Bastobota without reality chara

Business :

The human activity performed by individual or organisations of manufacturing , extracting, or buying & selling of goods or providing services in exchange for other goods , services or money, to the mutual benefits of the individuals or organisation concerned .

Functions of Business

1.Production :- Production involves the manufacture of goods or provision of services.

2.Personnel functions :- This involves in concentration with obtaining the best possible types of workers and creating the environment in which they can work most efficiently by providing appropriate pay, training and working arrangements.

3.Finance :- This is essential in any business in order to pay for suppliers and invest in new equipments , building and other assets .

4.Marketing :- This involves the research of the market and the needs and requirements of the customers .

TYPES OF BUSINESS ORGANISATIONS

Sole Trader :- In this form of business organisation one person provides the capital or permanent finance & in return , retains full control of the business & enjoys all the profits . He/ she is also liable for any debts of the business.

There are no legal formalities of forming the business as a sole trader . But under the Business Act 1985 a business using a trade name must conform to 3 basic requirements: -

a)The name of the owner must be displayed on all documents.
b)The owner must disclose information relating to ownership to any one who has dealings with the business.
c)A notice concerning ownership must be displayed in the business premises.

• Advantages

The owner has his own freedom to do what ever he wants to do.
He needs not to consult with any one while taking any decision, and thus no time is also wasted.
He /she alone enjoys the profit.
He /she has personal contact with the workers and customers.
Any new business strategy being taken needs not to be disclosed to others.

• Disadvantages

The source of finance is limited.
The firm is likely to grow.
The success depends upon the owner’s energy and continuing fitness.
All loss has to be borne by him/her.
No continuity possible if the owner dies.

Partnership : A partnership is an association of individuals and is not a legal entity in its own right . Consequently it cannot sue or be sued in its own name, but instead each of the partners has to be named. Each partner is liable for any debt of the business. Moreover, every partner, when acting on behalf of the firm, acts as an agent of the partnership and can thus bind his or her fellow partners.

• Advantages

The source of finance is more.
As a number of partners are available, each can select each of the responsibilities of the business.
The partners share the losses.
As a number of partners are available, each of them are expected to be specialized different sectors.

• Disadvantages

The profits are shared among the partners.
There may be argument between each of the partners.
If a partner makes a decision the other partners has to agree to that decision.
The partners have unlimited liability.

 The partnership agreement should deal with :-

The nature of the business, and date of commencement.
The amount of capital put into the business by each of the partner.
The method by which the profits and losses are to be shared.
The voting rights.
The role of each partner.
The duration of the partnership, and methods of dissolving the partnership.
Arbitration procedure if partners cannot reach agreement.
Arrangements to cover absence, retirement and the admission of new partner.
Arrangements concerning finance, book – keeping, etc.
Authority to sign contracts.

 If there is no written partnership deed , then the partners :-

are entitled to an equal share of the profits .
are entitled to participate in the management of the business .
decisions are settled on a majority basis .

Limited liability (joint stock) company :- Companies differ from partnership , sole trader , in that the act of incorporation creates a new legal entity distinct from the shareholders who own the company.
Companies can make contracts and sue or be sued. All action taken by the company, including the contracting of debt, are actions of the company rather then the actions of the individual owners.
The shareholders enjoy the privilege of limited liability, which means that they are only liable for debts amounting to what they have spent on the business.

•Private Limited Companies :- This type of companies are found in the private sector , and are owned by a number of shareholders who have limited liability . The business is not allowed to sell share in the Stock Exchange.

•Public Limited Company :- This type of companies are found in the private sector , and are owned by a number of shareholders who have limited liability . The business is allowed to sell share in the Stock Exchange to raise funds.

Economic Systems

There are three main types of economic systems: free market (capitalist), plamed (command) and mixed. The difference between the three systems stems from the, amount of government interference which takes place in the production and distribution of the goods and services.

THE FREE MARKET SYSTEM (also the Laissez-faire system)

Features of this System

In the free market system, there is no government interference in the working of the economy. The price mechanism is its main feature, prices of goods and services being determined by the demands made by the consumers and by the willingness of producers to supply these goods and services.

More over the resources are owned by the individuals , not by the state .

Advantages of free market economy :-

1.People are encouraged to work hard , because opportunities exist for individuals to accumulate high levels of wealth.

2.People can spend their money how they want ; they can choose to set up their own firm or they can choose for whom they want to work.

3.Through competition, less efficient producers are priced out of the market : more efficient producers supply their own products at lower prices for the consumers, and use factors of production more efficiently.

Disadvantages of free market economy

1.As the economy is free the wealthier members of the society tend to hold most of the economic and political power, while the poorer members have much low influence. Then is an unequal distribution of resources and sometimes production concentrates on luxuries, i.e. the wants of the rich.

2.The price mechanism may not work efficiently where services need to be provided or the benefit: of society as a whole (such as defense, education and health services).

3.Since the profit motive is all-important to producers, they may ignore social costs of production, such as pollution. Short-term profit performance may be considered more important than long-term growth.

4.Although. in theory factors of production such as labour are 'mobile' and can be switched from one market to another, in practice this is a major problem and can lead to hardship through unemployment. It also leads to these scarce factors of production being wasted, by not using them to fullest advantage.

