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Rotman Commerce
Course Code
John Oesch

of 12
RSM100 Notes
Stuff To Review:
-if velocity is constant, a rise in the price level means that money supply rose and the level
of transactions stayed the same
-labour unions formed from 1850-1900
-command economies fail because they do not generate enough innovation
-Marxist Ideas: workers were alienated, workers will eventually own all capital, and the
power of the state will eventually wither away
-Developing economies grew because they opened up foreign trade and increased exports
-GOLD serves 0 purpose in the monetary system
-A low unemployment rate and low interest rates (and rising money SUPPLY) lead to
inflation because of more spending
-When interest rates decrease, investments increase and so do jobs!
-Depreciation leads to more expensive imports and cheaper outputs for other countries
-Cutting taxes and increasing govt spending leads to increased demand for outputs and
economic growth
-govt spending on education is an possible source for Total Factor Productivity
-a larger physical capital stock is a possible source for Labour Productivity Growth
-GDP Expenditure includes exports, changes in inventory, and residential investment, but
NOT Wages and Salaries.
-BABY BOOM (1946-1963)
-decreasing income taxes and increasing spending will LEAST likely help the economy with
Baby Boomers
-When unemployment falls (not enough workers), wages rise and prices rise
-Dependency Ratio measures the total population to the employed population
-In the 1920s, the number of Canadians in urban areas was greater than rural areas
-Wheat exports increased from 1940-1945 because of WWII and decreased production from
Chapter 4 Entrepreneurship, Small Business, and New Venture Creation
A small business
-has fewer than 100 employees
-most innovative
-97.8% of employer businesses are small
-provides more jobs in total
-47% of all small and medium businesses are owned by women
A medium business
-has 100-500 employees
A large business
-500 or more employees
Entrepreneurship :
1.Idea Generation, most of which come from insights from previous jobs or hobbies
2.Screening, weeding out bad ideas by seeing IF:
-The idea adds value
-The idea provides a competitive advtange that can be sustained
-The idea is marketable and Financially Viable (by preparing sales forecasts, or
predictions of how much of a product will be purchased)
-The idea has low exit costs, in terms of time, money, and reputation.
3.Developing the Opportunity
a.Entry strategies include: introducing a completely new product/service,
product that will compete with existing things with a new twist, or start a
b.Create a business plan that includes:
i.Cover Page
ii.Executive Summary (1-3 pages)
iii.Table of Contents
iv.Company Description
v.Product/Service Description
vii.Operating Plan
ix.Financial Plan
x.Supporting Details/Appendix
4.Accessing Resources
a.Bootstrapping financing technique when owners make do with as few
resources as possible and use other peoples resources as much as they can
b.Debt Financing money that is borrowed and Equity Financing what the
entrepreneur invests, and private investors (Angels)
Forms of Business Ownership
Sole Proprietorship
Definition: a business owned and operated by one person
Usually small-scale form of business organization
Appeals to those who
oprefer to be their own bosses
oprefer to keep their financial affairs, business dealings and production
processes confidential
Required to have a municipal license or a provincial vendors permit
Most uncomplicated way to do business
The proprietor make all the business decisions
The proprietor is entitled to all the profits
Unlimited personal liability
oProprietors personal assets can be seized to pay off outstanding dept
No one to rely on to run the business or raise needed funds
Difficult and expensive to obtain business loans
Progressive income tax
othe more one earns, the higher the percentage rate of income tax one must pa
Definition: A firm owned by two or more people and bound by the terms of a legal document
known as a partnership agreement
oThis governs the business conduct of all partners and outlines their rights
and obligations
Appeal to those who
oPrefer not to assume by themselves all the risks of business operation
oIn addition, pride of ownership and satisfaction that come from being self
employed and after tax profits
A general partnership is where all partners take part in the management and have
unlimited personal liability for business losses
A limited partnership, not all are permitted to take part in the management of the
business and, in turn, are personally liable for business depts. Only up to the
amount of their original investment
Partnership legally terminates if he/she dies, become mentally incapacitated,
financially insolvent or acts against the best interest of the firm
Pooling of talent and capital
High personal motivation
Relatively few legal expenses and restrictions
Easier to obtain credit from suppliers and borrow money from the bank
Less interest rate compared to sole proprietors
General partners assume unlimited personal liability
Progressive personal income tax
Not easy for a partner to share his/her share in the firm
Partners must use personal savings or take out mortgages on person assets to raise
money for the partnership
Joint Liability A legal requirement that all partners in a partnership are together
liable for the debts of the partnership
Several Liability If one or more partners do not pay their share of a partnership
debts, the other partners are required to do so
Cannot usually attract large amounts of capital