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Presentation on theme: "Copyright Information Presentation Plus! Economics: Principles and Practices Copyright © by The McGraw-Hill Companies, Inc. Developed by FSCreations,"— Presentation transcript:

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2 Copyright Information Presentation Plus! Economics: Principles and Practices Copyright © by The McGraw-Hill Companies, Inc. Developed by FSCreations, Inc., Cincinnati, Ohio Send all inquiries to: GLENCOE DIVISION Glencoe/McGraw-Hill 8787 Orion Place Columbus, Ohio 43240

3 Splash Screen Chapter 3 Business Organizations

4 3 Contents CHAPTER INTRODUCTION SECTION 1Forms of Business Organization SECTION 2Business Growth and Expansion SECTION 3Other Organizations CHAPTER SUMMARY CHAPTER ASSESSMENT Click a hyperlink to go to the corresponding section. Press the ESC key at any time to exit the presentation.

5 4 Chapter Introduction 1 Economics and You Do you work at a business? Belong to a church? Participate in a club? Chances are these institutions play a significant role in your life. Click the Speaker button to listen to Economics and You.

6 5 Chapter Introduction 2 Chapter Objectives Describe the characteristics of the sole proprietorship.  Understand the advantages and disadvantages of the partnership.  Describe the structure and features of the corporation. Section 1: Forms of Business Organization Click the mouse button or press the Space Bar to display the information.

7 6 Chapter Introduction 3 Chapter Objectives Explain how businesses can reinvest their profits to grow and expand.  Recognize the reasons that cause firms to merge.  Identify two different types of mergers. Section 2: Business Growth and Expansion Click the mouse button or press the Space Bar to display the information.

8 7 Chapter Introduction 4 Chapter Objectives Section 3: Other Organizations Click the mouse button or press the Space Bar to display the information. Describe nonprofit organizations.  Explain the direct and indirect role of government in our economy.

9 End of Chapter Introduction Click the mouse button to return to the Contents slide.

10 9 Section 1-1 Study Guide Main Idea Businesses may be organized as individual proprietorships, partnerships, or corporations.  Reading Strategy Graphic Organizer As you read about business organizations, complete a graphic organizer similar to the one on page 57 of your textbook to explain how the three types of business organizations differ from one another. Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook.

11 10 Key Terms –proprietorship  –unlimited liability  –inventory  –limited life  –partnership  –limited partnership  –bankruptcy  –corporation  –charter  –sole proprietorship  Section 1-2 Study Guide (cont.) Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook. –stock  –stockholder  –shareholder  –dividend  –bond  –principal  –interest  –double taxation

12 11 Section 1-3 Objectives After studying this section, you will be able to:  Applying Economic Concepts Unlimited Liability How is personal liability affected by the type of business owned? Study Guide (cont.) –Describe the characteristics of the sole proprietorship.  –Understand the advantages and disadvantages of the partnership.  –Describe the structure and features of the corporation.  Click the Speaker button to listen to the Cover Story. Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 57 of your textbook.

13 12 Section 1-4 Click the mouse button or press the Space Bar to display the information. Introduction There are three main forms of business organizations in the economy today–the sole proprietorship, the partnership, and the corporation.  Each offers its owners significant advantages and disadvantages.

14 13 Section 1-4 Click the mouse button or press the Space Bar to display the information. Did You Know? In 1997 Dun & Bradstreet reported that corporation start-ups increased by 2 percent to reach a new high of 798,917. New corporations in Florida and New York represented 25 percent of that total.

15 14 Section 1-5 Click the mouse button or press the Space Bar to display the information. Sole Proprietorships A sole proprietorship is a business run by one person. It is the smallest type of business organization in size, yet the most numerous and profitable.

16 15 Section 1-6 Sole Proprietorships (cont.) The advantages to sole proprietorships are: ease of start-up; ease of management; owner gets all the profits; business itself pays no income taxes; taxes only on the owner’s personal income; psychological satisfaction of owning one’s business; ease of closing the business.

17 16 Section 1-6 Sole Proprietorships (cont.) The disadvantages to sole proprietorships are: the owner has unlimited liability; it is hard to raise financial capital; owner may not be able to hire enough personnel or stock enough inventory to operate efficiently; owner may have limited managerial experience; hard to attract qualified employees; business has limited life and legally stops existing when the owner dies or sell the business.

18 17 Section 1-Assessment 1 Discussion Question Why do you think so many business owners are sole proprietors despite the fact that they hold unlimited liability? Answers will vary. Students should support their opinions with a rationale. Click the mouse button or press the Space Bar to display the answer.

19 18 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships A partnership is a business jointly owned by two or more persons. It is the least and has the second smallest proportion of sales and net income.  General partnerships are a type of business in which all partners are involved in the management and finances. In a limited partnership, at least one partner is not involved in management. This partner may have helped to finance the business.

20 19 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships (cont.) Articles of the partnership document spell out how the partners divide up the profits or losses.  The advantages of partnerships are: the ease of start-up; ease of management; no special taxes on a partnership; easier to raise capital through bank loans or new partner; larger size aids efficient operations; easier to attract skilled employees.

