2. 1 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.

3. 2 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

4. 3 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.

5. 4 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.

6. 5 Section 1-5 Click the mouse button or press the Space Bar to display the information. Sole Proprietorships The most common form of business organization in the United States is the sole proprietorship or proprietorship – a business owned and run by one person. 

7. 6 Figure 3.1 Corporations, Partnerships, and Sole Proprietorships

8. 7 Section 1-8 Click the mouse button or press the Space Bar to display the information. Advantages The advantages of a sole proprietorship include:  –ease of starting up  –ease of management  –owner enjoys the profits of successful management  –no separate business income taxes  –psychological satisfaction  –ease of getting out of business

9. 8 Section 1-9 Click the mouse button or press the Space Bar to display the information. Disadvantages The disadvantages of a sole proprietorship include:  –owner has unlimited liability –full and personal responsibility for all losses and debts of the business  –difficulty in raising financial capital  –size and efficiency – the business may have to carry a large inventory, or stock of finished goods and parts in reserve  –limited managerial experience  –difficulty of attracting qualified employees  –limited life – firm ceases to exist when owner dies, quits, or sells the business

10. 9 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.  Partnerships are the least numerous form of business organization, accounting for the smallest proportion of sales and net income.

11. 10 Section 1-11 Click the mouse button or press the Space Bar to display the information. Types of Partnerships The most common form of partnership is a general partnership, one in which all partners are responsible for the management and financial obligations of the business.  In a limited partnership, at least one partner is not active in the daily running of the business, although he or she may have contributed funds to finance the operation.

12. 11 Section 1-12 Click the mouse button or press the Space Bar to display the information. Forming a Partnership Like a proprietorship, a partnership is relatively easy to start.  Because more than one owner is involved, formal legal papers called articles of partnership are usually drawn up to specify arrangements between partners.

13. 12 Section 1-13 Click the mouse button or press the Space Bar to display the information. Advantages The advantages of a partnership include:  –ease of establishment  –ease of management  –lack of special taxes  –attract financial capital easily  –slightly larger size, increased efficiency  –easier to attract top talent

14. 13 Section 1-14 Click the mouse button or press the Space Bar to display the information. Disadvantages The disadvantages of a partnership include:  –each partner is fully responsible for the acts of all other partners  –potential for conflict between partners  –A business may have to file for bankruptcy, a court-granted permission to an individual or business to cease or delay debt payments.

15. 14 Section 1-15 Click the mouse button or press the Space Bar to display the information. Corporations Corporations account for approximately one-fifth of the firms in the United States and about 90 percent of all sales.  A corporation is a form of business organization recognized by law as a separate legal entity having all the rights of an individual.

16. 15 Section 1-16 Click the mouse button or press the Space Bar to display the information. Forming a Corporation Unlike a sole proprietorship or partnership, a corporation is a very formal and legal arrangement.  People who would like to incorporate, or form a corporation, must file for permission from the national government or the state where the business will have its headquarters.  If approved, a charter – a government document that gives permission to create a corporation – is granted.

17. 16 Section 1-17 Click the mouse button or press the Space Bar to display the information. Forming a Corporation (cont.) The charter also specifies the number of shares of stock, or ownership certificates in the firm.  These shares are sold to investors, called stockholders or shareholders.  The money is then used to set up the corporation.

18. 17 Figure 3.2 Stock Ownership

19. 18 Section 1-18 Forming a Corporation (cont.) If the corporation is profitable, it may eventually issue a dividend – a check representing a portion of the corporate earnings – to each stockholder.

20. 19 Section 1-19 Corporate Structure When an investor purchases stock, he or she becomes an owner with certain ownership rights. –There are two types of stock. 1) Common Stock - this type of stock gives the owner voting privileges, but is the last to be sold in a bankruptcy. 2) Preferred Stock – this type of stock conveys no voting rights, but will have a higher redeem value if the company declares bankruptcy.

