second' editibjH^vi ^'••L-'--V\K^ w o * .;•!•.

William G. Nickels
University of Maryland

James M. McHugh
St. Louis Community College at Forest Park

Susan M. McHygh
Applied Learning Systems
contents
Prologue: Getting Ready for This Course and The Evolution of U.S. Business 20
Your Career P-1 Progress in the Agricultural and Manufacturing
Industries 20
Progress in Service Industries 21
part 1 Your Future in Business 21
Business Trends: Cultivating a Business in Video Case: Redbox Focusing on Customer
Needs 26
Diverse, Global Environments

Chapter Two
Chapter One 28 Understanding Economics and How It
Affects Business
2 Connecting to the Dynamic Business
Environment Profile: Connecting with Steven Levitt and
Stephen Dubner, Authors of Freakonomics 29
Profile: Connecting with Terry Pham,
Founder of Fat Straws 3 How Economic Conditions Affect Businesses 30
Entrepreneurship and Wealth Building 4 What Is Economics? 30

Revenues, Profits, and Losses 4 The Secret to Creating a Wealthy Economy 31

Matching Risk with Profit 5
Standard of Living and Quality of Life 5
Responding to the Various Business
Stakeholders 6
Using Business Principles in Nonprofit
Organizations 7
Entrepreneurship versus Working for Others
Opportunities for Entrepreneurs 8
Connecting with Small Business: Making the Most of a
Stinky Situation 9
The Importance of Entrepreneurs to the Creation
of Wealth 9
The Business Environment 11
The Economic and Legal Environment
Making Ethical Decisions: Ethics Begins
with You 13
Connecting Through Social Media: Using
Smartphones to Connect with Customers 14
The Technological Environment 14
The Competitive Environment 16
The'Social Environment 17
The Global Environment 18
Making the Green Connection: Green Up
Your Life 20
Making the Green Connection: It's Not Always
Greener 32
Adam Smith and the Creation of Wealth 33
How Businesses Benefit the Community 33
Making Ethical Decisions: How Corruption Harms
the Economy 34
8 Understanding Free-Market Capitalism 34
The Foundations of Capitalism 35
Connecting with Small Business: Small Loan, Big
Opportunity 36
How Free Markets Work 36
How Prices Are Determined 37
The Economic Concept of Supply 37
12 The Economic Concept of Demand 37
The Equilibrium Point, or Market Price 37
Competition within Free Markets 39
Benefits and Limitations of Free Markets 40
Understanding Socialism 41
The Benefits of Socialism 41
The Negative Consequences of Socialism 42
Understanding Communism 42
The Trend toward Mixed Economies 43
Connecting Across Borders: Africa's Evolving
Economy 44