21 20 Section 1-10 Click the mouse button or press the Space Bar to display the information. Partnerships (cont.) The disadvantages of partnerships are: partners are responsible for the acts of each and every partner, except in a limited partnership where the limits are spelled out; limited life of partnerships ends if a partner leaves; potential for partner conflicts.

22 21 Section 1-Assessment 1 Discussion Question Which type of partnership would you favor—general or limited? Answers will vary. Students should support their positions with a rationale. Click the mouse button or press the Space Bar to display the answer.

23 22 Section 1-15 Click the mouse button or press the Space Bar to display the information. Corporations Corporations receive a charter, or government permission to create a corporation, which includes details about stock ownership.  A corporation is a business organization recognized by law as a separate legal entity with all the rights of an individual.  Investors who buy common or preferred stock in a corporation become owners of the firm.

24 23 Section 1-15 Click the mouse button or press the Space Bar to display the information. Corporations (cont.) The disadvantages of corporations are; a charter is expensive; ownership and management are separated so shareholders have little say in running the business; corporate income is taxed twice; subject to government regulation. The advantages of corporations are: ease of raising capital; professionals may run the firm instead of the owners (shareholders); owners have limited liability; business’s life is unlimited; easy to transfer ownership. 

25 24 Section 1-17 Click the mouse button or press the Space Bar to display the information. Corporations (cont.)

26 25 Section 1-19 Corporations (cont.)

27 26 Section 1-Assessment 1 Discussion Question Who are really the owners of a corporation? Stockholders Click the mouse button or press the Space Bar to display the answer.

28 27 Section 1-23 Click the mouse button or press the Space Bar to display the information. Government and Business Regulation Federal and state governments regulate interest rates and utility rates.  State governments may offer industrial development bonds to help industries relocate or tax credits to draw investments. 

29 28 Section 1-Assessment 1 Discussion Question What are some recent examples of business development incentives in your state or community? Answers will vary. Students should describe what the proposed benefit offers. Click the mouse button or press the Space Bar to display the answer.

30 29 Section 1-Assessment 1 Section Assessment Main Idea Using your notes from the graphic organizer activity on page 57, explain why partnerships are able to attract more capital than sole proprietorships. partnerships are bigger, better established, have a better chance of getting a bank loan; new partners bring financial capital Click the mouse button or press the Space Bar to display the answer.

31 30 Section 1-Assessment 2 Section Assessment (cont.) Identify the characteristics and organization of the sole proprietorship. owned by one individual; all decisions made by owner; owner receives all profits, responsible for debts, losses; limited life Click the mouse button or press the Space Bar to display the answer.

32 31 Section 1-Assessment 3 Section Assessment (cont.) Discuss the advantages and disadvantages of the partnership. advantages: ease of establishment and management, no special taxes, can attract financing and top talent, more efficient; disadvantages: all partners equally responsible for business losses (except in limited partnerships), limited life, potential conflict among partners Click the mouse button or press the Space Bar to display the answer.

33 32 Section 1-Assessment 4 Section Assessment (cont.) Discuss the structure and features of the corporation. It is a separate legal entity with all the rights of the individual. It possesses a charter and shares of stock that are sold to investors. Investors purchase common stock or preferred stock. Click the mouse button or press the Space Bar to display the answer.

34 33 Section 1-Assessment 6 Section Assessment (cont.) Drawing Conclusions When a corporation wants to introduce a potentially profitable but risky product, it frequently sets up a separate company that has its own corporate structure. Why do you think the corporation does this? limited liability–the first corporation limits its exposure by setting up a separate corporation Click the mouse button or press the Space Bar to display the answer.

35 34 Section 1-Assessment 7 Discuss which business form you think is the most important for the American economy. Section Close

36 End of Section 1 Click the mouse button to return to the Contents slide.

37 36 Section 2-1 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 68 of your textbook. Study Guide Main Idea Businesses grow through merging with other companies and by investing in the machinery, tools, and equipment used to produce goods and services.  Reading Strategy Graphic Organizer As you read the section, complete a graphic organizer similar to the one on page 68 of your textbook by comparing a vertical merger to a horizontal merger.

38 37 Section 2-2 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 68 of your textbook. Key Terms –income statement  –net income  –depreciation  –cash flow  –horizontal merger  –vertical merger  –conglomerate  –multinational –merger  Study Guide (cont.)

39 38 Section 2-3 Click the Speaker button to listen to the Cover Story. Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 68 of your textbook. Objectives After studying this section, you will be able to:  Applying Economic Concepts Business Growth Businesses can grow by reinvesting their profits in themselves, or they can combine with another business. What influences growth? Study Guide (cont.) –Explain how businesses can reinvest their profits to grow and expand.  –Recognize the reasons that cause firms to merge.  –Identify two different types of mergers. 

40 39 Section 2-4 Click the mouse button or press the Space Bar to display the information. Introduction A business can grow in one of two ways.  First it can grow by reinvesting some of its profits.  A business can also expand by engaging in a merger–a combination of two or more businesses to form a single firm.

