Growth Through Reinvestment An income statement is a

Growth Through Reinvestment • An income statement is a report that shows a business’s sales, expenses, net income, and cash flow for a period of time. • Depreciation is a noncash charge for the general wear and tear on capital goods. • A company’s cash flow is a comprehensive measure of its profits because it represents the total amount of after-tax income generated by the company operations. • Reinvesting cash flow into a business allows the business to produce new or additional products, which may generate additional sales and even larger cash flow.

Growth Through Mergers • Merging is a combination of two or more businesses to form a single firm. • The two types of mergers are horizontal and vertical mergers. • Reasons for merging include faster growth, synergy, economies of scale, diversification, elimination of rivals, or changing or losing a corporate identity that is associated with errors or problems. • Conglomerates are firms that have at least four businesses that make unrelated products, none of which is responsible for a majority of sales. • Multinational corporations can move resources, goods, services, and financial capital across national borders.

Entrepreneurial Funding for Start-Ups • Start-up incubators are places within states and universities where potential entrepreneurs can get training in accounting, engineering, and managerial skills, as well as potential financing. • Venture capitalists lend investment funds to new or unproven businesses in exchange for a share of ownership (equity). • Angel investors are people who lend start-up money informally and are typically more interested in helping the individual survive than in getting a substantial return on their investment. • Crowdfunding, or crowdsourcing, involves using social networking to appeal to potential investors.