XXVII
 Understanding the U.S. Economic System 46
Key Economic Indicators 46
Productivity in the United States 48
Productivity in the Service Sector 48
The Business Cycle 49
Stabilizing the Economy through Fiscal Policy 50
Fiscal Policy in Action during the Economic
Crisis That Began in 2008 51
Using Monetary Policy to Keep the Economy Growing 51
Video Case: Opportunity International: Giving the
Poor a Working Chance 56
Chapter Three
58 Doing Business in Global Markets
Profile: Connecting with Bill Johnson, President
and CEO of Heinz 5 9
The Dynamic Global Market 60
Why Trade with Other Nations? 61
The Theories of Comparative and Absolute
Advantage 62
Getting Involved in Global Trade 63
Importing Goods and Services 63
Exporting Goods and Services 63
Connecting with Small Business: Improving Sight
through Entrepreneurship 64
Measuring Global Trade 64
Strategies for Reaching Global Markets 66
Licensing 66
Exporting 68
Franchising 68
Contract Manufacturing 68
Connecting Across Borders: McDonald's: Over 100
Cultures Served 69
International Joint Ventures and Strategic Alliances 70
Foreign Direct Investment 70
Forces Affecting Trading in Global Markets
Sociocultural Forces 72
Economic and Financial Forces 73
Legal and Regulatory Forces 75
Physical and Environmental Forces 75
Trade Protectionism 76
The World Trade Organization 77
Common Markets, 77
The North American and Central American Free Trade
Agreements 79
The Future of Global Trade 80
The Challenge of Offshore Outsourcing 81
Globalization and Your Future 82
Making Ethical Decisions: Need an Operation? Take a
Vacation 83
Video Case: CH2M Hill: A Global Company 87
XXVIII
Chapter Four
88 Demanding Ethical and Socially Responsible
Behavior
Profile: Connecting with Brenda Palms Barber,
CEO of Sweet Beginnings 8 9
Ethics Is More Than Legality 90
Making Ethical Decisions: Cost of Corruption 91
| Ethical Standards Are Fundamental 92
i
Ethics Begins with Each of Us 92
Connecting Through Social Media: Facebook or
Fakebook? 93
Managing Businesses Ethically and
Responsibly 9 4
Setting Corporate Ethical Standards 96
Corporate Social Responsibility 98
Responsibility to Customers 100
Responsibility to Investors 101
Responsibility to Employees 102
Responsibility to Society and the Environment 103
Making the Green Connection: Who's the Greenest of
Them All? 104
Social Auditing 104
International Ethics and Social
Responsibility 106
Connecting Across Borders: When a House Is Not a
Home 108
Video Case: Going Beyond Legality 112
Career Outlook: Part 1 Conclusion—Business
Trends
part 2
Business Ownership: Starting a
Small Business
72
Chapter Five
120 How to Form a Business
Profile: Connecting with David Overton, CEO of
The Cheesecake Factory 121
Basic Forms of Business Ownership 122
Sole Proprietorships 123
Advantages of Sole Proprietorships 123
Disadvantages of Sole Proprietorships 124
Partnerships 125
Advantages of Partnerships 126
Disadvantages of Partnerships 127
Making Ethical Decisions: Good Business, Bad
Karma? 128
Corporations 129
 Advantages of Corporations 129 Get Some Experience 167
Disadvantages of Corporations 131 Making Ethical Decisions: Should You Stay or Should
Individuals Can Incorporate 132 You Go? 168
Take Over a Successful Firm 168
S Corporations 133
Managing a Small Business 169
Limited Liability Companies 134
Begin with Planning 169
Corporate Expansion: Mergers and
Acquisitions 136 Writing a Business Plan 170
Getting Money to Fund a Small Business 170
Franchises 138
Connecting Through Social Media: Peer-to-Peer
Advantages of Franchises 140
Lending 173
Disadvantages of Franchises 140
The Small Business Administration (SBA) 173
Connecting with Small Business: Keeping Franchises in
Making the Green Connection: Going Locavore 175
the Family 142
Knowing Your Customers 175
Diversity in Franchising 142
Managing Employees 176
Home-Based Franchises 143
Keeping Records 176
E-Commerce in Franchising 143
Looking for Help 176
Using Technology in Franchising 144 Going Global: Small-Business Prospects 178
Franchising in Global Markets 144 Video Case: Launching a Business: Pillow
Connecting Through Social Media: From Facebook Pets 182
Friends to Franchisees 145 Career Outlook: Part 2 Conclusion—Business
Cooperatives 146 Ownership

Which Form of Ownership Is for You? 146

Video Case: PODS: The Evolution of a Small
Business 151 part 3
Business Management: Empowering
Chapter Six Employees to Satisfy Customers
152 Entrepreneurship and Starting ; a Small Business
Profile: Connecting with Aviva Weiss, Co-Founder
Chapter Seven
of Fun and Function 153 190 Management and Leadership
The Age of the Entrepreneur 154
Profile: Connecting with Kathy Ireland, CEO of
The Job-Creating Power of
Entrepreneurs in the United States 154 Kathy Ireland Worldwide 191
Managers' Roles Are Evolving 192
Connecting with Small Business: Business Has No Age
The Four Functions of Management 193
Limit 155
Planning and Decision Making 195
Why People Take the Entrepreneurial
Challenge 156 Decision Making: Finding the Best Alternative 198

What Does It Take to Be an Entrepreneur? 156 Organizing: Creating a Unified System 199

