Contents

BUSINESS:......................................................................................................................... 3
What are business goals? .................................................................................................. 3
What are business objectives? .......................................................................................... 4
BUSINESS GOALS VS. BUSINESS OBJECTIVES ..................................................... 4
What is a business decision? ............................................................................................. 4
WHAT IS SOCIAL RESPONSIBILITY? ...................................................................... 5
Role of Stakeholders in Business Organization .............................................................. 5
BUSINESS ENVIRONMENT .......................................................................................... 5
IMPACT OF ECONOMIC GROWTH ON BUSINESS ............................................... 5
DEPARTMENTALIZATION .......................................................................................... 6
JOINT STOCK COMPANY ............................................................................................ 6
RISK MANAGEMENT? .................................................................................................. 8
FACTORS THAT AFFECT MARKET PRICE .......................................................... 10
FUNDAMENTAL FACTORS ....................................................................................... 10
INTERNATIONAL MARKETING .............................................................................. 10
METHOD TO CONDUCT INTERNATINAL BUSINESS ........................................ 11
SOLE PROPRIETORSHIP ........................................................................................... 12
PARTNERSHIP............................................................................................................... 13
CORPORATION ............................................................................................................. 15
FRANCHISING ............................................................................................................... 20
ENTREPRENEURSHIP ................................................................................................. 21
CREATING NEW BUSINESS ....................................................................................... 22
DEVELOP A BUSINESS PLAN .................................................................................... 22
LEVEL OF MANAGEMENT ........................................................................................ 23
LEADERSHIP ................................................................................................................. 26
CENTRALIZATION? .................................................................................................... 26
DECENTRALIZATION ................................................................................................. 29
More Employee Input and Accountability Yield More Effective Practices .............. 30
IMPROVING PRODUCTIVITY................................................................................... 31
LAYOUT DESIGN GUIDE: 7 TIPS FOR DESIGNING A LAYOUT ...................... 32
VALUE OF MOTIVATION .......................................................................................... 33
THEORIES OF MOTIVATION.................................................................................... 34
ACQUIRED-NEEDS THEORY .................................................................................... 34
TWO-FACTOR THEORY ............................................................................................. 35
HUMAN RESOURCE PLANNING .............................................................................. 35
ANALYSIS ....................................................................................................................... 36
[Link] .............................................................................................................. 36
ROLE OF WHOLESALER ........................................................................................... 38
HOW FIRM USE ACCOUNTING ................................................................................ 39
FINANCIAL RESPONSIBILITIES .............................................................................. 39
FINANCIAL STATEMENT .......................................................................................... 39
DEBIT FINANCING ....................................................................................................... 40
EQUITY FINANCING ................................................................................................... 40
COMPANY ...................................................................................................................... 42
INVESTMENT DECISIONS ......................................................................................... 42
ACCOUNTS RECEIVABLE MANAGEMENT .......................................................... 42
STOCK EXCHANGE ..................................................................................................... 43
DETERMINE MARKET PRICE .................................................................................. 43
LIFE INSURANCE ......................................................................................................... 44
EMPLOYEES OUTPUT ................................................................................................ 46
CAPITAL STRUCTURE ............................................................................................... 47
BUSINESS:

A business (also known as an enterprise, a company, or a firm) is an organization entity

and legal entity made up of an association of people, be they natural, legal, or a mixture of
both who share a common purpose and unite in order to focus their various talents and
organize their collectively available skills or resources to achieve specific declared goals
and are involved in the provision of goods and services to customers. A business can also
be described as an organization that provides goods and services for human needs.

A company can be created at law as legal person so that the company in itself can accept
limited liability for civil responsibility and taxation incurred as members perform (or fail)
to discharge their duty within the publicly declared "birth certificate” or published policy.

Because companies are legal persons, they also may associate and register themselves as
companies – often known as a corporate group. When the company closes it may need a
"death certificate" to avoid further legal obligations.

What are business goals?

Business goals are goals that a business anticipates accomplishing in a set period of time.
You can set business goals for your company in general as well as for particular
departments, employees, managers and/or customers. Goals typically represent a
company's larger purpose and work to establish an end-goal for employees to work toward.
Business goals do not have to be specific or have clearly defined actions. Instead, business
goals are broad outcomes that the company wishes to achieve.

Setting business goals are important for several reasons, including that they:

Provide a way to measure success

Keep all employees on the same page as to what the goals of the company are

Give employees a clear understanding of how decision-making reaches company's goals

Ensure the company is headed in the right direction

What are business objectives?

Business objectives are clearly defined and measurable steps that are taken to meet a
company's broader goals. Objectives are specific in nature and can be easily defined and
kept track of. Companies must establish objectives to achieve their business goals.

BUSINESS GOALS VS. BUSINESS OBJECTIVES

The following are the differences between business goals and business objectives:

Business goals define the "what" of a business's purpose whereas business objectives
define the "how."

Business goals typically only provide a general direction that a company will follow
whereas business objectives clearly outline actionable steps.

Business objectives are measurable whereas business goals generally are not.

Business objectives are specific whereas business goals are more broad and all-
encompassing.

Business objectives typically have a set timeline whereas business goals do not.

What is a business decision?

A business decision, sometimes called an operational decision, is any choice made by a

business professional that determines short-term or long-term company activities.
Professionals make business decisions in response to a variety of different situations,
including determining which job candidate to hire, how to distribute department budgets,
when to expand into a new product market, if they should merge branches and other
situations that require well-thought out actions.
WHAT IS SOCIAL RESPONSIBILITY?

Social responsibility means that businesses, in addition to maximizing shareholder value,

must act in a manner that benefits society. Social responsibility has become increasingly
important to investors and consumers who seek investments that are not just profitable but
also contribute to the welfare of society and the environment. However, critics argue that
the basic nature of business does not consider society as a stakeholder.

Role of Stakeholders in Business Organization

A stakeholder is a person who has an interest in the company, IT service or its projects.
They can be the employees of the company, suppliers, vendors or any partner. They all
have an interest in the organization. Stakeholders can also be an investor in the company
and their actions determine the outcome of the company. Such stakeholder plays an
important role in defining the future of the company as well as its day-to-day workings.

BUSINESS ENVIRONMENT

Business Environment is the most important aspect of any business. The forces which
constitute the business environment are its suppliers, competitors, media, government,
customers, economic conditions, investors and multiple other institutions working
externally. So let us start with the introduction to business environment and learn its
importance.

IMPACT OF ECONOMIC GROWTH ON BUSINESS

The effect of economic growth on business is incredibly positive: your business is likely
to earn more customers, increase profitability, and experience great opportunities for
further growth and expansion. When you approach these opportunities with wisdom and
care, you are able to both grow your business and prepare it for any downturns that might
be in the future.
Want to learn more about growing your business, building a sales process, or aligning your
team under a shared goal of revenue? Subscribe to our blog for weekly updates delivered
right to your inbox.

DEPARTMENTALIZATION

Departmentalization or Departmentation is a process wherein jobs/teams are combined

together into functional units called as departments on the basis of their area of
specialization, to achieve the goals of the organisation. So, in this way, the entire
organization is divided into parts, i.e. departments which comprise of a group of
employees, who carry out activities of similar nature.

JOINT STOCK COMPANY

A joint stock company is an organisation which is owned jointly by all its shareholders.
Here, all the stakeholders have a specific portion of stock owned, usually displayed as a
share.

Each joint stock company share is transferable, and if the company is public, then its shares
are marketed on registered stock exchanges. Private joint stock company shares can be
transferred from one party to another party. However, the transfer is limited by agreement
and family members.

