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What is a key advantage of cooperatives?
What is a key advantage of cooperatives?
Which type of business enterprise has less than ₱ 3.0 M in total assets?
Which type of business enterprise has less than ₱ 3.0 M in total assets?
What is a disadvantage often faced by cooperatives?
What is a disadvantage often faced by cooperatives?
Which organizational business arrangement involves two or more companies creating a new entity?
Which organizational business arrangement involves two or more companies creating a new entity?
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What does horizontal integration primarily focus on?
What does horizontal integration primarily focus on?
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Which type of merger involves companies at different stages of production combining?
Which type of merger involves companies at different stages of production combining?
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In franchising, who is typically limited by a contractual relationship?
In franchising, who is typically limited by a contractual relationship?
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Which of the following best describes diversification in business strategy?
Which of the following best describes diversification in business strategy?
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What defines a business organization?
What defines a business organization?
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Which of the following is an advantage of a sole proprietorship?
Which of the following is an advantage of a sole proprietorship?
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In a sole proprietorship, what happens to profits after taxes?
In a sole proprietorship, what happens to profits after taxes?
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What is a major disadvantage of a sole proprietorship?
What is a major disadvantage of a sole proprietorship?
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Which statement is true regarding the legal status of a sole proprietorship?
Which statement is true regarding the legal status of a sole proprietorship?
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How does a sole proprietorship typically handle employee compensation?
How does a sole proprietorship typically handle employee compensation?
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What is an essential characteristic of profit in a business context?
What is an essential characteristic of profit in a business context?
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Which of the following is indicative of the ease of starting a sole proprietorship?
Which of the following is indicative of the ease of starting a sole proprietorship?
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What is a disadvantage of a sole proprietorship regarding its operational capacity?
What is a disadvantage of a sole proprietorship regarding its operational capacity?
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What aspect of partnerships allows for shared success?
What aspect of partnerships allows for shared success?
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What is a major drawback of a partnership?
What is a major drawback of a partnership?
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Which of the following statements about corporations is true?
Which of the following statements about corporations is true?
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What is one of the limitations that corporations face?
What is one of the limitations that corporations face?
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What is a key advantage of a corporation's structure?
What is a key advantage of a corporation's structure?
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Which characteristic distinguishes cooperatives from other business structures?
Which characteristic distinguishes cooperatives from other business structures?
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What is a disadvantage corporations face due to their structure?
What is a disadvantage corporations face due to their structure?
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Study Notes
What is a Business?
- It's an organization or entity involved in commercial, professional, charitable or industrial activities.
- Businesses can be for-profit or not-for-profit.
- They may or may not have a separate existence from the people controlling them.
- It's all work associated with providing people with goods and services for a profit.
What is Profit?
- It's the money left over from all sales after business expenses are deducted.
Forms of Business Organizations
- A business organization is a collection of people working together to achieve a common purpose.
- They share a common organizational culture aligned with their mission, vision, goals, and objectives.
1. Sole Proprietorship
- Owned, managed, and controlled by one individual.
- Simplest and most numerous form of business organization.
Advantages
- Easy to start-up: Minimal paperwork and legal expenses make it easy to establish.
- Fewer regulations: Least regulated form of business.
- Full control: Owner makes all decisions.
- Sole receiver of profit: Owner keeps all profits after taxes.
- Easy to discontinue: Minimal legal obligations to cease operations.
- No separate business income tax: Not recognized as a separate legal entity, owner pays only personal income tax.
Disadvantages
- Difficult to raise financial capital: Limited personal resources and potential lenders are reluctant to lend to new or small businesses.
- Difficult to raise human capital: Difficulty attracting qualified employees due to limited financial capital and potential inability to offer competitive wages.
- Size and efficiency: Limited capital can hinder hiring enough staff or stocking enough inventory for efficient operations.
- Lack of permanence: Business ceases to exist when the owner stops operating it.
2. Partnership
- A legal association of two or more individuals acting as co-owners.
- Combines skills of several people with shared interest in the business' success.
Advantages
- Ease of start-up: Partnerships are easy to establish, but articles of partnership are recommended.
- Shared decision making and specialization: Each partner contributes different strengths and skills.
- Larger pool of capital: Combined assets improve borrowing capacity and talent attraction.
- Taxation: Partners pay individual taxes, business itself is tax-exempt.
Disadvantages
- More people to share profits: Profits are divided amongst partners.
- Disagreements: Potential for disagreements between partners.
- Difficult to change partners: Changing partners requires legal arrangements.
- Sudden dissolution: Partnership can dissolve due to disagreements, death, or withdrawal of a partner.
3. Corporation
- An artificial person with unlimited lifespan, empowered by a state to carry on a specific line of business.
- Owned by shareholders who are liable for damages only to the extent of their holdings.
Advantages
- Limited liability: Shareholders are only liable for the amount of their investment.
- Ownership transfers: Shares are easily transferable.
- Easy availability of capital: Relatively easy to raise large amounts of capital.
- Perpetual life: No limit to the corporation's lifespan.
Disadvantages
- Complex process: Establishing a corporation requires multiple steps and compliance with regulations.
- Double taxation: Corporations pay taxes on profits, and shareholders pay taxes on dividends received.
- Higher start-up costs: Higher initial costs due to legal and regulatory requirements.
4. Cooperatives
- An association of people or small companies with similar products, services, or interests.
- Formed to obtain greater bargaining power or achieve economies of scale.
Advantages
- Various types: Cooperatives can be formed in various sectors.
- Large pool of talent, skills, and knowledge: Cooperatives benefit from the expertise of multiple members.
- Operates in diverse sectors: Cooperatives can operate in various industries.
Disadvantages
- Limited capital: May struggle to raise sufficient capital.
- Lack of managerial expertise: Can face challenges in attracting and retaining qualified managers.
- Dependence on government: May rely on government subsidies or programs for support.
Categories of Business Enterprises
- Size categories: Micro, Small, Medium, and Large.
- Criteria: Number of employees and total assets.
Organizational Business Arrangements
- Joint Ventures: Two or more companies establish a new company to pursue shared goals.
- Contract Arrangements: Entities like processing plants or marketing organizations have contractual agreements with various participants.
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Franchising Operations: A legal agreement where the franchisee operates according to the franchisor's specifications.
- Franchisor: Specifies methods and terms for the franchisee.
- Franchisee: Entrepreneur bound by contract to the franchisor.
Enterprise Growth & Expansion Strategies
- Horizontal Integration: Acquiring additional business activities at the same level of the value chain.
- Vertical Integration: Extending business activities to different stages of operation.
- Diversification: Broadening the range of products or services by adding new lines.
- Merger: Companies acquire other companies for growth.
Different Forms of Mergers
- Horizontal Merger: Combining competing companies performing similar functions
- Vertical Merger: A company in one phase of the operation absorbs or joins another company in a different phase.
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Description
Explore the fundamental concepts of business, including its definition, profit, and various forms of business organizations. This quiz covers essential knowledge for understanding how businesses operate and differ in structure. Ideal for students beginning their journey in business studies.
