Contains explanations for factors of production (land, labor, capital, entrepreneurship), four types of business firms (sole proprietorship, partnership, corporation, cooperative), and related terminology (franchise, conglomerate, holding company, multinational, etc).

1. PRODUCTION
Prepared by Sue Quirante for RTPM-DSHS
All lifted copyrighted content were used in the spirit of
Fair Use to teach economics concepts in a public school
setting. This material may not be used for commercial
purposes.
Last edited October 15, 2016

2. PRODUCTION
Putting together different inputs (factors
of production) to create a product or
service
factors of
production
production product
&
by-product

3. Factors of
Production

5. So I
coined a
word. :3
LABOR / PAGGAWA
Upton Sinclair

6. different from money
 money is used simply to purchase
goods and services for
consumption
capital is more durable
and is used to generate
wealth through
investment
ex. equipment, financial
capital
different from
intermediate goods that
get used up in production

7. Capital (Investopedia)
an input that can be used to create wealth
besides being used in production, capital can
be rented out for a monthly or annual fee to
create wealth

8. Capital (Investopedia)
 Capital does not exist until
it is produced.
 To create wealth, capital
must be combined with
labor.
 When people invest in
capital by foregoing
current consumption, they
can enjoy greater future
prosperity. (investment)

9. ENTREPRENEUR/ENTERPRISE
Let’s get
down to
business!

10. RENT
INTE
REST
WAGE
PRO
FIT
FACTOR PAYMENTS
Types of Income

11. ACTIVITY 1 SAMPLE

12. ACTIVITY 2 INSTRUCTIONS
Pick a strip of paper.
Find other factors of production which can join
you to make a good or service.
Once you have found fellow FOPs, paste your
strips on a ¼ sheet of paper.
Label each FOP appropriately: LAND, LABOR,
CAPITAL or ENTREPRENEUR.
Write the product at the back.

13. There
are four!
Types of
BUSINESS FIRMS

14. BUSINESS FIRM
An entity that employs the factors of
production (resources) and produces
goods and services to be sold to
consumers or firms of the
government.

15. BUSINESS FIRM types
1. sole proprietorship/sole trader
2. partnership
3. corporation
4. cooperative

16. 1 sole proprietorship
owned and controlled by a single
individual

17. 1 sole proprietorship

18. advantage
freedom
simple, easy and fast set up
inexpensive (capital requirement is small)
lesser business documents are required
conflicts are minimized

19. disadvantage
unlimited liability
proprietor and company are legally the same
company’s liabilities are also the proprietor’s
personal obligations, exposing you to great risks

20. disadvantage
 ”The law does not afford protection to the
personal assets of the entrepreneur from
claims against his business.”

21. disadvantage
short-term
no continuity of existence beyond the
proprietor’s lifespan

22. 2 PARTNERSHIP
formed by 2 or more individuals called
partners, binding themselves to contribute
money, property or industry to a common
fund, with the intention of dividing the
profits among themselves

23. 2 PARTNERSHIP example

24. 2 PARTNERSHIP
 income is equally divided among partners,
unless there is a written provision that
dictates otherwise

25. 2 PARTNERSHIP
 main investor and one personally liable is
called the general partner

26. 2 PARTNERSHIP
the others are called limited partners
because they have only limited liability, as
if they were shareholders in a corporation

27. 2 PARTNERSHIP
registration with the Securities and
Exchange Commission (SEC) takes between
5-8 days and the requirements are similar
to that of a corporation

28. DISADVANTAGE
quarrels between partners may occur
unlimited liability
short-term

29. 3 CORPORATION
an artificial person created by law (vs a
natural person)
registered in the SEC (for as low as P5000 in
paid-up capital)
minimum of 5 incorporators

30. 3 CORPORATION defined
“A corporation is an artificial being created by
operation of law, having the right of succession
and the powers, attributes and properties
expressly authorized by law or incident to its
existence.”
~The Corporation Code of the Philippines

31. 3 CORPORATION example

32. 3 CORPORATION example
Universal
Robina
Corporation

33. 3 CORPORATION example

34. disadvantage
 larger amount of expenses and effort
required in set up and maintenance
articles of incorporation, and other documentary
requirements
corporate acts must be supported by board resolution
maintenance requirements (reports, etc.)

35. disadvantage
double taxation
company’s income as well as shareholder’s
income (dividends)

36. advantage
limited liability
“the law affords the corporation a
personality separate and distinct from
that of its stockholders”

37. advantage
limited liability
veil of corporate fiction
“any claim against a corporation is limited
only to whatever the corporation’s assets
can satisfy”

38. advantage
limited liability
“you will not be liable beyond your
investment in the corporation”

39. advantage
long-term
a corporation can exist even after the death
of its stockholders because of the separate
personality granted to it by law

40. advantage
relatively easier to get additional financial
capital for it
initial public offering (sale of stocks)
use other people’s money to expand business
shareholders invest in order to get:
 a) dividends
b) stock appreciation (sell shares for higher price)

41. 3 CORPORATION types in the Philippines
1. stock
• have capital stock divided into shares and are
authorized to distribute to the holders of such
shares dividends or allotments of the surplus
profits

42. 3 CORPORATION types in the Philippines
2. non -stock
• all other foundations, educational institutions,
non-profit organizations, and associations
registered as corporations

43. Publicly-held vs Privately-held
Privately-held Corporation
shares are owned by company’s founders, management,
private investors, family or friends of the business
Publicly-held Corporation
a portion of shares were sold to the public via an
initial public offering

44. examples of privately-held companies
Mars, Inc.