FEATURES OF A JOINT STOCK COMPANY

1] Artificial Legal Person
A company is a legal entity that has been created by the statues of law. Like a natural
person, it can do certain things, like own property in its name, enter into a contract, borrow
and lend money, sue or be sued, etc. It has also been granted certain rights by the law which
it enjoys through its board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law and not in
any physical form. So we call it an artificial legal person.
2] Separate Legal Entity
Unlike a proprietorship or partnership, the legal identity of a company and its members are
separate. As soon as the joint stock company is incorporated it has its own distinct legal
identity. So a member of the company is not liable for the company. And similarly, the
company will not depend on any of its members for any business activities.

3] Incorporation
For a company to be recognized as a separate legal entity and for it to come into existence,
it has to be incorporated. Not registering a joint stock company is not an option. Without
incorporation, a company simply does not exist.

4] Perpetual Succession
The joint stock company is born out of the law, so the only way for the company to end is
by the functioning of law. So the life of a company is in no way related to the life of its
members. Members or shareholders of a company keep changing, but this does not affect
the company’s life.

5] Limited Liability
This is one of the major points of difference between a company and a sole proprietorship
and partnership. The liability of the shareholders of a company is limited. The personal
assets of a member cannot be liquidated to repay the debts of a company.

A shareholders liability is limited to the amount of unpaid share capital. If his shares are
fully paid then he has no liability. The amount of debt has no bearing on this. Only the
companies assets can be sold off to repay its own debt. The members cannot be made to
pay up.

6] Common Seal
A company is an artificial person. So its day-to-day functions are conducted by the board
of directors. So when a company enters any contract or signs an agreement, the approval
is indicated via a common seal. A common seal is engraved seal with the company’s name
on it.
RISK MANAGEMENT?

Risk management encompasses the identification, analysis, and response to risk factors
that form part of the life of a business. Effective risk management means attempting to
control, as much as possible, future outcomes by acting proactively rather than reactively.
Therefore, effective risk management offers the potential to reduce both the possibility of
a risk occurring and its potential impact.

Interest rates affect the ability of consumers and businesses to access credit

Why does the Fed cut interest rates when the economy begins to struggle—or raise them
when the economy is booming? The theory is that by cutting rates, borrowing costs
decrease, and this prompts businesses to take out loans to hire more people and expand
production.

The logic works in reverse when the economy is hot. Here, we take a look at the impact on
various parts of the economy when the Fed changes interest rates, from lending and
borrowing to consumer spending to the stock market.

When interest rates change, there are real-world effects on the ways that consumers and
businesses can access credit to make necessary purchases and plan their finances. It even
affects some life insurance policies.

RISK MANAGEMENT STRUCTURES

Risk management structures are tailored to do more than just point out existing risks. A
good risk management structure should also calculate the uncertainties and predict their
influence on a business. Consequently, the result is a choice between accepting risks or
rejecting them. Acceptance or rejection of risks is dependent on the tolerance levels that a
business has already defined for itself.

If a business sets up risk management as a disciplined and continuous process for the
purpose of identifying and resolving risks, then the risk management structures can be used
to support other risk mitigation systems. They include planning, organization, cost control,
and budgeting. In such a case, the business will not usually experience many surprises,
because the focus is on proactive risk management.
RESPONSE TO RISKS
Response to risks usually takes one of the following forms:

Avoidance: A business strives to eliminate a particular risk by getting rid of its cause.
Mitigation: Decreasing the projected financial value associated with a risk by lowering the
possibility of the occurrence of the risk.
Acceptance: In some cases, a business may be forced to accept a risk. This option is
possible if a business entity develops contingencies to mitigate the impact of the risk,
should it occur.
When creating contingencies, a business needs to engage in a problem-solving approach.
The result is a well-detailed plan that can be executed as soon as the need arises. Such a
plan will enable a business organization to handle barriers or blockage to its success
because it can deal with risks as soon as they arise.

IMPORTANCE OF RISK MANAGEMENT

Risk management is an important process because it empowers a business with the
necessary tools so that it can adequately identify and deal with potential risks. Once a risk
has been identified, it is then easy to mitigate it. In addition, risk management provides a
business with a basis upon which it can undertake sound decision-making.

For a business, assessment and management of risks is the best way to prepare for
eventualities that may come in the way of progress and growth. When a business evaluates
its plan for handling potential threats and then develops structures to address them, it
improves its odds of becoming a successful entity.

In addition, progressive risk management ensures risks of a high priority are dealt with as
aggressively as possible. Moreover, the management will have the necessary information
that they can use to make informed decisions and ensure that the business remains
profitable.
FACTORS THAT AFFECT MARKET PRICE

FUNDAMENTAL FACTORS

In an efficient market, stock prices would be determined primarily by fundamentals, which,

at the basic level, refer to a combination of two things:

An earnings base, such as earnings per share (EPS)

A valuation multiple, such as a P/E ratio

An owner of common stock has a claim on earnings, and earnings per share (EPS) is the
owner's return on their investment. When you buy a stock, you are purchasing a
proportional share of an entire future stream of earnings. That's the reason for the valuation
multiple: It is the price you are willing to pay for the future stream of earnings.

INTERNATIONAL MARKETING

The International Marketing is the application of marketing principles to satisfy the varied
needs and wants of different people residing across the national borders.

Simply, the International Marketing is to undertake the marketing activities in more than
one nation. It is often called as Global Marketing, i.e. designing the marketing mix (viz.
Product, price, place, promotion) worldwide and customizing it according to the
preferences of different nation people.

Characteristics of International Marketing?

All the features of modern marketing apply to international marketing. However, the latter
aims to satisfy the needs of global customers. So, it takes place across borders.

As a result, international marketing has specific characteristics, such as:

 It involves two or more countries
 Unique marketing strategies for specific countries
 It enables exchange between a company and foreign customers
 Decisions are taken with reference to the global business environment
As you may have guessed, global marketing offers attractive opportunities to companies
that are successful at it. However, it also comes with several threats and challenges.

Before we consider the benefits and challenges of international marketing, let’s address an
equally important question.

METHOD TO CONDUCT INTERNATINAL BUSINESS

1. Exporting and Importing
Exporting denotes selling of goods and services from the home country to a foreign
country. Similarly importing refers to purchasing of products from foreign country and
bringing them into home country

2. Contract Manufacturing (or) Outsourcing

It connotes a type of international business where a firm enters into a contract with one or
a few local manufacturers in foreign countries in order to get certain components of goods
produced according to its specifications. It is also called outsourcing or contract
manufacturing

3. Licensing and Franchising

Licensing is contractual agreement wherein one firm grants access to its plants, trade
secrets or technology to another firm in a foreign country, for a fee called royalty, e.g.
McDonald, Pisa Hut, etc., The firm which grants such permission is called Licensor or
Franchisor and other firm to whom the license is granted is called Licensee or Franchisee

4. Joint Venture
A Joint venture is a business agreement wherein parties agree to develop a new entity and
assets subscribing to equity shares and thereby exercising control over enterprise and
consequently sharing revenues, expenses and the assets. It can be established under three
different ways namely
a. Foreign Investors buying an interest in local company
b. Local firm acquiring an interest in the existing foreign firm
c. Both the foreign and local firms jointly forming a new enterprise.

5. Foreign Direct Investment (FDI)

FDI means investment made by a company or individual in one country in the business
interest in another country in the form of either establishing new business operations or
acquiring business assets in the other country.
SOLE PROPRIETORSHIP

A sole proprietorship—also referred to as a sole trader or a proprietorship—is an

unincorporated business that has just one owner who pays personal income tax on profits
earned from the business.

