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Economics 91508 http:students.resa.netmilewski


Sole proprietorship a business owned and run by one person. ... The Better Business Bureau, a nonprofit organization sponsored by local ... – PowerPoint PPT presentation

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Title: Economics 91508 http:students.resa.netmilewski

Economics 9/15/08 http//
  • OBJECTIVE Demonstration of Chapter2 and begin
    examination of the 3 types of business
  • I. Administrative Stuff
  • -attendance
  • -distribution of test
  • II. Chapter2 Test
  • III. Journal 8 pt.A
  • -Read Profiles in Economics p.67
  • -Answer question 1 p.67
  • IV. Journal 8 pt.B
  • -notes on business organizations

Types of Firms
  • Sole proprietorship a business owned and run by
    one person.
  • In 2000, 73 of all businesses in the U.S. were
    sole proprietorships.
  • Advantages of sole proprietorships
  • -easy start-up
  • -flexible (can make decisions quickly)
  • -the profits are yours
  • -you are your own boss
  • -easy exit

Disadvantages of sole proprietorships
  • -unlimited liability you are responsible for
  • -its hard to borrow money
  • -diseconomies of scale (expensive inventory)
  • -limited management experience
  • -hard time finding qualified employees
  • -limited life business dies when you die

  • Partnerships business jointly owned by two or
    more persons.
  • In 2000, partnerships accounted for 7.1 of
    business organizations in the U.S.
  • There are two types of partnerships
  • general partnerships all partners actively
    run the business
  • limited partnership at least one partner is
    not active in running the business

Forming a Partnership
  • Its sort of like getting a marriage pre-nup.
  • Legal papers are drafted that specify
  • -how profits are divided.
  • -how new partners may join.
  • -how property is divided if the partnership
  • Warning You are responsible for the debts of
    your partners!

Advantages of partnerships
  • -easy to start
  • -easy to manage
  • -you get your share of the profits
  • -can attract financial capital easier than sole
  • -larger, so some economies of scale present
  • -easier to attract qualified employees

Disadvantages of partnerships
  • -responsible for the acts of all the other
  • -if you are a limited partner, not involved in
    daily activity, you only lose your original
  • -when a partner dies, a new partnership has to
    be drawn up
  • -conflict between partners
  • -bankruptcy if youre not a limited partner,
    any debts you have to pay!

Economics 9/16/08 http//
  • OBJECTIVE Examine the structure of
  • I. Journal 9 pt.A
  • -Examine the Chart on p.64
  • -Answer the caption question on p.64
  • II. Return of Chapter2 Test
  • III. Journal 9 pt.B
  • -notes on corporations

(No Transcript)
  • Corporation a form of business organization
    that is recognized by the law as having all the
    legal rights of an individual.
  • They have the right to buy sell property, enter
    into legal contracts, and to sue be sued.
  • In 2000, corporations were 19.9 of business
    organizations, but were responsible for 88.8 of
    all sales.

How a corporation is formed
  • 1.) Must ask the permission of the government.
  • 2.) If approved, a charter is issued.
  • charter a government document that gives
    permission to create a corporation.
  • 3.) The charter states the name of the company,
    the address of the business, how many shares of
    stock can be issued, and other specific features
    of the business.

  • Stock a certificate of ownership in a firm.
  • Stockholders a.k.a. shareholders investors
    in a corporation (they own stock).
  • The money from the stockholders (investors) is
    used to set up the firm. This money is called
    financial capital.

Types of Stock
  • Common stock basic form of ownership in a
    corporation. Each share is worth one vote for
    the board of directors, who run the company.
  • Preferred Stock non-voting shares of stock, but
    these shareholders receive profits before common

Advantages of Corporations
  • Easy to raise financial capital
  • 1.) sell stock
  • 2.) issue bonds
  • bond a written promise to repay the amount
    borrowed in the future
  • Hire professional managers
  • Limited liability shareholders only lose money
    invested if something goes terribly wrong.
  • Unlimited life the firm doesnt die when a
    shareholder does.

Disadvantages of Corporations
  • Difficult to start
  • Shareholders have little say about how the
    business is run
  • Double taxation the firms profits are taxed and
    then the profit that is distributed to
    shareholders is also taxed.
  • Subject to government regulation.

The Role of Government
  • The state governments began regulating
    corporations in the mid-1800s.
  • Corporations in states with a lot of regulation
    moved to states with less, so as a result state
    regulations began to be lifted.
  • In the early 1900s, consumer groups demanded
    regulation of giant corporations.
  • Regulations of electric companies, insurance
    companies, the phone company, and transportation
    companies (Railroads Airlines)

Era of Deregulation
  • In the 1980s, a wave of government deregulation
    swept through Congress and state legislatures.
  • States competed for corporations to move to their
    state for the reasons of job creation and tax

Economics 9/17/08 http//
  • OBJECTIVE Examine Business Growth Expansion.
  • I. Journal 10 pt.A
  • -Read The Global Economy p.70
  • -Answer questions (1-2) p.70
  • II. Constitution Day!
  • -Fun Constitution Facts
  • -We the people
  • III. Journal 10 pt.B
  • -notes on mergers conglomerates

Business Growth
  • Businesses can grow in the following ways
  • 1.) Reinvestment
  • 2.) Merger
  • Income statement shows how much money the
    business makes and spends.