Turning Your Passions and Problems into Connecting Across Borders: Breaking the Language
Opportunities 157 Barrier 201
Entrepreneurial Teams 158 Tasks and Skills at Different Levels of
Management 201
Micropreneurs and Home-Based Businesses 158
Staffing: Getting and Keeping the Right
Web-Based Businesses 161
People 202
Entrepreneurship within Firms 163
Leading: Providing Continuous Vision and
Encouraging Entrepreneurship: What Government Can Values 203
Do 163
Making Ethical Decisions:
Getting Started in Small Business 164
To Share or Not to Share 204
Small versus Big Business 165
Leadership Styles 204
Importance of Small Businesses 165
Connecting Through Social Media: Caring for
Small-Business Success and Failure 166
Customers by Tracking Tweets 206
Learning about Small-Business Operations 167 Empowering Workers 206
Learn from Others 167 Managing Knowledge 207
XXIX
 Controlling: Making Sure It Works 207
A Key Criterion for Measurement:
Customer Satisfaction 208
Video Case: Zappos' Team Approach 213
Chapter Eight
214 Structuring Organizations for Today's
Challenges
Profile: Connecting with Dave Bing, Mayor of
Detroit 215
Everyone's Reorganizing 216
Building an Organization from the Bottom Up 216
Making Ethical Decisions: Would You Sacrifice Safety
for Profits? 217
The Changing Organization 218
The Development of Organization Design 218
Turning Principles into Organization Design 220
Decisions to Make in Structuring
Organizations 222
Choosing Centralized or Decentralized Authority 222
Choosing the Appropriate Span of Control 223
Choosing between Tall and Flat Organization
Structures 223
Weighing the Advantages and Disadvantages of
Departmentalization 224
Organizational Models 227
Line Organizations 227
Line-and-Staff Organizations 228
Matrix-Style Organizations 228
Cross-Functional Self-Managed Teams 230
Going Beyond Organizational Boundaries 230
Managing the Interactions among Firms
Transparency and Virtual Organizations 231
Connecting with Small Business: Starting Up with a .
Smaller Staff 232
Benchmarking and Core Competencies 232
Connecting Through Social Media: When Twitter and
Facebook Are Old School 234
Adapting to Change 234
Restructuring for Empowerment 235
Creating a Change-Oriented Organizational
Culture 236
Managing the Informal Organization 237
Video Case: Open-Book Management at New
Belgium Brewery 242
Chapter Nine
244 Production and Operations Management
Profile: Connecting with Virginia Rometty,
President and CEO of IBM 245
XXX
Manufacturing and Services in Perspective 246
Making the Green Connection: Sustaining Our Planet
for the Future 247
Manufacturers and Service Organizations
Become More Competitive 248
From Production to Operations Management 248
Connecting Across Borders: How Germany's Economy
Remains Mighty with Manufacturing 249
Operations Management in the Service Sector 250
Production Processes 251
The Need to Improve Production Techniques
and Cut Costs 252
Computer-Aided Design and Manufacturing 252
Flexible Manufacturing 253
Lean Manufacturing 253
Connecting with Small Business: Designed by You,
Enjoyed by Many 254
Mass Customization 254
Operations Management Planning 255
Facility Location 255
Facility Location for Manufacturers 256
Making Ethical Decisions: Stay or Leave? 257
Taking Operations Management to the Internet 257
Facility Location in the Future 258
Facility Layout 258
Materials Requirement Planning 259
Purchasing 259
Just-in-Time Inventory Control 260
Quality Control 261
The Baldrige Awards 262
ISO 9000 and ISO 14000 Standards 262
Control Procedures: Pert and Gantt Charts 263
231
Preparing for the Future 264
Video Case: Keeping Your Eye on Ball 269
Career Outlook: Part 3 Conclusion—Business
Management
part 4
Management of Human Resources:
Motivating Employees to Produce Quality
Goods and Services
Chapter Ten
,276 Motivating Employees
Profile: Connecting with Jim Goodnight, CEO
of SAS 277
The Value of Motivation 278
Frederick Taylor: The Father of Scientific
Management 279
Elton Mayo and the Hawthorne Studies 280
 Motivation and Maslow's Hierarchy Training and Developing Employees for Optimum
of Needs 281 Performance 320
Herzberg's Motivating Factors 283 Making Ethical Decisions: Intern or Indentured
McGregor's Theory X and Theory Y 285 Servant? 321
Theory X 285 Management Development 323
Theory Y 285 Networking 324
Ouchi's Theory Z 2 8 6 Diversity in Management Development 324
Goal-Setting Theory and Management by Appraising Employee Performance to Get
Objectives 2 8 8 Optimum Results 325
Meeting Employee Expectations: Compensating Employees: Attracting and Keeping
Expectancy Theory 289 the Best 326
Reinforcing Employee Performance: Reinforcement Pay Systems 327
Theory 290
Compensating Teams 327
Treating Employees Fairly: Equity Theory 290
Fringe Benefits 328
Putting Theory into Action 291
Scheduling Employees to Meet Organizational and
Motivation through Job Enrichment 291
Employee Needs 329
Motivating through Open Communication 292
Connecting Across Borders: Coping with Cultural
Connecting Through Social Media: Make the World Challenges 330
Your Office 293
Flextime Plans 330
Applying Open Communication in Self-Managed
Home-Based Work 331
Teams 294
Job-Sharing Plans 332
Recognizing a Job Well Done 294
Moving Employees Up, Over, and Out 333
Personalizing Motivation 295
Promoting and Reassigning Employees 333
Connecting with Small Business: A Little Fun Can Be a
Terminating Employees 333
Big Motivator 296
Connecting Through Social Media: HR on the Go 334
Motivating Employees across the Globe 296
Retiring Employees 334
Connecting Across Borders: Respecting Cross-
Cultural Boundaries 297 > Losing Valued Employees 334
Motivating Employees across Generations 297 Video Case: Human Resource Management
Video Case: Management Philosophy at The at SAS 339
Container Store 304
Chapter Twelve
Chapter Eleven 340 Dealing with Union and
306 Human Resource Management: Finding and Employee-Management Issues
Keeping the Best Employees Profile: Connecting with David Stern,
Commissioner of the NBA 341
Profile: Connecting with Kim Jordan, CEO of New
Employee-Management Issues 342
Belgium Brewing Company 307
Working with People Is Just the Beginning 308 Labor Unions from Different Perspectives 343