A sole proprietorship is the easiest type of business to establish or take apart, due to a lack
of government regulation. As such, these types of businesses are very popular among sole
owners of businesses, individual self-contractors, and consultants. Many sole proprietors
do business under their own names because creating a separate business or trade name isn't
necessary.

ADVANTAGES OF A SOLE PROPRIETORSHIP

Despite its simplicity, a sole proprietorship offers several advantages, including the
following:

1. Easy and inexpensive process

The establishment of a sole proprietorship is generally an easy and inexpensive process.
Certainly, the process varies depending on the country, state, or province of residence.
However, in all cases, the process requires minimum or no fees, as well as very little
paperwork.

2. Few government regulations

Sole proprietorships adhere to a few regulatory requirements. Unlike corporations, the
entities do not need to spend time and resources on various government requirements such
as financial information reporting to the general public.

3. Tax advantages
Unlike the shareholders of corporations, the owner of a sole proprietorship is taxed only
once. The sole proprietor pays only the personal income tax on the profits earned by the
entity. The entity itself does not have to pay income tax.
DISADVANTAGES
Potential disadvantages include the following:

1. Unlimited liability of the owner

Since a sole proprietorship does not create a separate legal entity, the business owner faces
unlimited personal liability for all debts incurred by the entity. In other words, if a business
cannot meet its financial obligations, creditors can seek repayment from the entity’s owner,
who must use his or her personal assets to repay outstanding debts or other financial
obligations.

2. Limitations on capital raising

Unlike partnerships and corporations, sole proprietorships generally enjoy fewer options
to raise capital. For example, the owner cannot sell an equity stake to obtain new funds. In
addition, the ability to obtain loans depends on the owner’s personal credit history.

PARTNERSHIP

A partnership is a formal arrangement by two or more parties to manage and operate a

business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership business,

all partners share liabilities and profits equally, while in others, partners may have limited
liability. There also is the so-called "silent partner," in which one party is not involved in
the day-to-day operations of the business.

FEATURES OF PARTNERSHIP:
Following are the few features of a partnership:

Agreement between Partners:

It is an association of two or more individuals, and a partnership arises from an agreement
or a contract. The agreement (accord) becomes the basis of the association between the
partners. Such an agreement is in the written form. An oral agreement is evenhandedly
legitimate. In order to avoid controversies, it is always good, if the partners have a copy of
the written agreement.
2. Two or More Persons:
In order to manifest a partnership, there should be at least two (2) persons possessing a
common goal. To put it in other words, the minimal number of partners in an enterprise
can be two (2). However, there is a constraint on their maximum number of people.

3. Sharing of Profit:
Another significant component of the partnership is, the accord between partners has to
share gains and losses of a trading concern. However, the definition held in the Partnership
Act elucidates – partnership as an association between people who have consented to share
the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is
vital.

4. Business Motive:
It is important for a firm to carry some kind of business and should have a profit gaining
motive.

5. Mutual Business:
The partners are the owners as well as the agent of their firm. Any act performed by one
partner can affect other partners and the firm. It can be concluded that this point acts as a
test of partnership for all the partners.
CORPORATION

A corporation is a legal entity that is separate and distinct from its owners. Under the law,
corporations possess many of the same rights and responsibilities as individuals. They can
enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and
pay taxes.

Ownership can affect return and risk

Methods of owning existing business

Step 1: Find a business to purchase

The first step is not just finding an available business, but finding one that’s worth buying.
There’s plenty of businesses for sale. But ones with financial promise that actually hold
your interest aren’t so common. You need to find a business that’s primed for profitability,
and isn’t hiding any skeletons.

When you’re ready to buy a business you should look for these things:

• Positive cashflow (or a trajectory that shows potential)

• An industry you’re familiar with

• A diversity of customers (no one client should be more than 20% of revenue,
roughly)

• A long-term growth plan

• A business that you could see yourself enjoying

Where to find a business to purchase

The wider your search, the more likely you are to find a gem. Don’t just stop looking when
you’ve found a business that ticks all the boxes. Look in as many places as possible before
you start ranking your favorites.

Some of the rocks you can turn over include:

• Online broker sites like BizBuySell

• Local business brokers

• Local attorneys

• Local CPAs

• Franchisors

• Existing small business owners in your ideal industry

Step 2: Value the business

Once you’ve identified a business you’re interested in, it’s time to figure out how much the
business is worth. You’ll find plenty of sellers that overvalue their business, and it’s
important to make sure you don’t overpay.

When valuing a business you have two options:

1. Do it yourself

2. Hire a professional

The problem with hiring a professional is it can be expensive—up to $5,000 or more. But
if you’re not confident in your ability to make an objective assessment, we’d recommend
this.

A business valuation is typically calculated through either business revenue, net income,
or EBITDA. We can’t give just one answer about how to value a business, because each
type of business is handled differently.

To get an idea of how valuation differs between sectors, check out these resources:

• How to value a SaaS company

• Valuing an ecommerce company

• Valuing a brick and mortar retail business

Step 3: Negotiate a purchase price

Once you’ve decided you want to move forward with a business acquisition and you think
you have a good idea of what the business is worth, it’s time to negotiate the price. You’ll
typically do this by making an unbinding offer, either written or verbal. If your offer is
close to what the seller is willing to sell for, they will start negotiating with you.

With most business transactions, you’ll go back and forth, negotiating different purchase
prices and terms before you come to a tentative agreement. These terms can be changed
later if you find something during due diligence that changes your opinion on the
company’s value.

As part of the negotiation, you’ll decide whether you want to purchase the assets of the
business or if you want to make it a stock sale.

A stock sale is preferred by most sellers for tax purposes. In a stock sale you’ll be agreeing
to take on any outstanding legal liability because the company operations will continue as
is, just with a new owner. Some sellers will even give you a discount on the purchase price
for agreeing to a stock sale.

Step 4: Submit a Letter of Intent (LOI)

Once you have a general idea of the terms and structure of the business purchase, you’ll
submit a letter of intent. This is a letter that outlines everything you’ve previously
negotiated, including the purchase price, and states your intent to buy the business. This is
a non-binding agreement that just furthers the business acquisition process. It shows the
seller you’re ready to commit and move forward in the process.

The letter of intent will also typically give you exclusive rights to buy the business for a
time period, usually up to 90 days. This means that you’ll be the only one that can purchase
the business during the time frame, and the seller has to act in good faith to close your
transaction if you’re able to meet the terms of your LOI.

Step 5: Complete due diligence

When the LOI is signed by you and the seller, then you’ll get access to more information
about the business. Typically, when you first show interest in purchasing a business you’ll
get a basic overview of how the business is performing. But when you enter due diligence,
you’ll get access to any financial or legal information that you feel is needed to close the
transaction.
We suggest making sure you review the following documents, at a minimum, before you
close:

• Organizational documents for the business (e.g. incorporation docs, certificates of

good standing, business licenses, etc.)

• Previous 3 years of business tax returns

• Current year income statements, balance sheets, and cash flow statements

• Revenue broken out by customer for the last 3 years

• Information on existing business debt

• Customer lists with proprietary information blocked out as necessary

• Existing contracts—can these be assigned to the new owner?

• Commercial lease or other property documents

• Rent rolls if the property has tenants

• Uniform franchise disclosure document (if the business is a franchise)

• Employee and manager information

• Marketing and advertising materials

• Legal records for pending litigation, if any

Bench takes bookkeeping off your hands, pairing you with a real, human bookkeeper at a
price you can afford. Need tax filing? We do that too. Give us a try with a month of free
bookkeeping.
Step 6: Obtain financing

During due diligence you should also be working on financing for the transaction. Most
businesses are purchased with a combination of debt and equity, meaning you’ll come up
with part of the purchase price and the rest through a loan. You’ve got lots of options here,
including SBA loans, traditional bank loans, and using a Rollover for Business Startups
(ROBS). If you have a strong 401K, going for a ROBS is the best solution, as you can
finance the purchase without having to pay back debt or interest.

