MIE 201 NCSU EXAM 2

Sole Proprietorship

business owned and operated by one person; most common form of business organizations in the united states

What are the advantages of a sole proprietorship?

- ease and cost of formation

- allows high levels of privacy

- owner keeps all profits

- flexibility and control of business

- minimal government regulation

- taxed at individual tax rates

- can be easily dissolved

How are sole proprietorships taxed?

taxed at individual tax rates

What are the disadvantages of a sole proprietorship?

- unlimited liability

- scarce external funding

- success is tied to the owner

- lack of qualified employees

- higher taxation rate

partnership

A form of business ownership in which the business is owned by two or more persons

General Partnership

a partnership which involves a complete sharing in both the management and the liability of a business

limited partnership

a partnership that has at least one general partner who assumes unlimited liability, and at least one limited partner whose liability is limited to his or her investment in the business

articles of partnership

legal documents that set forth the basic agreement between the partners

How are partnerships taxed?

individual owners income taxed

what are the advantages of partnerships?

- easy to organize

- availability of capital and credit

- combined knowledge and skills

- swift decision making

- government regulations are few

what are the disadvantages of partnerships?

- unlimited liability

- responsible for each others decisions

- new agreement needed if partnership changes

- difficult to sell a partnership interest

- distribution of profits may be uneven

- cannot find external funding as easily as large corporations

corporation

a legal entity, created by the state, whose assets and liabilities are separate from its owners

stock

shares of a corporation that may be bought or sold

dividend

The portion of corporate profits paid out to stockholders

domestic corporation

a corporation in the state in which it is chartered

foreign corporation

a corporation which conducts business outside the state in which it is chartered

alien corporation

a corporation that conducts business outside the nation in which it is chartered

private corporation

a corporation owned by one or few people who are closely involved in managing the business; no stock is sold in this corporation

Initial Public Offering (IPO)

The first public offering of a corporation's stock.

quasi-public corporation

corporations owned and operated by the federal, state, or local government

nonprofit corporation

a corporation that does not seek to earn a profit and differs in several fundamental respects from C corporations

board of directors

a group of persons elected by the stockholders to manage a corporation

preferred stock

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

common stock

the most basic form of ownership, including voting rights on major issues, in a company

what are the advantages of corporations?

- limited liability

- ease of transfer of ownership

- perpetual life

- securing funding is easier than for other forms of business

- expansion potential

what are the disadvantages of corporations?

- double taxation

- expensive to form

- disclosure of information to government and public

- owners and managers are not always the same and can have different goals

how are corporations taxed?

corporate and shareholders taxed

joint ventures

a partnership established for a specific project or for a limited time

s corporations

a form of business ownership that is taxed as though it were a partnership with restrictions on shareholders

limited liability companies

a form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership

cooperatives

Organizations composed of individuals or small businesses that have banded together to reap the benefits of belonging to a larger organization

merger

an action taken by two companies to combine and perform as a single entity

horizontal merger

a type of merger where the firm makes and sells similar products to same customers

vertical merger

a type of merger where companies operate at different but related levels of an industry

conglomerate merger

a merger with firms in unrelated industries

acquisition

An action taken by one company to buy a controlling interest in the voting stock of another company

hostile takeover

the buyer tries to convince enough shareholders to go against management and vote to sell

Leveraged Buyout (LBO)

a purchase in which a group of investors borrows money from banks and other institutions to acquire a company (or a division of one), using the assets of the purchased company to guarantee repayment of the loan

Entrepreneruship

the process of creating and managing a business to achieve desired objectives

Microentrepreneur

entrepreneurs who develop businesses with five or fewer employees

social entrepreneur

An individual who pursues initiatives and opportunities and mobilizes resources to address social problems and needs in order to improve society and well-being through creative solutions.

small business

an independently owned and operated business that is not dominant in its competitive area or industry group and does not employ more than 500 people

Small Business Administration (SBA)

an independent agency of the federal government that was created to help Americans start, build, and grow businesses; offers managerial and financial assistance

what are the advantages of small business ownership?

- independence

- costs

- flexibility

- focus

- reputation

what are the disadvantages of small business ownership?

- high stress level

- high failure rate

- undercapitalization

- managerial inexperience or incompetence

- inability to cope with growth

business plan

a precise statement of the rationale for a business and a step-by-step explanation of how it will achieve its goals

What does a business plan include?

