Chapter 8

Question 1

unlimited liability

Answer 1

a requirement that an owner is personally and fully responsible for all losses and
debts of a business; applies to proprietorships and general partnerships.

Question 2

Partnership

Answer 2

an unincorporated business owned and operated by two or more people who share the
profits and have unlimited liability for the debts and obligations of the firm.

Question 3

corporation

Answer 3

a form of business organization recognized by law as a separate legal entity with all the
rights and responsibilities of an individual, including the right to buy and sell property, enter into legal
contracts, and sue and be sued.

Question 4

Dividend

Answer 4

check paid to stockholders, usually quarterly, representing a portion of corporate profits.

Question 4

Stock

Answer 4

certificate of ownership in a corporation; can be either common or preferred stock.

Question 5

Bond

Answer 5

formal contract to repay borrowed money and interest on the borrowed money at regular future
intervals.

Question 6

Interest

Answer 6

payment made for the use of borrowed money; usually paid at periodic intervals for long-term
bonds or loans.

Question 7

limited liability

Answer 7

requirement in which a corporation, but not its owners, is responsible for all losses
and debts of the business.

Question 8

franchise

Answer 8

business investment that involves renting or leasing another successful business model.

Question 9

Net income

Answer 9

measure of business profits determined by subtracting all expenses, including taxes, from
revenues.

Question 10

Cash flow

Answer 10

total amount of new funds the business generates from operations; broadest measure of
profits for a firm because it includes both net income and non cash charges.

Question 11

Horizontal merger

Answer 11

combination of firms producing the same kind of product.

Question 12

Vertical merger

Answer 12

combination of firms involved in different steps of manufacturing, marketing, or sales.

Question 13

Conglomerate

Answer 13

firm with four or more businesses making unrelated products, with no single business
responsible for the majority of its sales.

Question 14

Venture Capitalist

Answer 14

provider of investment funds to a start-up business in exchange for partial
ownership of the business.

Question 15

Crowdfunding

Answer 15

using social networking to appeal to potential investors.

Question 16

Nonprofit organization

Answer 16

economic institution that operates like a business but does not seek financial
gain; schools, churches, and community-service organizations are examples.

Question 17

Credit Union

Answer 17

nonprofit service cooperative that accepts deposits, makes loans, and provides other
financial services.

Question 18

Collective Bargaining

Answer 18

process of negotiation between union and management representatives over
pay, benefits, and job-related matters.

Question 19

Chamber of commerce

Answer 19

nonprofit organization of local businesses whose purpose is to promote their
interests.