Ch. 3 Business Organizations

Question 1

Sole Proprietorship

Answer 1

business owned and run by one person

Question 2

Unlimited liability

Answer 2

owner is personally and fully responsible for all losses and debts of the business, disadvantage of sole proprietorship

Question 3

Inventory

Answer 3

a stock of finished goods and parts in reserve to satisfy customers or to keep production flowing smoothly

Question 4

Limited Life

Answer 4

the firm legally ceases to exist when the owner dies, quits or sells the business… disadvantage of sole proprietorship

Question 5

Partnership

Answer 5

business jointly owned by two or more persons

Question 6

General Partnership

Answer 6

all partners are responsible for the management and financial obligations of the business

Question 7

Limited Partnership

Answer 7

at least one partner is not active during the daily running of the business although he or she may have contributed funds to finance an operation

Question 8

Corporation

Answer 8

form of business organization recognized by law as a separate legal entity having all the rights of an individual

Question 9

Charter

Answer 9

government document that grants permission to create a corporation

Question 10

Stock

Answer 10

owner certificates in the firm

Question 11

Stockholders/ Shareholders

Answer 11

the shares (or stock) that are sold to the investors are called stockholders/ shareholders

Question 12

Dividend

Answer 12

check representing a portion of corporate earnings to each stockholder

Question 13

Common Stock

Answer 13

basic ownership of a stock, no prior claim on dividends, variable dividend payment, voting privileges

Question 14

Preferred Stock

Answer 14

prior claim on dividends, fixed dividends payment, no voting privileges

Question 15

Bond

Answer 15

a written promise to repay the amount borrowed at a later date

Question 16

Principal

Answer 16

the amount that is borrowed

Question 17

Interest

Answer 17

the price paid for the use of another’s money

Question 18

Double Taxation

Answer 18

Stockholder’s dividends are taxed twice– once as a corporate profit and again as personal income, disadvantage of corporation

Question 19

Income Statement

Answer 19

a report showing a business’s sales, expenses, and profits for a certain period to illustrate the process

Question 20

Net Income

Answer 20

measure of business profits determined by subtracting all expenses, including taxes from revenues

Question 21

Depreciation

Answer 21

a non cash charge the firm takes for the general wear and tear on its capital goods

Question 22

Cash Flow

Answer 22

total amount of new funds the business generates from operations

Question 23

Horizontal Merger

Answer 23

when two or more firms produce the same kind of product join forces

Question 24

Vertical Merger

Answer 24

firms involved in different steps of manufacturing or marketing join together

Question 25

Conglomerate

Answer 25

firm that has at least 4 businesses each making unrelated products, none of which are responsible for majority of its sales

Question 26

Multinational

Answer 26

corporation that has manufacturing or service operations in a number of different countries

Question 27

Non Profit Organizations

Answer 27

operates in a business like way to promote the collective interests of its members rather than to seek financial gain for its owner

Question 28

Cooperative/ Co-op

Answer 28

voluntary association of people formed to carry on some kind of activity that will benefit its members

Question 29

Credit Union

Answer 29

financial organization that accepts deposits from, and makes loans to, employees of a particular company or government agency

Question 30

Labor Union

Answer 30

organization of workers formed to represent its members’ interested in various employment matters

Question 31

Collective Bargaining

Answer 31

negotiating with management with management over issues such as pay, working hours, health care coverage, life insurance, vacations and other job related matters

Question 32

Professional Association

Answer 32

group of people in a specialized occupation that works to improve the working conditions, skill levels and public perceptions of the public

Question 33

Chamber of Commerce

Answer 33

promotes the welfare of its members and of the community

Question 34

Better Business Bureau

Answer 34

non profit organization sponsored by local businesses to provide general information on companies

Question 35

Public Utilities

Answer 35

investor or municipal owned companies that offer important products to the public such as water or electric service

Question 36

Revenue

Answer 36

income a firm receives from the sale of good or service to its costumers