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My Packs: DECA (Finance) > (Unfinished) Chapter 3: Types of Businesses and Types of Financial Institutions > Flashcards

(Unfinished) Chapter 3: Types of Businesses and Types of Financial Institutions Flashcards

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1
Q

Businesses participate in the creation and distribution of _____ and ________ in society

A

Goods
Services

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2
Q

Define:
Goods

A

The tangible, consumable items produced in the economy

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3
Q

Define:
Services

A

The intangible activities performed or provided by others

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4
Q

What is the end goal of the vast majority of businesses?

A

Creating wealth and profit

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5
Q

True or False:
The purpose of wealth-creation in businesses can vary

A

True

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6
Q

What are some purposes of wealth-creation? (3)

A

Many businesses may withdraw the profits as income
Some businesses reinvest them into the company
Some may choose to contribute to social causes (charities etc.)

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7
Q

What are some elements that businesses have in common? (4)

A

Profit and Wealth
Societal Function
Change
Social Role

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8
Q

Why do businesses have a societal function?

A

Most adults are employed, and thus work for businesses and rely on their employers for income

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9
Q

How do businesses have a societal function? (3)

A

Businesses can shape what people can do for entertainment, their choices, and their way of life

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10
Q

True or False:
Businesses drive change through innovation, creating many of the new products and other developments that integrate into our everyday lives

A

True

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11
Q

Define:
Corporate Social Responsibility

A

The responsibility of a business to society and the environment beyond basic laws and regulations

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12
Q

Define:
Sole Proprietorship

A

A business owned and operated by one person

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13
Q

Define:
Unlimited Liability

A

When the owner(s) are entirely responsible for the debts of the company, which can go beyond their ability to pay

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14
Q

Define:
Partnership

A

A business owned and operated by two or more partners

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15
Q

How many main types of partnerships are there?

A

3

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16
Q

What are the 3 main types of partnerships?

A

General Partnership
Limited Partnership
Limited Liability Partnership

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17
Q

Define:
General Partnership

A

A partnership where all partners have unlimited liability for the business

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18
Q

Define:
Limited Partnership

A

A partnership where at least one or more partners is a general partner with unlimited liability and the other partners have limited liability

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19
Q

Define:
Limited Liability

A

Where individuals are limited in the amount of liability they have for the business’s acquired debts

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20
Q

Define:
Limited Liability Partnership

A

A partnership where all partners have limited liability

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21
Q

What professions is limited liability partnership often limited to? (3)

A

Medical professions
Accounting professions

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22
Q

List the advantages of a sole proprietorship (5)

A

Easy to establish and run
Simple to establish
Sole control over all decision-making
Owner keeps all the profits
Income taxed only once

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23
Q

List the advantages of a partnership (4)

A

Easy to establish and run
Risk and rewards are shared
Easier access to capital (banks, partner investment, etc.)
Excellent access to different skill sets

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24
Q

List the disadvantages of a sole proprietorship (4)

A

Owner has unlimited liability
Limited access to funding
Owner may have a limited skillset (E.x.. Have both financial and marketing expertise)
Business lifespan limited to owner’s involvement

