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207 Cards in this Set
- Front
- Back
Business
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Those organizations that try to create value for the customer
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Profit
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The difference between revenue and expenditure
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Not-For-Profit Organization
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A organization whose primary objective is to provide goods and services for the community without the goal of making a profit
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risk
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The probability of failure
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Four Evolutions of Business
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-Industrail Revolution/Factory System
-Railroad Era -Assembly Line/Depression -Post WII/Globalization |
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Factory System
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A method of mass production in which everything is in one location to produce goods less expensively
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Specialization of Labor
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Grouping employees to work on assigned tasks on the basis of their specific skills and factory demand
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Laissez Faire
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The economic doctrine that advocates total governemnt inaction in business, so business can do what they want
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Market Domination
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A strategy of either acquiring competitors or colluding with the to control product prices and prevent new competitors
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Antitrust Policies
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Government laws designed to break up monopolies and control monopoly abuses by business
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GATT/WTO
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The organization sets rules of conduct for international trade policy and is headquartered in Geneva
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Globalization
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The process of intergrating the market for goods and services worldwide
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New Economy
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An economy largely driven by developments in information technology and the Internet
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Knowledge Workers
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Workers with a job that need a formal or advanced schooling
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Main Characteristics of Knowledge Workers
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-Borderless
-Upwardly Mobile -Offered the potentaial for success |
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Economic Resources
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Land,labor,capital,and technology that are scarce
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Capitalism
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Economic system that is based on private property rights, the free market, pursuit of self-interest, freedom to choose, and ability to borrow money
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Free Market System
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Economic system in which consumers demand certain goods and services and are willing to pay a price based on their budget, and producers are willing to supply the goods and services on the basis of a price that will cover their costs and provide a profit margin
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Theory/Law of Demand
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The statement, which appears to hold, that consumers will buy more when prices fall and less when prices are up
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Demand Curve
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The cruve that shows the relationship between the quantity demanded and the price of a product or service for a particular customer, group, or country
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Price Inelastic Demand
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The demand where significant increases in the price of a product or service will have little effect on the quantity of the product or services sold
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Price Elastic Demand
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The demand where a small change in the price will have a significant impact on the quantity of the product or service demanded
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Theory/Law of Supply
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The statement, which appears to hold, that producers will be willing to sell more when the prices rise and less when prices fall
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Supply Curve
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The curve that shows the relationship between the quantity supplied and the price of a product or service
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Price Inelastic Supply
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The supply where a large change in the price will have little impact on the quantity of a good or service supplied by the producer
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Price Elastic Supply
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The supply where a small change in the price will bring about significant increases in the quantity of a product or service supplied by the producer
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Market Clearing/Equilibrium
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The price at which supply will equal demand
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Shortage
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The amount of a good or service that will not be available when the price of the good or service is set below the equilibrium price
(Demand will exceed supply) |
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Surplus
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The amount of a good or service that will not be sold when the price of the good or service is set about the equilibrium price
(Supply will exceed demand) |
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Product Life Cycle Theory
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The theory that explains the different stages that a product goes through before it fades away
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The Life Cycle of a Product
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-Introduction
-Growth -Maturity -Decline |
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Market Structure
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The organization of an industry determined by the level of competition within the industry
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Pure Competition
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The industry market structure where there are a large number of suppliers that produce essentially identical products, which are sold at a price determined by the market
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Monopoly
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The industry market structure where there is essentially a single supplier of goods or services that has the power to set the prices
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Imperfect Competition
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The industry market structure where the industry's output of goods or services is supplied by a relatively small number of firms and price is largely determined by market forces
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Firm Concentration Ratios
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The percentage of total industry output that can be accounted for by the four largest firms and so a measure of the sellers' market power
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Barriers to Competition
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Barriers that arise when certain legal restrictions that reduce the level of competition are imposed on an industry
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The Three Different Trade Barriers to Competition
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-patents
-licensing -tariffs |
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Patents
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Awards to companies or individuals by governments to protect their inventions for a set period of time
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Licensing
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The practice by governments of selecting investors to operate certain types of businesses, thereby restricting entry into those businesses and reducing competition
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Tariffs