41 40 Section 2-4 Click the mouse button or press the Space Bar to display the information. Did You Know? The federal government’s Bureau of Economic Analysis reported that, in contrast to the American public’s suspicions, U.S.-based multinational companies do not establish most of their manufacturing affiliates in low-wage countries. In 1996, 87 percent of U.S. multinational affiliates’ employment was reported in relatively high-wage countries, primarily in Europe.

42 41 Section 2-5 Click the mouse button or press the Space Bar to display the information. Growth Through Reinvestment Business revenue can be used to invest in factories, machinery, or new technologies.  Before reinvesting, a business must estimate its cash flow. The business first records its total sales and then subtracts all expenses, taxes, and depreciation. The result is the business’s net income.

43 42 Section 2-5 Click the mouse button or press the Space Bar to display the information. Growth Through Reinvestment (cont.) Depreciation is added back to net income to get cash flow, or the bottom line—the real measure of business profit.  Business owners then decide whether part of the cash flow should be reinvested in the business to generate additional sales and more profits.

44 43 Section 2-6 Click the mouse button or press the Space Bar to display the information. Growth Through Reinvestment (cont.)

45 44 Section 2-Assessment 1 Discussion Question What do you predict may happen when a business has little or no cash flow? Answers will vary. Students should indicate that without additional machinery and newer technologies, the business will eventually lose business to its competitors. Click the mouse button or press the Space Bar to display the answer.

46 45 Section 2-9 Click the mouse button or press the Space Bar to display the information. Growth Through Mergers When firms merge, one gives up its separate legal identity.  A company may merge with another to grow faster; become more efficient; acquire or deliver a better product; eliminate a rival; or change its image.  A horizontal merger is the joining of firms that make the same product. A vertical merger is the joining of firms involved in different stages of manufacturing or marketing.

47 46 Section 2-9 Click the mouse button or press the Space Bar to display the information. Growth Through Mergers (cont.) A conglomerate is composed of four or more businesses, each making unrelated products, none of which is responsible for a majority of its sales. Figure 3.6 Conglomerate Structure

48 47 Section 2-9 Click the mouse button or press the Space Bar to display the information. Growth Through Mergers (cont.) A multinational is a corporation with manufacturing and service operations in several countries, which are subjected to each nation’s business regulations. Figure 3.6 Conglomerate Structure

49 48 Section 2-Assessment 1 Discussion Question Why have some multinational companies been criticized? Answers may include: paying low wages to workers, exporting scarce natural resources, driving out local businesses. Discuss with students that economists believe the advantages of multinationals outweigh the disadvantages. Click the mouse button or press the Space Bar to display the answer.

50 49 Section 2-Assessment 1 Section Assessment Main Idea Using your notes from the graphic organizer activity on page 68, explain how mergers improve efficiency. Mergers can diminish cost and increase buying power. Click the mouse button or press the Space Bar to display the answer.

51 50 Section 2-Assessment 2 Section Assessment (cont.) Describe how a firm can generate funds internally to grow and expand. A firm can reinvest revenue from sales into the company in the form of new plants, equipment, and technologies. Click the mouse button or press the Space Bar to display the answer.

52 51 Section 2-Assessment 3 Section Assessment (cont.) Identify five reasons why firms merge. grow faster, increase efficiency, acquire new product lines, eliminate rivals, or change corporate image Click the mouse button or press the Space Bar to display the answer.

53 52 Section 2-Assessment 4 Section Assessment (cont.) Describe the different ways a business can merge. horizontal: two or more firms that produce the same product merge; vertical: firms in different steps of manufacturing or marketing merge Click the mouse button or press the Space Bar to display the answer.

54 53 Section 2-Assessment 6 Section Assessment (cont.) Making Comparisons What are the benefits and drawbacks of multinationals to their host countries? benefits: help spread new technology, generate new jobs, produce tax revenues for host countries; drawbacks: may exploit workers, export scarce natural resources, or adversely interfere with local business Click the mouse button or press the Space Bar to display the answer.

55 54 Section 2-Assessment 7 Discuss the statement “The world is shrinking,” in relation to the role that multinationals play in the global economy. Section Close

56 End of Section 2 Click the mouse button to return to the Contents slide.

57 56 Section 3-1 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 75 of your textbook. Study Guide Main Idea Producer and worker cooperatives are associations in which the members join in production and marketing to lower costs for their members’ benefit.  Reading Strategy Graphic Organizer As you read the section, complete a graphic organizer similar to the one on page 75 of your textbook by describing the different kinds of cooperatives.

58 57 Section 3-2 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 75 of your textbook. Key Terms –cooperative  –co-op  –credit union  –labor union  –collective bargaining  –professional association  –chamber of commerce  –Better Business Bureau  –public utility –nonprofit organization  Study Guide (cont.)

59 58 Section 3-3 Click the Speaker button to listen to the Cover Story. Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 75 of your textbook. Objectives After studying this section, you will be able to:  Applying Economic Concepts Nonprofit Organizations How do churches, clubs, or civic organizations fit into our economic system? Study Guide (cont.) –Describe nonprofit organizations.  –Explain the direct and indirect role of government in our economy. 

