Business Structures, Management, and Economic Systems: Key Concepts and Definitions

Sole Proprietorship

A business owned by one person with unlimited personal liability

Partnership

A business owned by two or more people who share profits and liabilities

Corporation

A legal business entity with limited liability and double taxation

Limited Liability Company (LLC)

Business structure with limited liability and flexible taxation

Articles of Incorporation

Legal document that officially creates a corporation

Market Economy

Economic system driven by consumer choice and supply and demand

Command Economy

Economic system where government controls production and prices

Traditional Economy

Economic system based on customs and traditions

Mixed Economy

Economic system combining market and command elements

Opportunity Cost

The value of the next best alternative that is given up

Functions of Management

Planning, organizing, staffing, directing, controlling

Planning

Setting goals and deciding how to achieve them

Organizing

Arranging resources and tasks to accomplish goals

Staffing

Hiring and training employees

Directing

Leading, motivating, and supervising employees

Controlling

Evaluating performance and making corrections

Autocratic Leadership

Leadership style where manager makes all decisions alone

Democratic Leadership

Leadership style that encourages employee participation

Laissez-Faire Leadership

Hands-off leadership style encouraging creativity and independence

Transactional Leadership

Leadership style based on rewards and punishments

Line Organizational Structure

Direct chain of command from top to bottom

Line-and-Staff Structure

Managers supported by staff specialists

Matrix Structure

Employees report to more than one manager

Chain of Command

The flow of authority within an organization

Vertical Communication

Communication up and down the organizational hierarchy

Horizontal Communication

Communication between employees or departments at the same level

External Communication

Communication between a business and outside parties

Memo

Internal written communication used for policy updates

Business Ethics

Moral principles guiding business behavior

Ethical Dilemma

A situation where moral principles conflict

Unethical but Legal

Action that is legal but morally questionable

Confidentiality

The responsibility to protect private information

Data Breach

Unauthorized access or sharing of confidential information

First Response to Data Breach

Notify management or IT immediately

Intrapersonal Conflict

Conflict within an individual

Interpersonal Conflict

Conflict between two or more people

Favoritism

Unfairly favoring certain employees

Discrimination

Illegal unfair treatment based on protected characteristics

Just-in-Time Inventory (JIT)

Inventory system where goods arrive as needed

Risk of JIT

Stockouts caused by supply delays

Quality Control

Process that ensures products meet standards

Outsourcing

Hiring outside companies to perform business functions

Automation

Use of machines or technology to replace human labor

Automation Advantage

Increased efficiency and lower labor costs

Automation Disadvantage

Job loss and reduced employee morale

Gross Pay

Total earnings before deductions

Net Pay

Gross pay minus deductions

Payroll Taxes (Employer Portion)

Funds Social Security and Medicare

Matching Principle

Expenses recorded in the same period as related revenue

Revenue Recognition Principle

Revenue recorded when earned

Assets

Resources owned by a business

Liabilities

Debts owed by a business

Owner's Equity

Assets minus liabilities

Fixed Cost

Expense that remains constant regardless of production

Variable Cost

Expense that changes with production levels

Break-Even Point

Number of units needed to cover all costs

Net Profit

Revenue minus expenses

Cash Flow

The movement of cash in and out of a business

Importance of Cash Flow

Allows a business to pay bills on time

Liquidity

Ability to pay short-term debts

Law of Demand

As price increases, demand decreases

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats

Strengths

Internal advantages of a business

Weaknesses

Internal disadvantages of a business

Opportunities

External chances for growth or improvement

Threats

External risks to a business

Inventory Turnover

How often inventory is sold and replaced

Low Inventory Turnover

Indicates excess inventory

Markup Percentage

(Markup divided by cost) times 100

Discount Formula

Original price minus discount amount

Annual Expense

Monthly cost multiplied by 12

FBLA

Future Business Leaders of America

FBLA Mission

Prepare members for careers in business and leadership

FBLA Core Values

Service, Education, Progress

Ethical Business Benefits

Builds trust, loyalty, and long-term success

Productivity

Amount of output produced from given inputs

Mission Statement

Statement that guides long-term business decisions

Depreciation

Gradual loss of asset value over time

Intangible Asset

Non-physical asset such as a trademark or patent

Market Demand

Consumer willingness and ability to buy products