AFM 131 - Chapter 4 Notes

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Accounting & Financial Management
AFM 131
Robert Sproule

Chapter 4 Notes 1 The Role of Government in Business Government Affects Business:  National Policy is the government placing high tariffs on imports from the US to protect Canadian manufacturing. (pg 103) Crown Corporations  A company owned by the provincial or federal government (ex. LCBO).  They were created to bail out failing industries or provide services that were otherwise impossible to provide (ex. Air Canada was formed in the 1930s).  Privatization occurs when the government sells these Crown Corporations to the free market. (pg 103) Laws and Regulations  Can have a huge impact on business.  Laws come from 4 sources: 1.) Constitution; 2.) precedents established by judges; 3.) provincial and federal statutes; 4.) and federal and provincial administrative agencies. (pg 105) Federal Government Responsibilities  Some responsibilities that affect businesses include: trade regulations; incorporation of federal companies; taxation; banking and monetary system; national defense; unemployment; immigration; criminal law; fisheries.  Responsible for issues affecting citizens all across Canada.  Ensure and support the country’s economic performance.  Lobbies with other governments around the world to reduce trade barriers.  Helps to ensure competition exists and include fair practices.  Marketing Boards control the supply and pricing of certain agricultural products in Canada. This is done to improve the stability of the otherwise volatile agricultural industry. (pg 106-108) Provincial Government Responsibilities  They are responsible for the following: regulation of provincial trade and commerce; natural resources within their boundaries; direct taxation for provincial purposes; incorporation of provincial companies; licensing for revenue purposes; administration of justice; health and social services; municipal affairs, property law; labour law; and education.  Responsible for issues province-wide.  Federal and provincial governments work together to provide healthcare. (pg109-110) Municipal Government Responsibilities  Set up by provincial legislatures to govern smaller areas, like cities and counties.  Have roles in consumer protection.  Issue municipality license to operate and charge for utilities. (pg 111-112) Taxation and Financial Policies  Taxes are the way all governments make their money and redistribute wealth. Chapter 4 Notes 2  Sin taxes are placed on items that the government does not want people to consume, such as cigarettes. (pg 112) Stabilizing the Economy through Fiscal Policy  Fiscal Policy is the federal government’s efforts to keep the economy stable by increasing or decreasing taxes/government spending.  High taxes slow the economy while low taxes stimulate the economy.  A deficit occurs when the government spends more money than the amount it gathers in taxes.  Governments sometimes face pressure to increase spending from natural disasters, aid, etc. (pg 113) National Debt (Federal Debt)  Results from the accumulation of all deficits and surpluses that occur over the years.  It is important to control debt so that less money must be paid toward national debt and outstanding interest. This allo
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