Developing the Ultimate Resource 308 The History of Organized Labor 344

The Human Resource Challenge 309 Connecting with Small Business: The Triangle Fire 345

Laws Affecting Human Resource Management 311 Public Sector Union Membership 346

Laws Protecting Employees with Disabilities and Older Labor Legislation and Collective
Bargaining 346
Employees 312
Union Organizing Campaigns 347
Effects of Legislation 313
Determining a Firm's Human Resource Needs 314 Objectives of Organized Labor over Time 349
Recruiting Employees from a Diverse Resolving Labor-Management Disagreements 351
Population 315 Mediation and Arbitration 352
Connecting with Small Business: Attracting Big Players Tactics Used in Labor-Management
to Your Small Business 317 Conflicts 352
Selecting Employees Who Will Be Productive 318 Union Tactics 352
Hiring Contingent Workers 319 Management Tactics 353

xxxi
 Making Ethical Decisions: Would You Cross the Line? 354 Two Different Markets: Consumer and
The Future of Unions and Labor-Management Business-to-Business (B2B) 3 9 0
Relations 354 The Consumer Market 3 9 0
Controversial Employee-Management Issues 356 Segmenting the Consumer Market 391
Executive Compensation 356 Reaching Smaller Market Segments 392
Connecting Across Borders: Executive Compensation Moving toward Relationship Marketing 393
around the World 357 The Consumer Decision-Making Process 393
Pay Equity 358 The Business-to-Business Market 395
Sexual Harassment 359 Your Prospects in Marketing 396
Child Care 360 Video Case: Using the 4 Ps at Energizer 400
Elder Care 361
Drug Testing 362
Chapter Fourteen
Violence in the Workplace 362
Video Case: United We Stand 366 402 Developing and Pricing Goods and Services

Career Outlook: Part 4 Conclusion—Management Profile: Connecting with Randy Hetrick, CEO of
of Human Resources Fitness Anywhere 4 0 3
Product Development and the
Total Product Offer 4 0 4
Connecting Through Social Media: Settling Up Simply
part 5 through Social Media 405
Marketing: Developing and Implementing Distributed Product Development 406
Customer-Oriented Marketing Plans Developing a Total Product Offer 406
Product Lines and the Product Mix 407
Chapter Thirteen Making the Green Connection: Thinking Outside the
Bottle 408
374 Marketing: Helping Buyers Buy Product Differentiation 409

