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Business Essentials, Fifth Canadian Edition


The purchase of a company by another, larger firm, which absorbs the smaller company into its operations.

board of directors:

A group of individuals elected by a firm's shareholders and charged with overseeing, and taking legal responsibility for, the firm's actions.

business plan:

Document in which the entrepreneur summarizes her or his business strategy for the proposed new venture and how that strategy will be implemented.

chief executive officer (CEO):

The person responsible for the firm's overall performance.


An organization that is formed to benefit its owners in the form of reduced prices and/or the distribution of surpluses at year-end.

common stock:

Shares whose owners usually have last claim on the corporation's assets (after creditors and owners of preferred stock) but who have voting rights in the firm.

conglomerate merger:

A merger of two firms in completely unrelated businesses.

corporate governance:

The relationship between shareholders, the board of directors, and other top managers in the corporation.


Occurs when a company sells part of its existing business operations to another company.

employee stock ownership plan (ESOP):

An arrangement whereby a corporation buys its own stock with loaned funds and holds it in trust for its employees. Employees "earn'' the stock based on some condition such as seniority. Employees control the stock's voting rights immediately, even though they may not take physical possession of the stock until specified conditions are met.


A business person who accepts both the risks and the opportunities involved in creating and operating a new business venture.


An arrangement that gives franchisees (buyers) the right to sell the product of the franchiser (the seller).

franchising agreement:

Stipulates the duties and responsibilities of the franchisee and the franchiser.

friendly takeover:

An acquisition in which the management of the acquired company welcomes the firm's buyout by another company.

general partner:

A partner who is actively involved in managing the firm and has unlimited liability.

horizontal merger:

A merger of two firms that have previously been direct competitors in the same industry.

hostile takeover:

An acquisition in which the management of the acquired company fights the firm's buyout by another company.

initial public offering (IPO):

Selling shares of stock in a company for the first time to the general investing public.

inside directors:

Members of a corporation's board of directors who are also full-time employees of the corporation.

limited liability:

Investor liability is limited to their personal investments in the corporation; courts cannot touch the personal assets of investors in the event that the corporation goes bankrupt.

limited partner:

A partner who generally does not participate actively in the business, and whose liability is limited to the amount invested in the partnership.


The union of two companies to form a single new business.


An enterprise that the owner operates part-time from the home while continuing regular employment elsewhere.

outside directors:

Members of a corporation's board of directors who are not also employees of the corporation on a day-to-day basis.

parent corporation:

A corporation that owns a subsidiary.


A business with two or more owners who share in the operation of the firm and in financial responsibility for the firm's debts.

preferred stock:

Shares whose owners have first claim on the corporation's assets and profits but who usually have no voting rights in the firm.

private corporation:

A business whose stock is held by a small group of individuals and is not usually available for sale to the general public.

public corporation:

A business whose stock is widely held and available for sale to the general public.

small business:

An independently owned and managed business that does not dominate its market.

sole proprietorship:

Business owned and usually operated by one person who is responsible for all of its debts.


Strategy of setting up one or more corporate units as new, independent corporations.


A share of ownership in a corporation.

stockholders (or shareholders):

Those who own shares of stock in a company.

strategic alliance:

An enterprise in which two or more persons or companies temporarily join forces to undertake a particular project.

subsidiary corporation:

One that is owned by another corporation.

tender offer:

An offer to buy shares made by a prospective buyer directly to a corporation's shareholders.

unlimited liability:

A person who invests in a business is liable for all debts incurred by the business; personal possessions can be taken to pay debts.

vertical merger:

A merger of two firms that have previously had a buyer—seller relationship.

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