Chapter 19 Lesson 2 Business Organizations and Your

Chapter 19 : Lesson 2 Business Organizations and Your Money

Essential Question: Why is the role of an investor an important part of the economy?

Capital Formation : the transfer of money from households to businesses and government through investments and loans

Sole Proprietorship : unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the USA

Unlimited Liability : requirement that an owner is personally and fully responsible for all losses and debts of a business

Limited Life: situation in which a firm legally ceases to exist when the owner dies, quits, or a new owner is added; applies to sole proprietorship.

Partnership: business owned and operated by two or more people who share profits and unlimited liability.

Dividends: checks paid to stockholders, usually quarterly, representing portion of corporate profits

Preferred Stock: form of stock without vote, in which stockholders get their investments back before common stockholders

Common Stock: Most common form of corporate ownership, with one vote per share for stockholders

Portfolio Diversification: Strategy of holding different investments to protect against risk

Mutual Fund: company that sells shares of a portfolio of securities; stocks and bonds issued by other companies.

Stockbroker: person who buys or sells securities for investor

Six was to invest in Corporate and Government Bonds

Municipal Bonds: a type of investment, often tax exempt, issued by state and local governments; known as Munis

Treasury Bills : United States government obligation with a maturity of a few days to 52 weeks

Treasury Notes : United States government obligation with a maturity of 2 to 10 years

Treasury Bonds : United States government obligation with a maturity of 30 years

Savings Bonds : Low-denomination, non- transferable bond issued by the federal government, usually through payroll savings plan

Individual Retirement Accounts (IRAs) : retirement account in the form of a long-term time deposit, with annual contributions not taxed until withdrawn during retirement

Review Question: Chapter 19 : Lesson 2 Read pages 568 -573 and answer Review Questions on page 573. Hand in Google Class Room.