Profile: Connecting with Cesar Conde, President Marketing Different Classes of Consumer Goods
of Univision 375 / and Services 409
What Is Marketing? 376 Marketing Industrial Goods and Services 410
The Evolution of Marketing 377 Packaging Changes the Product 412
Nonprofit Organizations and Marketing 379 The Growing Importance of Packaging 412
Making the Green Connection: Are Your Blue Jeans Branding and Brand Equity 413
"Green " Jeans? 380
Connecting Across Borders: What's in a Name? 414
The Marketing Mix 3 8 0
Brand Categories 414
Applying the Marketing Process 380
Generating Brand Equity and Loyalty 415
Designing a Product to Meet Consumer Needs 381
Creating Brand Associations 416
Setting an Appropriate Price 382
Brand Management 416
Getting the Product to the Right Place 383 The New-Product Development Process 416
Developing an Effective Promotional Strategy 383
Generating New-Product Ideas 417
Connecting Through Social Media: Getting Attention Product Screening 417
through Mobile Marketing 384
Connecting with Small Business: Keep on Food
Providing Marketers with Information 384 Truckin' 418
The Marketing Research Process 385 Product Analysis 418
The Marketing Environment 387 Product Development and Testing 418
Global Factors 387 Commercialization 419
Technological Factors 387 The Product Life Cycle 419
Sociocultural Factors 388 Example of the Product Life Cycle 419
Competitive Factors 388 Using the Product Life Cycle 420
Connecting Across Borders: As Population Booms, Competitive Pricing 422
Marketers Target Hispanics 389 Pricing Objectives 422
Economic Factors 389 Cost-Based Pricing 423
XXXII
 Demand-Based Pricing 423 Water Transportation Is Inexpensive but Slow 453
Competition-Based Pricing 423 Pipelines Are Fast and Efficient 454
Break-Even Analysis 424 Air Transportation Is Fast but Expensive 454
Other Pricing Strategies 424 Intermodal Shipping 454
How Market Forces Affect Pricing 425 The Storage Function 454
Tracking Goods 455
Nonprice Competition 425
What All This Means to You 455
Video Case: Dream Dinners Food-to-Go 430
Video Case: Making Life Easier 460
Chapter Fifteen
Chapter Sixteen
432 Distributing Products
462 Using Effective Promotions
Profile: Connecting with Charlie Chanaratsopon,
Founder of Charming Charlie 433 Profile: Connecting with Shama Kabani, President
of The Marketing Zen Group 4 6 3
The Emergence of Marketing Intermediaries 434
Making the Green Connection: Saving on Shipping Promotion and the Promotion Mix 464
with Paper and Plastic Pallets 435 Connecting with Small Business: Turning Customers
Why Marketing Needs Intermediaries 435 into Spokespeople 465
How Intermediaries Create Exchange Efficiency 436 Advertising: Informing, Persuading, and
The Value versus the Cost of Intermediaries 437 Reminding 4 6 5

The Utilities Created by Intermediaries 439 Television Advertising' 469

Form Utility 439 Product Placement 469
Time Utility 439 Infomercials 470
Place Utility 439 Online Advertising 470
Possession Utility 440 Making Ethical Decisions: Pay-Per-Tweet 471
Information Utility 440 Using Social Media to Monitor Ad Effectiveness 472
Service Utility 440 Global Advertising 473
Wholesale Intermediaries 441 Connecting Across Borders: What's in Your
Merchant Wholesalers 441 / Oreo? 474