Before you enter due diligence you should know whether or not seller financing is an
option, which could alleviate some of the financial burdens of finding a loan. Seller
financing is a loan provided by the owner of the business instead of an outside lender. This
typically takes a lot of documentation from you as the new business owner and from the
business itself. That is why it’s important to work through this process during due
diligence. You’ll want to make sure your lender is ready to fund when you need to close
the transaction.

7. Close the transaction

If there were no surprises during due diligence, then it’s time to close the transaction. This
is where you’ll draft a final purchase agreement and agree to every term of the deal with
the seller.

You should always hire a lawyer to help you negotiate this part of the process. At the very
least, they can review the purchase agreement to make sure you’re getting what you
negotiated through the contract.
 FRANCHISING

Franchising is based on a marketing concept which can be adopted by an organization as a

strategy for business expansion. Where implemented, a franchisor licenses some or all of
its know-how, procedures, intellectual property, use of its business model, brand, and rights
to sell its branded products and services to a franchisee. In return the franchisee pays certain
fees and agrees to comply with certain obligations, typically set out in a franchise
agreement.

ADVANTAGES AND DISADVANTAGES OF FRANCHISING

ADVANTAGES TO FRANCHISORS
 Firstly, franchising is a great way to expand a business without incurring additional costs
on expansion. This is because all expenses of selling are borne by the franchise.
 This further also helps in building a brand name, increasing goodwill and reaching more
customers.

ADVANTAGES TO FRANCHISEES
 A franchise can use franchising to start a business on a pre-established brand name of the
franchisor. As a result, the franchise can predict his success and reduce risks of failure.
 Furthermore, the franchise also does not need to spend money on training and assistance
because the franchisor provides this.
 Another advantage is that sometimes a franchisee may get exclusive rights to sell the
franchisor’s products within an area.
 Franchisees will get to know business techniques and trade secrets of brands.

DISADVANTAGES FOR FRANCHISORS

 The most basic disadvantage is that the franchise does not possess direct control over the
sale of its products. As a result, its own goodwill can suffer if the franchisor does not
maintain quality standards.
 Furthermore, the franchisee may even leak the franchisor’s secrets to rivals. Franchising
also involves ongoing costs of providing maintenance, assistance, and training on the
franchisor.

DISADVANTAGES FOR FRANCHISEES

 First of all, no franchise has complete control over his business. He always has to adhere
to policies and conditions of the franchisor.
 Another disadvantage is that he always has to pay some royalty to the franchisor on a
routine basis. In some cases, he may even have to share his profits with the franchisor.
ENTREPRENEURSHIP

Entrepreneurship is the creation or extraction of value With this definition,

entrepreneurship is viewed as change, generally entailing risk beyond what is normally
encountered in starting a business, which may include other values than simply economic
ones.

TYPES OF ENTREPRENEURSHIP
It is classified into the following types:

Small Business Entrepreneurship

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter,
plumber, electrician, etc. These people run or own their own business and hire family
members or local employee. For them, the profit would be able to feed their family and not
making 100 million business or taking over an industry. They fund their business by taking
small business loans or loans from friends and family.

Scalable Startup Entrepreneurship

This start-up entrepreneur starts a business knowing that their vision can change the world.
They attract investors who think and encourage people who think out of the box. The
research focuses on a scalable business and experimental models, so, they hire the best and
the brightest employees. They require more venture capital to fuel and back their project
or business.

Large Company Entrepreneurship

These huge companies have defined life-cycle. Most of these companies grow and sustain
by offering new and innovative products that revolve around their main products. The
change in technology, customer preferences, new competition, etc., build pressure for large
companies to create an innovative product and sell it to the new set of customers in the new
market. To cope with the rapid technological changes, the existing organisations either buy
innovation enterprises or attempt to construct the product internally.

Social Entrepreneurship
This type of entrepreneurship focuses on producing product and services that resolve social
needs and problems. Their only motto and goal is to work for society and not make any
profits.
CREATING NEW BUSINESS

How to start a small business

1. Refine your idea

2. Write a business plan

3. Assess your finances

4. Determine your legal business structure

5. Register with the government and IRS

6. Purchase an insurance policy

7. Build your team

8. Choose your vendors

9. Brand yourself and advertise

10. Grow your business

DEVELOP A BUSINESS PLAN

For any business to be successful, it must be started and operated with a clear understanding
of its customers, its internal strengths, its competitive environment, and a vision of how it
will evolve to compete in the future. A business also needs money to start, to operate, and
to grow. By expending the effort to develop a comprehensive business plan, you will have
a powerful tool for attracting investors. Your business plan is the roadmap for your
company. It clearly states where you are, how you got there, and how you plan to proceed.

This Business Builder steps you through the process of developing a comprehensive
business plan. Although businesses may vary with regard to the products or services they
offer, there are specific elements that a potential investor will look for in any business plan.
Therefore, every well thought-out business plan includes a description of products and
services, a competitive analysis, a marketing plan, a management plan, and a financial plan.
Your business plan will provide you — and potential investors or lenders — with a clear
understanding of your objectives, strategies, and financial viability.
LEVEL OF MANAGEMENT

1. Top Level of Management

It consists of board of directors, chief executive or managing director. The top management
is the ultimate source of authority and it manages goals and policies for an enterprise. It
devotes more time on planning and coordinating functions.

The role of the top management can be summarized as follows -

a. Top management lays down the objectives and broad policies of the enterprise.

b. It issues necessary instructions for preparation of department budgets, procedures,

schedules etc.

c. It prepares strategic plans & policies for the enterprise.

d. It appoints the executive for middle level i.e. departmental managers.

e. It controls & coordinates the activities of all the departments.

f. It is also responsible for maintaining a contact with the outside world.

g. It provides guidance and direction.

h. The top management is also responsible towards the shareholders for the
performance of the enterprise.

2. Middle Level of Management

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote
more time to organizational and directional functions. In small organization, there is only
one layer of middle level of management but in big enterprises, there may be senior and
junior middle level management. Their role can be emphasized as -

a. They execute the plans of the organization in accordance with the policies and
directives of the top management.

b. They make plans for the sub-units of the organization.

c. They participate in employment & training of lower level management.

d. They interpret and explain policies from top level management to lower level.

e. They are responsible for coordinating the activities within the division or
department.

f. It also sends important reports and other important data to top level management.

g. They evaluate performance of junior managers.

h. They are also responsible for inspiring lower level managers towards better
performance.
3. Lower Level of Management

Lower level is also known as supervisory / operative level of management. It consists of

supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose work has to be largely with
personal oversight and direction of operative employees”. In other words, they are
concerned with direction and controlling function of management. Their activities include
-

a. Assigning of jobs and tasks to various workers.

b. They guide and instruct workers for day to day activities.

c. They are responsible for the quality as well as quantity of production.

d. They are also entrusted with the responsibility of maintaining good relation in the
organization.

e. They communicate workers problems, suggestions, and recommendatory appeals

etc to the higher level and higher level goals and objectives to the workers.

f. They help to solve the grievances of the workers.

g. They supervise & guide the sub-ordinates.

h. They are responsible for providing training to the workers.

i. They arrange necessary materials, machines, tools etc for getting the things done.

j. They prepare periodical reports about the performance of the workers.

k. They ensure discipline in the enterprise.

l. They motivate workers.

m. They are the image builders of the enterprise because they are in direct contact with
the workers.
LEADERSHIP

Leadership is the ability of an individual or a group of individuals to influence and guide

followers or other members of an organization.

