1.

Structure of business organization

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.
a. Definition of organization
An organization is a group of people who work together, like a neighborhood
association, a charity, a union, or a corporation. Organization is also the act of
forming or establishing something (like an organization). It can also refer to a
system of arrangement or order, or a structure for classifying things.

b. Enterprise
Enterprise is another word for a for-profit business or company, but it is most often
associated with entrepreneurial ventures. ... Sole proprietorship – A company run by a
single individual, typically for their benefit, with unlimited liability for any damages that
occur as a result of the business' operations.

c. Types of organization
i. Sole proprietorship
1. Definition
A sole proprietorship, also known as the sole trader, individual
entrepreneurship or proprietorship, is a type of enterprise that is owned and
run by one person and in which there is no legal distinction between the
owner and the business entity.
The sole proprietorship is the simplest business form under which one
can operate a business. The sole proprietorship is not a legal entity. It
simply refers to a person who owns the business and is personally
responsible for its debts.
2. Characteristics
Characteristics of Sole Proprietorship:
 Sole Proprietorship: The individual carries on business
exclusively by and for himself. ...
 Free from Legal Formalities: ...
 Unlimited Liability: ...
 Sole Management: ...
 Secrecy: ...
 Freedom regarding Selection of Business: ...
 Proprietor and Proprietorship are One:

ii. Partnership
1. Definition
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 have limited liability.
2. Characteristics
The essential characteristics of partnership are:
 Contractual Relationship: ...
 Two or More Persons: ...
 Existence of Business: ...
 Earning and Sharing of Profit: ...
 Extent of Liability: ...
 Mutual Agency: ...
 Implied Authority: ...
 Restriction on the Transfer of Share:

iii. Company
1. Definition
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.
2. Characteristics
The main characteristics of a company are as follows:
 Artificial Person: A company is an artificial person created by
law. ...
 Separate Legal Entity: A company has a separate legal entity. ...
 Perpetual Succession: ...
 Common Seal: ...
 Formation: ...
 Limited Liability: ...
 Transferability of Shares: ...
 Management and Control:

3. types
a. Public
A public company is a corporation whose ownership is
distributed amongst general public shareholders via the free
trade of shares of stock on exchanges or over-the-counter
markets.
b. Private
A private company is a firm held
under private ownership. Private companies may issue stock
 and have shareholders, but their shares do not trade on public
exchanges and are not issued through an initial public offering
(IPO).
c. Difference b/w them

2. Finance and accounting

a. Definition of finance
Finance is a broad term that describes activities associated with banking, leverage or
debt, credit, capital markets, money, and investments. Basically, finance represents
money management and the process of acquiring needed funds.
Financing is the process of providing funds for business activities, making
purchases, or investing. ... The use of financing is vital in any economic system, as it
allows companies to purchase products out of their immediate reach.
b. Source of finance
i. Internal Source of finance
internal sources of finance include Sale of Stock, Sale of Fixed Assets,
Retained Earnings and Debt Collection.  The internal source of finance is
retained profits, the sale of assets and reduction / controlling of working capital.
ii. External Source of finance
External sources of finance are equity capital, preferred stock, debentures, term
loans, venture capital, leasing, hire purchase, trade credit, bank overdraft,
factoring etc. ... For example, retained earnings are an internal source of
finance whereas bank loan is an external source of finance.
iii. Benefits and drawbacks
External finance
Advantage: Preserving Your Resources

One of the advantages of external funding is it allows you to use internal

financial resources for other purposes. If you can find an investment that
has a higher interest rate than the bank loan your company just secured,
it makes sense to preserve your own resources and put your money into
that investment, using the external financing for business operations.
You can also set aside your internal financial resources for cash
payments to vendors, which can help improve your company's credit
rating.
Advantage: Growth
Part of the reason organizations use external funding is it allows them to
finance growth projects the company could not fund on its own. For
example, if your business is growing to the point that you need
additional manufacturing space to keep pace with demand, external
financing can help you get the funding you need to build your addition.
External funding can also be used for making large capital equipment
purchases to facilitate growth that the company cannot afford on its own.

Advantage: Advice and Expertise

Organizations willing to finance your business can often also be useful
sources of expert advice. Your banker, for example, has funded many
other small businesses and may be able to offer guidance as to how to
avoid pitfalls that created problems for some. An investor in your
technology start-up likely has technology expertise of his own to offer,
and even if not, may be able to steer you towards useful sources of
advice.

