in Economics: Andrea Jung

16. A.A B.B C.C D.D Section 1 Which is not considered an advantage to being a sole proprietor? A.Retains all profits B.Unlimited liability C.Quick decision making D.Business is not recognized as a separate legal entity.

17. Section 1 Partnerships In a partnership, each partner fully shares responsibility for the operation of the business and all profits or losses.

18. Section 1 A partnership has many of the same advantages and disadvantages of a sole proprietor.partnership Partnerships are the least numerous form of business organization in the United States. Partnerships (cont.)

19. Section 1 Types of partnerships –General partnershipGeneral partnership –Limited partnershipLimited partnership Partnerships (cont.)

20. Section 1 Advantages to operating a partnership Partnerships (cont.) –Ease of startup –Formal legal papers called articles of partnership are usually written. –Ease of management/varied expertise –Lack of special taxes –Easier to attract capital than a proprietorship

21. Section 1 Advantages to operating a partnership Partnerships (cont.) –More efficient operations that come with increased size –Easier to find good employees than a proprietorship

22. Section 1 Disadvantages to operating a partnership Partnerships (cont.) –In a general partnership, each partner is responsible for acts of all partners. –In a limited partnership, limited partner loses original investment. General partners must make up the rest of the loss. –Limited life –Potential for conflict between partners

23. A.A B.B Section 1 In which type of partnership would you prefer to be a partner? A.General partnership B. Limited partnership

24. Section 1 Corporations Corporations are one of the most important forms of business and can easily raise large amounts of financial capital.

25. Section 1 A corporation is a formal, legal entity all its own.corporation Individuals who wish to incorporate must file with the national government and state where the business will have its headquarters. Corporations (cont.)

26. Section 1 If a corporation is approved, the government issues a charter stating the purpose of the business, specifying the number of shares of stock, and other business information.charterstock Corporations (cont.) Stock Ownership

27. Section 1 Selling shares of stock to stockholders, or shareholders, is a way for a corporation to raise capital.stockholdersshareholders Corporations pay out dividends to shareholders when the corporations become profitable.dividends Corporations (cont.)

28. Section 1 There are two types of stock that corporations issue. –Common stockCommon stock –Preferred stockPreferred stock Corporations (cont.) Type of stock purchased determines the ownership rights of the shareholder.

29. Section 1 Advantages to a corporation structure –Ease of raising capital—sell more stock or issue bondsbonds Corporations (cont.) Corporate Structure The amount of money borrowed on a bond is called the principal.principal Corporations pay interest on this borrowed money.interest

30. Section 1 Advantages to a corporation structure –Owners have limited liability. Corporations (cont.) Corporate Structure –Directors can hire professional managers to run daily operations. –Unlimited life –Ease of transferring ownership

31. Section 1 Disadvantages to a corporation structure –Detailed records need to be kept for payment of taxes. –Double taxation of corporate profitsDouble taxation –Difficulty and expense to get a corporate charter Corporations (cont.) Corporate Structure

32. Section 1 Disadvantages to a corporation structure –Owners or shareholders have little voice in business operations. Corporations (cont.) Corporate Structure –Subject to more government regulations Publicly held corporations must register with the federal Securities and Exchange Commission, established in 1934, to regulate the sale of stock.

33. A.A B.B C.C D.D Section 1 Some firms incorporate just to take advantage of which corporate characteristic? A.Unlimited life B. Ease of raising capital C. Limited liability D. All of the above

34. Section 1-End

35. Section 2-Preview Section Preview In this section, you will learn how businesses grow through merging with other companies or by reinvesting profits in themselves.

36. Section 2-Key Terms Content Vocabulary merger income statementincome statement net income depreciation cash flow horizontal mergerhorizontal merger Academic Vocabulary internally dominant vertical merger conglomerate multinational

37. A.A B.B C.C Section 2 What is the best way for a company to grow? A.Invest in self B. Merge with another company C. Depends on the situation

38. Section 2 Business Growth and Expansion Investing profits in new plants and equipment is one way to grow a business. A merger is another way.merger

39. Section 2 Growth Through Reinvestment Business owners can use their profits to update and expand their firms.

40. Section 2 Growth Through Reinvestment (cont.) Financial statements are used to keep track of a business’ operations. –Income statement—shows how a business uses the revenue it receives from sales to grow through reinvestmentIncome statement –An income statement shows a firm’s net income.net income Growth Through Reinvestment

41. Section 2 Growth Through Reinvestment (cont.) –Depreciation—a non-cash charge of capital goodsDepreciation –An increase in depreciation lowers the earnings before tax but increases cash flow. cash flow –Cash flow is the bottom line, a more comprehensive measure of profits. Growth Through Reinvestment

42. Section 2 Growth Through Reinvestment (cont.) Corporations with positive cash flow may issue dividends and reinvest in new plants, equipment, or technology. Proprietors and partnerships may keep some of the cash flow as reward for risk taking in addition to reinvesting in business.

43. Section 2 Growth Through Reinvestment (cont.) Reinvesting in the business increases production and generates more sales. Positive cash flow attracts investors.

