CHAPTER 10PRINCIPLES OF ECONOMICS THE FIRMS Submitted by: BSBM 102-C Ian Mark C. De Viana Regine Uson Mary Rose Gozo Submitted to: Mr. Christian J. Umlas
Business FirmsThese are the entities that employ factors of production (resources) and produces goods and services to be sold to the consumers, other firms of government.
Forms of Business Firms• Sole Proprietorship• Partnership• Cooperative• Corporation
Sole ProprietorshipIt is a form of business organization owned and controlled by a single individual.
Advantages of Sole Proprietorship• The single proprietor is the boss• Capital requirement is very small• Lesser business documents are required• Conflicts and quarrels are minimized
Disadvantages of Sole Proprietorship• Engages himself in borrowing and mortgaging his properties• Inability in transforming his small scale business into large-scale• Lack of managerial ability
Partnership It is a form of business organization owned and controlled by two or more persons. Who bind themselves to contribute money, property or industry to a common fund, with the intention of dividing profits among themselves. (General provisions, Article 1767).
Advantages of Partnership• The owners may transfer their shares of stock to new owners without affecting the life of the corporation.• Stockholders cannot be personally liable for any debts of the corporation.• A corporation may spread its responsibilities over many persons hired by the corporations.
Disadvantages of Partnership• A corporation is difficult to organize since it requires the permission of the government to operate.• Any changes in its original purpose require the approval of the government.• Government regulation is also apt to be more extensive in the case of a corporation.
Cooperative• It is a business voluntary organize by its members in order to operate.• It is the only one organization composed primarily of small producers and consumers who voluntarily join together to form business which they themselves own, control and patronize.
Basic Cooperative principles• Open and voluntary membership• Democratic control• Limited returns on capital• Patronage refund
Failures of Cooperative• Failure of the Board of Directors and members to provide adequate capital.• Incompetent management• Lack of proper understanding of the aims of the cooperatives• The inability to meet competition happens when a very small amount of capital outlay is provided in the business.
Similarities of Cooperative and Corporation• Factors of production are privately owned, controlled and managed.• Both depend on business efficiency to survive in a corporate market.• Their activities and operations are both regulated and supervised by the government.• Both enjoy a reasonable degree of economic freedom.
Differences of Cooperative and Corporation• Cooperatives are for service while corporations are for profits.• Membership in cooperatives is open, it is a “one man, one vote, no proxy”, while membership under a corporation is open only wealthy members of the society.• Profits are distributed among the members of the cooperative based on their patronage, while profits are distributed to the members of the corporation base on the number of their shares.
Financing Corporate Activities Ways of Corporation where they can increase their profits• Selling Bonds (sometimes referred to as issuing debt)• Issue (sell) additional shares of stock
Bond It is a statement that promises to pay back a certain fixed sum of money at specific point of time.
Share of Stock It is a certification of the assets of a corporation that give the purchaser a share of the ownership of the corporation
Non- profit OrganizationPublic Corporation It is created for the purpose connected with the administration of the government.Non-stock Corporation Their objective is to promote public welfare most of them are the religious, social, scientific, civic and political organizations and societies.
Ethical Standard in Business• If the business firms obey the golden rules, then there would be no need for a body of laws that will attempt to keep all rules and regulations within bounds.• Ethical rules have suppressed the ethical psychology of business because of the economic influence which lies in a capitalistic society’s motive of acquiring profits.
Ethics and Capitalism• The theory on the acquisition of gains puts the objective of the firm which is to “satisfy consumers” as the secondary objective. A person under the capitalist state of economy recognizes the role of morality and he is ready to put into practice the acceptable norms of the society. No ethical standard shall seek to correct bad practices.
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