Business environment

Forms of business organization

The three most common types are sole proprietorships, partnerships and corporations.

The simplest way to organize the business alone is to form a sole proprietorship. But a sole proprietor also has a risk – unlimited liability for matters relating to business.

Two or more people may join together to form a partnership to carry on the business for profit. They can do it on an informal basis without a written partnership agreement, or on the contract basis. Each partner is liable for the activities of the partnership as a whole, and is responsible for all the partnership’s debts. There are different classes of partners: general – active participants in the management of the business, who have unlimited liability; limited partners – who are liable only for the amount they invested into business; secret partners – who are not known to the public but have the right to make decisions and to vote; and silent partners – who are known to the public but without authority in management.

The third form of business organization is the corporation. Corporations are legal entities separate from their owners. To establish the corporation the owners must apply for the corporate charter. Stockholders, the corporation owners, have limited liability for the corporation’s activities.

Financial Management

Financial guidelines determine how money is raised and spent.

Financial management is in general a combination of accounting and economics. First, financial managers use accounting information (balance sheets, income state­ments, statements of cash flows) to interpret and to analyze it, in order to plan, and allocate financial resources for business firms.

Financial managers are central to most businesses, because finance is involved in the question of what adds value to a business. The financial managers measure the firm's performance, determine what the financial consequences will be if the firm maintains its present course or changes it, and rec­ommend how the firm should use its own assets.

It is very important for financial managers to be able to communicate, analyze, and make deci­sions based on information from many sources.

Financial managers work closely with other types of managers.

Business environment

There are different variables which influence business operations.

OWNERS. This group of people or organizations fund and set the business up.

LENDERS. Can be banks and finance which borrow funds to the businesses.

SUPPLIERS Are organization on which deliver goods to businesses.

EMPLOYEES offer businesses necessary skills and expertise. They expect to be paid accordingly.

CONSUMERS are the misnomers of clients of the business who are prepared to buy the goods or services.

COMPETITORS other organizations in the same industry selling similar products.

GOVERNMENT AND CUMMUNITY businesses must have an awareness of legal and social requirements if they are to remain in existence. Federal, state, and local government bodies all have various regulations which business are expected to adhere.

Date: 2015-12-24; view: 794