Economics 91508 http:students.resa.netmilewski

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Economics 9/15/08 http//students.resa.net/milews
ki

• OBJECTIVE Demonstration of Chapter2 and begin
  examination of the 3 types of business
  organizations.
• 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

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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

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Disadvantages of sole proprietorships

• -unlimited liability you are responsible for
  everything
• -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

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Partnerships

• 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

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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
  ends.
• Warning You are responsible for the debts of
  your partners!

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Advantages of partnerships

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

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Disadvantages of partnerships

• -responsible for the acts of all the other
  partners
• -if you are a limited partner, not involved in
  daily activity, you only lose your original
  investment
• -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!

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Economics 9/16/08 http//students.resa.net/milews
ki

• OBJECTIVE Examine the structure of
  corporations.
• 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

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Corporations

• 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.

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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.

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Stock?

• 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.

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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
  stockholders.

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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.

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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.

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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)

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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
  revenue.

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Economics 9/17/08 http//students.resa.net/milews
ki

• 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

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Business Growth

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

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Reinvestment

• 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.

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Why Merge?

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

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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

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Samsung
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Multinational

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

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Economics 9/18/08 http//students.resa.net/milews
ki

• 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
  proprietorship

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Nonprofits

• Firms use scarce resources to produce goods and
  services in order to make a profit for their
  owners.
• Other organizations operate on a not-for-profit
  basis
• 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

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Nonprofits

• 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.

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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.

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Cooperatives

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

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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.

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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?

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Economics 9/19/08 http//students.resa.net/milews
ki

• 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

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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
  them.

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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.

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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.

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NBR

• 1.) What was the problem with Tickle Me Elmo?
• 2.) What was the problem in the former Soviet
  Union?
• 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?