Corporations need financing for the purchase of assets and the payment of expenses. The corporations can issue shares in exchange for money or property. Sometimes it is called as equity funding. The holders of the shares form the ownership of the company. Each share is represented by a stock certificate, which is negotiable. It means that one buy and sell it. The value of a share is determined by the net assets divided by the total number of shares outstanding. The value of the share also depends on the success of the company. The greater the success, the more value the shares have.
A corporation can also get capital by borrowing. It is called debt funding. If a corporation borrows money, they give notes or bonds. They are also negotiable. But the interest has to be paid out whether business is profitable or not.
When running the corporation, management must consider both the outflow and inflow of capital. The outflow is formed by the purchase of inventory and supplies, payment of salaries. The inflow is formed by the sale of goods and services. In the long run the inflow must be greater than the outflow. It results in a profit. In addition, a company must deduct its costs, expenses, losses on bad debts, interest on borrowed capital and other items. It helps to determine if the financial management has been profitable. The amount of risk involved is also an important factor. It determines the fund raising and it shows if a particular corporation is a good investment.
LESSON 4 THE FUNCTIONS OF AN EXECUTIVE
Dialogue Anna is having lunch with her sister Barbara. Anna has just accepted a position as an Administrative Assistant. Her boss is an executive with a firm that manufactures heavy machinery used in construction. Barbara: You’ve got a new job, Anna. My congratulations. Anna: Thanks, Barbara. Barbara: Tell me a few words about your boss. What does he do? Anna: Well, he is one of the vice presidents of the company, so he’s rather important. He is an executive. Barbara: Do you know the difference between an executive manager and an administrator? Anna: I am afraid I can hardly tell you the difference. I think these words are interchangeable and they really aren’t different in many companies. Barbara: What about your company? Anna: In our company the top officers are called administrators. The next highest group – the vice presidents, the heads of major departments and branch plant managers – are executives like my boss. Barbara: Is that all? Anna: The group below consists of managers: they are general managers and foremen. Barbara: So I see that an organisation has a number of positions and some people have more authority than others. Anna: You are right. 20 Barbara: But it would be interesting to know more about the functions of an executive like your boss. Anna: I’d say he makes a lot of important decisions. He sets objectives, coordinates work, delegates authority, makes hiring, firing, evaluating and just general leading. Barbara: It seems to be important. Anna: It is important. It’s evident that making careful decisions is the basis of good management. Barbara: But do you work under much pressure? Anna: Barbara, you know I am quite used to working under pressure from my last job. I am also accustomed to lots of paper work and red tape. Barbara: Good for you. Anna: And what’s more important I feel that I can learn a lot because my boss is very competent. Barbara: Good, I think we’d be in a hurry not to get late for the work.
LESSON 5 LINE AND STAFF POSITIONS Text
In business, organisation structure means the relationship between positions and people who hold the positions. Organisation structure is very important because it provides an efficient work system as well as a system of communication. Historically, line structure is the oldest type of organisation structure. The main idea of it is direct vertical relationship between the positions and tasks at each level, and the positions and tasks above and bellow each level. For example, a sales manager may be in a line position between a vice- president of marketing and a salesman. Thus a vice president of marketing has direct authority over a sales manager. A sales manager in his turn has direct authority over a salesman. This chain of command simplifies the problems of giving and taking orders. When a business grows in size and becomes more complex, there is a need for specialists. In such case administrators may organise staff departments and add staff specialists to do specific work. These people are usually busy with services, they are not tied in with the company product. The activities of the staff departments include an accounting, personnel, credit and advertising. Generally they do not give orders to other departments.
