Chapter 3- Section 2 Flashcards
A report showing a businesses sales, expenses, and profits for certain period to illustrate the process
Income statement
A combination of two or more businesses to form a single firm
Merger
What does cash flow represent?
The sum of net income and non-cash changes such as deprecation, the “Bottom Line”; real measure of profit
Subtracting all it’s expenses including taxes from its revenue
Net income
The non-cash charge the firm takes for the general wear and tear on its capital goods
Deprecation
What can business owners do with cash flow to further help their business?
Decide how it can be allocated and reinvest in new technology and equipment
What can happen when cash flow’s are reinvested in the business?
They can produce additional products
What happens when two firms merge?
One gives up its separate legal identity
What are five possible reasons for mergers?
The desire to be bigger, efficiency, need to acquire more product lines to catch up or eliminate their rival, and to lose its corporate identity
Takes place when two or more firms that produce the same kind of product join forces (Bank of America and Wells Fargo)
Horizontal merger
Firms involved in different steps of manufacturing or marketing join together (tree farm and Lumber mill and truck company)
Vertical merger
What is the main reason for conglomerate to want diversification?
Don’t want to “put all their eggs in one basket” so overall home sales and profits are protected
A firm that has at least four businesses, each making unrelated products none of which is responsible for majority of its sales
Conglomerate
A corporation has manufacturing or service operations in a number of different countries
Multinational
What are the advantages of a multinational?
Transfer new technology and generate new jobs, produce tax revenues for host country