Agents and Brokers 442 Personal Selling: Providing Personal

Attention 474
Retail Intermediaries 443
Steps in the Selling Process 475
Retail Distribution Strategy 443
Connecting with Small Business: Pop Goes the Retail The Business-to-Consumer Sales Process 477
Store 444 Public Relations: Building Relationships 478
Nonstore Retailing 4 4 5 Publicity: The Talking Arm of PR 478
Electronic Retailing 445 Sales Promotion: Giving Buyers
Telemarketing 446 Incentives 479
Vending Machines, Kiosks, and Carts 446 Word of Mouth and Other Promotional
Direct Selling 446 Tools 481
Multilevel Marketing 447 Connecting Through Social Media: The Dark Side of
Direct Marketing 447 Yelp 482
Building Cooperation in Channel Viral Marketing 482
Systems 4 4 8 Blogging 483
Corporate Distribution Systems 448 Podcasting 483
Contractual Distribution Systems 448
E-Mail Promotions 483
Administered Distribution Systems 448
Mobile Media 483
Supply Chains 449
Managing the Promotion Mix: Putting It All
Connecting Across Borders: The Globe's Growing
Together 4 8 4
Service Supply Chain 450
Promotional Strategies 484
Logistics: Getting Goods to Consumers
Efficiently 451 Video Case: Integrated Marketing Communications
at Groupon 4 8 9
Trains Are Great for Large Shipments 452
Trucks Are Good for Small Shipments Career Outlook: Part 5 Counclusion—
to Remote Locations 453 Marketing
xxxiii
 The Role of Finance and Financial Managers 528
The Value of Understanding Finance 529
part 6 What Is Financial Management? 530
Managing Financial Resources Financial Planning 531
Forecasting Financial Needs 531
Chapter Seventeen
Working with the Budget Process 532
496 Understanding Accounting and Financial Establishing Financial Controls 533
Information The Need for Operating Funds 534

Profile: Connecting with Roxanne Coady, Founder Managing Day-by-Day Needs

of R.J. Julia Booksellers 497 of the Business 535
The Role of Accounting Information 498 Controlling Credit Operations 535
What Is Accounting? 498 Making Ethical Decisions:
Accounting Disciplines 499 Good Finance or Bad Medicine? 536

Managerial Accounting 499 Acquiring Needed Inventory 536

Making Capital Expenditures 536
Financial Accounting 500
Alternative Sources of Funds 537
Auditing 501
Obtaining Short-Term Financing 537
Tax Accounting 502
Trade Credit 538
Government and Not-for-Profit Accounting 502
Family and Friends 538
The Accounting Cycle 503
Commercial Banks 538
Accounting Technology 504
Different Forms of Short-Term Loans 539
Understanding Key Financial Statements 505
Connecting Through Social Media: Finding Funding
The Fundamental Accounting Equation 506
Online 540
The Balance Sheet 506
Factoring Accounts Receivable 541
Classifying Assets 506
Commercial Paper 542
Liabilities and Owners' Equity Accounts 508
Credit Cards 542
The Income Statement 509
Obtaining Long-Term Financing 543
Revenue 510
Debt Financing 543
Cost of Goods Sold 510
Operating Expenses 511 Connecting Across Borders: Investing Domestically in

Net Profit or Loss 511 the Middle East 544

Connecting with Small Business: UFO or FIFO? 512 Equity Financing 545

The Statement of Cash Flows 512 Comparing Debt and Equity Financing 547

The Need for Cash Flow Analysis 514 Lessons from the Financial Crisis 548

Making Ethical Decisions: Would You Cook the Video Case: Starting Up: Tom and Eddie's 553
Books? 515
Chapter Nineteen
Analyzing Financial Performance
Using Ratios 515 554 Using Securities Markets for Financing and
Liquidity Ratios 516 Investing Opportunities
Leverage (Debt) Ratios 516 Profile: Connecting with Maria Bartiromo of
Profitability (Performance) Ratios 517 CNBC 555
Activity Ratios 518 The Function of Securities Markets 556
Connecting Across Borders: Speaking a Universal The Role of Investment Bankers 557
Accounting Language 519
Stock Exchanges 557
Video Case: The Accounting Function at Goodwill
Industries 524 Connecting with Small Business: You Are Not Too Small
to Trade 559
Chapter Eighteen Securities Regulations and the Securities and Exchange
Commission 559
526 Financial Management Foreign Stock Exchanges 560
Profile: Connecting with James Reinhart, CEO of How Businesses Raise Capital
thredUP 527 by Selling Stock 561