44. A.A B.B C.C D.D Section 2 Which of the following is included on a net income statement? A.Sales revenue B. Expenses C. Cash flow D. All of the above

45. Section 2 Growth Through Mergers Mergers allow firms to quickly grow in size.

46. Section 2 When two companies merge, one gives up its separate legal identity. The name of the new company may reflect the identities of both for public recognition, however. Growth Through Mergers (cont.)

47. Section 2 Two types of mergers Growth Through Mergers (cont.) –Horizontal mergerHorizontal merger –Vertical mergerVertical merger Types of Mergers

48. Section 2 Reasons to merge Growth Through Mergers (cont.) –Faster growth –Become more efficient –Better product manufacturing or delivery –Eliminate competition –Change image

49. Section 2 A corporation may become so large through mergers and acquisitions that it turns into a conglomerate.conglomerate Diversification is the reason why some businesses become conglomerates. Isolated economic events may affect some product lines but not all of them at the same time. Growth Through Mergers (cont.) Conglomerate Structure

50. Section 2 Large corporations that become international in scope are referred to as multinationals. multinationals Growth Through Mergers (cont.)

51. Section 2 Multinationals Growth Through Mergers (cont.) –Have manufacturing or service operations in several countries –Are subject to laws in each country and may pay taxes to each –Are able to move resources, goods, services, and financial capital across national borders

52. Section 2 Multinationals are generally welcomed in a country because they bring new technology, generate jobs and revenue, increase the standard of living, and pay taxes. Growth Through Mergers (cont.)

53. Section 2 Critics argue that multinationals often pay low wages, export natural resources, interfere with local businesses, and alter traditional ways of life in the host country. Multinationals can demand concessions by threatening to move operations out of the country. Growth Through Mergers (cont.)

54. Section 2 Economists, however, welcome the lower- cost production and higher-quality output that global competition brings. Global competition raises the standard of living for everyone. Growth Through Mergers (cont.)

55. A.A B.B C.C D.D Section 2 Which of the following is a conglomerate in Japan? A.Samsung B. Sony C. Daewoo D. Gold Star

56. Section 2-End

57. Section 3-Preview Section Preview In this section, you will learn about the economic benefits that cooperatives and other nonprofit organizations bring to their members.

58. Section 3-Key Terms Content Vocabulary nonprofit organizationnonprofit organization cooperative co-op credit union labor union collective bargainingcollective bargaining professional associationprofessional association Academic Vocabulary analyze devoting chamber of commercechamber of commerce Better Business BureauBetter Business Bureau public utility

59. A.A B.B Section 3 Can you name any nonprofit organizations that exist in your community? A.Yes B.No

60. Section 3 Nonprofit Organizations Most businesses use scarce resources to produce goods and services in order to generate a profit. Other businesses operate on “not-for- profit” basis and are called nonprofit organizations.nonprofit organizations

61. Section 3 Community Organizations and Operatives A variety of nonprofit organizations provide a wide range of goods and services to communities and members.

62. Section 3 Community Organizations and Operatives (cont.) Many community organizations such as schools, churches, hospitals, and welfare groups are legally incorporated but do not issue stock or pay income taxes. Any surplus earned is used to further their work.

63. Section 3 Community Organizations and Operatives (cont.) One common type of nonprofit organization is the cooperative or co-op.cooperativeco-op

64. Section 3 Community Organizations and Operatives (cont.) Three major types of cooperatives –Consumer cooperative—members keep costs down by devoting time to operation. –Service cooperative—particular company/agency employees use a credit union. credit union

65. Section 3 Community Organizations and Operatives (cont.) Three major types of cooperatives –Producer cooperative—in the United States, farmers may organize this to sell their produce. Cooperatives

66. A.A B.B C.C Section 3 Which type of cooperative would provide insurance to its members? A.Producer B.Consumer C.Service

67. Section 3 Labor, Professional, and Business Organizations Some nonprofit organizations are formed to promote the interests of workers and consumers.

68. Section 3 Many other groups besides co-ops organize nonprofit organizations to promote the interests of their members. –Labor unions—use collective bargaining when negotiating with managementLabor unionscollective bargaining –Professional associationsProfessional associations Labor, Professional, and Business Organizations (cont.)

69. Section 3 Many other groups besides co-ops organize nonprofit organizations to promote the interests of their members. –Business associations—chamber of commerce or Better Business Bureau are exampleschamber of commerceBetter Business Bureau Labor, Professional, and Business Organizations (cont.)

70. A.A B.B C.C D.D Section 3 Which nonprofit organization might a machinist belong to? A.Labor union B. Professional association C. Business association D. Any of the above

71. Section 3 Government The government provides some goods and services while helping to make sure the economy runs smoothly.

72. Section 3 Local, state, and federal governments operate as nonprofit economic organizations. Government (cont.)

73. Section 3 Government plays both a direct and indirect role in the economy. –Direct involvement—government supplies a good or service that competes with private businesses Government (cont.) Examples: the U.S. Postal Service (USPS), state colleges and universities, and police protection

74. Section 3 Government plays both a direct and indirect role in the economy. –Indirect involvement includes the regulation of public utilities, financial aid to college students, rent subsidies, and veteran’s checks.public utilities Government (cont.)