  • Net income business pre-profit.
  • Depreciation non-cash charge the firm takes for
    the general wear and tear on its capital goods.
  • Bottom line cash flow, a.k.a. profit.
  • When cash flows are reinvested, the firm can
    produce additional products which will generate
    additional profits.

Why Merge?
  • 1.) Grow faster
  • 2.) Become more efficient
  • 3.) Acquire or deliver a better product
  • 4.) Eliminate a rival
  • 5.) Change image

Types of Mergers
  • Horizontal merger when two or more firms that
    make the same product join forces.
  • Example Nextel Sprint Sprint-Nextel
  • Vertical merger when firms involved in
    different steps of the manufacturing or marketing
    join together.
  • Example Time Warner Incorporated(a major cable
    operation) Turner Corporation (which produces
    CNN, TBS and other programming) Time Warner/AOL
  • Conglomerate a firm that has at least four
    businesses each making unrelated products.
  • Example RJ Reynolds Nabisco RJR Nabisco

  • Multinational - can be an ordinary corporation or
    a conglomerate, but it has manufacturing or
    service operations in several different
  • Multinationals introduce new technology, generate
    jobs, and produce tax revenues for the host

Economics 9/18/08 http//
  • OBJECTIVE Examine Nonprofits and Cooperatives.
  • I. Journal 11 pt.A
  • -Read theBusiness Week Newsclip p.74
  • -Answer questions (1-2) p.74
  • II. Journal 11 pt.B
  • -notes on non-profits and cooperatives
  • III. Journal 11 pt.C
  • -questions on short film about sole

  • Firms use scarce resources to produce goods and
    services in order to make a profit for their
  • Other organizations operate on a not-for-profit
  • A nonprofit organization operates in a
    businesslike way to promote the collective
    interests of its members rather than to seek
    financial gain for its owners

  • Examples schools, churches, hospitals, welfare
    groups, and adoption agencies.
  • Many of these organizations are legally
    incorporated to take advantage of unlimited life
    and limited liability.
  • They are similar to profit-seeking businesses,
    but do not issue stock, pay dividends, or pay
    income taxes.
  • They use scarce factors of production to serve
    many needs.

Goal of Cooperatives
  • Producer and worker cooperatives are associations
    in which the members join in production and
    marketing and share the profits.
  • Cooperative - a voluntary association of people
    formed to carry on some kind of economic activity
    that will benefit its members.

  • The consumer cooperative is a voluntary
  • They buy bulk amounts of goods such as food and
    clothing on behalf of its members.
  • The goal is lower prices for members.

Credit Unions
  • An example of a cooperative is a credit union
  • It is a financial organization that accepts
    deposits from, and makes loans to, employees of a
    particular company or government agency.

Small Business Film Questions
  • 1.) Who is the entrepreneur of this short film?
  • 2.) What is his business?
  • 3.) What game does the entrepreneur suggest be
    played instead of the waiting game?
  • 4.) Who is the entrepreneurs competition?
  • 5.) What type of business organization do the
    rivals decide to form?

Economics 9/19/08 http//
  • OBJECTIVE Examine Community, Civic, Labor,
    Professional, and Business Organizations.
  • I. Journal 12 pt.A
  • -Read Issues in Free Enterprise p.84-85
  • -Answer questions (1-3) p.85
  • -2nd Hour ONLY! (1-7) p.82
  • II. Journal 12 pt.B
  • -notes on community, civic, labor, professional,
    and business organizations
  • III. Mindjogger
  • -video quiz on Chapter3

Professional Associations
  • Many workers belong to professional societies,
    trade associations, or academies. For example
    ABA, ADA, etc
  • These associations also seek to influence
    government policy on issues that are important to

Business Organizations
  • Most cities and towns have a chamber of commerce
    that promotes the welfare of its members and of
    the community.
  • The Better Business Bureau, a nonprofit
    organization sponsored by local businesses to
    provide general information on companies, is one
    of these.

Direct Indirect Role of Government
  • The role is direct because the government
    supplies a good or service that competes with
    private businesses.
  • Many federal agencies are organized as
    government-owned corporations.
  • The government plays an indirect role when it
    acts as an umpire to make sure the market economy
    operates smoothly and efficiently.
  • One such case is the regulation of public
    utilities, investor- or municipal-owned companies
    that offer important products to the public, such
    as water or electric service.

  • 1.) What was the problem with Tickle Me Elmo?
  • 2.) What was the problem in the former Soviet
  • 3.) Why does the government put some restrictions
    on business?
  • 4.) How does Carnival come up with the money to
    build new ships?
  • 5.) What is the franchise system?