Business Economics And Financial Analysis Unit-1 PDF

BUSINESS ECONOMICS AND FINANCIAL ANALYSIS UNIT-I BUSINESS: 4. Transferability of Ownership: The term business refers to an organization or 5. Professional Management: ente...

BUSINESS ECONOMICS AND FINANCIAL ANALYSIS UNIT-I BUSINESS: 4. Transferability of Ownership: The term business refers to an organization or 5. Professional Management: enterprising entity engaged in commercial, industrial, or DEMERITS professional activities. 1. Double Taxation: TYPES OF BUSINESS ENTITIES: 2. Complexity and Cost: 1. SOLE TRADER 3. Regulatory Scrutiny The sole trader is the simplest, oldest and natural form of 4. Loss of Control: business organization. It is also called sole proprietorship. REGISTRATION PROCESS ‘Sole’ means one. ‘Sole trader’ implies that there is only 1. Choose a Company Name one trader who is the owner of the business. 2. Obtain Digital Signature Certificate (DSC) MERITS: 3. Obtain Director Identification Number (DIN) 1. Easy to start and easy to close 4. Draft Company Memorandum and Articles of 2. Personal contact with customers directly Association 3. Prompt decision-making Memorandum of Association (MoA): Defines the 4. High degree of flexibility scope and objectives of the company. 5. Secrecy Articles of Association (AoA): Outlines the rules 6. Minimum interference from government governing the company’s internal management. DEMERITS: 5. File Registration Documents 1. Unlimited liability 2. No division of labour 6. Submit the required documents online through the MCA portal, including: 3. More competition 2. PARTNERSHIP a. MoA and AoA Indian Partnership Act, 1932 defines partnership as the b. Form INC-7 (for incorporation) relationship between two or more persons who agree to share the c. Form DIR-12 (for directors) profits of the business carried on by all or any one of them d. Form INC-22 (for registered office) acting for all. (MAX LIMIT:50) e. Other necessary declarations and MERITS: affidavits 1. Easy to form: 7. Pay the required registration fees based on the 2. Availability of larger amount of capital authorized capital of the company. 3. Division of labour: 8. Certificate of Incorporation: The Registrar of 4. Flexibility: Companies (RoC) DEMERITS: 9. Apply for PAN and TAN 1. Formation of partnership is difficult: 2. Liability: 10. Open a Bank Account 3. Lack of harmony or cohesiveness: 4. LIMITED LIABILITY COMPANY: (WRITE MIXED INFORMATION OF PARTNERSHIP AND CORPORATION) 4. Limited growth: PARTNERSHIP DEED SOURCES OF FINANCE: The written agreement among the partners is called ‘the partnership deed’. It contains the terms and conditions governing the working of partnership. KIND OF PARTNERS 1. Active Partner: called working partner. 2. Sleeping Partner: contributes to capital but does not take part in the affairs 3. Nominal Partner: Nominal partner is partner just for namesake. 3. CORPORATION A corporation is considered a legal entity, which means it is recognized by law as a separate entity from its owners (shareholders). MERITS 1. Limited Liability: 2. Perpetual Existence: 3. Access to Capital:  5. Applied in nature: BUSSINESS CYCLE 6. Interdisciplinary: Business cycles are characterized by boom in one 7. Assumptions and limitations: period and collapse in the subsequent period in the SCOPE OF BUSINESS ECONOMICS: economicactivities of a country. Business Economics Decision These fluctuations in the economic activities are termed as Areas:  phases of business cycles. Production: Concepts and  Reduction or control of Optimum Techniques of costs: Solutions Business Economics  Make or Buy Decisions:  Inventory Decisions:  Capital Management:  Investment Decisions: NATIONAL INCOME: National Income means, All Final goods and services produced by a country during in a year. Generally, its financial year. MEASURES: 1. GDP (Gross Domestic Product) 2. GNP (Gross National Product) 1. Expansion: Characterized by increasing economic 3. NDP (Net Domestic Product) activity, rising GDP, higher employment, and 4. NNP (Net National Product) growing consumer spending. Businesses invest more, INFLATION: leading to production growth. 2. Peak: The highest point of the cycle where economic 1. Inflation is a rise in the general level of prices of activity reaches its maximum. Unemployment is low, goods and services in an economy over a period of and inflation may begin to rise due to high demand. time. 3. Contraction (Recession): A decline in economic 2. TYPES: activity marked by falling GDP, rising 1. Creeping (Below 3%) unemployment, and reduced consumer spending. 2. Walking (Below 10%) Businesses may cut back on investments and 3. Galloping (Below 20%) production. 4. Depression: A prolonged period of significant 4. Hyper (Above 20%) economic decline, characterized by high REASONS: unemployment, reduced consumer spending, and 1. Demand push widespread business failures. 2. Cost push 5. Trough: The lowest point of the cycle, where 3. Built up economic activity bottoms out before recovery begins.  Microeconomics is the study of an individual, a Unemployment is typically high, and consumer firm, an organization. confidence is low. 6. Recovery: The phase following a depression where  Macroeconomics is the study of aggregation of economic activity begins to increase again, marked by individuals. rising GDP, improving employment rates, and  Economics is the study of nature and uses of renewed consumer confidence. national wealth ENTITY BUSSINESS ECONOMICS According to E. F. Brigham and J. L. Pappas Business An entity refers to an organization or unit that has its Economics is “the applications of economics theory and own legal and economic status. methodology to business administration practice”. THEORY OF FIRM NATURE OF BUSINESS ECONOMICS: The theory of the firm explores how businesses make 1. Close to microeconomics: decisions to maximize profits and efficiently allocate 2. Operates against the backdrop of macroeconomics: resources. It examines factors like production costs, 3. Normative statements: 4. Prescriptive actions: market structures, and competition etc.