xxxiv
 Advantages and Disadvantages The History of Banking and the Need for
of Issuing Stock 561 the Fed 5 9 5
Issuing Shares of Common Stock 562 Banking and the Great Depression 596
Issuing Shares of Preferred Stock, 562 The U.S. Banking System 597
How Businesses Raise Capital Commercial Banks 597
by Issuing Bonds 5 6 3
Services Provided by Commercial Banks 597
Learning the Language of Bonds 563 Connecting Through Social Media: Banking On the
Advantages and Disadvantages Go 598
of Issuing Bonds 564
Services to Borrowers 598
Different Classes of Bonds 564
Savings and Loan Associations (S&Ls) 598
Special Bond Features 565 Making Ethical Decisions: Would You Tell the Teller? 599
How Investors Buy Securities 566 Credit Unions 599
Investing through Online Brokers 566 Other Financial Institutions (Nonbanks) 600
Making Ethical Decisions: Connecting with Small Business:
Money Going Up in Smoke 567 The Rise of the Nonbank 601
Choosing the Right Investment Strategy 567 The Recent Banking Crisis and How the
Connecting Across Borders: Investment Opportunities Government Protects Your Money 601
Home and Away 568 Protecting Your Funds 602
Reducing Risk by Diversifying Investments 568 The Federal Deposit Insurance Corporation (FDIC) 602
Investing in Stocks 569 The Savings Association Insurance Fund (SAIF) 603
Stock Splits 570 The National Credit Union Administration (NCUA) 603
Buying Stock on Margin 571 Using Technology to Make Banking More
Understanding Stock Quotations 571 Efficient 6 0 3
Investing in Bonds 572 Online Banking 605
Investing in High-Risk (Junk) Bonds 572 International Banking and
Understanding Bond Quotations 573 Banking Services 6 0 5
Investing in Mutual Funds and Leaders in International Banking 605
Exchange-Traded Funds 573 •'' The World Bank and the International Monetary Fund
Understanding Mutual Fund Quotations 575 (IMF) 606

Understanding Stock Market Indicators 576 Connecting Across borders: Troubles Facing the
World's Financial Watchdogs 607
Riding the Market's Roller Coaster 577
Video Case: The Financial Crisis 612
Investing Challenges in the 21 st-Century Market 579
Video Case: Where Did All My Money Go? 584 Career Outlook: Part 6 Conclusion—Financial
Management
Chapter Twenty
586 Money, Financial Institutions, and the Federal Appendix 1
Reserve A1 Working within the Legal Environment
Profile: Connecting with Ben Bernanke, Chairman Profile: Connecting with Kenneth C. Frazier r
of the Federal Reserve 587 CEO of Merck A1-1
Why Money Is Important 588 The Case for Laws A1-2
What Is Money? 589
Statutory and Common Law A1-3
What Is the Money Supply? 590
Administrative Agencies A1-3
Managing Inflation and the Money Supply 590
Tort Law A1-4
The Global Exchange of Money 591
Product Liability A1-4
Control of the Money Supply 591 Legally Protecting Ideas: Patents,
Basics about the Federal Reserve 591 Copyrights, and Trademarks A1-6
The Reserve Requirement 593 Sales Law: The Uniform Commercial
Open-Market Operations 593 Code A1-8
The Discount Rate 593 Warranties A1-8
The Federal Reserve's Check-Clearing Role 594 Negotiable Instruments A1-9
XXXV
 Contract Law A1-9 Protecting Your Financial Base: Buying
Breach of Contract A1 -10 Insurance A2-10
Promoting Fair and Competitive Health Insurance A2-11
Business Practices A1-11 Homeowner's or Renter's Insurance A2-12
The History of Antitrust Legislation A1 -11 Other Insurance A2-12
Laws to Protect Consumers A1-13 Planning Your Retirement A2-12
Tax Laws A1-14 Social Security A2-12
Bankruptcy Laws A1-15 Individual Retirement Accounts (IRAs) A2-13

Deregulation versus Regulation A1-17 Simple IRAs A2-14

401 (k) Plans A2-15
Keogh Plans A2-15
Appendix 2
Financial Planners A2-15
A2 Managing Personal Finances Estate Planning A2-16

Profile: Connecting with Carmen Wong Ulrich,

Personal Finance Expert A2-1
Epilogue: Getting the Job You Want E
The Need for Personal Financial Bonus Chapter A: Using Techonology to
Planning A2-2
Manage Information Online
Financial Planning Begins with Making Money A2-2 Bonus Chapter B: Managing
Risk Online
Six Steps to Controlling Your Assets A2-3
Building Your Financial Base A2-6 Chapter Notes N
Real Estate: Historically, a Relatively Secure Glossary G-1
Investment A2-7 Photo Credits PC-1
Tax Deductions and Home Ownership A2-7 Name Index 1-1
Where to Put Your Savings A2-8 Organization Index 1-8
Learning to Manage Credit A2-8 Subject Index 1-12

xxxvi