Leadership involves making sound -- and sometimes difficult -- decisions, creating and
articulating a clear vision, establishing achievable goals and providing followers with the
knowledge and tools necessary to achieve those goals.

Organizational structure

An organizational structure is a system that outlines how certain activities are directed in
order to achieve the goals of an organization. These activities can include rules, roles, and
responsibilities.

The organizational structure also determines how information flows between levels within
the company. For example, in a centralized structure, decisions flow from the top down,
while in a decentralized structure, decision-making power is distributed among various
levels of the organization.

CENTRALIZATION?

Centralization refers to the process in which activities involving planning and decision-
making within an organization are concentrated to a specific leader or location. In a
centralized organization, the decision-making powers are retained in the head office, and
all other offices receive commands from the main office. The executives and specialists
who make critical decisions are based in the head office.

ADVANTAGES OF CENTRALIZATION
An effective centralization offers the following advantages:

1. A clear chain of command

A centralized organization benefits from a clear chain of command because every person
within the organization knows who to report to. Junior employees know who to approach
whenever they have concerns about the organization.
On the other hand, senior executives follow a clear plan of delegating authority to
employees who excel in specific functions. The executives also gain the confidence that
when they delegate responsibilities to mid-level managers and other employees, there will
be no overlap. A clear chain of command is beneficial when the organization needs to
execute decisions quickly and in a unified manner.

2. Focused vision
When an organization follows a centralized management structure, it can focus on the
fulfillment of its vision with ease. There are clear lines of communication and the senior
executive can communicate the organization’s vision to employees and guide them toward
the achievement of the vision.

In the absence of centralized management, there will be inconsistencies in relaying the

message to employees because there are no clear lines of authority. Directing the
organization’s vision from the top allows for a smooth implementation of its visions and
strategies. The organization’s stakeholders such as customers, suppliers, and communities
also receive a uniform message.

3. Reduced costs
A centralized organization adheres to standard procedures and methods that guide the
organization, which helps reduce office and administrative costs. The main decision-
makers are housed at the company’s head office or headquarters, and therefore, there is no
need for deploying more departments and equipment to other branches.

Also, the organization does not need to incur extra costs to hire specialists for its branches
since critical decisions are made at the head office and then communicated to the branches.
The clear chain of command reduces the duplication of responsibilities that may result in
additional costs to the organization.

4. Quick implementation of decisions

In a centralized organization, decisions are made by a small group of people and then
communicated to the lower-level managers. The involvement of only a few people makes
the decision-making process more efficient since they can discuss the details of each
decision in one meeting.

The decisions are then communicated to the lower levels of the organization for
implementation. If lower-level managers are involved in the decision-making process, the
process will take longer and conflicts will arise. That will make the implementation process
lengthy and complicated because some managers may object to the decisions if their input
is ignored.

5. Improved quality of work

The standardized procedures and better supervision in a centralized organization result in
improved quality of work. There are supervisors in each department who ensure that the
outputs are uniform and of high quality.

The use of advanced equipment reduces potential wastage from manual work and also
helps guarantee high-quality work. Standardization of work also reduces the replication of
tasks that may result in high labor costs.

DISADVANTAGES OF CENTRALIZATION
The following are the disadvantages of centralization:

1. Bureaucratic leadership
Centralized management resembles a dictatorial form of leadership where employees are
only expected to deliver results according to what the top executives assign them.
Employees are unable to contribute to the decision-making process of the organization, and
they are merely implementers of decisions made at a higher level.

When the employees face difficulties in implementing some of the decisions, the
executives will not understand because they are only decision-makers and not
implementers of the decisions. The result of such actions is a decline in performance
because the employees lack the motivation to implement decisions taken by top-level
managers without the input of lower-level employees.

2. Remote control
The organization’s executives are under tremendous pressure to formulate decisions for the
organization, and they lack control over the implementation process. The failure of
executives to decentralize the decision-making process adds a lot of work to their desks.

The executives suffer from a lack of time to supervise the implementation of the decisions.
This leads to reluctance on the part of employees. Therefore, the executives may end up
making too many decisions that are either poorly implemented or ignored by the
employees.

3. Delays in work
Centralization results in delays in work as records are sent to and from the head office.
Employees rely on the information communicated to them from the top, and there will be
a loss in man-hours if there are delays in relaying the records. This means that the
employees will be less productive if they need to wait long periods to get guidance on their
next projects.

4. Lack of employee loyalty

Employees become loyal to an organization when they are allowed personal initiatives in
the work they do. They can introduce their creativity and suggest ways of performing
certain tasks. However, in centralization, there is no initiative in work because employees
perform tasks conceptualized by top executives. This limits their creativity and loyalty to
the organization due to the rigidity of the work.

DECENTRALIZATION

Decentralization or decentralization is the process by which the activities of an

organization, particularly those regarding planning and decision making, are distributed or
delegated away from a central, authoritative location or group.[1]

Concepts of decentralization has been applied to group dynamics and management science
in private businesses and organizations, political science, law and public administration,
economics, money and technology.

BENEFITS OF DECENTRALIZATION

1. Quick decision making:

Decision making becomes quicker and better at the same time, by pushing down the power
to make a decision to the operational level, which is nearest to the situation.

2. Executive development:
It encourages self-sufficiency and confidence amongst subordinates, as when the authority
is delegated to lower levels, they have to rely on their judgement. By such delegation the
executives are constantly challenged, and they have to find solutions, for the problems they
face in the day to day operations.

3. Development of managerial skills:

In a decentralised structure, subordinates get an opportunity to prove their abilities.
Management also gets a pool of competent manpower, which can be placed at situations
that are challenging and breeds responsibility, by way of promotions.

4. Relieves top management:

It reduces the extent of direct supervision over subordinates by the supervisor, as they are
given the liberty to decide and act accordingly, within limits set by the superior. As a result,
the top management gets more time to take policy decisions.

5. Facilitates growth:
It confers greater independence to the lower management levels as it let them perform
functions in the way that is most appropriate for their department or division. It propagates
a sense of competition among various departments, to outperform others. This ultimately
results in the increased productivity level and generates

More Employee Input and Accountability Yield More Effective Practices

Despite good intentions from management, employees believe many workplace practices
aren't effective and often get in the way of performance results. And about one out of two
employees thinks that a lack of openness about how decisions are made and little employee
input are major causes, according to a new survey by Fierce Inc., a communication training
and leadership development company.

Although most employees said they would speak up about an issue, less than one-third felt
that it would make a difference. "Among respondents who reported limited or no benefits
from their organization's current practices, less than one-third felt that their company was
willing to change practices based on employee input and feedback," notes Halley Bock,
CEO and president of Fierce. "This indicates that about two-thirds of respondents felt that
their opinion was either unwelcome or not valued."
IMPROVING PRODUCTIVITY

Imagine closing each workday with a satisfied sigh, knowing that you had been so
productive that you accomplished everything on your list. And knowing, too, that you were
at the top of your creative game—getting your tasks done both efficiently and well. See
yourself whistling as you walk away from work?

You can be the star in this movie about productivity, rather than the alternate version where
you end the day tired and slumped behind a desk stacked with unfinished projects. If you
don’t like the way your usual workday goes, there is a way to change it.

Most of us aren’t as productive as we would like for two reasons: We have bad habits that
interfere with our workplace productivity and we’re reactive rather than proactive, putting
out fires instead of making progress toward our goals.

