Lesson 10-1 Turning Savings Into Investments – Financing business operations and growth in an important part of the free-enterprise system. – People deposit funds into financial institutions, which makes these funds available to businesses. – The movement of these funds creates economic growth and expansion.

Before you Pursue Financing – Cost-benefit analysis- weigh cost against benefits – Estimate costs of expansion – Calculate expected income – Calculate expected profits – Calculate cost of loans – Undertake an activity up to the point at which the additional benefit equals the additional cost.

Why people are willing to finance investment – People who finance investments seek rewards – Interest earned on loan – Dividends from the stock – Personal stake in the company – The same individual is sometimes both the borrower and the lender

Pursuing Investment Financing – Resources go where they generate the highest expected value – Businesses compete for scarce financial resources – There are many methods of financing bonds, stocks, loans, and the Internet.

Lesson 10-2 Three kinds of financing – Short-term financing is when the term of loan is less than one year; used for short-term needs. – Intermediate-term financing is when the term of the loan is 1 to 10 years; used when a company wants to expand through land, buildings, or equipment. – Long-term financing is when the term of loan is longer than 10 years; used for major expansion

Choosing the Right Financing – Interest costs- higher interest rates make companies more likely to take out short-term loans in hopes that interest rates will drop. – Financial condition of company- is company too indebted? – Market climate – Control of the company- sometimes stockholders have to give approval before financing decisions can be made

Lesson 10-3 Steps in Production Operations – Consumer goods are sold directly to individuals as they are – Capital goods are products used to make other goods – Planning step: choosing where to locate the business and how to get the product to consumers (scheduling) – Purchasing step: obtaining raw materials, machines, and supplies – Quality control: checking the quality of your products – Inventory control: taking an inventory of materials used in production

Technology and Methods of Production – Mechanization: combining the labor of people and the power of machines – The assembly line – Division of labor: breaking down of jobs into smaller tasks – Automation: machines do the work while people oversee – Robotics: complicated computer-controlled machinery used to operate assembly lines