The American Private Enterprise
System
Part IV
How to Do Business
Overview of How to Do Business• Business Organizations- produce or manufacture, distribute, or sell goods
and services
• Production of Basic Commodities- basic-raw goods and materials consumers- coal and oranges
• Processing and Manufacturing- make basic commodities more useful to consumers
• Marketing- selling and transporting products
• Business Services- selling services instead of products to people or businesses
How Does Business Produce?
• Basic Natural Resources• Labor• Capital• Management• Government• Capital Goods
What Business Does for a Community??
• Provides our basic needs:– Food– Shelter– Clothing– Transportation– Communication– Services
Starting a Business
Entrepreneur A person with a new idea who took a risk in the hope of making PROFIT
Problems of Productivity
ProductivityOutput per worker per hour• Flood of inexperienced workers• Failure of firms• Implementation of technology
A Topsy Turvey Investment World
• Core- financial system that puts money to work to make more money
• Our economy relies on financial markets to funnel peoples savings into industrial expansion
• Inflation • Double Digit Interest Rates• Stocks and Bonds • Raising the Money
In the Driver Seat
• Board of Directors– Officers of the Company– Major stockholders– Outsiders who can provide useful connections
with law firms, banks, investment houses, and customers
Stock Market
• “Hub of the Investment World”• More than 40 Million individuals own shares
in the U.S. corporations (valued at $1 Trillion)• Stocks can provide:– Dividend- profits a firm distributes to its
shareholders– Capital gain- investor reaps when a stock is sold
for more than the original PRICE
Stock Prices
• Bear Market- prices are FALLING • Bull Market- prices are RISING• Influenced by: – Value of firms assets– Earning prospects– Investor demand
How the Market Works?
• Buying and Selling Bonds– Less Risky than Stocks• Invest savings• Bond certificate
• Hedging Bets– Buying or selling a stock at a current market price
prior to the future date