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Taxes on imports that raise the price of imports and consequently enable domestic competitors to raise prices as well
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Oligopoly
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The industry market structure where a few producers of almost identical products cater to the needs of the whole market
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Product Differentation
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A strategy that firms employ to make their product seem different from those of their competitors
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Command/Planned Economic System
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The economic system in which the ownership and control of the factors of production are totally in government hands
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The Command/Planned Economic System's Objectives
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-Utilize as much of domestic resources as possible
-Employ whoever wants to work to solve unemployment -Minimize income inequality among workers -Provide limited choice to workers |
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State Enterprises
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Goverment owned firms that produce goods and services, generally in command and mixed economic systems
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Mixed Economic System
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The economic system that exhibits elements of both the capitalist and the command economic systems
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Privatization
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The process of selling state enterprizes to private entrepreneurs
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Economic Transition
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The move from a command economic system to a capitalist economic system
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Outputs
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A wide array of useful goods or services that are either consumed or used for further production in business
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Inputs
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Factors of production or commodities or services that are used by firms in their production process
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Entrepreneurs
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People with initiative who seize opportunites as they see them to get things done or make things happen, generally for profit
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Capital Goods
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Finished goods like machinery and equipment that can be used as inputs for further production of goods and services
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Investors
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Those who have a financial stake in a business, small or large, and expects to receive a return on their invested capital
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Revenue
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The sum of the quantities of all goods or services sold times their price
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Dividends
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The portion of profits distributed to stockholders
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Retained Earnings
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The portion of profits not distributed as dividends but reinvested back into the company to generate future profits
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Increasing Shareholder Wealth
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Increasing dividends and stock prices
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Stakeholder Company
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A business that takes into consideration the interests of all its partners, including its customers, management, employees, suppliers, and society
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Business Ethics
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The principles governing whether certain business practices are morally acceptable
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Productivity
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The dollar output of goods and services per dollar input of labor
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Inventory
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Unsold goods in stock
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Consumer Confidence Index
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An indicator that measures the self-assurance of consumers and is crucial in determining consumer spending habits that have a direct impact on business prospects and the economy
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Target Group
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A population segment whose members have more or less similar consumption habits
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Market Segmentation
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The breakdown of target consumers into categories on the basis of age, gender, education, ethnic backgrond, etc
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Psychographics
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The analysis and understanding of the consumer's mind to identify consumer likes, dislikes, or preferences
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Culture
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The behavior patterns, beliefs, and institutions that underpin all human activities
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Gross National Product (GNP)
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The value of all final goods and services produced in an economy and measured at current prices over a given time period, usually a year
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Gross National Income (GNI)
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The expenditures that make up GNP and are equal to the income that the factors of production receive
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Consumption
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The amount used by private domestic residents
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Investment
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The amount spent by private firms on new plant and equipment for future production and profit
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Government Expenditures
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The amount spent by the government
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Net Exports
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Exports minus imports of goods and services
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Gross Domestic Product (GDP)
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The total dollar value of all final goods and services produced each year within a country's borders
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Nominal GNI, GNP, or GDP
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Economic output measured in current prices
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Real GNI, GNP, or GDP
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Economic output measured on an inflation-adjustment basis
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Purchasing Power Parity (PPP)
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The purchasing power of an international dollar, which will have the same purchasing power in any country as the U.S. dollar has in the United States
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Business Cycle
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The up and downswings in real GNI, GNP, or GDP levels over time
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Digital Era
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The period of transformation within our lifestyle to make the Internet and related technologies a part of our everyday lives
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Bandwidth
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The amount of data and other info that can be transferred in a second via the Internet
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E-Business Trends
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-Companies are transforming on a massive scale
-Customers are becoming smarter and more demanding -Business is becoming more nimble -Knowledge is the key asset -Transparency and openness are crucial for business success. |
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B2C
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Business to consumer electronic commerce
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B2B
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Business to business electronic commerce
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Three major issues that impact business today
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-Globalization
-Technology -Ethics |