60 59 Section 3-4 Click the mouse button or press the Space Bar to display the information. Introduction Most businesses use scarce resources to produce goods and services in hopes of earning a profit for their owners.  Other organizations operate on a “not-for- profit” basis.  A nonprofit organization operates in a businesslike way to promote the collective interests of its members rather than to seek financial gain for its owners.

61 60 Section 3-4 Click the mouse button or press the Space Bar to display the information. Did You Know? The National Center for Charitable Statistics reported that nearly 1.5 million organizations had registered with the federal government in 1997 as tax-exempt, private nonprofit organizations. Because some organizations do not need to register with the Internal Revenue Service, this number does not include all types of nonprofit organizations described in Section 3. 

62 61 Section 3-5 Click the mouse button or press the Space Bar to display the information. Community and Civic Organizations A nonprofit organizations is in business to promote its members’ collective interests, not to seek financial gain.  Many nonprofit organizations incorporate to take advantage of a corporation’s unlimited life and limited liability  If the nonprofit organization has money after its expenses are paid, its board of directors may apply the surplus to other projects that further the organization’s mission.

63 62 Section 3-Assessment 1 Discussion Question How might a hospital’s board of directors decide to spend a year’s surplus? Answers will vary. Students should support their examples with how the product or service benefits a hospital’s mission of helping the sick. Click the mouse button or press the Space Bar to display the answer.

64 63 Section 3-6 Click the mouse button or press the Space Bar to display the information. Cooperatives A cooperative is voluntary association of people who carry on an economic activity that benefits its members.

65 64 Section 3-6 Click the mouse button or press the Space Bar to display the information. Cooperatives Consumer cooperatives buy food and other necessities in bulk. Members donate time to the co-op, and members pay lower prices for goods.  Service cooperatives, such as credit unions, offer services to its members at lower rates.  Producer cooperatives help members, such as farmers, promote or sell their products.

66 65 Section 3-Assessment 1 Discussion Question Why might a credit union member qualify for a car loan from the credit union in a shorter time than for a car loan from a dealer or a bank? The loan approval officer likely knows the member much better than the dealer or the banker does. Click the mouse button or press the Space Bar to display the answer.

67 66 Section 3-10 Click the mouse button or press the Space Bar to display the information. Labor, Professional, and Business Organizations Labor unions represent workers’ interest and negotiate with management through collective bargaining..  Professional associations set standards for those in the profession and influence government policies on issues concerning members’ interest.  Business associations are industries or trade associations that represent specific kinds of businesses. Some business associations, such as the Better Business Bureau, help protect the consumer.

68 67 Section 3-Assessment 1 Discussion Question The National Council for the Social Studies is a professional association for social studies teachers. What might it offer its members? Answers will vary, but students may indicate publications with social studies lesson plans, standards for social studies courses, and conferences for teachers. Click the mouse button or press the Space Bar to display the answer.

69 68 Section 3-15 Click the mouse button or press the Space Bar to display the information. Government Government plays a direct role in the economy when its agencies produce and distribute goods and services to consumers such as the Tennessee Valley Authority (electricity), and the U.S. Postal Service (stamps and mail delivery).  Government corporations have boards of directors, but Congress’s money rather than investor’s money supports their work.  Government plays an indirect role when it regulates public utilities or when it grants money to people in the form of Social Security and student financial aid.

70 69 Section 3-Assessment 1 Discussion Question National and local security come under the jurisdiction of the federal and local governments. How do national defense and local police protection directly and indirectly impact the economy? The labor and goods purchased to run a police department or support the military have a direct influence on the economy. Indirect influences include the expectation among citizens that their wealth and belonging will be protected. Click the mouse button or press the Space Bar to display the answer.

71 70 Section 3-Assessment 1 Section Assessment Main Idea Using your notes from the graphic organizer on page 75, describe the different types of cooperatives. consumer: buy goods in bulk/offer members reduced prices; service: provide service instead of goods; producer: help members promote/sell products Click the mouse button or press the Space Bar to display the answer.

72 71 Section 3-Assessment 2 Section Assessment (cont.) Click the mouse button or press the Space Bar to display the answer. Identify the purpose of the different types of nonprofit organizations. community/civic organizations: provide goods and services and promote a common good; cooperatives: carry on activities that benefit members; labor, professional, and business organizations: promote interests of members; government: regulate economy

73 72 Section 3-Assessment 3 Section Assessment (cont.) Click the mouse button or press the Space Bar to display the answer. Provide examples that illustrate the government’s direct and indirect roles as an economic institution. direct: police and fire protection, schools, court systems; indirect: regulation of public utilities and quasi- monopolies, subsidies

74 73 Section 3-Assessment 5 Section Assessment (cont.) Click the mouse button or press the Space Bar to display the answer. Classifying Information Make a list of 10 activities performed by your local government. Classify each as to its direct or indirect influences on the local economy. Lists should demonstrate an understanding of the economic roles of government.

