Private Enterprise and Capitalism
Accounting 2036
Chapter 1: Introduction
I. Private Enterprise and Capitalism
a. Private Enterprise
i. Individuals own companies that produce and sell services and/or goods for a profit ii. Must be able to obtain cash to begin to operate and grow
b. Service companies
i. Perform services or activities that benefit individuals or business customers
1. UPS, Great Cuts, Midas, accounting, law, medicine, architecture
c. Merchandising Companies
i. Purchase goods for resale to customers ii. Wholesalers primarily sell to retailer or commercial users iii. Retailers sell goods to final customers
d. Manufacturing Companies
i. Make their own product and then sell those products to customers ii. Make products first then sell them
1. Apple Inc, Stanley Black & Decker
e. Entrepreneurship and Sources of Capital
i. Capital
1. Funds a company needs to operate or to expand operations ii. Entrepreneurship
1. The owner’s idea, willingness of owner totake a risk, abilities of the company’s owner and employees to use capital to produce and sell goods or services
2. Entrepreneur
a. Individual who is willing to risk this uncertainty in exchange for earning a profit iii. Sources of Capital
1. Entrepreneur’s investment in the company
a. Return of the contribution
i. Hope to get back money he or she contributed to the company
b. Return on the Contribution
i. Additional money above the amount he or she originally contributed to the company
2. Borrowing
a. Borrow money from creditors (Banks)
b. Occurs when company’s profits and owner’s contributions are not large enough to finance growth
c. Solvent
i. Company can pay off its debts
II. Forms that Companies can Take
a. Not-for-profit Organizations
i. Does not have profit- making as a company goal
b. Sole Proprietorships
i. Company owned by one individual who is the sole investor of capital into the company ii. Most common type of company
c. Partnerships
i. Company owned by two or more individuals who
Chapter 1: Introduction
I. Private Enterprise and Capitalism
a. Private Enterprise
i. Individuals own companies that produce and sell services and/or goods for a profit ii. Must be able to obtain cash to begin to operate and grow
b. Service companies
i. Perform services or activities that benefit individuals or business customers
1. UPS, Great Cuts, Midas, accounting, law, medicine, architecture
c. Merchandising Companies
i. Purchase goods for resale to customers ii. Wholesalers primarily sell to retailer or commercial users iii. Retailers sell goods to final customers
d. Manufacturing Companies
i. Make their own product and then sell those products to customers ii. Make products first then sell them
1. Apple Inc, Stanley Black & Decker
e. Entrepreneurship and Sources of Capital
i. Capital
1. Funds a company needs to operate or to expand operations ii. Entrepreneurship
1. The owner’s idea, willingness of owner totake a risk, abilities of the company’s owner and employees to use capital to produce and sell goods or services
2. Entrepreneur
a. Individual who is willing to risk this uncertainty in exchange for earning a profit iii. Sources of Capital
1. Entrepreneur’s investment in the company
a. Return of the contribution
i. Hope to get back money he or she contributed to the company
b. Return on the Contribution
i. Additional money above the amount he or she originally contributed to the company
2. Borrowing
a. Borrow money from creditors (Banks)
b. Occurs when company’s profits and owner’s contributions are not large enough to finance growth
c. Solvent
i. Company can pay off its debts
II. Forms that Companies can Take
a. Not-for-profit Organizations
i. Does not have profit- making as a company goal
b. Sole Proprietorships
i. Company owned by one individual who is the sole investor of capital into the company ii. Most common type of company
c. Partnerships
i. Company owned by two or more individuals who