1. Business Growth and Expansion

2. FYI
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.

3. I. Growth Through Reinvestment
A. Business revenue can be used to invest in factories, machinery, or new technologies.

4. B. Before reinvesting, a business must estimate its cash flow
B. 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.

5. C. Depreciation is added back to net income to get cash flow, or the bottom line—the real measure of business profit.

6. Question
What do you predict may happen when a business has little or no cash flow?
without additional machinery and newer technologies, the business will eventually lose business to its competitors.

7. II. Growth Through Mergers
When firms merge, one gives up its separate legal identity.

8. Reasons for merging grow faster become more efficient
Acquire or deliver a better product
eliminate a rival
or change its image

9. 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.

10. A conglomerate is composed of four or more businesses, each making unrelated
products, none of which is responsible for a majority of its sales.

11. A multinational is a corporation with manufacturing and service operations in several countries, which are subjected to each nation’s business regulations.