Economics Chapter 8

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sole proprietorship

Back 1

unicorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States

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unlimited liability

Back 2

requirement that an owner is personally and fully responsibile for all losses and debts of a business; applies to proprietorships, and general partnerships

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inventory

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stock of goods held in reserve; includes finished goods waiting to be sold and raw materials to be used in production

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limited life

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situation in which a firm legally ceased to exist when an owner dies or quits, or a new owner is added; applies to sole proprietorships and parnerships

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partnership

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unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm

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general partnership

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form of parnership where all partners are jointly responsible for managements and debts

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limited partnership

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form of partnership where one or more partners are not active in the daily running of the business, and whose liaibity for the parnership's debt is restricted to the amount invested in the business

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corporation

Back 8

form of business organization recognized by law as a separate legal entity with all the rights and responsbiilitieis of an individual, including the right to buy and sell property, enter into legal contracts, and to sue and be sued

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charter

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written government approval to establish a corporation; includes company name, address, purpose of business, number of shares of stock, and other features of the business

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stock

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certificate of ownership in a corporation; common or preferred stock

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stockholders

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people who own a share or shares of stock on a corporation; same as shareholders

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divident

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check paid to stockholders, usually quarterly, representinga portion of corporate profits

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common stock

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most basic form of coporate ownership, with one vote per share for stockholders

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preferred stock

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form of stock with no voting privileges; has a higher claim on coporate income and assets than does common stock

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bond

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formal contract to repay borrowed money and interest on the borrowed money at regular future intervals

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principal

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amount borrowed when getting a loan or issuing a bond

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interest

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payment made for the use of borrowed money; usually paid at periodic intervals for long-term bonds or loans

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double taxation

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feature of taxation that allows stockholders' dividends to be taxed both as corporate profit and as personal income

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franchise

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business investment that involves renting or leasing another successful business model

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franchisor

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creator of the business model that is rented or leased by investors

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franchisee

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person that invests in the business model of the franchisor with his or her own money and start-up costs

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income statement

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report showing a business's sales, expenses, and profts for a certain period, usually three months or a year

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net income

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measure of business profits determined by subtracting all expenses, including taxes, from revenues

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depreciation

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gradual wear on capital goods

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cash flow

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total amount of new funds the business generates fro operations; broades measure of profits for a firm because it includes both net income and noncash charges

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horizontal merger

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combination of firms producing the same kind of product

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vertical merger

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combination of firms involved in different steps of manufacturing or marketing

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conglomerate

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firm with four or more businesses making unrelated products, with no single business reponsible for a majority for its sales

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multinational

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

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incubators

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places where entrpreneurs can receive the training to build a successful start-up business

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venture capitalist

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provider of investment funds to a start-up business in exchange for partial ownership of the business

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angel investors

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informal and usally affluent investors who provide start-up funds

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crowdfunding

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using social networking to appeal to potential investors

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nonprofit organization

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economic institution that operates like a business but does not seek financial gain; schools, churches, and community-service organizations are examples

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cooperative, or co-op

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nonprofit association performing some kind of economic activity for the benefit of its members

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labor union

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organization that works for its members' interests concerning pay, working hours, health coverage, fringe benefits, and other job-related matters

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collective bargaining

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process of negotiation between union and management representtatives over pay, benefits, and job-related matters