The solution is simple, though not always easy. We can replace our bad habits and reactive
patterns with good habits that will make us proactive, and take charge of our own
workdays. Follow these tips on how to increase productivity and become your best, most
productive self at work.
LAYOUT DESIGN GUIDE: 7 TIPS FOR DESIGNING A LAYOUT

1. Create a mood board. Make an inspiration collage or mood board before getting
started on your own design. Look for page layouts, color palettes, typographies, and ideas
on how information can be arranged. You can always return to your mood board to remind
yourself of the effect you want to achieve.

2. Match your design to your content. Consider the content and the audience you want
to reach with your design. If you're designing for a magazine feature, read the article and
see if any design concepts jump out at you. If you're designing a landing page for a brand,
consider the brand identity and think of a design concept to match.

3. Turn to templates to guide yourself. If you're new to website layout, starting from
online templates is a great way to learn how to create balanced and dynamic page designs.
You can also plan out a grid to guide yourself.

4. Create visual contrast. Look for ways to create visual contrast in your image that
can immediately catch your audience’s attention before they've read anything. You can
create contrast with color, typography, shape, and balance.

5. Play around with typography. Look for typefaces that speak to the brand identity of
your page while still creating visual interest. You can pair multiple fonts in the same font
family together to keep a sense of cohesion between disparate elements.

6. Embrace white space. Thoughtfully applied negative space can create more visual
interest than a busy layout. If your mockups are becoming crowded, try the minimalist
approach and incorporate more white space.

7. Experiment with the rules. The design process will look different for everyone.
Design principles and gridding can help guide you, but experimenting can produce exciting
and fresh images. Allow yourself to play with and break the rules with your design.
VALUE OF MOTIVATION

Motivation is a very important for an organization because of the following benefits it

provides:

1. Puts human resources into action

Every concern requires physical, financial and human resources to accomplish the goals.
It is through motivation that the human resources can be utilized by making full use of it.
This can be done by building willingness in employees to work. This will help the
enterprise in securing best possible utilization of resources.

2. Improves level of efficiency of employees

The level of a subordinate or a employee does not only depend upon his qualifications and
abilities. For getting best of his work performance, the gap between ability and willingness
has to be filled which helps in improving the level of performance of subordinates. This
will result into-

a. Increase in productivity,

b. Reducing cost of operations, and

c. Improving overall efficiency.

3. Leads to achievement of organizational goals

The goals of an enterprise can be achieved only when the following factors take place :-

a. There is best possible utilization of resources,

b. There is a co-operative work environment,

c. The employees are goal-directed and they act in a purposive manner,

d. Goals can be achieved if co-ordination and co-operation takes place simultaneously

which can be effectively done through motivation.

4 Builds friendly relationship

Motivation is an important factor which brings employees satisfaction. This can be done
by keeping into mind and framing an incentive plan for the benefit of the employees. This
could initiate the following things:

a. Monetary and non-monetary incentives,

b. Promotion opportunities for employees,

c. Disincentives for inefficient employees.

In order to build a cordial, friendly atmosphere in a concern, the above steps should be
taken by a manager. This would help in:

iv. Effective co-operation which brings stability,

v. Industrial dispute and unrest in employees will reduce,

vi. The employees will be adaptable to the changes and there will be no resistance to
the change,

vii. This will help in providing a smooth and sound concern in which individual interests
will coincide with the organizational interests,

viii. This will result in profit maximization through increased productivity.

THEORIES OF MOTIVATION

ACQUIRED-NEEDS THEORY

Among the need-based approaches to motivation, David McClelland’s acquired-needs

theory is the one that has received the greatest amount of support. According to this theory,
individuals acquire three types of needs as a result of their life experiences. These needs
are the need for achievement, the need for affiliation, and the need for power. All
individuals possess a combination of these needs, and the dominant needs are thought to
drive employee behavior.
McClelland used a unique method called the Thematic Apperception Test (TAT) to assess
the dominant [Link], W. D. (1992). Validity of questionnaire and TAT measures
of need for achievement: Two meta-analyses. Psychological Bulletin, 112, 140–154. This
method entails presenting research subjects an ambiguous picture asking them to write a
story based on it. Take a look at the following picture. Who is this person? What is she
doing? Why is she doing it? The story you tell about the woman in the picture would then
be analyzed by trained experts. The idea is that the stories the photo evokes would reflect
how the mind works and what motivates the person.

TWO-FACTOR THEORY

Frederick Herzberg approached the question of motivation in a different way. By asking

individuals what satisfies them on the job and what dissatisfies them, Herzberg came to the
conclusion that aspects of the work environment that satisfy employees are very different
from aspects that dissatisfy [Link], F., Mausner, B., & Snyderman, B. (1959). The
motivation to work. New York: John Wiley; Herzberg, F. (1965). The motivation to work
among Finnish supervisors. Personnel Psychology, 18, 393–402. Herzberg labeled factors
causing dissatisfaction of workers as “hygiene” factors because these factors were part of
the context in which the job was performed, as opposed to the job itself. Hygiene factors
included company policies, supervision, working conditions, salary, safety, and security
on the job. To illustrate, imagine that you are working in an unpleasant work environment.
Your office is too hot in the summer and too cold in the winter. You are being harassed
and mistreated. You would certainly be miserable in such a work environment. However,
if these problems were solved (your office temperature is just right and you are not harassed
at all), would you be motivated? Most likely, you would take the situation for granted. In
fact, many factors in our work environment are things that we miss when they are absent
but take for granted if they are present.

HUMAN RESOURCE PLANNING

Human resource planning (HRP) is the continuous process of systematic planning ahead
to achieve optimum use of an organization's most valuable asset—quality employees.
Human resources planning ensures the best fit between employees and jobs while avoiding
manpower shortages or surpluses.
ANALYSIS

A detailed examination of anything complex in order to understand its nature or to

determine its essential features : a thorough study

[Link]

E-marketing is a process of planning and executing the conception, distribution, promotion,

and pricing of products and services in a computerized, networked environment, such as
the Internet and the World Wide Web, to facilitate exchanges and satisfy customer
demands. It has two distinct advantages over traditional marketing. E-marketing provides
customers with more convenience and more competitive prices, and it enables businesses
to reduce operational costs.

IMPORTANCE OF E-MARKETING

In modern times where most of the work and transactions are happening through online
channels, it becomes every important for marketers to reach out to customers through right
channels. Smartphones, tablets, smart TVs, laptops are being used globally to run
businesses and buy and sell goods. E-marketing helps in reaching out to your audience on
these channels along with traditional offline channels as well. Sometimes for some
offerings, e-marketing is the only viable option.

E-marketing is very transparent in terms of its effectiveness as compared to offline

marketing. One thing which makes e-marketing standout is the ability to measure the
impact in real time. Marketers can see the performance and tweak the messaging
accordingly which can be very effective when compared to offline marketing.

In the times of pandemic, online marketing becomes even more prominent when the offline
or traditional marketing channels cannot deliver the optimum return on value.
ADVANTAGES OF E-MARKETING

Certain advantages of e-marketing are discussed as below:

1. Much better return on investment from than that of traditional marketing as it helps
increasing sales revenue.

2. E-marketing means reduced marketing campaign cost as the marketing is done through
the internet

3. Fast result of the campaign as it helps to target the right customers

TYPES OF E-MARKETING

There are several ways in which companies can use internet for marketing. Some ways of
e-marketing are:

1. Article marketing

2. Affiliate marketing

3. Video marketing

4. Email marketing/Newsletters

5. Blogging

6. Content marketing

7. Podcasts

8. Webinars

All these and other methods help a company or brand in e-marketing and reaching customer
through the internet.
ROLE OF WHOLESALER

1. BULK BUYING

Wholesalers buy bulk quantity goods of certain product lines from producers. They work
as buying agents for customers. Besides identifying customers and their needs, wholesalers
also become well informed of market and sources of supply. The customers know
wholesalers as the representative of some limited producers of certain product lines.

