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GROSS - Economics > Chapter 5: Launching a Business > Flashcards

Chapter 5: Launching a Business Flashcards

1
Q

What is an ENTREPRENEUR?

A
  • a person who creates a business in the hope of earning a profit
  • a person who organizes, manages, and assumes risks of a business enterprise
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2
Q

What four things must an entrepreneur do in order to make a profit…?

A
  • create a useful product
  • have an efficient method of production
  • finance production
  • market the product at a profit
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3
Q

What is PROFIT?

A

what remains after the cost of doing business has been deducted

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4
Q

What is another name for profit?

A

residual

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5
Q

What are the three forms of business organizations?

A
  • sole proprietorship
  • partnership
  • corporation
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6
Q

What is SOLE PROPRIETORSHIP?

A

a business owned by one person

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7
Q

What is a PARTNERSHIP?

A

an unincorporated business that is owned by two or more people

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8
Q

What is CORPORATION?

A

a business organization created under a government (state) charter

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9
Q

What is the most common form of business organizations?

A

sole proprietorship

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10
Q

What are 5 advantages of a sole proprietorship?

A
  • easiest and least costly
  • you own all profits
  • you are your own boss
  • minimal legal restrictions
  • do not have to pay corporate income tax
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11
Q

What are 3 disadvantages of a sole proprietorship?

A
  • unlimited liability
  • difficult to raise money
  • lack of business continuity
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12
Q

What is UNLIMITED LIABILITY?

A
  • The taking of personal property to satisfy a business debt

- the owner must assume full responsibility for all losses in cured by the business

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13
Q

What is A LACK OF BUSINESS CONTINUITY?

A

if the owner withdraws the business will end

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14
Q

What form of business makes up 10% of the total and 6% of the total money?

A

partnership

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15
Q

What form of business makes of 70% of total and 6% of total money?

A

sole proprietorship

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16
Q

What are three advantages of a partnership?

A
  • additional funds
  • two heads are better than one
  • no corporate tax
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17
Q

What are four disadvantages of a partnership?

A
  • unlimited liability
  • if a partner dies or withdrawals the partnership as legally terminated
  • amount of capital is limited
  • Partners can have a falling out which may lead to death
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18
Q

What is a CREDITOR?

A

someone that lends money to another

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19
Q

What is a DEBTOR?

A

someone that receives or owes money to another

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20
Q

What is the difference between a creditor and a debtor?

A

A creditor lends the money whereas the debtor owes the money

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21
Q

What form of business makes up 20% of the total and 90% of the total money?

A

Corporation

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22
Q

What is a STOCKHOLDER?

A
  • owners of shares of stocks and a corporation
  • considered an artificial person
    • can do everything a person can do but it is not you
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23
Q

What are four advantages of a corporation?

A
  • Limited liability
  • ease of transfers
  • unlimited life
  • tax advantages
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24
Q

What are four disadvantages of a corporation?

A
  • expensive to organize
  • some corporations are subject to special taxes or double taxes
  • Open or public corporation
  • liability
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25
Q

What is LIMITED LIABILITY?

A

you can’t lose more than you put in

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26
Q

What is EASE OF TRANSFER?

A

you can buy or sell anytime

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27
Q

What is UNLIMITED LIFE?

A

The company goes on even if the CEO dies

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28
Q

What is OPEN PUBLIC CORPORATION?

A

corporations that sell stock give up their right to secrecy

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29
Q

What is LIABILITY?

A

any claim on the debt of the business or individual

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30
Q

What are the five niches?

A
  • S-Corporation
  • nonprofit
  • Government owned corporation
  • cooperative corporation
  • franchise
31
Q

What is an S-Corporation?

A

Corporation for small businesses that has all the advantages of a corporation but you don’t pay the corporate tax

32
Q

What is a NON PROFIT CORPORATION?

A

it’s service some educational social charitable or religious purposes rather than simply earning a profit

33
Q

What is a GOVERNMENT OWNED CORPORATION?

A

provide services that private enterprise is unable or willing to offer

34
Q

What is COORPORATIVE CORPORATION (CO-OP)?

A

an association of individuals or companies whose purpose is to perform some business function for its members

35
Q

What are the three types of cooperative corporations (co-ops)?

