CH 3, Section 2 p. 68 Terms: listed in front of section

CH 3, Section 2 p. 68Terms: listed in front of section Merger 68 a combination of two or more businesses to form one firm + =

Income statement 68 a report showing a business’s Sales Expenses Earnings and profits Over a period of time Quarterly (3 months) Annually (12 months)

Net income 68 gross income (revenue) minus: Expenses Taxes Cost of goods (inventory) Wages and salaries Interest payments

Depreciation 69 a non-cash charge the firm takes for the general wear and tear on its capital goods. May be deducted from taxes

Cash flow 69 the sum of net income and non-cash charges (depreciation). The true amount of profit (cash) made by the company’s operations.

Horizontal merger 71 two more firms that produce the same good or service join forces. Chase National Bank and the Bank of Manhattan => Chase Manhattan Bank

Vertical merger 71 firms involved in different steps of manufacturing or marketing join forces Main motivation is to Cut costs Avoid problems if a supplier Goes out of business Raise prices Goes in with a competitor Andrew Carnegie started US Steel, but Merged with an iron ore company to gain a cheaper price on iron. Merged with a rail company to get cheaper prices on transportation

Thinking Back Which type of merger was that of Continental Airlines and United Airlines? Why? Horizontal Because both companies do the same type of business.

Conglomerate 71 a firm having at least four businesses making unrelated goods and services Diversification: Ex.: RJ Reynolds (tobacco/cigarettes) Sea-Land (containerized shipping) KFC (fast food) Del Monte (fruit and vegetable processing) Heublein (wine and distilled spirits)

Korea Samsung Group GS Group Hyundai Heavy Industries Lotte Group Japan Lotte Group Panasonic Mitsubishi Itochu Corporation Sony Sega Sammy Holdings EU ThyssenKrupp Siemens AG Bayer Airbus Contrive Group US Fortune Brands The Walt Disney Company Koch Industries General Electric Berkshire Hathaway 4Kids Entertainment Other Conglomerates (samples)

Multinational 72 aka ‘Multinational Corporation’, MNC’, ‘Transnational’ A business that has manufacturing or service operations in a number of different countries. Microsoft, US Ford, US Coca Cola, US Gap, US Toyota, Japan Mitsubishi Sony Nabisco, UK British Petroleum (BP), UK Royal Dutch Shell, The Netherlands

CH 3, Section 3 p. 75Terms: listed in front of section Non-profit organization 75 Operates like a business Promotes a collective interest of its membership Does not seek financial gain for its owners from its operations. Schools Churches Hospitals Welfare groups Adoption agencies

Cooperative 76 aka Co-op A voluntary association of people formed to carry on some kind of economic activity that will benefit its members….. Cut costs by group purchases Special deals for members Goods and services Types include Consumer co-op Service co-op Producer co-op

Credit union 76 A service co-op Members usually employees in A similar job field A government agency A large corporation deposit money in it like a bank Get easier/faster loan terms and interest

Labor union 76 an organization of workers formed to represent workers. Hears and presents members’ interests in various employment matters. Collective bargaining Union negotiates with company over member’s issues, including….. Pay Work hours Health care coverage Life insurance Vacations Job related matters

Professional association 77 a group of people in a specialized occupation that works to improve the Working conditions Skill levels Public perception of the profession Samples include: American Medical Association American Bar Association American Federation of Teachers

Chamber of commerce 78 promotes the welfare of its members (business) and of the community national, state, and local Activities include: Promotion of business Opportunities Generation Education Neighborhood charity/assistance Lobbying government for favorable business legislation

Better Business Bureau 78 a non-profit organization sponsored by local businesses Provides general information on companies Maintains records on Consumer questions Consumer complaints Sometimes offers consumer education programs

Public utility 79 Any company that offers vital products or services to the public Privately owned Municipal-owned Include: Water, Natural gas Electricity Public transportation telephone Are regulated by the government to assure: Smooth, efficent operation Availability to all members of the public Reasonable rates Lower costs to low-income members

Hwk Assessments, Class Work, to Know

CH 3 sect 2 Assessments: Checking for Understanding 1 Mergers can diminish costs and increase buying power

Assessments 3 A firm can reinvest revenue from sales into the company: New plants Equipment technologies

Assessments 4 Grow faster Increase efficiency Acquire new product lines Eliminate rivals Change corporate image

Assessments 5 Horizontal: Two or more firms that produce same product or service merge Vertical: Firms in different steps of manufacturing or marketing merge

CH 3 sect 3 Assessments: Checking for Understanding 1 Consumer: Buy goods/services in bulk Offer members reduced prices Service: Provide only services instead of goods Producer Help member promote/sell products

Assessments 3 Community/civic organizations: Provide goods/services, Promote the common good Cooperatives: Carry on activities that benefit members Labor, Professional, and Business organizations: Promote interests of members Government: Regulate the economy

Assessments 4 Direct: Police and fire protection Schools Court systems Indirect: Regulation of public utilities Regulation of quasi-monopolies Subsidies

Images, p. 69 question: The cash flow + what does it make possible for the company? Investment in new plant Equipment technologies + what does that help generate for the company? Sales and services earnings

Images, p. 72 Question + Can a multinational BE a conglomerate (and vice versa)? Explain. Conglomerate: has at least four business Multinational Has manufacturing or service organizations in a number of different countries. Yes If the conglomerate makes goods and services in other nations If the multinational makes diversified goods and services.

Concepts List two reasons businesses merge. Define a vertical merger and a horizontal merger. Businesses merge because they want to increase or ensure their profits by becoming larger and more efficient. A horizontal merger is when two or more firms that produce the same kind of product join forces. A vertical merger takes place when firms involved in different steps of manufacturing or marketing come together

Image, p. 76 Question Consumer cooperative Buys bulk goods on behalf of members Service cooperative Offers members various services at lower costs Producer cooperative Helps members promote or sell their products and services

Image, p. 77 question Because a co-op buys goods in bulk, it can offer its members reduced prices. + Name a well-known consumer co-op in your city…..(remember, members pay a membership fee) Costco Sam’s Club

EC Project: due in two weeks You and up to one partner create a company around a real type of business. (26 EC possible) Company name ID product Incorporate the graphic organizer on p. 64 with your own information. write how each department would be involved in the product. Make up circumstances, but be accurate and appropriate. Ex.: Peach Corporation (2) Laptops (2) In one box (there are 11 (x2 pts) : Payroll -- cuts pay and bonus checks to various employees This example, so far, just earned 6 EC points for the individual/pair of students

CH 3, Section 2 p. 68 Terms: listed in front of section

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