Corporation

Partnership

Forms of business

Private

Public

Sole traders (sole proprietorship )

General

Limited

Peculiarities of each form, its advantages and disadvantages are presented in the table A

Table A

Forms of business (definition, peculiarities, advantages and disadvantages)

		Form of business	Peculiarities	Advantages	Disadvantages
		Sole traders (sole proprietor-ship )	Simplest form of business, arranged and run by one person	Easy to start; Very flexible, The owner has absolute control	has unlimited liability. Creditors may proceed not only against the assets and property of the business, but also after the personal properties of the owner. the law basically treats the business and the owner as one and the same. This uniform treatment also has important tax implications. the potential growth and reach of a sole proprietorship pale in comparison with that of a corporation
	Limited companies	Public company	A corporation is a juridical entity established under the Corporation Code and registered with the SEC. It must be created by or composed of at least 5 natural persons (up to a maximum of 15), technically called “incorporators.”	The liability of the shareholders of a corporation is limited to the amount of their capital contribution.	A corporation, however, is relatively more difficult to create, organize and manage. There are more reportorial requirements with the SEC. Unless you own sufficient number of shares to control the corporation, you’ll most likely be left with no participation in the management. The impact of these concerns, however, is minimized by the army of lawyers, accountants and consultants that assist the corporation’s management.
		Private company
	Partnership	general (In a general partnership, the partners have unlimited liability for the debts and obligation of the partnership, pretty much like a sole proprietorship)	consists of two or more persons (up to 20) who bind themselves to contribute money or industry to a common fund, with the intention of dividing the profits among themselves		a partnership is dissolved upon the death of a partner or whenever a partner bolts out
		In a limited partnership, one or more general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions

Questions on unit 2:

1. What is business?

2. What business classification do you know?

3. What forms of business do you know?

4. What is the difference between public and private company?

5. What types of partnership do you know? What is the difference between them?

6. What is sole trade? What are the advantages of it?

7. Compare different forms of business. What is the most optimal one for you to start? Why?

UNIT 3Types of Economic Systems

A traditional economic system The work that people do, the goods and services they provide, how they use and exchange resource, all tend to follow long-established patterns. These economic systems are not very dynamic – things don’t change very much. Standards of living are static; individuals don’t enjoy much financial or occupational mobility. But economic behaviors and relationships are predictable. You know what you are supposed to do, who you trade with, and what to expect from others.

Today you can find traditional economic systems at work among Australian aborigines and some isolated tribes in the Amazon. In the past, they could be found everywhere – in the feudal agrarian villages of medieval Europe, for example.

In a command economic system or planned economy, the government controls the economy. The state decides how to use and distribute resources. The government regulates prices and wages; it may even determine what sorts of work individuals do. Socialism is a type of command economic system. Historically, the government has assumed varying degrees of control over the economy in socialist countries. In some, only major industries have been subjected to government management; in others, the government has exercised far more extensive control over the economy.

The classic (failed) example of a command economy was the communist Soviet Union. The collapse of the communist bloc in the late 1980s led to the demise of many command economies around the world; Cuba continues to hold on to its planned economy even today.

In market economies, economic decisions are made by individuals. The unfettered interaction of individuals and companies in the marketplace determines how resources are allocated and goods are distributed. Individuals choose how to invest their personal resources-what training to pursue, what jobs to take, what goods or services to produce. And individuals decide what to consume. Within a pure market economy the government is entirely absent from economic affairs.

A mixed economic system combines elements of the market and command economy. Many economic decisions are made in the market by individuals. But the government also plays a role in the allocation and distribution of resources.

The United States today, like most advanced nations, is a mixed economy. The eternal question for mixed economies is just what the right mix between the public and private sectors of the economy should be.

Questions to Unit 4

1. W hat types of economic system do you know?

2. What is traditional economic system?

3. What is the peculiarity of command economic system?

4. What is market economic system?

5. What is the main idea of mixed economic system?

UNIT 4 PROFIT AND WEALTH

I n accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses.

The surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise.

Profit is reflected in reduction in liabilities, increase in assets, and/or increase in owners' equity. It furnishes resources for investing in future operations, and its absence may result in the extinction of a company. As an indicator of comparative performance, however, it is less valuable than return on investment (ROI). Also called earnings, gain, or income.

There are several important profit measures in common use. Note that the words earnings, profit and income are used as substitutes in some of these terms (also depending on US or UK usage), thus inflating the number of profit measures.

Gross profit equals sales revenue minus cost of goods sold (COGS), thus removing only the part of expenses that can be traced directly to the production or purchase of the goods. Gross profit still includes general (overhead) expenses like R&D, S&M, G&A, also interest expense, taxes and extraordinary items.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) equals sales revenue minus cost of goods sold and all expenses except for interest, amortization, depreciation and taxes. It measures the cash earnings that can be used to pay interest and repay the principal. Since interest is paid before income tax is calculated, the debtholder can ignore taxes.

