BUSM1010 – Forms of Business Ownership & Financial Statements

Vocabulary flashcards covering key ownership forms, corporate actions, and financial-statement terms from BUSM1010 Week 1–2 lecture notes.

Sole Trader

A business owned by a single person; profits flow directly to the owner and are taxed as personal income.

Unlimited Liability

Legal condition in which business debts are the personal responsibility of the owner(s).

Partnership

A company owned by two or more people that is not incorporated.

General Partnership

Partnership where all partners share management authority and unlimited liability for debts.

Limited Partnership

Partnership with at least one general partner (unlimited liability) and one or more limited partners (liability restricted to invested amount).

Partnership Agreement

A written document outlining partners’ investment percentages, profit sharing, roles, decision rules, exit plans and dispute procedures.

Corporation

A legal entity distinct from its owners, able to own property, conduct business and issue shares.

Shareholder

An investor who owns shares in a corporation.

Public Corporation

Corporation whose shares are traded openly and can be bought by any investor.

Private Corporation

Corporation whose shares are held by a small group (up to 50 in Australia) and not offered to the public.

Limited Liability

Condition in which shareholders’ losses are limited to the amount they invested.

Liquidity (Shares)

Ease with which investors can convert shares to cash by selling on the open market.

Board of Directors

Group elected by shareholders to oversee management, set strategy and hire corporate officers.

Corporate Governance

Policies, procedures and relationships used to ensure legal and effective operation of a corporation.

Merger

Action in which two companies combine and operate as a single entity.

Acquisition

Action in which one company buys a controlling interest in another company.

Vertical Merger

Merger of firms at different stages of the same industry (e.g., supplier with manufacturer).

Horizontal Merger

Merger of firms at the same stage of the same industry (e.g., two suppliers).

Product Extension Merger

Merger that expands the acquiring firm’s product mix.

Market Expansion Merger

Merger that extends a firm’s geographic market coverage.

Conglomerate Merger

Merger between companies in unrelated industries.

Hostile Takeover

Acquisition attempt opposed by the target company’s management.

Tender Offer

Bid to buy a set number of shares at a premium price to gain control of a company.

Proxy Fight

Campaign to gain shareholders’ voting rights to replace a company’s board and management.

Poison Pill Defense

Strategy making a firm less attractive to a raider, often by issuing cheap shares to existing owners.

White Knight Tactic

Inviting a friendly third company to acquire a firm threatened by a hostile takeover.

Leveraged Buyout (LBO)

Purchase of a company primarily with borrowed funds, using the firm’s assets as collateral.

Strategic Alliance

Long-term partnership to jointly develop, produce or sell products without forming a new entity.

Joint Venture

Separate legal entity created by two or more firms to pursue shared objectives.

Accrual Basis (Accounting)

Recognises revenues when earned and expenses when incurred, regardless of cash movement.

Historical Cost Principle

Assets and liabilities are recorded at their original purchase price.

Income Statement

Report showing revenues, expenses and profit for a specific period.

Balance Sheet

Snapshot of assets, liabilities and shareholders’ equity at a specific date.

Cash Flow Statement

Report explaining changes in cash through operating, investing and financing activities.

Statement of Changes in Equity

Document detailing movements in share capital, retained earnings and reserves over a period.

Cost of Goods Sold (COGS)

Cost of acquiring or producing the products or services sold during a period.

Operating Expenses

Day-to-day costs of running a business, such as salaries and utilities.

Depreciation Expense

Non-cash allocation of a long-lived asset’s cost over its useful life.

Gross Profit Margin

Gross profit divided by sales; shows profit after COGS per sales dollar.

Operating Profit Margin

EBIT divided by sales; indicates profit after operating expenses per sales dollar.

Net Profit Margin

Net profit divided by sales; shows percentage of revenue remaining after all expenses.

Current Asset

Asset expected to be used or converted to cash within 12 months.

Non-Current Asset

Asset with a useful life longer than 12 months (e.g., plant, equipment).

Current Liability

Obligation due within 12 months (e.g., accounts payable).

Non-Current Liability

Debt payable beyond 12 months (e.g., long-term loans).

Net Working Capital

Current assets minus current liabilities; indicator of short-term liquidity.

Unlimited Public Company

Public company whose shareholders have unlimited liability for corporate debts.

No Liability Company

Australian company (mainly mining) where shareholders can forfeit unpaid shares instead of paying calls.

Public Company Limited by Shares

Company where shareholder liability is limited to any unpaid amount on their shares.

Public Company Limited by Guarantee

Typically not-for-profit; members’ liability limited to the amount they agree to contribute if wound up.