5.Some firms may use expensive advertising campaigns to sell products which are basically the same as many other- products currently on sale. Other firms, who control most of the supply of some goods, may choose to restrict supply and therefore keep price artificially high or, with other suppliers, they may agree the prices to charge and so price will not be determined by the interaction of supply and demand.

THE PLANNED SYSTEM

This is also known as the command system .

Features of this system

Unlike the market economy, where the government plays no direct role in deciding what is produced the planned system relies exclusively on the State. The government will decide what is made, how it is made, where it is made, how much is made and how distribution takes place.

The resources - the factors of production - are controlled by the government on behalf of producers and consumers. Price levels are not determined by the forces of supply and demand but are fixed by the government.

Advantages of the planned system

1.Central planning can lead to the full use of all the factors of production so reducing or ending unemployment.

2.Economies of scale become possible due to mass production taking place.

3.' Natural monopolies ' such as the supply of domestic power, or defence, can be provided by central planning

4.There is less concentration on making luxuries for those who can afford them and greater emphasis on providing a range of good and services for all the population.



Disadvantages of the planned system

1.Consumers have little influence over what is produced and people may have little say in what they do as a career.

2.Since competition between different producers is not as important as in the market economy, there is no great incentive to improve existing systems of production or work. Workers are given no real incentive to work harder and so production levels are not as high as they could be.

3.The existence of such a powerful and large bureaucracy can lead to inefficient planning and to problems of communication. Furthermore, government officials can become over privileged and use their position for their personal gain rather than for the good of the rest of the society.

THE MIXED ECONOMY

There are no economies in the world that are entirely 'market' or 'planned': all will contain elements of both systems.

Features of this system

The mixed economy includes elements of both market and planned economies. The government operates and controls the public sector firms which includes health and education. The private sector is largely governed by the price mechanism and market forces.

Advantages

1.The necessary services, which make no profit are provided in this economy.

2.As in this economy private sector is there, individuals will work hard to make profit, as all profits will be enjoyed by him.

3.Prices of goods & services in the private sector are kept down through competition taking place.

2002

Introduction:
Financial statement provides the primary means for managers to communicate about the financial condition of their organization to outside parties. Investors, lenders, financial analysts and government agencies are among the users of financial statements. In this point it falls into the external category. Investors buy capital stock, from which they hope to receive dividends and an increase in value. So they face risk, as the risk that dividends will be reduced or not paid or the market price of the stock will drop. In this case, the goal is to achieve a return that makes up for the risk taken. In general, the grater the risk taken, the grater the return required as compensation.


Ratio Analysis:
It is an important way to state meaningful relationships between companies of financial statement. Ratios are guided or short cuts that are useful in evaluating the financial position & operations of a company & in company them to provides.

The current ratio

Many creditors feel that a current ratio of 2.0 higher is relying too heavily on the current ratio may not be advisable.


1) Current Ratio = Current Asset / Current Liabilities

= 20147354 / 19624156

= 1.03

Here it is lower then the satisfactory rate.

The quick ratio

Creditors generally use the rule of thumb that a quick ratio of at least 1:1 is satisfactory.


2) Quick Ratio = Cash marketable securities and receivable (net) / Current liability

= 130642 + 73223000 + 865000 + 61854 / 19624156

= 7428496 / 19624156

= 3.78

In this case, it’s way high.


3) Current cash debt coverage ratio


Current cash debt coverage ratio = Net cash provided by operating activities /
Average current liabilities

= (493063) / 19624156

= (0.025)

This ratio at least should be positive. Here it is on minus side.

4) Receivable turnover


Receivable turnover = Net Sales / Average trade receivables (net)

= 13226625 / 865000 + 150000 + 61854

= 13226625/ 1076854

= 12.28

Creditors are interested in receivables turnover and the average age of receivables as indicators of how quickly the company’s receivables are converted into the cash required for operations and debt repayment. Investors and creditors use receivables turnover as one more index of management efficiency.


5) Asset turnover

Asset turnover = Net sales / Average total assets

= 13226625 / 8637000

= 1.5314

6) Profit Margin on sales

Profit Margin on sales = Net Income / Net sales

= (226654) / 13226625

= (0.0171)

Here profit margin on sales is on negative side. It is not at all satisfactory.


7)Rate of return on assets

Rate of return on assets = Net income / Average total assets

= (226654) / 8637000

= (0.0262)


Rate of return on Common stock equity


8)Rate of return on Common stock equity = Net income minus preferred dividends /
Average common stockholder’s equity

= (226654) / 73223000

= 0.0030

It is even lower then one.



Earnings per share


9)Earnings per share = Net income minus preferred dividends / Weighted shares
outstanding

= (226654) / 20000000

= (0.0113)

Earning per share is on negative side.


Payout ratio

10) Payout ratio = Cash dividends / Net income

= (21114) / (226654)

= 0.0931

Debt to total assets


11) Debt to total assets = Total debt / Total assets or equities

= 21434156 / 92327665

= 0.2321


Times interest earned

12) Times interest earned = Income before interest charges and taxes / Interest
charges

Cash debt coverage ratio

13) Cash debt coverage ratio =
Net cash provided by operating activities / Average total liabilities

= (280544) / 23763647

= ( 0.0118)

Book value per share

14) Book value per share = Common stockholder’s equity / Outstanding shares

= 73223000 / 20000000

= 3.66115



2001