When I was your age……. In 1969……. New home $27,900 Cost of a stamp $0.06 Gal. of gas $0.35 Gal of milk $1.10 In 1979…… New home $71,800 Stamp $0.15 Gal. of gas $0.86 Gal. of milk $1.62 In 1989….. New home $148,800 Stamp $0.25 Gal. of gas $1.12 Gal. of milk $2.34 In 1999….. New home $195,800 Stamp $0.33 Gal. of gas $1.17 Gal. of milk $3.32
New home $234,600
Gal of Gas $1.93
Gal of Milk $3.82
Why would the man not want govt. regulation?
What is the artist’s attitude towards wall street?
Is govt. regulation good for business or bad? Why?
Forms of Business Organization
What is sole proprietorship?
What are the advantages and disadvantages of the partnership?
Describe the structure and features of a corporation?
Business owned by one person.
Most common form of business.
Easy to start.
Owner doesn’t have to share profits
Doesn’t have to pay separate taxes
Disadvantages of Proprietorship
Owner is personally responsible for all losses and debts.
Difficulty in raising financial capital
Size and efficiency
Hard to find good help
Easy to start
Easy to manage
Lack of special taxes on a partnership
Can attract more financial capital
Larger in size
Easy to attract top talent
Each partner is responsible for the others.
Conflict-not everyone gets along with others.
Form of business organization recognized by law as a separate legal entity having all the rights of an individual.
Count for about 20% of the firms in the U.S.
Very formal and legal arrangement.
Has charter, stockholders, and usually a board that makes decisions.
Common stock represents basic ownership in a corporation.
Preferred stock is a nonvoting share of the company. Receive dividends before common stockholders.
Advantages and Disadvantages
Ease of raising financial capital.
Directors can hire professional managers
Provides limited liability for the owner.
Charters are expensive
Shareholders have little say in how the company should be run.
Double taxation of profits
Subject to more govt. regulation
In theory, capitalism calls for less govt. intervention.
However, some regulation is necessary. Especially for businesses that control utilities such as gas, phone, power, etc.
Govts also play a part in attracting business.
What does the tourney bracket represent?
Why would the artist use the tourney bracket to describe the economic situation?
What is the artist trying to tell us about our economy?
Business Growth and Expansion
How do businesses reinvest their profits to grow?
What are the reasons that cause firms to merge?
What are the two types of mergers?
Companies grow by a number of ways.
Two major ways are reinvestment and mergers.
Mergers occur when two or more companies combine.
Reinvestment is where a company takes some of its revenue to upgrade technology, machinery, buy more property, etc.
A company finds its net income by subtracting wages, interest payments, depreciation from its revenue.
The company comes up with the bottom line by adding all non-cash charges with net income.
Now it takes this cash flow and can purchase upgrades or find a more efficient way to produce.
When a companies merge, one company has to give up a legal identity.
One reasons that mergers take place is the desire for growth and to be bigger.
Efficiency is another reason, the smaller company might have a management problem so they merger with a more efficient company.
Can you think of any mergers that have recently taken place?
Types of Mergers
Horizontal- two or more firms produce the same type of product and join forces.
Vertical- companies purchase companies that produce supplemental goods or capital goods.
Conglomerates vs. Multinationals
Conglomerates have at least four businesses that make unrelated products. This leads to diversification. Since the 1980’s many conglomerates have declined in the U.S.
Multinationals operate in a number of countries. This is a more common type of business. Some examples are UPS, Pepsi, Coca-Cola, etc.
What is this cartoon saying about our economy?
Do you think that fear is a factor in today’s economic world?
What is a non-profit organization?
What role does government play in our economy?
What is a Co-op?
How do labor unions affect our economy?
Are designed to reap some other kind of reward.
Some examples are schools, adoption agencies, welfare, churches, hospitals (yeah, right!), etc.
Voluntary association of people that carry out some kind of economic activity.
Consumer co-ops buy bulk amounts of a good on behalf of its members.
Service co-ops provide a service such as credit, insurance, etc.
Producer Co-ops sell their products to help promote its members.
Labor Unions and other Organizations
Labor unions are organized to benefit its members in employment activities. They served their purpose in the past, but are far more driven by political agendas now.
Government’s role in economy
Produces goods/services to people
Ex. FDIC, TVA, Post Office
Acts as a regulator to make sure that the economy operates efficiently.