Introduction to Business - Posted

Introduction to Business - Posted - Some changes to Primary...

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Unformatted text preview: Some changes to Primary Stakeholders for our class Primary Primary Stakeholders: – Owners (equity finance, stockholders, shareholders, investors all mean the same thing) the – Employees (not appointed by the BOD see slide 13. Receive health benefits) benefits) – Customers (B2B and B2C, always look from the perspective of the company in the case) company – Suppliers (raw material inputs and debt capital. Don’t receive health benefits.) benefits.) – Society (includes all levels of communities impacted by the business but not covered above. Not used very often: environmental concerns, Not potential employees) potential Why aren’t corporate Officers considered employees? Corporate Officers (appointed by the BOD) are expected to act like Corporate the Owners and have a strong fiduciary responsibility. the Why is the Government not a primary stakeholder? The government should not have a stake itself, but instead should The be serving in the best interest of the other primary stakeholder groups (i.e. a jury trial). groups General Introduction to Business Information You Should Know Information Please review the following slides on your Please own and come with questions on Thursday. Thursday. Business Defined Business Business: Profit-seeking enterprises or activities Business: that provide goods and services that → Established to serve the needs of consumers Established → Owners seek to make profits Owners Revenue: Revenue: – – – Sales, Sales, the Top line, the What customers pay you when they by goods or What services. services. Profit: Rewards for taking risk – – – Net Income The Bottom Line What owners get to keep after subtracting all costs to What run the business. run A business has to do well to do good business Profit is NOT a dirty word! Without profit, businesses Without cannot… cannot… Provide jobs for people. Pay taxes to the Pay community. community. Do other socially Do desirable things. desirable Survive in a very Survive competitive global economy. economy. Basic Forms of Ownership Basic Number Sales 72% 6% Partnership 8% 13% Corporation 20% 81% Sole Proprietorship Sole Proprietorships: The simplest form of business The ADVANTAGES Easy to start Easy (Flexibility) (Flexibility) Simple tax rules: Simple business income = personal income personal DISADVANTAGES Unlimited liability: Unlimited responsible for all debts debts Limited resources Limited available available – Financial support – Human resources Limited growth Limited potential potential Partnerships Partnerships ADVANTAGES More resources More available, both financial and talent financial Can share the load Longer survival (in Longer case of departure of a partner) partner) No special taxes DISADVANTAGES Unlimited liability in some Unlimited forms of partnership forms Division of profit Potential for Potential disagreements disagreements Exit conditions must be Exit spelled out in partnership agreement agreement Traditional Types of Partnerships Traditional Limited: At least one GP; rest are silent partners General: Each partner manages firm. Passive Investor GP GP GP GP Each GP has unlimited liability. GP Passive Investor Passive Investor Passive means they cannot actively manage firm. Recap on Traditional Partnerships: Recap General vs. Limited Limited partnerships are limited in both liability of silent partners and their ability to actively manage the firm. to At least one person in a limited At partnership must be on record as the managing partner or general partner. managing In general partnerships, each partner has In unlimited liability. unlimited Corporate Form of Ownership Corporate Origin of the term: – From Latin corpus, which means From corpus which “body” “body” A legal entity with a life of its own, legal apart from those who manage it apart – Can sign contracts Can – Can sue and be sued Articles of Incorporation filed with state serves as “birth certificate” for corporations. corporations. A single person can be a corporation, single does not need to be lots of owners. does Corporations Corporations What are the main advantages of incorporating a What business? business? → Limited liability, and more money can be raised Limited What gives them limited liability? What → The separation of ownership from control. The Typical Corporate Structure The stockholders own the company; majority rules. The Corporation The Board of Directors govern the corporation. The officers manage the company and make the dayto-day decisions (consider them owner for stakeholder analysis). Employees Corporations Corporations ADVANTAGES Limited liability Limited Greater access to $ Greater – Can sell shares of Can ownership to others ownership Separation of ownership Separation from management from Ease of ownership Ease transfer transfer DISADVANTAGES More costly to form Must keep accurate Must records records Potential for conflict with Potential Board of Directors Board Taxed TWICE if Taxed dividends given dividends Separation of ownership Separation from management from 3 Basic Types of Corporations of Private or Closely Held: Not traded on any stock exchange; stock held by a few exchange; Some are big: Hallmark, Bose, MasterCard and Mars Many are relatively small; a single individual can Many incorporate and form a corporation. incorporate Don’t have to share financials with outsiders Public: Shares traded on stock exchanges, widely held by many people and institutions held Financial statements are open to the public Financial Non-Profit: Performs public service, special tax considerations Private Enterprise System Private What is another name for the Private Enterprise What System? System? → Also known as capitalism Also System that rewards companies for their ability to System recognize and meet the needs of consumers. recognize – – Pure capitalism has very minimal laws Managed or Democratic Capitalism is driven by competition, but the Managed government plays a significant role in making laws to protect different groups. different Competition: Battle for customer acceptance → Industries with high product demand tend to have higher competition competition → Competition helps keep prices low but can result in lower profits profits → Adam Smith’s Invisible Hand Invisible What other economic systems are there? there? Pure Communism – 100% property owned by the collective government. Socialism – Government owned and private owned industries Government (50%/50% range). (50%/50% Democratic Socialism – Heavy government involvement in the economy (30% Heavy to 50% Government ownership). to Key Facts Key How many people are there in the United How States? States? – http:// www.census.gov/population/www/popclockus.html How many people are there in the World? – http://www.census.gov/ipc/www/popclockworld.html What is the largest country currently? China = 1.3 billion What will the largest country be in 2020? India ~ 1.4 billion Want to know more? Ask the CIA. – https:// www.cia.gov/cia/publications/factbook/index.html The Aging of America The 40.0 Median Age 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 1900 Source: Census Bureau 1920 1940 1960 1980 2000 % U.S. Population by Age U.S. 80% 70% 60% 50% Under 15 15-64 65+ 40% 30% 20% 10% 0% Source: Census Bureau 1920 1940 1960 1980 2000 The Changing Business Environment Environment But that is just the U.S. But We need a broader perspective. We The business world we live and compete in is The changing at a rapid pace. changing The world we live in is getting smaller. Recognize and embrace a broader world view Differences in languages Differences in culture, religion, attitudes Differences in political, legal and ethical environments Differences in economic environments – Exchange rates, currency conversions – Restrictions with respect to trade (tariffs, taxes, quotas) ...
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This document was uploaded on 11/01/2011 for the course BUS 101 at Miami University.

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