Business 201 - Chapter 3 Flashcards
(29 cards)
5 Main Legal Structure Factors
Ease of Setup Degree of Control Magnitude of Risk Financial Capacity Required Skills
What are the 3 legal structures
Sole Proprietorship
Partnership
Corporation
What is a sole proprietorship
One individual, business and individual are one entity
What is a partnership
Two or more individuals, partners and business are still tied together
What is a corperation
Separate entity from the owners
Established by the process of incorperation
Board of directors
What is joint liability
Each individual is fully liable for the business
What is several liability
Each individual is liable for their share of ownership
What is a buy-sell agreement
Details the sale and purchase of the business interest of the selling partner
What is an LLP
Limited Liability Partnership
limited partners contribute funds but do not participate in management
General partners still assume liability
What does a board of directors do?
Oversee and advise management on behalf of the organizations shareholders
Which structure provides the most protection?
Corperation, shareholders have limited liability
Difference between a private and a public corperation?
Ownership is either private, or public (traded)
How is stock issued in a corperation?
IPO - initial public offering
APO - additional public offering / secondary offering
What is capital structure
Organizations use of debt, internal cash reserves, and external equity based investments, in support of operational activities
What are the 3 main sources of funds?
Operations
Credit Facilities
Equity Financing
What are retained earnings?
Net earnings accumulated over organizations history that is has chosen to hold within
What are credit facilities?
Debt taken on to support business activites, comes with legal responsibility to pay, regardless of financial position
Examples of short-term credit facilities
Accounts Payable
Accounts Recievable
Line of Credit
What is collateral?
Capital or monetary assets used to secure a credit facility
Examples of long-term credit facilities
Bonds
Mortgages
Lease
Equity options
Private Equity
Public Equity
Sources of private equity
owners personal resources
angel investors
private equity firms
venture capitalists
What does equity represent?
An ownership stake in the business
What is public equity
Stocks issues through IPO or APO
