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Questions and Answers
What is a sole proprietorship?
What is a sole proprietorship?
A business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm.
What is unlimited liability?
What is unlimited liability?
Requirement that an owner is personally and fully responsible for all losses and debts of the business.
What is inventory?
What is inventory?
Stock of finished goods and parts held in reserve.
What is a partnership?
What is a partnership?
What is a general partnership?
What is a general partnership?
What is a limited partnership?
What is a limited partnership?
What is a corporation?
What is a corporation?
What is a charter?
What is a charter?
What is stock?
What is stock?
Who are stockholders or shareholders?
Who are stockholders or shareholders?
What is a dividend?
What is a dividend?
What is common stock?
What is common stock?
What is preferred stock?
What is preferred stock?
What is a bond?
What is a bond?
What is principal?
What is principal?
What is interest?
What is interest?
What is double taxation?
What is double taxation?
What is a merger?
What is a merger?
What is an income statement?
What is an income statement?
What is net income?
What is net income?
What is depreciation?
What is depreciation?
What is cash flow?
What is cash flow?
What is a horizontal merger?
What is a horizontal merger?
What is a vertical merger?
What is a vertical merger?
What is a conglomerate?
What is a conglomerate?
What is a multinational?
What is a multinational?
What is a nonprofit organization?
What is a nonprofit organization?
What is a cooperative or co-op?
What is a cooperative or co-op?
What is a credit union?
What is a credit union?
What is a labor union?
What is a labor union?
What is collective bargaining?
What is collective bargaining?
What is a professional association?
What is a professional association?
What is a chamber of commerce?
What is a chamber of commerce?
What is the better business bureau?
What is the better business bureau?
What is a public utility?
What is a public utility?
What are the three types of business organizations?
What are the three types of business organizations?
How is a sole proprietorship formed?
How is a sole proprietorship formed?
A sole proprietorship is easy to start up.
A sole proprietorship is easy to start up.
In a sole proprietorship, management is simple.
In a sole proprietorship, management is simple.
In a proprietorship, with profits of successful management, the owner does not have to share the profits with other owners.
In a proprietorship, with profits of successful management, the owner does not have to share the profits with other owners.
The proprietorship does not have to pay separate business income taxes.
The proprietorship does not have to pay separate business income taxes.
What type of satisfaction do many people get from being their own boss?
What type of satisfaction do many people get from being their own boss?
It is easy to get out of business.
It is easy to get out of business.
What is limited life?
What is limited life?
The main disadvantage of proprietorship is that the owner of the business has unlimited liability.
The main disadvantage of proprietorship is that the owner of the business has unlimited liability.
In a proprietorship, it is easy to raise financial capital.
In a proprietorship, it is easy to raise financial capital.
The size and efficiency of a proprietorship is a disadvantage.
The size and efficiency of a proprietorship is a disadvantage.
The proprietor often has limited managerial experience.
The proprietor often has limited managerial experience.
It is difficult to attract qualified employees.
It is difficult to attract qualified employees.
The sole proprietorship is limited life.
The sole proprietorship is limited life.
What is a partnership?
What is a partnership?
What are two types of a partnership?
What are two types of a partnership?
How is a partnership formed?
How is a partnership formed?
Partnerships can usually attract financial capital more easily than proprietorships.
Partnerships can usually attract financial capital more easily than proprietorships.
There is a lack of special taxes on a partnership.
There is a lack of special taxes on a partnership.
In a partnership, management is easy.
In a partnership, management is easy.
Partnerships are more efficient operations that come with their slightly larger size.
Partnerships are more efficient operations that come with their slightly larger size.
Partnerships find it more difficult to attract top talent than proprietorships.
Partnerships find it more difficult to attract top talent than proprietorships.
A partnership is easy to start up.
A partnership is easy to start up.
In general partnerships, each partner is fully responsible for the acts of all other partners.
In general partnerships, each partner is fully responsible for the acts of all other partners.
There is usually potential for conflict between partners.
There is usually potential for conflict between partners.
In the case of the limited partnership, a partner's responsibility for the debts of the business is limited by the size of his or her investment in the firm.
In the case of the limited partnership, a partner's responsibility for the debts of the business is limited by the size of his or her investment in the firm.
A partnership does have limited life like a proprietorship.
A partnership does have limited life like a proprietorship.
How is 90% of all business done in the United States?
How is 90% of all business done in the United States?
How is a corporation formed?
How is a corporation formed?
What is the structure of a corporation?
What is the structure of a corporation?
What are the strengths of a corporation?
What are the strengths of a corporation?