- explanation of business

- business model

- analysis of competition

- income/expense estimates

- establish strategy for acquiring sufficient funds to keep businesses going

- management

- exit strategy

venture capitalists

persons or organizations that agree to provide some funds for a new business in exchange for an ownership interest or stock

line of credit

Agreement to allow borrowing as needed to up to a certain amount of money

trade credit

allows a business to 'buy now and pay later'. The credit provider does not receive any cash from the buyer until a later date (usually allow between 30-60 days).

bartering

trading goods and services without using money

what are the advantages of franchising?

- training and support

- brand-name appeal

- standardized quality of goods and services

- national/local advertising

- financial assistance

- proven products/format

- centralized buying power

- site selection and territorial protection

- greater chance for success

what are the disadvantages of franchising?

- fees and profit sharing

- standardized operations

- restrictions on purchasing

- limited product line

- possible market saturation

- less freedom in decisions

intrapreneur

takes responsibility for development of innovations within organization

Operations Management (OM)

the development and administration of the activities involved in transforming resources into goods and services

system

an interconnected set of elements that is coherently organized in a way that achieves something - function or purpose

inputs

the resources—such as labor, money, materials, and energy—that are converted into outputs

outputs

the goods, services, and ideas that result from the conversion of inputs

Standardization

the making of identical interchangeable components or products

Modular Design

the creation of an item in self-contained units, or modules, that can be combined or interchanged to create different products

Customization

making products to meet a particular customer's needs or wants

capacity

the maximum amount that something can contain.

computer-assisted design (CAD)

the design of components, products, and processes on computers instead of on paper

computer-assisted manufacturing (CAM)

a system that directly controls manufacturing equipment

flexible manufacturing

designing machines to do multiple tasks so that they can produce a variety of products

computer-integrated manufacturing (CIM)

a complete system that designs products, manages machines and materials, and controls the operations function

Supply Chain Management

connecting and integrating all parties or members of the distribution system in order to satisfy customers

purchasing

also known as procurement, is the buying of all the materials needed by the organization

inventory control

the process of determining how many supplies and goods are needed and keeping track of quantities on hand, where each item is, and who is responsible for it

Economic Order Quantity (EOQ) Model

a model that identifies the optimum number of items to order to minimize the costs of managing (ordering, storing, and using) them

Just-in-time (JIT)

An inventory-management approach in which supplies arrive just when needed for production or resale

Material Requirements Planning (MRP)

a planning system that schedules the precise quantity of materials needed to make the product

Outsourcing

A decision by a corporation to turn over much of the responsibility for production to independent suppliers.

operations managers

managers who are concerned with managing inventory to ensure that there is enough inventory in stock to meet demand

quality control

the strategy for minimizing errors by managing each stage of production

quality assurance

The maintenance of a desired level of quality in a service or product

Statistical Process Control (SPC)

a system in which management collects and analyzes information about the production, involves taking samples from the process periodically and plotting observations of the samples on a control chart

six sigma

a process for reducing costs, improving quality, and increasing customer satisfaction

____________ do not pay taxes when submitting the organizations tax returns to the internal revenue service

partners

what is the ownership of sole proprietorship?

one owner

what is the ownership of partnerships?

two or more owners

what is the ownership of corporations?

any number of shareholders

what is the ownership of S corporations?

up to 100 shareholders

when a corporation is separate from its owners and does not terminate with the death of one owner, the corporation is said to have _____________.

perpetual life

what are listed in the articles of partnership?

- contribution (money and assets) of each partner

- how profits will be distributed

- authority and responsibility of each partner

what are some resources available to a sole proprietorship to obtain funds?

- money from friends and family

- loans from a bank

- the business owners personal funds

how are the members of a board of directors selected?

they are elected by the shareholders of the corporation

what are the two main types of partnerships?

general and limited

based on the information in the articles of incorporation, the state issues a ______________ to the company.

corporate charter

corporate charter

a legal document that the state issues to a company based on information the company provides in the articles of incorporation

a sole proprietor needs skills in...?

marketing, personnel management, finance and accounting

as an entity, cooperatives are not set up to make ____________.

profits

limited liability

means that a business owner's liability for debts and losses of the business is limited

public corporation

a corporation whose stock anyone may buy, sell, or trade

what are corporate owners normally called?

shareholders or stockholders

incorporators

the individuals creating the corporation

partnerships are...

quasi-taxable organizations

corporate raider

An individual who targets a corporation for takeover because it is undervalued.

how much of employer firms do small businesses represent?

99.7 percent

what are typically wholesaling activities?

- planning and negotiating for supplies

- promoting

- distributing