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My Packs: DECA (Finance) > (Unfinished) Chapter 3: Types of Businesses and Types of Financial Institutions > Flashcards

(Unfinished) Chapter 3: Types of Businesses and Types of Financial Institutions Flashcards

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1
Q

Businesses participate in the creation and distribution of _____ and ________ in society

A

Goods
Services

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2
Q

Define:
Goods

A

The tangible, consumable items produced in the economy

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3
Q

Define:
Services

A

The intangible activities performed or provided by others

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4
Q

What is the end goal of the vast majority of businesses?

A

Creating wealth and profit

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5
Q

True or False:
The purpose of wealth-creation in businesses can vary

A

True

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6
Q

What are some purposes of wealth-creation? (3)

A

Many businesses may withdraw the profits as income
Some businesses reinvest them into the company
Some may choose to contribute to social causes (charities etc.)

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7
Q

What are some elements that businesses have in common? (4)

A

Profit and Wealth
Societal Function
Change
Social Role

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8
Q

Why do businesses have a societal function?

A

Most adults are employed, and thus work for businesses and rely on their employers for income

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9
Q

How do businesses have a societal function? (3)

A

Businesses can shape what people can do for entertainment, their choices, and their way of life

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10
Q

True or False:
Businesses drive change through innovation, creating many of the new products and other developments that integrate into our everyday lives

A

True

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11
Q

Define:
Corporate Social Responsibility

A

The responsibility of a business to society and the environment beyond basic laws and regulations

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12
Q

Define:
Sole Proprietorship

A

A business owned and operated by one person

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13
Q

Define:
Unlimited Liability

A

When the owner(s) are entirely responsible for the debts of the company, which can go beyond their ability to pay

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14
Q

Define:
Partnership

A

A business owned and operated by two or more partners

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15
Q

How many main types of partnerships are there?

A

3

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16
Q

What are the 3 main types of partnerships?

A

General Partnership
Limited Partnership
Limited Liability Partnership

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17
Q

Define:
General Partnership

A

A partnership where all partners have unlimited liability for the business

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18
Q

Define:
Limited Partnership

A

A partnership where at least one or more partners is a general partner with unlimited liability and the other partners have limited liability

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19
Q

Define:
Limited Liability

A

Where individuals are limited in the amount of liability they have for the business’s acquired debts

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20
Q

Define:
Limited Liability Partnership

A

A partnership where all partners have limited liability

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21
Q

What professions is limited liability partnership often limited to? (3)

A

Medical professions
Accounting professions

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22
Q

List the advantages of a sole proprietorship (5)

A

Easy to establish and run
Simple to establish
Sole control over all decision-making
Owner keeps all the profits
Income taxed only once

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23
Q

List the advantages of a partnership (4)

A

Easy to establish and run
Risk and rewards are shared
Easier access to capital (banks, partner investment, etc.)
Excellent access to different skill sets

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24
Q

List the disadvantages of a sole proprietorship (4)

A

Owner has unlimited liability
Limited access to funding
Owner may have a limited skillset (E.x.. Have both financial and marketing expertise)
Business lifespan limited to owner’s involvement

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25
Q

List the disadvantages of a partnership (4)

A

One or more owners may have unlimited liability
Potential conflicts in decision-making between partners
Partners responsible for poor decisions of other partners
Business lifespan limited to owners’ involvement

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26
Q

A barber starting his own barber shop is an example of a:

A

Sole proprietorship

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27
Q

A group of accountants starting a small firm is an example of a:

A

Partnership

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28
Q

Define:
Corporation

A

A business that is a legal entity separate from its owners, who own shares of the business

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29
Q

Define:
Shareholders

A

Individuals who own shares of the corporation, and thus are partial owners of the company

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30
Q

Define:
Shares

A

Denotes partial ownership of the corporation, in the form of stock

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31
Q

List the advantages of incorporation (6)

A

Limited Liability
Transferable ownership
Continuous existence
Acting as separate legal entity
Fewer barriers to raising capital
Tax advantages over sole proprietorships and partnerships

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32
Q

How is limited liability an advantage of incorporation?

A

Shareholders can only lose as much as they invest in the corporation

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33
Q

How is transferable ownership an advantage of incorporation?

A

Shareholders can transfer their ownership by buying and selling stock

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34
Q

How is continuous existence an advantage of incorporation?

A

The business doesn’t stop existing once one shareholder gives up their ownership of a certain share

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35
Q

How is acting as separate legal entity an advantage of incorporation?

A

A corporation’s assets and debts are separate from a shareholder’s assets and debts

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36
Q

How is fewer barriers to raising capital and advantage of incorporation?

A

Corporations have access to large sources of funds, through equity or debt

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37
Q

List the disadvantages of incorporation (2)

A

Greater legal, financial and procedural barriers
Tighter regulations on activities and record-keeping (may result in greater costs)

38
Q

What are the important steps to follow in the process of incorporation? (5)

A

Naming the corporation
Completing the articles of incorporation
Establishing a public registered office address and a board of directors who meet eligibility requirements
Filing required paperwork and paying the incorporation fee
Processing the application

39
Q

When naming the corporation, what needs to be made sure?

A

Making sure the name is available for use

40
Q

Completing the articles of incorporation establishes what?

A

Corporate structure

41
Q

What are some elements of corporate structure? (3)

A

Share structure
A board of directors
Restrictions

42
Q

For a corporation, what is the purpose of a public registered office address?