2. Mass Selling

Another function of wholesalers is mass selling. Wholesalers work as sales-force for the
producers. They deliver goods to retailers and industrial users at lower cost than the cost
the producer would need if they directly delivered or supplied. Wholesalers help in mass
selling of goods by supplying to several retailers living scattered in different places.

3. Dividing or bulk breaking

Wholesalers buy goods in bulk quantity from producers and resell in small quantity to
retailers or industrial users. In the absence of wholesalers, the producers cannot sell their
products to the retailers in bulk quantity on the one and the retailers cannot buy in bulk
quantity to sell to the final consumers on the other. As a result, marketing gets paralyzed.
So, the wholesalers serve both producers and retailers.

4. Transportation

As wholesalers buy goods in bulk quantity, they help producers and retailers minimize
transportation cost. They provide fast delivery services to customers by which investment
in overstock and risk is minimized. Wholesalers create place utility of goods by
transporting them from one place to another with fast speed and skill.
HOW FIRM USE ACCOUNTING

Accounting plays a vital role in running a business because it helps you track income and
expenditures, ensure statutory compliance, and provide investors, management, and
government with quantitative financial information which can be used in making business
decisions.

There are three key financial statements generated by your records.

• The income statement provides you with information about the profit and loss

• The balance sheet gives you a clear picture on the financial position of your business on
a particular date.

• The cash flow statement is a bridge between the income statement and balance sheet and
reports the cash generated and spent during a specific period of time.

It is critical you keep your financial records clean and up to date if you want to keep your
business afloat. Here are just a few of the reasons why it is important for your business, big
or small!

FINANCIAL RESPONSIBILITIES

Financial responsibility refers to the process of managing money and other similar assets
in a way that is considered productive and is also in the best interest of the individual, or
the family, or the business company. Being adept at financial tasks and money management
involves cultivation of a mindset which makes it possible to look beyond the needs of the
present so as to provide for the needs of future. Besides, it is essentially important to
understand the various basic principles so as to achieve a high level of financial
responsibility.

FINANCIAL STATEMENT

Financial statements are written records that convey the business activities and the financial
performance of a company. Financial statements are often audited by government agencies,
accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes.
Financial statements include:

• Balance sheet

• Income statement

• Cash flow statement.

DEBIT FINANCING

Debt financing occurs when a firm raises money for working capital or capital expenditures
by selling debt instruments to individuals and/or institutional investors. In return for
lending the money, the individuals or institutions become creditors and receive a promise
that the principal and interest on the debt will be repaid.

DEBT FINANCING OPTIONS

1. Bank loan
A common form of debt financing is a bank loan. Banks will often assess the individual
financial situation of each company and offer loan sizes and interest rates accordingly.

2. Bond issues
Another form of debt financing is bond issues. A traditional bond certificate includes a
principal value, a term by which repayment must be completed, and an interest rate.
Individuals or entities that purchase the bond then become creditors by loaning money to
the business.

3. Family and credit card loans

Other means of debt financing include taking loans from family and friends and borrowing
through a credit card. They are common with start-ups and small businesses.

EQUITY FINANCING

Equity financing is the process of raising capital through the sale of shares. Companies
raise money because they might have a short-term need to pay bills or have a long-term
goal and require funds to invest in their growth. By selling shares, a company is effectively
selling ownership in their company in return for cash.

MAJOR SOURCES OF EQUITY FINANCING

When a company is still private, equity financing can be raised from angel investors,
crowdfunding platforms, venture capital firms, or corporate investors. Ultimately, shares
can be sold to the public in the form of an IPO.

1. Angel investors
Angel investors are wealthy individuals who purchase stakes in businesses that they believe
possess the potential to generate higher returns in the future. The individuals usually bring
their business skills, experience, and connections to the table, which helps the company in
the long term.

2. Crowdfunding platforms
Crowdfunding platforms allow for a number of people in the public to invest in the
company in small amounts. Members of the public decide to invest in the companies
because they believe in their ideas and hope to earn their money back with returns in the
future. The contributions from the public are summed up to reach a target total.

3. Venture capital firms

Venture capital firms are a group of investors who invest in businesses they think will grow
at a rapid pace and will appear on stock exchanges in the future. They invest a larger sum
of money into businesses and receive a larger stake in the company compared to angel
investors. The method is also referred to as private equity financing.

4. Corporate investors
Corporate investors are large companies that invest in private companies to provide them
with the necessary funding. The investment is usually created to establish a strategic
partnership between the two businesses.
COMPANY

A company is a legal entity formed by a group of individuals to engage in and operate a

business—commercial or industrial—enterprise. A company may be organized in various
ways for tax and financial liability purposes depending on the corporate law of its
jurisdiction.

INVESTMENT DECISIONS

The Investment Decision relates to the decision made by the investors or the top level
management with respect to the amount of funds to be deployed in the investment
opportunities.

Simply, selecting the type of assets in which the funds will be invested by the firm is termed
as the investment decision.

ACCOUNTS RECEIVABLE MANAGEMENT

There are three key areas of accounts receivable management.

• Before a company grants credit to a customer it should ensure, as far as possible,

that the customer is worthy of that credit and that bad debts will not result. Checks should
continue to be carried out on existing customers as a company would like to have early
warning of any problems which may be developing. This is especially true for key
customers of the company.

• Once the decision has been taken to grant credit, then suitable credit terms must be
set and the receivables that arise must be monitored efficiently if the costs of giving credit
are to be kept under control.

• A key area of the management of accounts receivable is the final collection of cash
from customers. Any company must have a rigorous system to ensure that all customers
pay in a timely fashion as, without this, the level of receivables and the cost of financing
these receivables will inevitably rise, as will the risk and cost of bad debts.
STOCK EXCHANGE

Stock exchange, also called stock market or in continental Europe bourse, organized
market for the sale and purchase of securities such as shares, stocks, and bonds.

In most countries the stock exchange has two important functions. As a ready market for
securities, it ensures their liquidity and thus encourages people to channel savings into
corporate investment. As a pricing mechanism, it allocates capital among firms by
determining prices that reflect the true investment value of a company’s stock. (Ideally,
this price represents the present value of the stream of expected income per share.)

DETERMINE MARKET PRICE

The market price is the current price at which an asset or service can be bought or sold.
The market price of an asset or service is determined by the forces of supply and demand.
The price at which quantity supplied equals quantity demanded is the market price.

RELATIONSHIP BETWEEN DEMAND AND MARKET PRICES

Demand can be defined as the consumer’s willingness to pay for a certain product at a
certain price. Its essential elements comprise of its desire, ability to pay or affordability,
and the consumer’s willingness to pay. When the price of the commodity rises, its demand
falls, and when the price of the commodity falls, its demand rises.

Prices of substitute goods

Substitute goods are goods that can be used in place of one another, which means that they
provide similar utility for the consumer. In such a case, the demand for a good is directly
related to the price of its substituted good. For example, Coke and Pepsi are substitute
goods.

Prices of complementary goods

Complementary goods are goods that are used together to satisfy a want. In such a case,
the demand for a good is inversely related to the price of its complementary good. For
example, a vehicle and fuel are complementary goods.