75 74 Section 3-Assessment 6 Section Assessment (cont.) Click the mouse button or press the Space Bar to display the answer. Making Comparisons Why do many people prefer to deal with credit unions rather than banks? They can borrow at better rates.

76 75 Section 3-Assessment 7 Discuss which of the institutions examined in this section has the most impact on your life and why. Section Close

77 End of Section 3 Click the mouse button to return to the Contents slide.

78 77 Chapter Summary 1 Section 1: Forms of Business Organization Click the mouse button or press the Space Bar to display the information. Sole proprietorships are small, easy-to-manage enterprises owned by one person. They are relatively numerous and profitable. Disadvantages include raising financial capital and attracting qualified employees.  Partnerships are owned by two or more persons. Their slightly larger size makes it easier to attract financial capital and qualified workers. Disadvantages include the unlimited liability of each general partner for the acts of the other partners, the limited life of the partnership, and the potential for conflict among partners.

79 78 Chapter Summary 2 Click the mouse button or press the Space Bar to display the information. Section 1: Forms of Business Organization (cont.) Corporations are owned by shareholders who vote to elect the board of directors. Shareholders have limited liability and are not liable for the actions or debts of the corporation. The relatively large size of the corporation allows for specialized functions and large- scale manufacturing within the firm.  Disadvantages of corporations include the cost of obtaining charters, limited shareholder influence over corporate policies, and having to deal with some government regulations.  The corporation is recognized as a separate legal entity and so must pay a separate corporate income tax not paid by proprietorships and partnerships.

80 79 Chapter Summary 3 Click the mouse button or press the Space Bar to display the information. Section 2: Business Growth and Expansion Businesses can grow by reinvesting their cash flows in plant, equipment, and new technology.  Businesses can also expand through mergers. Most mergers take place because firms want to become bigger, more efficient, acquire a new product, catch up to or eliminate a competitor, or change its corporate identity.  A horizontal merger takes place when two firms that produce similar products come together. A vertical merger is one that involves two or more firms at different stages of manufacturing or marketing.

81 80 Chapter Summary 4 Click the mouse button or press the Space Bar to display the information. Section 2: Business Growth and Expansion (cont.) A conglomerate is a large firm that has at least four different businesses, none of which is responsible for a majority of sales.  A multinational can be an ordinary corporation or a conglomerate, but it has manufacturing or service operations in several different countries. Multinationals introduce new technology, generate jobs, and produce tax revenues for the host countries.

82 81 Chapter Summary 5 Click the mouse button or press the Space Bar to display the information. Section 3: Other Organizations Nonprofit organizations function like a business, but on a not-for-profit basis to further a cause or for the welfare of their members.  The cooperative, or co-op, is one of the major nonprofit organizations. The co-op can be organized to provide goods and services, or to help producers.  Professional associations work to improve the working conditions, skill levels, and public perceptions of their profession.  Businesses often form a chamber of commerce or a Better Business Bureau to promote their collective interests.

83 82 Chapter Summary 6 Section 3: Other Organizations (cont.) Government plays a direct role in the economy when it provides goods and services directly to consumers; it plays an indirect role when it provides Social Security, veterans’ benefits, unemployment compensation, and financial aid to college students, or when it regulates businesses.

84 End of Chapter Summary Click the mouse button to return to the Contents slide.

85 84 bond _______________________________________ stock _______________________________________ cooperative __________________________________ dividend _____________________________________ unlimited liability_______________________________ charter ______________________________________ labor union ___________________________________ professional association _________________________ limited partner _________________________________ credit union ___________________________________ Click the mouse button or press the Space Bar to display the answer. The Chapter Assessment is on pages 82–83. Chapter Assessment 1 Identifying Key Terms Classify each term below into the following categories: Sole ProprietorshipsCorporations PartnershipsNonprofit Organizations corporations nonprofit organization corporations sole proprietorships; partnerships corporations; nonprofit organizations nonprofit organizations partnerships nonprofit organizations

86 85 Chapter Assessment 2 Click the mouse button or press the Space Bar to display the answer. Explain the strengths of a sole proprietorship. ease of establishment, ease of management, owner keeps all profits, no separate taxes, psychological benefits, ease of getting out of business Reviewing the Facts

87 86 Chapter Assessment 3 Click the mouse button or press the Space Bar to display the answer. Identify the weaknesses of a partnership. all partners equally responsible for business losses (except limited partnerships), limited life, potential conflict among partners Reviewing the Facts (cont.)

88 87 Chapter Assessment 4 Click the mouse button or press the Space Bar to display the answer. Reviewing the Facts (cont.) Explain the structure and strengths of a corporation. structure: A board of directors, elected by owners of common stock, sets broad policies and goals. The board hires a professional management team to run the business on a daily basis. Strengths: ease of raising financial capital, ability to hire best managers, limited liability for owners, unlimited life, and ease of transfer of ownership

89 88 Chapter Assessment 5 Click the mouse button or press the Space Bar to display the answer. Reviewing the Facts (cont.) Explain how the firm obtains, and then disposes of, its cash flow. Cash flow is obtained by adding net income to non-cash charges. A firm may pay this sum back to the owners or reinvest in itself.

