Business sector

Question 1

Business organization which owns and operates plants

Answer 1

firm

Question 2

an institution that hires productive resources and that organizes those factors to produce and sell goods and services

Answer 2

firm

Question 3

A firms’ goal is to…

Answer 3

maximize profit

Question 4

Physical structures or locations where business is conducted

Answer 4

plant

Question 5

group of related firms which produce similar products

Answer 5

industry

Question 6

business organizations

Answer 6

sole proprietorship; partnership; corporation

Question 7

business owned by a single individual

Answer 7

sole proprietorship

Question 8

sole proprietorship advantages

Answer 8

easy to organize; proprietor is own boss; profits taxes once

Question 9

sole proprietorship disadvantages

Answer 9

unlimited liability; limited life; owner responsible for all decisions and all aspects of business whether or not a strength; expense of capital and labor; difficult to grow into a large enterprise

Question 10

2 or more individuals own and operate business in a partnership agreement

Answer 10

partnership

Question 11

partnership advantages

Answer 11

ease to organize; diversified decision making; greater financial resources; profits taxed once

Question 12

partnership disadvantages

Answer 12

unlimited liability; limited life; consensus difficult to achieve; capital expensive and finances still limited

Question 13

legal entity distint from its owners; can act as legal person; buy and sell, own property, make contracts

Answer 13

corporation

Question 14

formed by charter granted by government

Answer 14

common and preferred stocks; Corporate bonds

Question 15

Common to all corporations; initial way to raise funds to finance corporation; initial public offering

Answer 15

common stock

Question 16

voting rights: 1 share = 1 vote

Answer 16

common stockholders

Question 17

dividends rights if there is profit and Board of directors approve; capital gains/losses from sale of stock

Answer 17

common stockholders

Question 18

If new stock issued, existing stockholders can purchase new shares in proportion to their existing holdings before stock offered for sale to general public

Answer 18

pre-emptive rights

Question 19

when dividends skipped amount accumulated and firm cant pay any dividenct to common stockholders until all accumulated dividends paid to preferred stockholders

Answer 19

cumulative

Question 20

IOU; long term debt of corporation

Answer 20

corporate bonds

Question 21

when borrowers must bay back principal (usually 10-20 years

Answer 21

maturity date

Question 22

amount to be repaid when bond matures (principal)

Answer 22

par value

Question 23

annual interest paid on bond, expressed in terms of % of bond’s par value

Answer 23

coupon rate

Question 24

most bonds secured with pledge of specific assets

Answer 24

corporate bonds

Question 25

bonds secured only by reputation of company

Answer 25

debentures

Question 26

bonds are retired ( paid off) by maturity date

Answer 26

…

Question 27

bonds are usually issued in ____–each series has unique maturity date and coupon rate in insure that all bonds are not due at once

Answer 27

series

Question 28

have provisions for early redemption; if interest rates fall, issuer can repay early and re-issue bonds at lower rate

Answer 28

callable bonds

Question 29

option of being converted into a set number of common stocks

Answer 29

convertible bonds

Question 30

Bond ratings indicate bond rist (Aaa to C)

Answer 30

Ratings influence rate of interest paid by corporations

Question 31

bonds rated Ba or lower; corporations with ____ have to pay high rate of interest to get people to buy them

Answer 31

junk bonds

Question 32

corporation advantages

Answer 32

easy to raise capital; limited liability; unlimited life; professional management

Question 33

corporation disadvantages

Answer 33

doble taxation; principal-agent problem; difficult to organize; complex management stucture

Question 34

Corporations dominate where a large amount of capital is necessary

Answer 34

Proprietorships dominate where flexibility in decision making is critical

Question 35

LLC

Answer 35

limited Liability company

Question 36

distributes all profit directly to owners and investors

-shields personal assets of owners from liability claims

Answer 36

LLC

Question 37

35 or fewer employees; profit passes directly to owners avoiding double taxation;
limited liablity

Answer 37

S corporation

Question 38

multi-plant firm in which company owns plants at different production stages

Answer 38

vertical combinations

Question 39

muti-plant firm with plants performing the same manufacturing process

Answer 39

horizontal combination

Question 40

firm that owns plants in different industries or markets

Answer 40

conglomerate