A

A place where documents can be served

43
Q

A business can incorporate to be either a ________-______ ___________ or a _________-______ ___________

A

Publicly-traded corporation
Privately-traded corporation

44
Q

Define:
Private Corporation

A

A corporation owned by a select group of people, such as the founders and private investors

45
Q

Define:
Public Corporation

A

A corporation with stock that is sold to and traded openly with the public on the stock market

46
Q

A public corporation has stock that is sold to and traded with the public after an:

A

Initial public offering (IPO)

47
Q

Define:
Initial Public Offering (IPO)

A

A type of public offering where shares of the corporation first become public, and the corporation becomes a public corporation

48
Q

True or False:
Private companies have fewer obligations to the public decision-making

A

True

49
Q

Do private companies face more or fewer disclosure requirements from the SEC? Why?

A

Private companies face fewer disclosure requirements
Since their stocks are not available publically

50
Q

What is the SEC?

A

U.S. Securities and Exchange Commission

51
Q

Private companies are limited to _______ sources of funding, which can inhibit ______

A

Private
Growth

52
Q

What do public companies have obligations to? (2)

A

Greater obligations to their shareholders
Regular obligations to disclose financial information to the public

53
Q

Define:
Board of Directors

A

Group of individuals elected by the shareholders in the organization, and make appropriate decisions in line with the shareholder interests

54
Q

Define:
Upper Management

A

The second tier of management including the CEO, the CFO, and the COO

55
Q

True or False:
Public companies do not have access to funding from the public

A

False, public companies have access to larger sources of funding from the public

56
Q

Define:
Chairperson

A

The chair of the board of directors, who plays a leadership role in the board’s operations

57
Q

Define:
Internal Directors

A

Members of the board of directors who have experience with the organization and are able to provide insight on, and make decisions about operations

58
Q

Define:
Outside Directors

A

Members of the board of directors who are consulted for an external perspective on the organization’s operations, and are not part of the organization’s day-to-day operation

59
Q

What does CEO stand for?

A

Chief Executive Officer

60
Q

What does COO stand for?

A

Chief Operating Officer

61
Q

What does CFO stand for?

A

Chief Financial Officer

62
Q

Define:
Chief Executive Officer (CEO)

A

A upper level manager responsible for the entire corporation’s operations, and is often also on the board of directors

63
Q

Define:
Chief Operating Officer (COO)

A

The executive vice-president responsible for operations (including marketing, sales, employees, etc.)

64
Q

Define:
Chief Financial Officer (CFO)

A

The executive vice-president responsible for finances

65
Q

The chairperson is elected from the _____ of _________

A

Board
Directors

66
Q

How many key roles are there on the board of directors? What are they?

A

3
Chairperson
Internal directors
Outside directors

67
Q

Who do the COO and CFO report to?

A

CEO

68
Q

Define:
Non-profit organization (NPO)

A

An entity whose primary focus is something other than making a profit

69
Q

What does NPO stand for?

A

Non-Profit Organization

70
Q

What are the advantages an NPO gets over for-profit organizations? (2)

A

Potential income tax exemptions
Tax rebates on purchases

71
Q

True or False:
NPOs can personally benefit members with their income

A

False, they cannot always issue charitable receipts for donations, and cannot personally benefit members with their income

72
Q

Are NPO staff volunteers or paid employees?

A

Can be both

73
Q

What are some possible crucial roles within a corporation and other businesses? (4)

A

Supervisors
Office managers
Team leaders
Employees

74
Q

True or False:
NPO employees may receive very competitive salaries

A

True, some receive lower pay than at for-profit organizations, other such as university CEOs may receive very competitive salaries

75
Q

Define:
Section 501(c)(3)

A

A section of the Internal Revenue Code(IRC) which outlines the tax-exempt status of certain non-profits on income generated from operations directly related to the purpose of the organization

76
Q

______ can receive tax deductions for _________

A

Donors
Donations

77
Q

True or False:
Not all non-profits have tax-exempt status, it is granted through an application

A

True

78
Q

Define:
Cooperative

A

A business owned and operated for the benefits of its members (E.x. a group of farmers who band together to sell their crops

79
Q

Give examples of possible benefits for members of a cooperative (2)

A

Cut costs
Increase influence

80
Q

What are some advantages of cooperatives? (3)

A

Easy to establish
Encourage member participation in business operations and democratic decision-making
Increase economic resilience of participating members

81
Q

What are some disadvantages of cooperatives? (2)

A

Limited or no financial return
A lack of incentive to contribute more than necessary

82
Q

Define:
Financial Institution

A

Provides financial services to clients, including investment services, banking services, currency exchange, and acts as a financial intermediary

83
Q

Define:
Financial Intermediary

A

An entity that acts as the middleman between two parties in a financial transaction

84
Q

True or False:
The role of financial institutions have become essential in developed economies

A

True, such as in United States and Canada

85
Q

Define:
Financial System

A

Connects lenders, investors, and borrowers together within the economy, and allows for commercial activity to take place

86
Q

_________ systems operate from the ____ to the ______ level

A

Financial
Firm
Global

87
Q

State the Firm level (2)

A

Revenue
Expense schedules

88
Q

State the Regional level (2)

A

Financial Institutions
Financial Markets

89
Q

State the Global level (2)

A

Central Banks
World Banks

90
Q

Define:
Financial Markets

A

Where financial instruments like stocks and bonds are traded

My Packs: DECA (Finance) (12 decks)

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