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Sound Economic Management Objective
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-High levels of output with GDP growth
-High levels of employment -Low rates of inflation -Stable exchange rates |
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Stable Currency
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A currency with a value that does not fluctuate wildly
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Two Major Elements of Fiscal Policy
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-Taxation
-Government Expenditure |
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Fiscal Policy
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A government policy of using expenditures and taxation to guide the economy to meet economic goals
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Government Expenditures
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The purchase of goods and services by the government to serve the public's interest
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Disposable Income
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The money left over after taxes are taken out of a person's paycheck
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Monetary Policy
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A policy followed by the central bank to control money supply in an economy, to manage inflation, growth, employment, and exchange rate
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Incomes policies
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Strategies based on wage and price controls that are used by government to curb inflation and at the same time maintain employment and keep economic output stable
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Trade Policy
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Gov policy implemented primarily through changes in tariff rates or quotas with the objective of encouraging exports or discouraging imports
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Exchange Rate Policy
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A policy of managing the country's exchange rate, to improve the country's balance of payments position
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International Trade
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The imports or export of goods or services from or to other countries by individuals, firms, or governments
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Imports
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Goods or services that are purchased from abroad
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Exports
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Goods or services that are sold to citizens abroad
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Free Trade Regime
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A system in which imports and exports of goods or services take place voluntarily, without government restrictions and based on a principle of free market
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International Trade Benefits for Consumers
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-A greater amount of choice
-Lower prices for goods -Higher living standards |
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Absolute Advantage
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The ability of one country to produce a good or service more efficiently than the other
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Comparative Advantage
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The ability of one country that has an absolute advantage in the production of two or more goods to produce one of them relatively more efficiently than the other
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Foreign Direct Investment (FDI)
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An overseas investment in plant and equipment to produce goods or services for local consumption or for exports
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Protection
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The government practice of impsing trade barriers to shield domestic producers from international competition
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Five Major Trade Barriers
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-Tariffs
-Quotas -Voluntary Restraints -Counter Trade -Embargoes |
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Tariffs
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Taxes on imports
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Quantitative Restrictions (QR)
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Quotas that limit the amount of imports that can come into a country
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Voluntary Restraints
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Self-imposed export quotas on specific sensitive products to a specific country/countries for a set period of time
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Counter Trade
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A barter system of exchange in which trade between specific countries is conducted without the use of monetary transactions
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Embargoes
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Trade sanctions that are imposed on a country and that restrict trade with that country
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Foreign Exchange Market
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Financial centers where a network of international banks and currecny traders transact business
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Three Largest Foreign Exchange Markets
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-London
-New York -Tokyo |
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Exchange Rate
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The price of one currency compared with that of another currency
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Floating Exchange Rate System
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The system in which currency values are determined by the demand for and supply of currencies in a foreign exchange market
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Managed Floating Exchange Rate System
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A floating exchange rate system in which the values of some currencies are partly determined by active government intervention
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Fixed Exchange Rate System
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The system in which a country fixes its currency value at a fixed rate to a major currecy or a basket of currencies
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Free Trade Area
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An area in which two or more countries agree to eliminate all barriers to trade such as tariffs, while at the same time they keep their own external tariffs against nonmembers
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Customs Union
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A group of free trade member countries that have adopted a common external tariff with nonmember countries
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Common/Single Market
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A market formed when member countries of a customs union remove all barriers to the movement of capital and labor within the customs union
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Economic and Monetary Union
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A union formed when members of a common market agree to implement common social programs and coordinated macroeconomic policies that would lead to the creation of a single regional currency and an apex central bank
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Political Union
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The union created when member countries of an economic and monetary union work closely with each other to arrive at common defense and foreign policies and behave as a single country
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The Triad Economies
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-U.S
-Japan -Germany |
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Risk Profile
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The potential loss that entrepreneurs are willing to take in a business
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Export-Import Business
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A relatively low-risk operation that involves penetrating foreign markets or importing merchandise at competitive prices for domestic consumption
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Licensing
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The practice in which a company or individual provides the foreign partner the technology to manufacture and sell products or services for an annual license fee
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Franchising
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The practice in which a firm is obligated to provide specialized equipment and service suppport, and at times even some seed money, in return for an annual fee from the franchisee