75. A.A B.B C.C Section 3 How do government organized nonprofits differ from privately held nonprofits? A.Limited life B. Professional management team is hired to oversee daily operations. C. Congressional, state, or local funds may be necessary to cover any losses.

76. Section 3-End

77. Business Organizations Three main forms of business organizations exist in the United States today. VS 1

78. VS 2 Growth A company can reinvest its profits or merge with another firm in order to grow.

79. VS 3 Nonprofit Organizations Some organizations work in a businesslike way to promote the interests of their members. Unlike businesses, these nonprofit organizations do not seek to earn a profit.

80. VS-End

81. Figure 1

82. Figure 2

83. Figure 3

84. Figure 4

85. Figure 5

86. Figure 6

87. Figure 7

88. Profile Andrea Jung (1958– ) first female chief executive officer (CEO) in Avon Products’ 118-year history ranked #5 on Fortune magazine’s “50 Most Powerful Women in Business”

89. Concept Trans Menu Economic Concepts Transparencies Transparency 2Opportunity Cost & Trade-Offs Transparency 3Productivity Transparency 5Economic Institutions and Incentives Select a transparency to view.

90. Concepts Trans 1

91. Concepts Trans 2

92. Concepts Trans 3

93. DFS Trans 1

94. DFS Trans 2

95. DFS Trans 3

96. Vocab1 sole proprietorship business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm

97. Vocab2 proprietorship business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm

98. Vocab3 unlimited liability requirement that an owner is personally and fully responsible for all losses and debts of the business

99. Vocab4 inventory stock of finished goods and parts held in reserve

100. Vocab5 limited life situation in which a firm ceases to exist when an owner dies, quits, or sells the business

101. Vocab6 partnership unincorporated business owned and operated by two or more people who share the profits and responsibility for debts

102. Vocab7 general partnership form of partnership where all partners are equally responsible for management and debts

103. Vocab8 limited partnership form of partnership where one or more partners are not active in the daily running of the business and have limited responsibility for debts

104. Vocab9 corporation form of business organization recognized by law as a separate legal entity

105. Vocab10 charter written government approval to establish a corporation

106. Vocab11 stock certificate of ownership in a corporation

107. Vocab12 stockholder people who own a share or shares of stock in a corporation

108. Vocab13 shareholder people who own a share or shares of stock in a corporation

109. Vocab14 dividend check that transfers a portion of the company profits to stockholders, usually quarterly

110. Vocab15 common stock most frequently used form of corporate ownership, with one vote per share for stockholders

111. Vocab16 preferred stock form of corporate ownership without vote, in which stockholders get their investments back before common stockholders

112. Vocab17 bond formal contract to repay borrowed money with interest

113. Vocab18 principal amount borrowed when getting a loan or issuing a bond

114. Vocab19 interest payment made for the use of borrowed money

115. Vocab20 double taxation taxation of dividends both as corporate profit and personal income

116. Vocab21 comprise to be composed of

117. Vocab22 entity unit or being

118. Vocab23 merger combination of two or more businesses to form a single firm

119. Vocab24 income statement report showing a firm’s sales, expenses, net income, and cash flows for a certain period, usually three months or a year

120. Vocab25 net income common measure of business profits determined by subtracting all expenses, including taxes, from revenues

121. Vocab26 depreciation gradual wear on capital goods

122. Vocab27 cash flow total amount of new funds a business generates from operations

123. Vocab28 horizontal merger combination of two or more firms producing the same kind of product

124. Vocab29 vertical merger combination of firms involved in different stages of manufacturing or marketing

125. Vocab30 conglomerate firm with four or more businesses making unrelated products, with no single business responsible for a majority of its sales

126. Vocab31 multinational corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries

127. Vocab32 internally within

128. Vocab33 dominant possessing the most influence and control

129. Vocab34 nonprofit organization economic organization that operates like a business but does not but does not seek financial gain

130. Vocab35 cooperative nonprofit association performing some kind of economic activity for the benefit of its members

131. Vocab36 co-op nonprofit association performing some kind of economic activity for the benefit of its members

132. Vocab37 credit union nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services

133. Vocab38 labor union organization that works for its members’ interests concerning pay, working conditions, and benefits

134. Vocab39 collective bargaining negotiation between union and company representatives over pay, benefits, and other job-related matters

135. Vocab40 professional association nonprofit organization of professional or specialized workers seeking to improve working conditions, skill levels, and public perceptions of its profession

136. Vocab41 chamber of commerce nonprofit organization of local businesses formed to promote their interests

137. Vocab42 Better Business Bureau business-sponsored nonprofit organization providing information on local companies to consumers

138. Vocab43 public utility company providing an essential services such as water and electricity to consumers

139. Vocab44 analyze to break down into parts and study how each part relates to one another

140. Vocab45 devoting giving time or attention

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