Disadvantage: Ownership

Some sources of external financing, such as investors and shareholders,

require you to give up a portion of the ownership in your company in
exchange for the funding. You may get that large influx of cash you need
to launch your new product, but part of the financing agreement is the
investor is allowed to vote on company decisions. This can compromise
the vision you originally had for your company when you founded it.
Disadvantage: Interest

External funding sources require a return on their investment. Banks will

add interest to a business loan, and investors will ask for a rate of return
in the investment agreement. Interest adds to the overall cost of the
investment and can make your external funding more of a financial
burden than you had originally planned.

Disadvantage: It's a Lot of Work

Securing external funding can be a nearly full-time job in its own right.
You're faced with the task of identifying potential sources of funding,
preparing a slick business plan, practicing a presentation, and calling
dozens of people to arrange – or try to arrange – a face-to-face meeting.
All of these tasks take a good deal of time and resources. None of them
are a guarantee that you'll get the funds you're seeking.

Internal finance
Advantages

 Capital is immediately available

  No interest payments
 No control procedures regarding creditworthiness
 Spares credit line
 No influence of third parties
 More flexible
 More freedom given to the owners
Disadvantages

 Expensive because internal financing is not tax-deductible

 No increase of capital
 Losses (shrinking of capital) are not tax-deductible
 Limited in volume (volume of external financing as well is limited but
there is more capital available outside - in the markets - than inside of
a company)

3. Finance and cost

a. Definition of cost
Costs are the necessary expenditures that must be made in order to run a business.
Every factor of production has an associated cost. The cost of labor, for example,
used in the production of goods and services is measured in terms of wages and
benefits.
b. Classifications of cost
i. Direct cost
Direct costs are costs which are directly accountable to a cost object.
Some overhead costs which can be directly attributed to a project may also
be classified as a direct cost. Initial delivery are not included in direct
attributable cost Direct costs are directly attributable to the object.
Direct costs are business expenses that can be directly applied to
producing a specific cost object, like a good or service. Cost objects are
items that costs are assigned to. Examples of direct
costs include direct labor, direct materials, and manufacturing supplies
ii. Indirect cost
Indirect costs are costs that are not directly accountable to a cost object.
Indirect costs may be either fixed or variable. Indirect costs include
administration, personnel and security costs. These are those costs which
are not directly related to production. Some indirect costs may be
overhead.
iii. Margin cost
The direct cost margin is calculated by taking the difference between the
revenue generated by the sale of goods or services and the sum of all
direct costs associated with the production of those goods, divided by the
total revenue.
iv. Direct material
 Direct materials cost the cost of direct materials which can be easily
identified with the unit of production. For example, the cost of glass is a
direct materials cost in light bulb manufacturing. The manufacture of
products or goods required material as the prime element.
 Direct materials are raw materials that are made into finished products.
These are not materials that are used in the production process. Direct
materials are goods that physically become the finished product at the end
of the manufacturing process.
v. Direct labor
Direct labor refers to the salaries and wages paid to workers that can be
directly attributed to specific finished products. It includes the cost of
regular working hours, overtime hours worked, payroll taxes,
unemployment tax, Medicare, employment insurance, etc.
vi. Variable cost
Variable costs are costs that change as the quantity of the good or service
that a business produces changes. Variable costs are the sum of marginal
costs over all units produced. They can also be considered normal costs.
Fixed costs and variable costs make up the two components of total cost.
vii. Fixed cost
While these fixed costs may change over time, the change is not related to
production levels but rather new contractual agreements or
schedules. Examples of fixed costs include rental lease payments,
salaries, insurance, property taxes, interest expenses, depreciation, and
potentially some utilities.
c. Break even analysis
The break-even point in economics, business—and specifically cost accounting—
is the point at which total cost and total revenue are equal, i.e. "even". There is no
net loss or gain, and one has "broken even", though opportunity costs have been
paid and capital has received the risk-adjusted, expected return.
i. Uses of breakeven analysis
The main use of breakeven analysis is identifying the point at which
profitability will occur for a new project or investment decision. Break even
analysis usually requires many inputs such as the initial investment requirement,
variable costs per period (or per unit sold) and revenue per period (or per unit
sold).