Chapter 3

Question 1

small business administration (SBA)

Answer 1

government agency charged with assisting small businesses

Question 2

small business

Answer 2

independently owned business that has relatively little influence in its market

Question 3

entrepreneur

Answer 3

businessperson who accepts bothe the risks and the opportunities involved in creating and operating a new business venture

Question 4

entrepreneurship

Answer 4

process of seeking business opportunities under conditions of risk

Question 5

business plan

Answer 5

document in which an entrepreneur summarized his or her business strategy for a proposed new venture and how that strategy will be implemented

Question 6

franchisee

Answer 6

arrangement in which a buyer (franchisee) purchases the right to sell the good or service of the seller (franchiser)

Question 7

venture capital company

Answer 7

group of small investors who invest money in companies with rapid growth potential

Question 8

small-business investment company (SBIC)

Answer 8

government-regulated investment company that borrows money from the SBA to invest in or lend to a small business

Question 9

small business development center (SBDC)

Answer 9

SBA program designed to consolidate informaiton from various disciplines and make it available to small businesses

Question 10

sole proprietorship

Answer 10

business owned and usually operated by one person who is responsible for all of its debts

Question 11

unlimited liability

Answer 11

legal principle that holds owneers responsible for paying off all debts of a business

Question 12

general partnership

Answer 12

business with two or more owners who share in both the operation of the firm and the financial responsiblity for its debts

Question 13

limited partnership

Answer 13

type of partnership consisting of limited partners and a general (or active) partner

Question 14

general (or active) partner

Answer 14

partner who actively manages a firm and who has unliimited iabilty for its debts

Question 15

master limited partnership

Answer 15

form of ownership that sells shares to investors who receive profits and that pays taxes in income from profits

Question 16

cooperative

Answer 16

form of ownership in which a group of sole proprietorships and/or partnerships agree to work together for common benefits

Question 17

corporation

Answer 17

business that is legally considered an entity separate from its owners and is liable for its own debts; owners’ liabilities extended to the limits of their investments

Question 18

limited liability

Answer 18

legal principle holding investors liable for a firm’s debts only to the limits of their personal investments in it

Question 19

tender offer

Answer 19

offer to buy shares made by a prospective buyer directly to a target corporation’s shareholders, who then make individual decisions about whether to sell

Question 20

double taxation

Answer 20

situation in which taxes may be payable both by a corporation on its profits and by shareholders on dividend incomes

Question 21

closely held (or private) corporation

Answer 21

corporation whose stock is held by only a few people and is not available for sale to the general public

Question 22

publicly held (or public) corporation

Answer 22

corporation whose stock is widely held and available for sale to the general public

Question 23

s corporation

Answer 23

hybrid of a closely held corporation and a partnership, organized and operated like a corporation but treated as a partnership for tax purposes

Question 24

limited liability corporation (LLC)

Answer 24

hybrid of a publicly held corporation and a partnership in which owners are taxed as partners but enjoy the benefits of limited liablity

Question 25

professional corporation

Answer 25

form of ownership allowing professionals to take advantage of corporate benefits while granting them limited business liability and unlimited professional liability

Question 26

miltinational (or transnational) coporation

Answer 26

form of coporation spanning national boundries

Question 27

corporate governance

Answer 27

roles of shareholders, directors, and other managers in corporate decision making and accountability

Question 28

stockholder (or shareholder)

Answer 28

owner of shares of stock in a corporation

Question 29

board of directors

Answer 29

governing body of a corporation that reports to its shareholders and delegates power to run its day-to-day operations while remaining responsible for sustaining its assets

Question 30

officers

Answer 30

top management team of a corporation

Question 31

cheif executive officer (CEO)

Answer 31

top manager who is responsible for the overall performance of a corporation

Question 32

strategic alliance

Answer 32

strategy in which two or more organizations collaborate on a project for mutual gain

Question 33

joint venture

Answer 33

strategic alliance in which the collaboration involves joint ownership of the new venture

Question 34

merger

Answer 34

union of two corporations to form a new corporation

Question 35

acquisition

Answer 35

purchase of one company by another

Question 36

divestiture

Answer 36

strategy whereby a firm sells one or more of its business units

Question 37

spin-off

Answer 37

strategy of setting up one or more coporate units as new, independent corporations