21. 20 Figure 3.3 Ownership, Control, and Organization of a Typical Corporation

22. 21 Section 1-20 Click the mouse button or press the Space Bar to display the information. Advantages A bond is a written promise to repay the amount borrowed at a later date.  The amount borrowed is known as the principal.  While the money is borrowed, the corporation pays interest, the price paid for the use of another’s money. The advantages of a corporation include:  –ease of raising financial capital  –gain capital by selling additional stock  –borrow money by issuing bonds 

23. 22 Section 1-21 Click the mouse button or press the Space Bar to display the information. Advantages (cont.) More advantages of a corporation include:  –professional managers run the firm  –limited liability for owners  –unlimited life  –ease of transferring ownership

24. 23 –difficulty and expense of getting a charter  –owners have little say in how the business is run  –double taxation of corporate profits, stockholders’ dividends are taxed twice– once as corporate profit and again as personal income  –more government regulation Section 1-22 Click the mouse button or press the Space Bar to display the information. Disadvantages The disadvantages of a corporation include: 

25. 24 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.

26. 25 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.

27. 26 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.

28. 27 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.

29. 28 Section 1-Assessment 7 Discuss which business form you think is the most important for the American economy. Section Close

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

31. 30 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.)

32. 31 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. 

33. 32 Section 2-4 Click the mouse button or press the Space Bar to display the information. Introduction Two ways that a business can grow.  1) It can grow by reinvesting some of its profits.  2) A business can also expand by engaging in a merger – a combination of two or more businesses to form a single firm.

34. 33 Section 2-5 Click the mouse button or press the Space Bar to display the information. Growth Through Reinvestment Most businesses use some of the revenue they receive from sales to invest in factories, machinery, and new technologies.  We can use the income statement – a report showing a business’s sales, expenses, and profits for a certain period – to illustrate the process.

35. 34 Section 2-6 Click the mouse button or press the Space Bar to display the information. Estimating Cash Flows The business first records its total sales for the period.  Next, it finds its net income by subtracting all of its expenses, including taxes, from its revenues.  These expenses include the cost of goods and depreciation, a non-cash charge the firm takes for the general wear and tear on its capital goods. Figure 3.4

36. 35 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.  The name of the new company may reflect the identities of the merged companies.  A firm may seek a merger to grow faster, to become more efficient, to acquire or deliver a better product, to eliminate a rival, or to change its image.

37. 36 Section 2-10 Click the mouse button or press the Space Bar to display the information. Reasons for Merging in order to grow fasterSome companies merge in order to grow faster.  EfficiencyEfficiency is another reason for mergers.  to acquire new product linesSome mergers are driven by the need to acquire new product lines.  to catch up with, or even eliminate, their rivalsSometimes firms merge to catch up with, or even eliminate, their rivals.  to lose its corporate identityA company may use a merger to lose its corporate identity.

38. 37 Section 2-11 Click the mouse button or press the Space Bar to display the information. Types of Mergers Economists generally recognize two types of mergers:  –The first is a horizontal merger, which takes place when two or more firms that produce the same kind of product join forces.  –When firms involved in different steps of manufacturing or marketing join together, it is a vertical merger. Figure 3.5 Business Combinations

39. 38 Section 2-12 Click the mouse button or press the Space Bar to display the information. Conglomerates A corporation may become so large through mergers and acquisitions that it becomes a conglomerate.  A conglomerate is a firm that has at least four businesses, each making unrelated products, none of which is responsible for a majority of its sales. Figure 3.6 Conglomerate Structure

40. 39 Section 2-13 Click the mouse button or press the Space Bar to display the information. Multinationals Other large corporations have become international in scope.  A multinational is a corporation that has manufacturing or service operations in a number of different countries.  They are important because they have the ability to move resources, goods, services, and financial capital across national borders.

41. 40 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.

42. 41 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.

43. 42 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.

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

45. 44 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.

46. 45 Section 3-5 Click the mouse button or press the Space Bar to display the information. Community and Civic Organizations Examples of nonprofit institutions include organizations such as schools, churches, hospitals, welfare groups, and adoption agencies.  Most of these organizations are legally incorporated to take advantage of unlimited life and limited liability.  They are similar to profit-seeking businesses, but do not issue stock, pay dividends, or pay income taxes. 