Earnings Before Interest and Taxes (EBIT) or Operating profit equals sales revenue minus cost of goods sold and all expenses except for interest and taxes. This is the surplus generated by operations. It is also known as Operating Profit Before Interest and Taxes (OPBIT) or simply Profit Before Interest and Taxes (PBIT).

Earnings Before Tax (EBT) or Net Profit Before Tax equals sales revenue minus cost of goods sold and all expenses except for taxes. It is also known as pre-tax book income (PTBI), net operating income before taxes or simply pre-tax Income.

Earnings After Tax or Net Profit After Tax equals sales revenue after deducting all expenses, including taxes (unless some distinction about the treatment of extraordinary expenses is made). In the US, the term Net Income is commonly used. Income before extraordinary expenses represents the same but before adjusting for extraordinary items.

Earnings After Tax (or Net Profit After Tax) minus payable dividends becomes Retained Earnings.

To accountants, Economic Profit, or EP, is a single-period metric to determine the value created by a company in one period – usually a year. It is Earnings After Tax less the Equity Charge, a risk-weighted cost of capital. This is almost identical to the economists' definition of economic profit.

Questions to UNIT 4

1. W hat is profit?

2. What is the difference between profit and benefit?

3. What profit measures are used?

4. What is the connection between profit and wealth?

5. How do you understand the phrase: Profit is the engine of business?

UNIT 5 Business Cycle

The business cycle describes the phases of growth and decline in an economy. The goal of economic policy is to keep the economy in a healthy growth rate – fast enough to create jobs for everyone who wants one, but slow enough to avoid inflation. Unfortunately, life is not so simple. Many factors can cause an economy to be out of control, or settle into depression. The most important, over-riding factor (определяющий) is confidence of investors, consumers, businesses and politicians. The economy grows when there is confidence in the future and in policymakers, and does the opposite when confidence drops.

There are four stages that describe the business cycle. At any point in time you are in one of these stages:

1. Contraction - When the economy starts slowing down.

2. Trough - When the economy hits bottom, usually in a recession.

3. Expansion - When the economy starts growing again.

4. Peak - When the economy is in a state of exuberance (изобилие)

What Causes the Business Cycle?

The business cycle is affected by all the forces of supply and demand. When consumers are confident, they buy now knowing there will be income in the future from better jobs, higher homes values and increasing stock prices. Even a little healthy inflation can trigger demand (вызывать спрос) by spurring (побуждая) shoppers to buy now before prices go up. As demand increases, businesses hire new workers, which further stimulates more demand. This is the Expansion phase.

If demand outstrips (опережать) supply, then the economy can overheat. It's still the Expansion phase, but if demand isn't cooled down with higher taxes (fiscal policy) or higher interest rates (monetary policy), then the Peak is not far off.

In the Contraction phase, confidence is replaced by fear or even panic. Consumers sell their homes, and stop buying. Businesses lay off workers, and hoard (копить) cash. In addition to demand, the business cycle is also heavily dependent on the availability of capital. This is known as liquidity, and is itself dependent upon interest rates. A trough usually is accompanied by a recession and a bear market, while an expansion is usually signaled by a bull market and inflation.

Questions of UNIT 5

1. W hat is the goal of economic policy?

2. What stages of business cycle are there?

3. What is the peculiarity of contraction stage?

4. What is the role of expansion stage?

5. What happens if demand outstrips supply on expansion stage?

6. What forces is business cycle affected by?

7. What is over-riding factor of business cycle?

8. What causes the business cycle?

UNIT 6 Market Research

M arketing research is "the function that links the consumers, customers, and public to the marketer through information – information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications."[1] Marketing research is the systematic gathering, recording, and analysis of data about issues relating to marketing products and services. The goal of marketing research is to identify and assess how changing elements of the marketing mix impacts customer behavior.

Marketing research

by target market

by methodological approach

Consumer marketing research

Business-to-business (B2B) marketing research

Qualitative marketing research

Quantitative marketing research

Consumer marketing research is a form of applied sociology that concentrates on understanding the preferences, attitudes, and behaviors of consumers in a market-based economy, and it aims to understand the effects and comparative success of marketing campaigns.

Marketing research may also be described as the systematic and objective identification, collection, analysis, and dissemination of information for the purpose of assisting management in decision making related to the identification and solution of problems and opportunities in marketing

Market research should answer the number of questions:

• Whether the market for a product is growing, shrinking or..

• how customers see the company and its product

• Who the competition is

• How the market is changing and how people spend the money

• the standards and the features the public expects from a product

• what price they will pay

• How people react to the new product

Market research
Field research	Desk research