45. examples of privately-held companies
local example:
Uymatiao Trading
Corporation

46. examples of publicly-held companies

47. examples of publicly-held companies
 Look up http://whoownsfacebook.com/ for a more complete list of the biggest
shareholders of Facebook

48. Special case: GOCCs
government-owned and controlled corporations
(GOCCs) are stock or non-stock corporations
established by a special charter or law for the
interest of everyone and subject to the test of
economic viability. It is owned or controlled by the
government directly, or indirectly through a parent
corporation or a subsidiary corporation.

49. important terms
holding company
may be a parent corporation, limited liability
company or limited partnership that owns enough
voting stock (shares/interest) in another company to
control its policies and management

50. important terms
subsidiary
partly or completely owned by another company that
holds a controlling interest in the subsidiary company
conglomerate
a corporation that is made up of a number of
different, seemingly unrelated businesses

51. example
parent corp.
/ holding co.
subsidiary

52. example
Filipino Conglomerates

55. important terms
multinational
transnational corporation
has its facilities and other assets in at least one
country other than its home country
have offices and/or factories in different countries
and usually have a centralized head office where
they co-ordinate global management

56. examples

57. 4 Cooperative
a farm, business, or other organization that is
owned and run jointly by its members, who
share the profits or benefits
in the Philippines, monitored by the
Cooperative Development Authority

58. 4 Cooperative
Watch the video Introduction to Cooperatives by the
Singapore National Co-operative Federation:
https://www.youtube.com/watch?v=rtzuz2j9LI4

59. 4 Cooperative
Also watch the video What is a Co-operative? by Co-
operatives UK:
https://www.youtube.com/watch?v=90FL_bBE4mw

60. 4 Cooperative
An example of a cooperative is electric cooperatives.
Watch the video The Electric Cooperative Story by
NRECA:
https://www.youtube.com/watch?v=tenKnIx4ouY

61. local example

62. Student Questions!
What is franchising?
refers to the method of practicing and using another’s
perfected business concept
the franchisee is granted the right to market a product
or a service under a marketing plan or a system that
uses the trademark, name, logo and advertising owned
by the franchisor

63. Question!
What is a franchise?
FinLit explains what is a franchise in this video called
How Does Franchising Work?
https://www.youtube.com/watch?v=EmjA6O2HIus

64. Student Questions!
If you want to know more:
Planning on a Partner for Your Franchise? Here are some
Pro’s and Con’s.
http://www.franchiseknowhow.com/buying_franchise/partner.ht
m
Does it Matter How You Own Your Franchise?
http://www.franchising.com/articles/does_it_matter_how_you_o
wn_your_franchise.html

65. Student Questions!
What type of business is Avon?

66. Student Questions!
What type of business is Avon?
This tells us it
started out as a
partnership.

67. Question!
What type of business is Avon?
It later became
a corporation.

68. Student Questions!
equity
value of the shares issued by a
company
operating income
 OI = Gross Income - Operating Expenses
- Depreciation & Amortization

69. Student Questions!
net income
net earnings, net profit, “bottom
line”
income minus cost of goods sold,
expenses and taxes

70. Video Reflection
Watch: https://www.youtube.com/watch?v=_zwh9dPyidA
1. What qualities did the character(s) possess that are
essential characteristics of entrepreneurs?
2. Do you have these characteristics already?
a. Yes? Cite a situation that proves you have these
characteristics. Were you born this way or did you learn
it? Explain.
b. No? Think of three ways a student like you could learn
how to become an entrepreneur. Which of these can you
do right now? Explain.

71. References
 -. (2011). “Personal Exemptions for Income Tax in the Philippines.” Tax & Accounting Center, Inc. Retrieved from
http://taxacctgcenter.org/personal-exemptions-for-income-tax-in-the-philippines/
 -. (2013). “Sole Proprietorship, Corporation or Partnership: Choosing your business enterprise”. Nicolas & De Vega Law Offices.
Retrieved from http://ndvlaw.com/sole-proprietorship-corporation-or-partnership-choosing-your-business- enterprise/
 -. (2015). “What are Capital Goods?” wiseGEEK. Retrieved from http://www.wisegeek.org/what-are-capital-goods.htm
 Abrugar, Victorino. (2011). “What are Deductions and Exemptions to Income Tax (Philippines). BusinessTips.ph. Retrieved from
http://businesstips.ph/what-are-deductions-and-exemptions-to-income-tax-philippines/
 Anlacan, Ruben, Jr. (2013). “Be A Sole Proprietorship, Partnership Or Corporation?”. BusinessCoach, Inc. Retrieved from
http://www.businesscoachphil.com/be-a-sole- proprietorship-partnership-or-corporation
 Corporation Code of the Philippines, B.P. 98 (1980)
 Department of Education. (2015). Ekonomiks 10: Araling Panlipunan – Modyul para sa Mag-aaral. Philippines: Vibal Group, Inc.
 Department of Finance. (2011). “What are GOCCs?” Department of Finance. Retrieved from http://www.dof.gov.ph/?page_id=1530
 Investopedia Staff. (2015). “Capital”. Investopedia. Retrieved from http://www.investopedia.com/terms/c/capital.asp
 Investopedia Staff. (2015). “What’s the difference between publicly- and privately-held companies?” Investopedia. Retrieved from
http://www.investopedia.com/ask/answers/162.asp
 Pamaos, Fred B. (2007). “Forms of Business: Sole Proprietorship, Partnership, Corporation”. Philippine e-Legal Forum. Retrieved
from http://jlp-law.com/blog/forms-of-business-sole-proprietorship-partnership-corporation/
 Online Educational Videos, links are indicated in the slides