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International Jointventure
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A business that is jointly owned that pool their resources, tech, and management to penetrate host country markets, generate profits, and share the commercial risk
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Strategic Alliances
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Marriages of convenience between two or more firms that do not involve the creation of a separate entity with joint ownership and in which the firms stand to gain through cooperation with each other for specific purposes and for a given period of time
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Multinational Enterprises (MNE's)
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Frims that have a home base in one country, but owns plants or other businesses in one or more foreign countires
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Why MNE's invest abroad
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-Acquiring essential raw material
-Maximizing production efficiency -Expanding market share -Minimizing compliance cost -Pursuing a politically safe business environment |
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Maquiladoras
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The Maquiladora program allowed factories to temporarily import supplies, parts, machinery, and equipment to produce goods in Mexico duty-free, as long as the output was exported back to the U.S
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Mergers and Acquisitions
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The process of identifying, valuing, and taking over a foreign firm to meet a company's growth objectives
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Acquisitions
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Purchase of established firms abroad with the goal of utilizing the existing production, marketing, and distribution networks and of having instant access to foreign markets that fit the purchasing firm's global strategy
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Subsidiaries
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New facilities built and operated overseas by MNEs that require large investment of capital given the fact that these new establishments are tailored to the exact needs of the MNEs
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Sole Proprietorships
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Individually operated unincorporated businesses
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Partnerships
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Unincorporate businesses run by two or more individuals
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Partnership Agreement
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An agreement spelling out the organizational details of a partnership
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General Agreement
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Partners who run the partnership's business and who are liable for its actions
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Limited Partners
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Partners whose liabiltiy is limited to the amount of money they invested in the partnership and who generally aren't involved in running the business
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Corporations
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Legal "persons" or entities, established for the purpose of doing business and distinct from their owners in terms of liability
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Limited Liability
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The principle that shareholders are not generally liable for the debts or actions of the corporation
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Supravoting Shares
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Shares of a corporation's stock that have superior voting rights
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Pierce the Corporate Veil
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The situation where creditors of a corporation are able to break down the legal wall separating the corporation and its shareholders and reach the assets of its shareholders
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Board of Directors
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The governing board of a corporation, which generally must have at least three members
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Inside Directors
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Corporate board of directors members employed full-time by the company, example, CEO
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Independent Outside Directors
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Outside directors who do not have any financial or other relationship with the corporation beyond their service as a director
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Business Judgement Rule
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The requirement that corporate directors and officers act in good faith and exercise at least an ordinary prudent person's judgement in making business decisions
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Chief Executive Officer (CEO)
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The top officer of a corporation, responsible for the firm's overall performance
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Chief Financial Officer (CFO)
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Responsible for accounting and general financial matters at the firm
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Shareholder Model of Business Governance
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The business governance model operating from the premise that the purpose of the business is to maximize financial returns to shareholders
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Principals
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Owners/Shareholders of a business
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Agents
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People working for the owners of the business
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Seperation of Ownership and Control
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The fact that the shareholders of major corporations generally do not have much respect to the corporation
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Takeover Bid
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An offer made by another company to acquire a company
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Buy-and-Hold Investors
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Investors looking at the long term profitability of a corporation
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Asymmetry of Corporate Information
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An imbalance among different people regarding information or what's going on at a corporation
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Restricted Stock
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Corporate stock that has some restrictions on it, such as when it can be sold
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Shareholder Proposal Process
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The process by which shareholders make proposals a number of months before a firm's annual meeting
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Institutional Investors
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Large, professionally managed sources of capital
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Confidentiality Agreement
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Agreements by the employees to keep confidential trade secrets or other sensitive information learned by working at a company
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Covenants Not to Compete
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Agreement by employees not to compete with their former employer
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Golden Parachute Agreement
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Severance payment agreements, often fairly lucrative, to be received by corporate executives if their corporation is acquired
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Sarbanes-Oxley Act
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Federal corporate governance legislation increasing the duties and the liabilities of corporate officers and direcotrs
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Rule FD (Fair Rule Disclosure)
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The federal fair disclosure rule prohibiting selective disclosure of corporate information to certain parties
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Insider Trading
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Stock trading based on material nonpublic information
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Short-Swing Profits
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Stock trading profits made by corporate insiders within a six month period
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Stakeholder Model of Business Governance
