Term
| Proprietorship definition |
|
Definition
| business enterprises owned by a single individual or household |
|
|
Term
|
Definition
-small businesses
-family farms
-retail trade owned by an individual
-72% of US businesses
-only 5% of total revenues |
|
|
Term
| Proprietorship advantages |
|
Definition
-owners have complete control over the business
-fewer legal obligations
-few taxes (and not double taxed) |
|
|
Term
| Proprietorship disadvantages |
|
Definition
-the owner is solely responsible and has unlimited liability for the debts of the company
-raising funds can be difficult |
|
|
Term
|
Definition
| exist when two or more persons together own a business enterprise and make a formal or informal agreement b/t the partners as to how the business is to be operated and how profits are to be distributed. |
|
|
Term
|
Definition
-found in financial service area, such as insurance and real estate agencies
-fairly common in retail trade(small stores) |
|
|
Term
|
Definition
-relatively easy to set up
-provides easier access to funds than a proprietorship
-not double taxed |
|
|
Term
| Partnership disadvantages |
|
Definition
-each partner has unlimited liability for the company's debt
-legal complications arise when any change in ownership occurs |
|
|
Term
|
Definition
| a legal entity owned by stockholders whose liability is limited to the value of their stock. |
|
|
Term
|
Definition
-generally more than one owner, some have 100,000's owners.
-if it has fewer than 35 owner and no foreign or corporate stockholders then it is an S corporation. |
|
|
Term
|
Definition
-can continue indefinitely w/o and change in its legal status
-if one of the owners dies or decides to sell his interest in the firm, it will NOT affect the status of the corporation.
-access to large amounts of capital necessary for efficient operation |
|
|
Term
| Corporation disadvantages |
|
Definition
-double taxed
-separation of ownership and management
-typical owner(stockholder) has little or no voice in decisions
-failure to earn a normal rate of return can endanger the existence of a firm
-profits provide funds for expansion |
|
|
Term
|
Definition
| occurs when the agents(managers) are pursuing their own individual goals rather than those of the principals(shareholders) |
|
|
Term
|
Definition
| the owners of corporations own shares of stock in the company |
|
|
Term
|
Definition
| regular, fixed dividend of payment |
|
|
Term
|
Definition
-residual claimants on the resources of the corporation.
-dividends frequently vary with profits. |
|
|
Term
|
Definition
| most common form of corporate borrowing |
|
|
Term
|
Definition
| creditor to whom the corporation has a debt obligation |
|
|
Term
| plowbacks or reinvestment |
|
Definition
| practice of using corporate profits for capital investment rather then dividend payouts |
|
|
Term
|
Definition
|
|
Term
| price earnings ratio formula |
|
Definition
| the price of the stock divided by the amount the company earned per share over the past year |
|
|
Term
| Price earnings ratio definition |
|
Definition
measure of how highly a stock is valued.
-average is about 15.
- >15, the stock is relatively expensive in terms of recent earnings, might be overvalued or investors are expecting share prices to rise in the future
- <15, stock is undervalued or investors may expect future earnings to fall. |
|
|