A
  • housing
  • consumer
  • producer
36
Q

What is a HOUSING CO-OPS?

A

multiple dwelling units owned by the tenants (condos)

37
Q

What are CONSUMER CO-OPS?

A

businesses owned by members who share in the profits or who purchase goods at a lower price

38
Q

What are PRODUCER CO-OPS?

A

manufacturer and market products on behalf of their members

39
Q

What is a FRANCHISE?

A

individually owned businesses as if it were part of a large chain

40
Q

What is a CHARTER?

A

A license issued by the secretary of state of the state in which the corporation is headquartered

41
Q

What are BYLAWS?

A

The rules of operation for corporations stated in the charter which governs officers actions

42
Q

What three things do the Board of Directors do?

A
  • choose president and other officers
  • decide how they get their money
  • choose if dividends are to be paid
43
Q

What is the object of the board of directors?

A

separate ownership from management

44
Q

Who elects the Board of Directors and how do they do it?

A

Stockholders

  • 1 vote per share of stock
  • vote at annual meeting
    ~ your proxy votes for you if you can not attend the meeting
45
Q

What is a PROXY?

A

written authorization temporarily transferring voting rights to another at a meeting

46
Q

What is an ANNUAL REPORT?

A

Report sent to stockholders containing pregnant finance information

47
Q

What is a PROSPECTUS?

A

Report providing info on the company you MIGHT invest in

48
Q

What is PRODUCT QUALITY?

A

once quality has been established it should not be lowered

49
Q

What is QUAITY CONTROL?

A

maintenance of standards

50
Q

What is PRODUCT RELIABILITY?

A

does what its supposed to do

51
Q

What are the three functions of PRODUCT PACKAGING?

A
  • to protect the product
  • provide info
  • enhance appearance
52
Q

What are results of product packaging?

A
  • could lead to higher prices

- if mass marketed could lead to lower prices

53
Q

What is PRODUCT LABELING?

A

some products carry testing labels from private organizations

54
Q

What is CONSUMER SAFTEY?

A

responsibility to safeguard consumers and their property in the storage and use of the product

55
Q

What is another name for consumer safety?

A

product responsibility

56
Q

What is MICROTEEN?

A

natural mix of computers and young people

57
Q

Between what ages do most people start their own business?

A

26-40

58
Q

What is the con of starting your own businesses with training from a college program?

A

you have to pay a higher price

59
Q

True or false children of business families are not likely to go into business themselves if they see their parents business fail

A

FALSE!

children of business families are more likely to go into business themselves despite the business success rate of their parents

60
Q

What is a DISLOCATION OF A JOB?

A

loss of a job

61
Q

What is a SMALL BUSINESS?

A

any company with less than 500 employees

62
Q

True or False, small businesses accounted for 39% of the GMP

A

TRUE

small businesses did account for 39% of GMP but this is been declining because of the advantages of big businesses

63
Q

What is SCALE?

A

large

64
Q

What are two advantage of scale businesses?

A
  • mass marketing

- buying in bulk

65
Q

What are the two sectors of small business by industry and what percentage do they take up?

A
  • retail service 29%

- services 28%

66
Q

True or false the smaller the firm the more likely it is to survive

A

FALSE!

The larger the firm the more likely it is to survive

67
Q

Businesses have a 30% chance of surviving four years if they have how many employees

A

1-20

68
Q

Businesses have a 54% chance of surviving four years if they have how many employees?

A

21-50

69
Q

What are four problems small businesses face

A
  • taxes
  • slow sales
  • competition
  • difficulty in raising money
70
Q

What are three advantages of a small business

A
  • can react quickly to changing times
  • 80% of new jobs are being created
  • two times more innovations per employees at scale businesses
71
Q

What is the first thing you do when starting a small business?

A

contact the small business administration (SBA)

72
Q

What is the formal organization of a large scale corporation?

A

1) stockholders
2) board of directors
3) president
4) vice president
5) department heads
6) workers

73
Q

What is a disadvantage of a large business?

A

The corporations that pays dividends are subject to double taxes. First the company pays a corporate tax. Second the dividend holder pays another tax.

GROSS - Economics (7 decks)

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