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61 Cards in this Set
- Front
- Back
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sole proprietorship
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a business organization in which the business is owned and managed by a single individual.
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what are the most and least common forms of busniess organizations?
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most=sole proprietorship
least= partnership |
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partnership
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a business organization owned by 2 or more persons who agree on a specific division of responsibility and profits
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3 types of partnerships
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general (partners share equally)
limited (one person has more control) limited liability (all partners are limited partners) |
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corporation
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a business organization that's a legal entity set up by a charter (articles of incorporation), owned by individual stockholders, each of whom has limited liability for the firm's debt
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multinational corporation
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operates in more than 1 country at a time
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business franchise
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a semi-independent business that pays fees to a parent company (ex/ fast food)
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advantages/disadvantages of sole proprietorship
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A:
easy to establish, few regulations, sole profit receiver, full level of control, easy to discontinue D: personal liability,limited access to resources, lack of permanence |
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advantages/disadvantages of partnership
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A:
easy to establish, shared decision-making and specialization, larger pool of capital, not subject to double taxation D: unlimited liability,potential for conflict, lack of permanence |
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advantages/disadvantages of corporation
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A:
limited liability for owners, transferable ownership, ability to attract capital, long life, more potential growth D: expense and diffilculty of start up, double taxation, potential loss of control by founders, slow decision-making, lots of legal requirements |
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advantages/disadvantages of a franchise
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A:
management training and support, standardized quality, national advertising programs, financial aid, centralized buying power D: high fees and royalties, strict operating stds, purchasing restrictions, lmt. product line |
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What are the 2 types of corporations?
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Closely held and loosely/ publicly held
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Closely held corporation
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issue stock to very few (nepotism) and are privately held
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publicly held corporation
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has many shareholders who can buy/sell stock on the open market
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Corporate Chain of Command
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corporation owners (stockholders)--> elects
Board of Directors ( decision makers)--> appoints Corporate Officers (runs corp./oversees production) --> hires managers and employees (does the work) |
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How are corporations financed?
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PROFITS! (2/3)
selling stocks and bonds borrowing money |
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What's the difference between a stockholder and a bondholder?
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stockholder= an owner that receives dividends
bondholder= creditor that gets interest |
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What are the 2 types of stock?
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common and preferred stock
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What is common stock?
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gets ownership, gets to vote for Board of Directors, gets dividends ad stock growth
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What is preferred stock?
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gets ownership, no vote for board of directors, gets stock growth and FIXED RATE DIVIDENDS
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New York Stock Exchange (NYSE)
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aka Big Board, DOW
fractional reports on stock prices blue chip companies 3000+ companies (DOW=30 industrial companies) largest in US |
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NASDAQ
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midsize companies, smaller of the exchanges, autoated/computers (technology companies)
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S+P 500
and OTC |
much smaller exchange-->500 companies
40,000 listing on the over-the-counter market, unknown small companies, dirt cheap, learner's market |
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stock volume
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how many shares have been traded for the day
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what are the 3 ways in which corporations combine?
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horizotal mergers, vertical mergers, congomerates
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horizontal merge
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joins 2 or more firms competing in the same market w/ the same good or service
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vertical merge
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joins 2 or more firms involved in different stages of producing the same good or service. They can control all phases of production
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conglomerate
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when firms buy other companies that produce totally unrelated goods or services. more than 3 businesses that make unrelated products, and no.1 business earns the majority of the profits
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why do corporations combine?
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it can lead to larger, more efficient firms.
larger firms can produce and sell goods at lower prices and eventually gain monopoly power improve sales + increase control |
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What is a cooperative?
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a business organization owned and operated by a group of individuals for their shared benefit.
3 types: consumer (ex/ special deals for Loehmans members), service (insurance), producer (agricultural marketing) |
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Non-profit organizations
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institution that functions like a business but doesn't generate profits.
professional org., business assoc., trade assoc., labor union TAX EXEMPT provides services rather than goods |
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Competition
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the struggle among producers for the $$$ of consumers
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market structure
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describes different types of competition
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perfect competition
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a market structure in which a large number of firms all produce the same product.
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pure monopoly
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"a single seller in the market"
one firm, no substitutes, difficult to enter/capital |
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what must market conditions be for perfect competition to exist?
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many buyers and sellers participate in the market
sellers must offer identical products (commodities) buyers and sellers must be well informed about products sellers must be able to enter/exit the market freely (ex/ agricultural products) |
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how does perfect competition affect prices?
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individual firms can't influence prices.
lowest sustainable prices possible. |
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how do pure monopolies affect price?
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they can take advantage of their market power and charge higher prices
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Monopolies considered "good" or legal
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government monopoly (ex/ post office)
government-regulated monopoly (ex/ utilities) b/c they dont waste resources and have set prices technological monopolies b/c patents encourage research-->societal improvement |
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monopolistic competition
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similar features as perfect competition.
many companies sell products that are similar but not identical (ex/ airlines, retail stores, fast food) |
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What must market conditions be for monopolistic competition to exist?
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many firms
few entry barriers slight control over price *differentiated products (ex/ brand name loyalty -->increases profit) |
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Aside from prices, how do businesses compete?
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physical characteristics, location, service level, advertising/image/status
competive vs. imformative advertising |
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Oligopoly
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a market structure in which a few large firms dominate the market (3-4 firms control 70% of market)
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pure oligopoly vs. differentiated oligopoly
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pure= identical product (ex/ oil, steel, lumber)
differentiated= similar product (ex/ cars, cereal) |
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What market conditions must be present for an oligopoly to exist?
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barriers to entry
economies of sale (avg. cost of production decreases + output increases) |
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How do oligopolies determine price?
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collusion, cartel, price wars
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collusion
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an agreement among firms to set prices and production levels (price-fixing)
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cartel
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a formal organization of producers that agree to coordinate prices and production
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4 skill levels of workers
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1. unskilled-no education (hourly wage)
2. semi-skilled- minimal education (hourly wage) 3. skilled- requires education, no supervision necessary (still hourly wage) 4. professional labor- requires advanced education (yearly salary) |
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what is the learning effect?
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education increases productivity, and results in higher wages
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How has the government attempted to regulate labor?
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In the 1930s <3 support
Fair Labor Std.s Act in the 1940s not so good Taft-Hatley and right-to- work laws |
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Labor supply goes up when ______ go ____
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wages; up
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wage
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the amt. of $$$ paid on the basis of time worked (usu. hours)
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Worker supply and demand is determined by:
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worker productivity, worker education, market competition and # of employees, availability of substitutes (machines), wages
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what were the first 3 major unions in the US?
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Knights of Labor
American Federation of Labor Congress of Industrial Organizations (splinter group) the last 2 merged to form AFL-CIO |
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right-to-work laws
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banned mandatory union membership
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types of "shops"
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closed-you MUST join union (illegal now)
open- don't have to join union- after a reasonable amt. of time, you should join |
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Collective Bargaining
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used to negotiate contracts between labor and management
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Mediation vs. arbitration
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both 3rd party decisions
mediation=non binding arbitration= binding |
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Factors used by strikers
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legal: strikes (sometimes), primary boycott, picketing
illegal: secondary boycott |
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how can management respond to strikers?
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legal:
lockout, hire scab labor illegal: blacklisting, yellow dog contract, company union |
