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Flashcards in Chapter 3- Section 2 Deck (16):
0

A combination of two or more businesses to form a single firm

Merger

1

A report showing a businesses sales, expenses, and profits for certain period to illustrate the process

Income statement

2

What does cash flow represent?

The sum of net income and non-cash changes such as deprecation, the "Bottom Line"; real measure of profit

3

Subtracting all it's expenses including taxes from its revenue

Net income

4

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

Deprecation

5

What can business owners do with cash flow to further help their business?

Decide how it can be allocated and reinvest in new technology and equipment

6

What can happen when cash flow's are reinvested in the business?

They can produce additional products

7

What happens when two firms merge?

One gives up its separate legal identity

8

What are five possible reasons for mergers?

The desire to be bigger, efficiency, need to acquire more product lines to catch up or eliminate their rival, and to lose its corporate identity

9

Takes place when two or more firms that produce the same kind of product join forces (Bank of America and Wells Fargo)

Horizontal merger

10

Firms involved in different steps of manufacturing or marketing join together (tree farm and Lumber mill and truck company)

Vertical merger

11

What is the main reason for conglomerate to want diversification?

Don't want to "put all their eggs in one basket" so overall home sales and profits are protected

12

A firm that has at least four businesses, each making unrelated products none of which is responsible for majority of its sales

Conglomerate

13

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

Multinational

14

What are the advantages of a multinational?

Transfer new technology and generate new jobs, produce tax revenues for host country

15

What are the disadvantages of multinationals?

Low wages, exporting scarce natural resources, demand tax concessions, exploitation of local businesses