90 89 Chapter Assessment 6 Click the mouse button or press the Space Bar to display the answer. Reviewing the Facts (cont.) Describe the difference between a horizontal and a vertical merger. horizontal merger: two or more firms that produce the same product join forces; vertical merger: firms in different steps of manufacturing or marketing come together

91 90 Chapter Assessment 7 Click the mouse button or press the Space Bar to display the answer. Reviewing the Facts (cont.) Explain why a corporation might choose to become a conglomerate. Its overall sales and profits will be protected from isolated economic happenings.

92 91 Chapter Assessment 8 Click the mouse button or press the Space Bar to display the answer. Describe the difference between a nonprofit institution and other forms of business organizations. Nonprofits do not seek financial gain. Reviewing the Facts (cont.)

93 92 Chapter Assessment 9 Click the mouse button or press the Space Bar to display the answer. List three examples of cooperative associations. consumer: a food co-op; service: a credit union; producer: a farmers’ co-op Reviewing the Facts (cont.)

94 93 Chapter Assessment 10 Click the mouse button or press the Space Bar to display the answer. Reviewing the Facts (cont.) Describe the purpose of a labor union. to work for its members’ interests

95 94 Chapter Assessment 11 Click the mouse button or press the Space Bar to display the answer. Identify three types of business or professional organizations. professional (American Bar Association); business to promote members’ interests: (chamber of commerce); business to help consumers (Better Business Bureau) Reviewing the Facts (cont.)

96 95 Chapter Assessment 12 Click the mouse button or press the Space Bar to display the answer. Compare the direct and the indirect roles of government. direct role: producer and consumer of goods and services; indirect role: regulates, makes payments to individuals Reviewing the Facts (cont.)

97 96 Chapter Assessment 13 Click the mouse button or press the Space Bar to display the answer. Making Comparisons If you were planning to open your own business, such as a sportswear store or a lawn service, which form of business organization would you prefer–sole proprietorship, partnership, or corporation? Give reasons for your answer. To help you organize your response, begin by setting up a diagram like the one on page 82 of your textbook. Answers should demonstrate understanding of advantages offered by the form chosen. Thinking Critically

98 97 Chapter Assessment 14 Click the mouse button or press the Space Bar to display the answer. Drawing Conclusions Do you think mergers are beneficial for the U.S. economy? Defend your response. Answers should include reason for response. Thinking Critically (cont.)

99 98 Chapter Assessment 15 Click the mouse button or press the Space Bar to display the answer. Synthesizing Information List the strengths and weaknesses of each type of business organization. Then share the list with the owner of a business in your community. Ask the owner which items on the list were the most influential in deciding how to organize his or her business. Write a report summarizing your findings. Answers should identify strengths and weaknesses of each organization. Thinking Critically (cont.)

100 99 Chapter Assessment 16 Click the mouse button or press the Space Bar to display the answer. Applying Economic Skills Economic Institutions Cite a case in your community where a cooperative would fulfill a definite economic need. Explain why you think so, and then tell what kind of cooperative you would set up. Answers will vary, but should indicate an understanding of the concept.

101 100 Chapter Assessment 17 Click the mouse button or press the Space Bar to display the answer. Applying Economic Skills (cont.) The Role of Government Which do you think is more appropriate–the direct or indirect role of government? Defend your position. Answers should indicate an understanding of the concept.

102 101 Chapter Assessment 18 Click the mouse button or press the Space Bar to display the answer. Applying Economic Skills (cont.) Unlimited Liability What is the difference between the unlimited liability of proprietorships and partnerships, and the limited liability of corporations? unlimited: the owner(s) is/are personally and fully responsible for all losses and debts of the business; limited: the corporation itself, not the owners, is fully responsible for its debts and losses

103 102 Chapter Assessment 19 Click the mouse button or press the Space Bar to display the answer. Applying Economic Skills (cont.) Business Growth What advantages might a multinational bring to a host nation? Multinationals transfer new technology, generate new jobs, and produce tax revenues for the host nation.

104 103 Chapter Assessment 20 Click the mouse button or press the Space Bar to display the answer. Applying Economic Skills (cont.) Nonprofit Organizations In what ways does a consumer cooperative differ from a service cooperative? A consumer co-op offers goods to its members, whereas a service co-op offers services.

105 104 Chapter Assessment 21 Identify at least one similarity and one difference between someone who owns common stock and a citizen of our country. Both have the right to vote for people who direct the entity’s business by setting policies and goals. Differences include how many votes a citizen or stockholder has. A citizen has only one vote while a stockholder may have many votes. Click the mouse button or press the Space Bar to display the answer.

106 End of Chapter Assessment Click the mouse button to return to the Contents slide.

107 Economic Concepts 1

108 Focus Activity 1.1 Continued on next slide.

109 Focus Activity 1.2

110 Focus Activity 2.1 Continued on next slide.

111 Focus Activity 2.2

112 Focus Activity 3.1 Continued on next slide.

113 Focus Activity 3.2

114 Extra Credit Project Visit your local chamber of commerce. Investigate the procedures for establishing various forms of businesses. Share your findings with the class.