47. 46 Section 3-6 Click the mouse button or press the Space Bar to display the information. Cooperatives Another example of a nonprofit organization is the cooperative, or co-op.  A cooperative is a voluntary association of people formed to carry on some kind of economic activity that will benefit its members. Figure 3.7 Cooperatives in the United States

48. 47 Section 3-7 Click the mouse button or press the Space Bar to display the information. Consumer Cooperatives The consumer cooperative is a voluntary association that buys bulk amounts of goods such as food and clothing on behalf of its members.  Members usually help keep the cost of the operation down by devoting several hours a week or month to the operation.  If successful, the co-op is able to offer its members products at prices lower than those charged by regular businesses. –Examples : Sams, Costco

49. 48 Section 3-8 Click the mouse button or press the Space Bar to display the information. Service Cooperatives A service cooperative provides services such as insurance, credit, and baby-sitting to its members, rather than goods.  One example is a credit union, a financial organization that accepts deposits from, and makes loans to, employees of a particular company or government agency. –Example : Teachers Credit Union

50. 49 Section 3-9 Click the mouse button or press the Space Bar to display the information. Producer Cooperatives Producers, like consumers, can also have co-ops.  A producer cooperative helps members promote or sell their products. –Examples : Amway, Ignite Energy

51. 50 Section 3-15 Click the mouse button or press the Space Bar to display the information. Government Government is another nonprofit economic organization.  Sometimes government plays a direct role in the economy, while at other times the role is indirect.

52. 51 Section 3-16 Click the mouse button or press the Space Bar to display the information. Direct Role of Government Many government agencies produce and distribute goods and services to consumers, giving government a direct role in the economy.  The role is “direct” because the government supplies a good or service that competes with private businesses. Many federal agencies are organized as government-owned corporations. –Examples : Public Schools

53. 52 Section 3-17 Click the mouse button or press the Space Bar to display the information. Indirect Role of Government The government plays an indirect role when it acts as an umpire to make sure the market economy operates smoothly and efficiently.  One such case is the regulation of public utilities, investor- or municipal-owned companies that offer important products to the public, such as water or electric service.

54. 53 Section 3-18 Indirect Role of Government (cont.) The government also plays an indirect role when it grants money to people in the form of Social Security, veterans’ benefits, financial aid, and unemployment compensation.

55. 54 Section 3-Assessment 3 Section Assessment (cont.) Click the mouse button or press the Space Bar to display the answer. Other 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

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

57. 56 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.

58. 57 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.

59. 58 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.

60. 59 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.

61. 60 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.

62. 61 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.

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

64. 63 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

65. 64 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

66. 65 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.)

67. 66 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

68. 67 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.

69. 68 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

70. 69 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.

71. 70 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.)

72. 71 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.)

73. 72 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

74. 73 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.)

75. 74 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.)

76. 75 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

77. 76 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.)

78. 77 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.)

79. 78 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.

80. 79 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.

81. 80 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

82. 81 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.

83. 82 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.

84. 83 Chapter Assessment 21 Identify at least one similarity between someone who owns common stock and a citizen of our country. Name one difference. 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.

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

86. Economic Concepts 1

87. Focus Activity 1.1 Continued on next slide.

88. Focus Activity 1.2

89. Focus Activity 2.1 Continued on next slide.

90. Focus Activity 2.2

91. Focus Activity 3.1 Continued on next slide.

92. Focus Activity 3.2

93. Extra Credit Project Compile an illustrated dictionary of business terms by using all the Key Terms introduced in the study guides in each section of Chapter 3.

94. 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 http://epp.glencoe.com

95. 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 http://www.businessweek.com

96. 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.

97. 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.

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

99. 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

100. 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

101. 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 1999, the top ten companies were: FYI 1 6. International Business Machines 7. Citigroup 8. Philip Morris 9. Boeing 10. AT&T 1. General Motors 2. Ford Motor 3. Wal-Mart Stores 4. Exxon 5. General Electric

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

103. 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.

104. 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. But a new kind of Web site has sprung up that might diminish eBay’s advantage. Sites such as AuctionRover.com enable buyers to check out several auction sites at once by doing the searching for them. If these sites catch on, then sellers at obscure sites like Rbid.com might have some more buyers looking over their wares. Cybernomics 1.2

105. 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

106. 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.

107. 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.

108. 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.

109. 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

110. 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. Click inside this box to play the preview. Economics and You Video 4: Business Organizations

111. 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?

112. 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

113. 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.

114. 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.

115. 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.

116. 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.

117. 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.

118. 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 1952–

119. 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 1952–

120. 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 1952–

121. 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.

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