Entrepreneurs are persons who are willing to take a risk to create a new product or to develop a better way to operate a business.
Entrepreneurs use a variety of strategies
to succeed: * seizing unexpected opportunities * changing market conditions * improving a product or process * providing an alternative good or service * identifying population trends
E-commerce is the promotion and sale of goods and services over the Internet.
GDP (gross domestic product) is the total value of all goods and services produced by the US economy in a year .
Small Businesses:
Advantages * ability to adapt to change * ability to satisfy special markets
Challenges *poor management *inadequate financing *inability to hire highly qualified workers
Forms of Business Organization:
*sole proprietorship - a business oowned by one person
*partnership - a business owned by two or more people
* corporation -a business managed on behalf of the owners/stockholders, who provide the funds
The advantages and disadvantages of each form of business organization are very important. Make sure you can recognize and understand each of them, particularly the issues of limited v. unlimited liability, limited v. unlimited life and taxation.
There are additional forms of business organization that include:
* S Corporations
* Not-for-Profit Corporations
* Government-Owned Corporations
* Limited Liability Companies
* Cooperatives
* Franchises
Investment is the purchase of capital resources used to produce goods and services It may consist of shares in a corporation, real estate, or plant and equipment.
Financial markets coordinate the movement of money from investors to borrowers who are willing to pay for the use of someone else's money.
Businesses borrow money:
* long-term -bonds (IOUS) present a lower risk to the investor than stock. A bondholder is a CREDITOR of the corporation or government that issues the bond. If a business does go
bankrupt, creditors (bondholders) are paid before stockholders receive dividends.
* short-term -loans usually paid w/in the year and used to help w/cash flow problems. The most common forms of short-term financing are trade credit, loans from financial institutions and from other companies.
Equity is ownership in a business. A stockholder holds equity in a corporation. A stockholder is an OWNER of the corporation. Two types of stock issued by corporation:
* common
* preferred (no voted, but preferential treatment in dividend distribution.
Businesses save money by:
* depreciation -the value lost in assets like tools or machines as they wear out or become obsolete.
* retained earnings -profits less taxes not paid as dividends but reinvested in the business for purchase of new capital resources.
Corporations use their profits in three ways:
* pay income taxes to state and federal governments.
* distribute some of their profits to stockholders as dividends.
* set aside retained earnings.
Remember a balance sheet must balance! The equation may read: assets -liabilities = net worth
or assets=liabilities + net worth.
The income statement shows the profit-and-loss over a period of time.
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