Business chapter 3-4 Flashcards
Absolute advantage
a country can produce more of a given product that another country given the same resources.
comparative advantage
being able to produce something with a lower opportunity cost that other countries.
exporting/importing
The process of receiving and removing goods from other counties.
Embargo
complete halt to trading with a particular nation or in a particular product.
tariff
taxes on imported goods
currency devaluation
the reduction of a value of an nations currency relative to the currencies of another counties
countertrade
an international barter transaction
strategic alliance
partnerships formed to create competitive advantage on a worldwide basis
joint venture
a partnership formed to achieve a specific goal or to operate for a specific period of time.
bill of lading
issued by a transport carrier to an exporter to prove merchandise has been shipped
letter of credit
issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary
draft
issued by the exporter’s bank ordering the importer’s bank to pay for the merchandise thus guaranteeing payment once accepted by the importers bank
licensing
a contractual agreement in which one firm permits another to produce and market its product and use its brand name in return for a royalty or other compensation
trading company
firms that provide a link between buyers and sellers in different countries.
dividend
a distribution of earnings to the stockholders of a corporation
board of directors
people elected by stockholders to oversee management
preferred stock
stock owned by individuals or firm who usually do not have voting rights but whose claims on dividend are paid before those of common stock owners.
common stock
stock owned bu individuals or firms who may vote on corporate matters but whose claims on profit and assets are subordinate to the claims of others
Partnership
A business that was created by 2 or more individuals
Corporation
an artificial person created by law with most of the legal rights of a real person, including the right to start and operate a business, to buy or sell property, to borrow money, to be sued or to sue, and to enter into biding contracts.
sole proprietorship
the business that was created an downed by one person
double taxation
when the income tax is paid twice on the same source. (dividends)
vertical merger
merger between firms that operate at different but related levels of production and marketing a product.
horizontal merger
merger between firms that make and produce similar products.
Conglomerate merger
merger between firms that have nothing in common.
non-profit corporation
organizations meant to provide social, educational, religious, or other services rather than to earn a profit.
stockholder
a person who owns a corporations stock
limited liability company
a form of business ownership that combining the benefits of a corporation and partnership but avoids some of the restrictions and disadvantages.
understand the balance of trade
the total value of a nations exports minus the total value of its imports over some period of time (imports > exports then the balance of trade = negative.)
Favoradable is more imports than export
unfavorable is more exports than imports.
balance of payment have a surplus(Positive) or a negative(deflict)
Arguments for and against trade restrictions
FOR
to equalize a nations balance of payments
to produce new or weak industries
to protect national security
to protect the health of citizens
to retaliate for another nations trade restrictions
to protect domestic jobs
AGAINST
higher prices for consumers
restriction of consumer choice
misallocation of international resources
loss of jobs
understand how and why tariffs are utilized. what are the potential results of tariffs
Tariffs are used to generate income for the government and to protect a domestic industry form competition by keeping the price of imports at or above the price of domestic products. Tariffs could cause for foreign products to be more expensive than domestic products.
Discuss GATT? what was the objective?
General Agreements of trade
international organization made of 160 nations dedicated to reduce or eliminate tariffs and other trade barriers.
Most favored nation status (MEN) each member of GATT was to be treated equally by all other members
eight rounds of negotiations between 1947 and 1994.
the purpose was to create more competition.
discuss limited vs unlimited liability
limited liability refers to a corporation since they are registered as an individual so that if anything happens within the company, the company is responsible for the expense.
unlimited liability refers to sole proprietorships and partnerships and state that if anything happens within their company, the owner is responsible for paying for all damages and expenses and come out of their own person bank account and even their own property.
advantages and disadvantaged to a corporation, sole proprietorship, and partnership
Advantages of a corporation
limited liability
ease of raising capital
ease of transfer of ownership
Perpetual life
specialized management
Disadvantages of a corporation
difficult and expensive to form
government regulation and increased work paperwork
conflict within the corporation
Double taxation
lack of secrecy
advantages to a sole proprietorship
easy to start up and closure
pride of ownership
retention of all the profits
no special taxes
Flexibility of being your own boss
Disadvantages of a sole proprietorship
Unlimited liability
lack of continuity
lack of money
limited management skills
Difficulty hiring employees
advantages to a partnership
Easy to start up
Availability of capital and credit
personal interest
combined business skills and knowledge
Retention of profits
no special taxes
Disadvantages of a partnership
unlimited liability
management disagreements
lack of continuity
frozen investment
the difference between non profit and profit corporations
non profit is created for more of a a social factor while a profit corporation is made to earn a profit from their goods or services.
Determine absolute and competitive advantage from a scenario.
see chapter 3 notes.