What are the weaknesses of a corporation?
What are the weaknesses of a corporation?
How do stockholders vote in corporate businesses?
How do stockholders vote in corporate businesses?
How do common stockholders differ from preferred stockholders?
How do common stockholders differ from preferred stockholders?
What two ways do businesses expand and grow?
What two ways do businesses expand and grow?
What is diversification?
What is diversification?
How does a conglomerate differ from a multinational?
How does a conglomerate differ from a multinational?
What are the purposes of nonprofit organizations?
What are the purposes of nonprofit organizations?
What are the direct and indirect roles of government within our economy?
What are the direct and indirect roles of government within our economy?
How do three kinds of cooperatives differ?
How do three kinds of cooperatives differ?
Why do many people prefer to deal with credit unions rather than banks?
Why do many people prefer to deal with credit unions rather than banks?
The main advantage of a corporation is the ease of raising financial capital.
The main advantage of a corporation is the ease of raising financial capital.
The corporation provides unlimited liability.
The corporation provides unlimited liability.
The directors of a corporation can hire professional managers to run the firm.
The directors of a corporation can hire professional managers to run the firm.
What is it called when the corporation continues to exist even when ownership changes?
What is it called when the corporation continues to exist even when ownership changes?
Transferring ownership of a corporation is easy.
Transferring ownership of a corporation is easy.
What kind of detailed records must a corporation keep so that it can pay taxes on its profits?
What kind of detailed records must a corporation keep so that it can pay taxes on its profits?
What features of obtaining a charter causes a disadvantage for the corporate structure?
What features of obtaining a charter causes a disadvantage for the corporate structure?
Who has little voice in how the business is run?
Who has little voice in how the business is run?
What are corporations subjected more to?
What are corporations subjected more to?
Study Notes
Business Organizations
- Sole Proprietorship: A business owned by a single person; owner retains all profits but faces unlimited liability for debts.
- Partnership: An unincorporated business owned by two or more individuals sharing profits and responsibilities for debts.
- Corporation: A legally separate entity from its owners, offering limited liability and more complex administrative structures.
Business Structures and Liabilities
- Unlimited Liability: Owners are fully liable for business debts, exposing personal assets to risk.
- Limited Liability: Protects owners’ personal assets; they are not personally liable for corporate debts.
Financial Instruments and Ownership
- Stock: Represents ownership in a corporation, with stockholders having voting rights in corporate decisions.
- Dividends: Payments made to shareholders from a corporation's profits, typically issued quarterly.
- Common Stock vs. Preferred Stock: Common stock grants voting rights; preferred stock typically has a fixed dividend and no voting rights.
Organizational Types
- General Partnership: All partners share management and liabilities equally.
- Limited Partnership: At least one partner has limited liability and is not involved in daily management.
Mergers and Growth Strategies
- Merger: The combination of two or more businesses into one entity.
- Horizontal Merger: Merging firms produce similar products, enhancing market share.
- Vertical Merger: Companies at different production stages join to streamline operations.
- Conglomerate: Businesses producing unrelated products, reducing risks through diversification.
Financial Statements and Performance Metrics
- Income Statement: A summary of revenue, expenses, and profitability over a defined period.
- Net Income: A key measure of profitability after deducting all expenses from revenues.
- Cash Flow: Reflects the total new funds generated from business operations.
- Depreciation: The gradual reduction in value of tangible assets like equipment over time.
Other Organizational Forms
- Nonprofit Organization: Operates like a business but aims to benefit society rather than generate profit.
- Cooperative (Co-op): A non-profit association created to provide economic benefits to its members.
- Credit Union: A member-owned financial cooperative providing better services than traditional banks.
- Labor Union: Advocates for workers’ interests regarding pay, conditions, and benefits.
Advantages & Disadvantages
- Corporation Strengths: Access to capital, limited liability, continuity despite ownership change, and professional management.
- Corporation Weaknesses: Double taxation, regulatory challenges, and limited owner influence over management decisions.
Government and Economic Roles
- Government Roles: Indirectly supports the economy through welfare services; directly provides essential services like education and law enforcement.
Additional Definitions
- Collective Bargaining: Negotiations between management and labor unions about pay and conditions.
- Chamber of Commerce: A local business organization promoting commercial interests.
- Better Business Bureau: Offers consumer information about local companies, fostering trust and ethical business practices.
Studying That Suits You
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Description
Test your knowledge on key concepts from Economics Chapter 3 with these flashcards. Focus on definitions such as sole proprietorship, unlimited liability, and inventory. Ideal for students preparing for exams in economics.
