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8-3: Corporations, Mergers, and Multinationals

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Presentation on theme: "8-3: Corporations, Mergers, and Multinationals"— Presentation transcript:

1 8-3: Corporations, Mergers, and Multinationals

2 Characteristics of Corporations
Corporation: business owned by stockholders These shareholders have limited liability for the company’s debts and losses They acquire ownership through the purchase of stock—shares of ownership in the corporation

3 Characteristics of Corporations (continued)
If a company does well and earns a profit, stockholders may receive dividends—part of the profit paid to stockholders


5 Characteristics of Corporations (continued)
Corporations make up 20% of all businesses in the U.S. Public corporation: a corporation that issues stock that can be freely bought and sold

6 Characteristics of Corporations (continued)
Private corporation: corporation that retains control over who can buy and sell the stock

7 Advantages of Corporations
Access to resources: Easy to raise money through the sale of stocks and bonds Bonds: a contract issued by a corporation that promises to repay borrowed money plus interest, on a fixed schedule

8 Advantages of Corporations (continued)
Professional managers: CEOs, etc. are in charge of the corporation Limited liability for debts/losses

9 Advantages of Corporations (continued)
Unlimited life: they continue to exist even after a change in ownership

10 Disadvantages of Corporations
Start-up cost and effort: expensive and lots of paperwork Heavy regulations: stockholders meetings and annual reports

11 Disadvantages of Corporations (continued)
Double taxation: must pay taxes on profits and on dividends—the corporate profits paid to stockholders Loss of control: some control may be lost to the board of directors

12 Business Consolidation
Horizontal merger: when 2 companies that produce the same product merge Example: car companies

13 Business Consolidation (continued)
Vertical merger: when 2 companies involved in different steps of marketing/producing a specific product merge


15 Business Consolidation (continued)
Conglomerate: the merger of companies that produce unrelated products

16 Business Consolidation (continued)
Multinational corporation: a large corporation with branches in several countries Example: General Electric


18 8-4: Franchises, Co-ops, and Nonprofits

19 Franchise Franchise: business made up of semi-independent businesses that offer the same products or services Example: McDonald’s

20 Advantages of Franchises
Proven/well-known product Training in how to run the business is given Franchiser pays for advertising

21 Disadvantages of Franchises
Start-up costs Sharing profits with franchiser Must follow franchisers’ rules

22 Examples: credit unions, producer’s co-ops, etc.
Cooperatives Cooperative: business operated for the shared benefit of its owner, who are also its customers Examples: credit unions, producer’s co-ops, etc.

23 Nonprofit Organization
Nonprofit organization: institution that acts like a business organization but its purpose is to benefit society not to make a profit Example: Habitat for Humanity

24 Questions 1. What are the benefits of forming a conglomerate?

25 2. In what ways might a vertical merger in the oil industry influence gas prices?

26 3. What would be the outcome of raising the fees and requiring more paperwork in order to start a corporation?

27 4. How is a franchise “an almost independent” business?

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