Name:_____________________________
Chapter 8 Section 3
6. Regulatory Requirementsannual shareholders
meetings, careful recordkeeping; annual and
quarterly reports to the SEC
7. Possible Combinationshorizontal merger, vertical
merger, conglomerate
1. Corporate structureBoard of directors, who
appoints corporate
officers, who hire
managers and employees
that work in various
departments
INCORPORATION
2. Advantages for stockholderslimited liability; stocks can be
sold
3. Advantages for businessesgrowth potential; long life
potential
4. Start-up procedure- apply
for state license; receive
charter from state
5. Taxation- corporation pays
taxes on income;
stockholders pay taxes on
dividends and capital gains
Define and provide examples for the following words:
1. Horizontal merger- joins two or more firms competing in the same market with
the same good or service.
Example: If McDonalds and Burger King merged
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Name:_____________________________
2. Vertical merger- joins two or more firms involved in different stages of producing
the same good or service.
Example: If General Motors bought out Bridgestone Tires
3. Conglomerate- business combination merging more than 3 businesses that make
unrelated products.
Example: ITT, Avis Rent-a-Car, Sheraton Hotels and Continental Baking merged
Determine if each of the following statements is true or false and label accordingly. If
the answer is false, either correct the statement to make it true or write a statement
explaining why it’s false:
F
1. Companies in the same business might form vertical mergers.
F
2. Multinational corporations usually headquarter in several countries.
T
3. If you buy stocks, you own part of a corporation.
F
4. Corporate bonds pay dividends.
T
5. Dividends represent a portion of corporate profits.
T
6. Privately held corporations are also closely held corporations.
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Name:_____________________________
Chapter 8 Section 4
Business
Franchises
Cooperative
Organizations
Advantages
Disadvantages
2. management training and
support
3. standardized quality
1. submission to parent company’s
guidance
2. high franchise fees, royalty
payments
3. strict operating standards
4. National advertising programs
4. purchasing restrictions
5. financial assistance from parent
company
6. Centralized buying power
5. limited product line
1. Built-in product reputation
Membership and/or Purpose
Formed by individuals for
shared benefits
Categories
1. Consumer cooperatives
2. Service cooperatives
3. Producer cooperatives
Nonprofit
Organizations
Usually formed to benefit
society.
Mostly provides services
rather than goods.
1. Museums
2. Public schools
3. Hospitals
4. Adoption agencies
5. Churches
6. Professional organizations, business
associations, trade associations, and labor
unions.
Define the following terms:
1. Royalties- share of earnings given as payment
2. Trade association- a nonprofit organization that promotes the interests of a
particular industry
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Name:_____________________________
3. Cooperative- a business organization owned and operated by a group of
individuals for their mutual benefit
Choose the correct answer choice:
1. All of the following are advantages of incorporation EXCEPT
(a) the responsibility for the business is shared
(b) capital is easier to raise than in other business forms
(c) corporations face double taxation
(d) corporations have more potential for growth
2. A horizontal merger
(a) combines two or more firms involved in different stages of producing the same good
or service.
(b) combines two or more partnerships into a larger partnership.
(c) combines two or more firms competing in the same market with the same good or
service.
(d) combines more than three businesses producing unrelated goods.
3. A business franchise
(a) attempts to improve the image and working conditions of people in a particular
occupation.
(b) operates without the aim of profit.
(c) is a semi-independent business tied to a parent company.
(d) is not required to pay income taxes.
4. Consumer cooperatives
(a) are owned and operated by consumers.
(b) provide a service, rather than a good.
(c) help members sell their agricultural products.
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Name:_____________________________
(d) pay no income tax.
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