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2 Paths to Business Growth

2 Paths to Business Growth. Reinvestment and Mergers. Reinvestment. Companies often use revenue from sales to buy more capital goods Investing in capital goods / new technology =business growth Companies use income statements to calculate how much money can be used for reinvestment.

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2 Paths to Business Growth

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  1. 2 Paths to Business Growth Reinvestment and Mergers

  2. Reinvestment • Companies often use revenue from sales to buy more capital goods • Investing in capital goods / new technology =business growth • Companies use income statements to calculate how much money can be used for reinvestment

  3. Mergers • When two businesses join and one loses its separate legal identity • Exp: Cingular and AT&T, Exxon-Mobil

  4. Reasons Companies Merge • Desire for growth • Efficiency

  5. Reasons for Merging Cont’d. • Desire for new product lines • AT&T buying cable TV firms • Desire to catch up with or eliminate competition • Royal Caribbean Cruise lines merged with Celebrity Cruise lines • Desire to lose corporate identity • ValuJet merged with AirWays to form AirTran Holding Co.

  6. Types of Mergers • Horizontal Mergers • When two companies who produce the same type of products merge • Cingular and AT&T • Vertical Mergers • When companies involved in different steps of manufacturing merge

  7. Conglomerates and Multi-Nationals • Conglomerate • A firm that owns at least 4 companies that produce unrelated products • Exp: Proctor and Gamble • Multi-National • A firm that has operations outside of the U.S.

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