Incomes levels
The demand for luxuries increases with a rise in income levels of the consumer base. Thus,
the income effect is considered to be positive. In the case of inferior goods, which are low-
quality products, the demand falls with an increase in the income levels of the target
market. Thus, the income effect is said to be negative.
LIFE INSURANCE

Life insurance is a contract between an insurer and a policy owner. A life insurance policy
guarantees the insurer pays a sum of money to named beneficiaries when the insured dies
in exchange for the premiums paid by the policyholder during their lifetime.

For the contract to be enforceable, the life insurance application must accurately disclose
the insured’s past and current health conditions and high-risk activities.

WHAT ARE THE BENEFITS OF LIFE INSURANCE PLANS?

Once you get an understanding of what is life insurance meaning, as well as the different
types of life insurance policies, you will find that there are 3 main advantages of getting
the best life insurance policy that you should know about. Following are the 3 primary
benefits offered by different types of life insurance policy:

1. Financial Security

Life is unpredictable and can be full of uncertainties. It is difficult to reduce the possibility
of an unfortunate event like death. In such a scenario, the family faces financial constraints
arising from the lack of a steady income.

Investing in the best life insurance policy early on in life acts as a safety blanket during
such eventuality. According to the life insurance definition, the insurance provider is
obliged to pay the nominee or beneficiary the pre-defined sum assured. As a result, even
in the policyholder’s absence, his family stays protected.

2. Long-Term Savings

If one wants to make long-term investments, it’s important to think about life insurance
meaning. Such insurance plans help you make systematic savings and create a corpus,
which can be used for several reasons, such as building a new home, financing quality
schooling for your child, and funding a child’s marriage expenses.
What’s more, when you learn the life insurance definition, you will find some types of life
insurance policies often offer monthly pay-outs in the form of annuities, which is an ideal
way to aim at and achieve retirement goals.

3. Investment Options

Understanding the meaning of life insurance in your financial context will allow you to
plan your investments efficiently as well. Life insurance providers offer Unit-Linked
Investment Plans (ULIPs), which are mainly investment instruments based on the market
linked returns and life insurance, meaning you can get dual benefits with a single financial
product.

These market-linked life insurance products provide significant gains during maturity,
therefore making them ULIPs a reliable investment tool.

4. Tax Benefits

According to the life insurance definition, you are required to pay regular premiums to
keep the policy active. With life insurance plans, you also get tax benefits under prevailing
laws as per Income Tax Act, 1961. The life insurance premium paid can be availed as a tax
deduction under Section 80C of the Income Tax Act, 1961. You can avail of deduction up
to Rs.1.5 lakh under Section 80C.
EMPLOYEES OUTPUT

Employee productivity (sometimes referred to as workforce productivity) is an assessment

of the efficiency of a worker or group of workers.

Productivity may be evaluated in terms of the output of an employee in a specific period

of time. Typically, the productivity of a given worker will be assessed relative to an average
for employees doing similar work. Because much of the success of any organization relies
upon the productivity of its workforce, employee productivity is an important consideration
for businesses.

How do you measure employee productivity?

According to some, the typical worker is productive for only 3 hours every 8. But how you
define productivity depends on the metrics and methods you use.

As we’ve talked about before when discussing productivity management, the classic
measure is a simple equation:

Productivity = output (the volume you create) ÷ input (labor hours and resources)

That’s the baseline. But over time, measuring productivity - especially individual or
personal productivity - has become more sophisticated. Some productivity measures go
beyond inputs and outputs to assess product quality and the financial costs involved.

Efficiency and effectiveness measurements

You can track productivity in terms of efficiency – how quickly the job gets done.

But what happens if efficiency is high, but the quality is low? Effectiveness measurements
of productivity try to address this question by building in quality standards.
For example, in a contact center, an employee’s productivity could be measured by the
number of calls completed where the customer has rated the service level at 7/10 or above.
This kind of measurement provides more information than efficiency measurement alone,
but it depends on quantifying quality – and that’s not always possible.

Some productivity measures look at the financial investment that went into the results, not
just the employee’s time. For example, Employee A may have become very effective and
efficient due to intensive training from the employer. In contrast, Employee B might have
had the same skills when the employer hired them. If we include financial costs in the mix,
an organization might rate Employee B’s productivity higher.

As organizations think about recruitment or training in a new world of work, the ability to
make measurements like these can take on extra significance. What costs more - training
people or hiring the right skills? Is it more cost effective to “buy” productivity or to build
it internally?

CAPITAL STRUCTURE

Capital structure refers to the specific mix of debt and equity used to finance a company’s
assets and operations. From a corporate perspective, equity represents a more expensive,
permanent source of capital with greater financial flexibility.

TYPES OF CAPITAL STRUCTURE

The meaning of Capital structure can be described as the arrangement of capital by using
different sources of long term funds which consists of two broad types, equity and debt.
The different types of funds that are raised by a firm include preference shares, equity
shares, retained earnings, long-term loans etc. These funds are raised for running the
business.

Equity Capital
Equity capital is the money owned by the shareholders or owners. It consists of two
different types

a) Retained earnings: Retained earnings are part of the profit that has been kept separately
by the organisation and which will help in strengthening the business.
b) Contributed Capital: Contributed capital is the amount of money which the company
owners have invested at the time of opening the company or received from shareholders as
a price for ownership of the company.

Debt Capital
Debt capital is referred to as the borrowed money that is utilised in business. There are
different forms of debt capital.

Long Term Bonds: These types of bonds are considered the safest of the debts as they
have an extended repayment period, and only interest needs to be repaid while the principal
needs to be paid at maturity.
Short Term Commercial Paper: This is a type of short term debt instrument that is used
by companies to raise capital for a short period of time
Optimal Capital Structure
Optimal capital structure is referred to as the perfect mix of debt and equity financing that
helps in maximising the value of a company in the market while at the same time minimises
its cost of capital.

Capital structure varies across industries. For a company involved in mining or petroleum
and oil extraction, a high debt ratio is not suitable, but some industries like insurance or
banking have a high amount of debt as part of their capital structure.

Financial Leverage
Financial leverage is defined as the proportion of debt that is part of the total capital of the
firm. It is also known as capital gearing. A firm having a high level of debt is called a
highly levered firm while a firm having a lower ratio of debt is known as a low levered
firm.

Importance of Capital Structure

Capital structure is vital for a firm as it determines the overall stability of a firm. Here are
some of the other factors that highlight the importance of capital structure

A firm having a sound capital structure has a higher chance of increasing the market price
of the shares and securities that it possesses. It will lead to a higher valuation in the market.
A good capital structure ensures that the available funds are used effectively. It prevents
over or under capitalisation.
It helps the company in increasing its profits in the form of higher returns to stakeholders.
A proper capital structure helps in maximising shareholder’s capital while minimising the
overall cost of the capital.
A good capital structure provides firms with the flexibility of increasing or decreasing the
debt capital as per the situation.
Factors Determining Capital Structure
Following are the factors that play an important role in determining the capital structure:

Costs of capital: It is the cost that is incurred in raising capital from different fund sources.
A firm or a business should generate sufficient revenue so that the cost of capital can be
met and growth can be financed.
Degree of Control: The equity shareholders have more rights in a company than the
preference shareholders or the debenture shareholders. The capital structure of a firm will
be determined by the type of shareholders and the limit of their voting rights.
Trading on Equity: For a firm which uses more equity as a source of finance to borrow new
funds to increase returns. Trading on equity is said to occur when the rate of return on total
capital is more than the rate of interest paid on debentures or rate of interest on the new
debt borrowed.
Government Policies: The capital structure is also impacted by the rules and policies set by
the government. Changes in monetary and fiscal policies result in bringing about changes
in capital structure decisions.