115 Economics Online Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the Economics: Principles and Practices Web site. At this site, you will find interactive activities, current events information, and Web sites correlated with the chapters and units in the textbook. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to principles2005/index.php

116 BusinessWeek Online Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the BusinessWeek Web site. At this site, you will find up-to-date information dealing with all aspects of economics. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to

117 Infobyte 1 Business Inventories The Business Inventories report measures the monthly percentage changes in inventories from manufacturers, retailers, and wholesalers. The report is useful in predicting inventories within the gross domestic product (GDP), which can be volatile from quarter to quarter. Business inventories are reported monthly by the Commerce Department. Business inventories data, released in the third week of each month, show the monthly percentage change in inventories from manufacturers, retailers, and wholesalers. Because the majority of the data is old by the time it is released, it is usually not a key report to the markets. One portion of the report that does draw a bit of attention, though, is the inventory-to-sales ratio. This particular component is useful in forecasting, since increasing inventory-to-sales ratios signals a cutback in production.

118 GE 1 Corporations in Japan Annual shareholder meetings in Japan are much different than in the United States. Every corporation in that country holds its annual meeting on the same day. The meetings are usually packed with loyal employees, and some meetings last less than an hour.

119 When You Say Profits, Smile World Markets GE Contents 2 Click on a hyperlink to choose that topic.

120 When You Say Profits, Smile Just as foreigners are striving to learn more about American culture, Americans traveling abroad are wise to learn more about foreign cultures. The following are examples or taboos in other countries: In many parts of the world, it is deeply offensive to offer something or to eat with the left hand In parts of Latin America, it’s considered rude to yawn in public. It’s insulting to tip in China. GE 2.1

121 World Markets In the 1990s, Avon Products found its sales lagging in the United States and Europe. With more women in the labor force, fewer people are at home when the Avon sales representative calls, or are willing to work for Avon as part-time salespeople. In Asia, Eastern Europe, Africa, and Latin America, however, people (typically women) are eager to supplement their incomes as Avon representatives, and their customers are happy to buy what they consider to be chic American products. Since Avon relies on door- to-door sales, it fits in well in developing countries that don’t have good retailing infrastructures. GE 2.2

122 Each year, Fortune magazine provides a list of the top 500 U.S. companies, called the “Fortune 500.” The companies are ranked by sales revenue. In 2002, the top ten companies were: FYI 1 6. Citigroup 7. Chevron Texaco 8. International Business Machines 9. American International Group 10. Verizon Communications 1. Wal-Mart Stores 2. General Motors 3. Exxon Mobil 4. Ford Motor 5. General Electric Source: Fortune Magazine

123 More About … Dell Computers and Online Auctions Internet Business Forms Cybernomics Contents 1 Click on a hyperlink to choose that topic.

124 More About … Dell computers and Online Auctions Michael Dell started Dell Computers from his dorm room at the University of Texas at Austin with a few computers and $1,000. His biggest innovation was eliminating the middleman by selling computers directly to customers. That enabled Dell not only to keep prices down, but also to offer more reliable service and support to customers. Dell’s superior service was very well received by consumers and eventually prodded other computer manufacturers to offer better service. There are now many online auction sites, but eBay has a distinct advantage over all of them–it’s the largest. Sellers are drawn to eBay because it gives them access to the greatest number of potential buyers. Buyers flock there because it also offers the largest selection. Cybernomics 1.1 Continued on next slide.

125 More About … Dell computers and Online Auctions (cont.) One rival, Rbid.com, promoted its new auction site in May 1999 by offering $60,000 in prize money. It didn’t work. On August 13, or example, the auction site had only 16 items listed, and no bidders for any of them. A new site called AuctionRover.com also sprang up in an attempt to diminish eBay’s advantage. This site enabled buyers to check out several auction sites at once by doing the searching for them. By 2001, both Rdid.bom and AuctionRover.com were out of business, leaving eBay as the reigning auction site. Have students research and report on other innovative companies that have benefited from advances in communication. Cybernomics 1.2

126 Internet Business Forms What kind of business organization is best suited to selling books on the Internet? The largest online bookstores, such as Amazon and Barnes & Noble, are corporations. This allows them to acquire large amounts of financial capital so that they can maintain a huge inventory of books, provide reliable service to their customers, and advertise heavily. But some sole proprietorships and partnerships are also succeeding at selling books on the Internet. While it’s difficult for them to offer the selection, low prices, and service of the larger online bookstores, some of them have found a niche selling used, rare, or out-of-print books. Since these bookstores are usually too small to attract many users to their own sites, many of them list their books on Web sites like Bibliofind.com, which puts potential buyers in contact with sellers. Cybernomics 1.3

127 BW Newsclip 1 Continued on next slide. Cosmetic companies like L’Oréal have found a profitable strategy: acquire smaller cosmetic companies and promote the culture from which they came. With this formula, and with the help of chief executive Lindsay Owen-Jones, L’Oréal’s profits have dramatically increased. Read the BusinessWeek Newsclip article on page 74 of your textbook. Learn how L’Oréal’s profits have increased. The Beauty of Global Branding This feature is found on page 74 of your textbook. Click the Speaker button to listen to an audio introduction.

