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