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25
List the disadvantages of a partnership (4)
One or more owners may have unlimited liability Potential conflicts in decision-making between partners Partners responsible for poor decisions of other partners Business lifespan limited to owners' involvement
26
A barber starting his own barber shop is an example of a:
Sole proprietorship
27
A group of accountants starting a small firm is an example of a:
Partnership
28
Define: Corporation
A business that is a legal entity separate from its owners, who own shares of the business
29
Define: Shareholders
Individuals who own shares of the corporation, and thus are partial owners of the company
30
Define: Shares
Denotes partial ownership of the corporation, in the form of stock
31
List the advantages of incorporation (6)
Limited Liability Transferable ownership Continuous existence Acting as separate legal entity Fewer barriers to raising capital Tax advantages over sole proprietorships and partnerships
32
How is limited liability an advantage of incorporation?
Shareholders can only lose as much as they invest in the corporation
33
How is transferable ownership an advantage of incorporation?
Shareholders can transfer their ownership by buying and selling stock
34
How is continuous existence an advantage of incorporation?
The business doesn't stop existing once one shareholder gives up their ownership of a certain share
35
How is acting as separate legal entity an advantage of incorporation?
A corporation's assets and debts are separate from a shareholder's assets and debts
36
How is fewer barriers to raising capital and advantage of incorporation?
Corporations have access to large sources of funds, through equity or debt
37
List the disadvantages of incorporation (2)
Greater legal, financial and procedural barriers Tighter regulations on activities and record-keeping (may result in greater costs)
38
What are the important steps to follow in the process of incorporation? (5)
Naming the corporation Completing the articles of incorporation Establishing a public registered office address and a board of directors who meet eligibility requirements Filing required paperwork and paying the incorporation fee Processing the application
39
When naming the corporation, what needs to be made sure?
Making sure the name is available for use
40
Completing the articles of incorporation establishes what?
Corporate structure
41
What are some elements of corporate structure? (3)
Share structure A board of directors Restrictions
42
For a corporation, what is the purpose of a public registered office address?
A place where documents can be served
43
A business can incorporate to be either a ________-______ ___________ or a _________-______ ___________
Publicly-traded corporation Privately-traded corporation
44
Define: Private Corporation
A corporation owned by a select group of people, such as the founders and private investors
45
Define: Public Corporation
A corporation with stock that is sold to and traded openly with the public on the stock market
46
A public corporation has stock that is sold to and traded with the public after an:
Initial public offering (IPO)
47
Define: Initial Public Offering (IPO)
A type of public offering where shares of the corporation first become public, and the corporation becomes a public corporation
48
True or False: Private companies have fewer obligations to the public decision-making
True
49
Do private companies face more or fewer disclosure requirements from the SEC? Why?
Private companies face fewer disclosure requirements Since their stocks are not available publically
50
What is the SEC?
U.S. Securities and Exchange Commission
51
Private companies are limited to _______ sources of funding, which can inhibit ______
Private Growth
52
What do public companies have obligations to? (2)
Greater obligations to their shareholders Regular obligations to disclose financial information to the public
53
Define: Board of Directors
Group of individuals elected by the shareholders in the organization, and make appropriate decisions in line with the shareholder interests
54
Define: Upper Management
The second tier of management including the CEO, the CFO, and the COO
55
True or False: Public companies do not have access to funding from the public
False, public companies have access to larger sources of funding from the public
56
Define: Chairperson
The chair of the board of directors, who plays a leadership role in the board's operations
57
Define: Internal Directors
Members of the board of directors who have experience with the organization and are able to provide insight on, and make decisions about operations
58
Define: Outside Directors
Members of the board of directors who are consulted for an external perspective on the organization's operations, and are not part of the organization's day-to-day operation
59
What does CEO stand for?
Chief Executive Officer
60
What does COO stand for?
Chief Operating Officer
61
What does CFO stand for?
Chief Financial Officer
62
Define: Chief Executive Officer (CEO)
A upper level manager responsible for the entire corporation's operations, and is often also on the board of directors
63
Define: Chief Operating Officer (COO)
The executive vice-president responsible for operations (including marketing, sales, employees, etc.)
64
Define: Chief Financial Officer (CFO)
The executive vice-president responsible for finances
65
The chairperson is elected from the _____ of _________
Board Directors
66
How many key roles are there on the board of directors? What are they?
3 Chairperson Internal directors Outside directors
67
Who do the COO and CFO report to?
CEO
68
Define: Non-profit organization (NPO)
An entity whose primary focus is something other than making a profit
69
What does NPO stand for?
Non-Profit Organization
70
What are the advantages an NPO gets over for-profit organizations? (2)
Potential income tax exemptions Tax rebates on purchases
71
True or False: NPOs can personally benefit members with their income
False, they cannot always issue charitable receipts for donations, and cannot personally benefit members with their income
72
Are NPO staff volunteers or paid employees?
Can be both
73
What are some possible crucial roles within a corporation and other businesses? (4)
Supervisors Office managers Team leaders Employees
74
True or False: NPO employees may receive very competitive salaries
True, some receive lower pay than at for-profit organizations, other such as university CEOs may receive very competitive salaries
75
Define: Section 501(c)(3)
A section of the Internal Revenue Code(IRC) which outlines the tax-exempt status of certain non-profits on income generated from operations directly related to the purpose of the organization
76
______ can receive tax deductions for _________
Donors Donations
77
True or False: Not all non-profits have tax-exempt status, it is granted through an application
True
78
Define: Cooperative
A business owned and operated for the benefits of its members (E.x. a group of farmers who band together to sell their crops
79
Give examples of possible benefits for members of a cooperative (2)
Cut costs Increase influence
80
What are some advantages of cooperatives? (3)
Easy to establish Encourage member participation in business operations and democratic decision-making Increase economic resilience of participating members
81
What are some disadvantages of cooperatives? (2)
Limited or no financial return A lack of incentive to contribute more than necessary
82
Define: Financial Institution
Provides financial services to clients, including investment services, banking services, currency exchange, and acts as a financial intermediary
83
Define: Financial Intermediary
An entity that acts as the middleman between two parties in a financial transaction
84
True or False: The role of financial institutions have become essential in developed economies
True, such as in United States and Canada
85
Define: Financial System
Connects lenders, investors, and borrowers together within the economy, and allows for commercial activity to take place
86
_________ systems operate from the ____ to the ______ level
Financial Firm Global
87
State the Firm level (2)
Revenue Expense schedules
88
State the Regional level (2)
Financial Institutions Financial Markets
89
State the Global level (2)
Central Banks World Banks
90
Define: Financial Markets
Where financial instruments like stocks and bonds are traded

My Packs: DECA (Finance) (12 decks)

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