128 The Beauty of Global Branding BW Newsclip 2 Continued on next slide. Analyzing Information How has L’Oréal become more competitive in the global market? by acquiring smaller companies and promoting the cultures from which they came Click the mouse button or press the Space Bar to display the answer. This feature is found on page 74 of your textbook.

129 The Beauty of Global Branding Click the mouse button or press the Space Bar to display the answer. This feature is found on page 74 of your textbook. BW Newsclip 3 Summarizing Information In your own words, explain why it is a challenge for a company to “add brands, yet keep differentiation.” It is usually easier and more efficient to make all company products look the same; in L’Oréal’s case, however, differentiation gives the company a competitive edge.

130 NBR 1.1 Name common types of business organizations.  Describe how stocks and bonds are used in corporate finance.  Identify the characteristics of a franchise.  Explain the relationship between the franchisor and the franchisee. After viewing Business Organizations, you should be able to:  Click the mouse button or press the Space Bar to display the information. Continued on next slide. Economics and You Video 4: Business Organizations

131 NBR 1.2 Side 1 Disc 1 Chapter 4 Click the Videodisc button anytime throughout this section to play the complete video if you have a videodisc player attached to your computer. Click the Forward button to view the discussion questions and other related slides. Continued on next slide. Economics and You Video 4: Business Organizations Click inside the box to play the preview.

132 When a company sells stock, it allows individuals to become part owners. In return, if the company earns a profit, stockholders receive a share of the profits, which is called a dividend. When a company sells bonds, it borrows money from the buyer of the bond for a fixed period of time. In return, the company pays the bond owner a fixed rate of interest until it repays the debt. NBR 1.3 Economics and You Video 4: Business Organizations Side 1 Disc 1 Chapter 4 Click the mouse button or press the Space Bar to display the answer. How do stocks and bonds differ as a means of financing a corporation’s needs?

133 SWS 1 Continued on next slide. Effective note taking involves more than just writing facts in short phrases. It involves breaking up the information into meaningful parts so that it can be understood and remembered. This feature is found on page 80 of your textbook. Taking Notes

134 SWS 2 Continued on next slide. Learning the Skill Taking Notes To take good notes, follow these steps.  –When taking notes on material presented in class, write the key points, along with the important facts and figures, in a notebook.  –Write quickly and neatly, using abbreviations and phrases.  –Copy words, statements, or diagrams drawn on the chalkboard. Click the mouse button or press the Space Bar to display the information. This feature is found on page 80 of your textbook.

135 SWS 3 Continued on next slide. Learning the Skill (cont.) Taking Notes –Ask the teacher to repeat important points you have missed or do not understand.  –When studying textbook material, organize your notes into an outline.  –When outlining written material, first read the material to identify the main ideas. Click the mouse button or press the Space Bar to display the information. This feature is found on page 80 of your textbook.

136 SWS 4 Continued on next slide. Learning the Skill (cont.) Taking Notes –Next, identify the subheads. Place details supporting or explaining subheads under the appropriate head.  Click the mouse button or press the Space Bar to display the information. This feature is found on page 80 of your textbook. –For a research report, take notes on cards.  –Notecards should include the title, author, and the page number of sources.

137 SWS 5 Continued on next slide. Practicing the Skill Taking Notes Suppose you are writing a research report on the topic Business Organizations.  First, identify main idea questions about this topic, such as “What are the different kinds of business organizations?” “How are they formed?” and “What are their advantages and disadvantages?”  Then find material about each main-idea question. Click the mouse button or press the Space Bar to display the information. This feature is found on page 80 of your textbook.

138 SWS 6 Practicing the Skill (cont.) Taking Notes Using this textbook as a source, read the material on “Forms of Business Organization,” beginning on page 57.  Then, review the material and prepare notes like those on page 80 of your textbook. Click the mouse button or press the Space Bar to display the information. This feature is found on page 80 of your textbook.

139 Profiles in Economics 1.1 This feature is found on page 67 of your textbook. Continued on next slide. Click the picture to learn more about Kenneth I. Chenault. Be prepared to answer the questions that appear on the next two slides. Kenneth I. Chenault 1951–

140 Profiles in Economics 1.2 Drawing Conclusions What personal qualities do you think Chenault has that helped make him a success? Answers will vary, but should at least imply that Chenault is intelligent and hard working. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 67 of your textbook. Continued on next slide. Kenneth I. Chenault 1951–

141 Click the mouse button or press the Space Bar to display the answer. This feature is found on page 67 of your textbook. Profiles in Economics 1.3 For Further Research Learn about and report on Chenault’s philanthropic contributions in New York City. Answers will vary. Kenneth I. Chenault 1951–

142 End of Custom Shows WARNING! Do Not Remove This slide is intentionally blank and is set to auto-advance to end custom shows and return to the main presentation.

143 End of Slide Show Click the mouse button to return to the Contents slide.


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