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The business governance model operation from the premise all groups with a meaningful stake in them
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Foreign Corrupt Practices Act
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The federal law prohibiting U.S. companies doing business overseas from making payments to foreign officials to influence their discretionary decisions
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Business Codes of Ethics
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Formal written documents adopted by businesses regarding ethical conduct standards
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Small Business
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A firm with fewer than 500 employees
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Microbusiness
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A business with fewer than five employees
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Creative Destruction
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The competitive process where new small firms enter the marketplace to compete against existing larger firms and cause some to fail
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Economies of Scale
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The reduction in cost per unit output that occurs as a firm mass-produces a product or service
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Intrapreneur
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A person within a large corporation who takes the responsibility to develop a new product through innovation and risk taking
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Home Business
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A small business that is operated out of a household address, rather than out of a business office or factory
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Ways Government Can Assist Small Businesses
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-Reduction of regulations
-Simplification of tax rules -Improved access to financial resources -Providing essential info |
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Successful Entrepreneur Traits
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-Commitment
-Desire for independence -Risk taker |
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Visions/Mission Statement
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A statement that illuminates the main goals of an enterprise
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Goals
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The aims that guide the future direction of a firm
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Strategies
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More detailed descriptions of how a goal can be achieved
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Key Components of a Business Plan
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-Marketing Plan
-Management Plan -Operating Plan -Financial Plan |
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Venture Capitalists
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Investors in small business firms seeking higher-risk and higher-return business opportunities by purchasing equity ownership positions
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Angels
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Venture capitalists who are wealthy individuals and who likely were previously successful small business people
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Working Capital
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Money needed to pay the short-run expenses of producing a product or service, including raw materials, variable production costs, and labor
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Par Value
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The initial value of stocks issued by a firm
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Stock Price
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The market value of a share of stock issued by a firm
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Capital Gain
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The difference between the price paid to purchase a share of stock and the money received when it is sold
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Double Taxation of Earnings
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The taxation of a corporation's profits plus the taxation of the dividends paid to shareholders from after-tax profits
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Dilution of Ownership Control
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The loss of ownership control that occurs as more shareholders own stock, thereby reducing the percentage ownership of each individual shareholder
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Stock Options
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A type of compensation that gives the managers the right to buy common shares of stock at a predetermined price
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S corporation
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A hybrid form of corporation that has limited liability but is taxed as a partnership and therfore avoids double taxation of earnings
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Limited Liability Company (LLC)
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A type of corporation that combines the corporate advantages of limited liablity protection with the personal taxation of a partnership of S corporation
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Franchise
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An authorization by a corporation to individuals that allows them to participate as an owner-manager of a branch entity of that corporate firm
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Company Credo
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A business philosophy that provies an ethical standard for firm, as well as its managers and employees
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Acquisition
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The purchase of one firm by another for a price that is paid to the purchased firm's owner/s
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Initial Public Offering (IPO)
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The first public sale by a firm of its common stock
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Business Risks
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Internal and external risks of losses that can severely cripple a business or even cause bankruptcy
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Internal Business Risks
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-Poor business plan
-Bad leadership -Too much debt -Inexperienced management -Marketing problems |
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External Business Risks
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-Competitor firms
-Changes in customer preference -Economic downturn -Catastrophic losses from property damage, personal liabilities, and legal problems |
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Recessions
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Relatively brief slowdowns, or contractions, in economic activity within a business cycle
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Depressions
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Long, severe economic downturns that are particularly damaging to a business economy
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Property Insurance
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Protection purchased from an insurance company against property losses due to fire, water and wind damage, etc
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Insurance Premiums
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A payment to an insurance company on a monthly or periodic basis for insurance coverage
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Liability Insurance
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Insurance coverage of employees under worker compensation laws that require employers to pay health and disability costs to injured employees and liablity losses in court decisions against the firm
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Health Insurance
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Protection offered by insurance companies against the high costs of medical treatments
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Disability Insurance
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Protection offered by insurance companies against long term expenses due to chronic medical condition
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Life Insurance
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Protection offered by insurance companies intended to pay a death benefit for a beneficiary
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Estate Plan
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A plan that seeks to reduce taxes on the family level and provide for an orderly transfer of wealth and leadership within a firm
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