- Advantages and disadvantages of partnerships:
A partnership is a form of business ownership that results from the association of two or more people in co-owning a business.
Advantages of partnerships:
- Partnerships have little start up restrictions and other than the setup of the partnership agreement, everything else is simple.
- Partnerships enable the pooling of resources i.e. capital, skills and borrowing power thus people can invest more as a group than as individuals.
- Partnerships offer better chances at specialization than sole proprietorships since partners can assign roles depending on skillsets and get the benefits of specialization.
- Partnerships are not taxed separately from the owners thus only the owners are taxed, not the business.
Disadvantages of partnerships:
- All partners have joint and unlimited financial liability and are thus responsible for business debts incurred by others. All combined personal properties are available to the firm’s creditors.
- Decision making is a group task and thus the potential for personal or work disagreements in partnerships is higher and may result to business failure.
- It is relatively impermanent and is ended legally upon withdrawal, insanity or death of a partner.
- A partner’s investment is frozen in the entity and they cannot simply withdraw their investments in the firm. They thus must find a willing person(s) to buy in and this person(s) must be acceptable to the remaining partners.
- Funding options for small businesses:
Establishing a small business entity and setting it off requires financing and there are different ways to get this much needed funding:
Debt Financing - This refers to funding small businesses with loans from financial institutions. People with good credit and are well established in banks may easily secure a small business loan. Banks may be reluctant to fund un-established firms and an entrepreneur say, in the US may go through the federal Small Business Administration to help them secure financing. Lenders usually diminish risks if a person is backed by the SBA.
Grants: This is free funding especially for players in the science and technology industry for innovative business ideas. One can also work with government agencies in Cooperative Research and Development Agreements (CRADA) and optimize resources while performing research cost-effectively. Grants are very competitive and funds are strictly monitored.
Equity Financing - This involves attracting investors to fund a business. This may involve selling a share of the business to institutional and private investors or asking for help from family and friends and other silent partners such as local entrepreneurs and business associates.
Venture Capitalists - This funding option is for businesses past the startup phase with initial streams of revenue, have quality teams in place and have charted a clear path to go public or eventually sell out. Venture capitalists are funding gurus looking to quickly recover their capital and profits from a venture. They are thus very time sensitive in their funding and are a good source if the business is promising and if you plan for future expansion.
Other funding options include strategic and angel investors. The latter are very patient, friendly with their investments and provide business wisdom and relationships along with the funding. Strategic investors on the other hand are industry specific and look to invest in a specific industry promote their own business objectives while helping with yours.
- How managerial accounting helps managers with product costing, incremental analysis and budgeting.
Managerial accounting deals with producing useful financial information for managers to use in decision making. This information is focused more on departments, activities and products and covers a wide range of functional areas that include finance, marketing, production etc.
In terms of product and service costing, managers must understand the capture and assignment of costs to goods and services. The process is more complex than perceived should thus be extensively covered in the management accounting function of cost accounting. The various costing approaches that a manager should consider are job, activity and process based costing methods that help cost determination in consideration of the job type, activities and processes involved respectively.
Incremental analysis is an important decision making tool that assesses costs and revenues of each alternative in the decision making process. Managers use this tool to highlight the likely implications of a decision to the business by summarizing the advantages, limitations and consequences of options at hand before making the final decision.
In terms of budgeting, managerial accounting helps managers in the outlining of business financial plans. The process of budgeting must account for capital expenditure plans, corporate financing and ongoing operations thus the necessary financial information must be produced to back this.
- Basic components of the marketing process using a product as an example:
The marketing process is a sequential step wise procedure used by firms to identify and satisfy unfilled consumer needs and deliver products that satisfy such needs. A good example is global food manufacturer Nestlé.
The company observed the problem of obesity in young children in the US, did a situational analysis and found that they could start producing nutritional food products to help curb this epidemic.
These products however had to reach the final consumer if produced. Nestlé’s marketing strategy thus focused on offering highly nutritional and differentiated products with low calories, removing bad ingredients in existing products and introducing new products. They further differentiated products by adding nutritional enhancements such as vitamins, antigens and minerals. They also did nutritional profiles and tests on their products for quality assurance and to ensure conformity to standards, reliability and durability through extensive research.
Nestlé is a well-established and trusted brand with a wide customer base and a well-established distribution channel that uses resellers. However, in terms of pricing strategies, Nestle uses a National Price List (NPL) that they closely monitor to avoid price and distribution channel conflicts. Products are offered to resellers at discounted prices since Nestle enjoys large economies of scale thus ensuring every stakeholder benefits. In terms of promotion, Nestle uses healthy campaigns depicting image of healthy and energetic people in adverts, public awareness on the effects of obesity, the need for exercise and a balanced diet. After considering all these elements in the marketing mix, Nestle launched their nutritional products not only in the US but also in Asia and other continents. Their good customer support and quality assurance departments constantly follow up on product performance and improvement and this has seen the rate of obesity drop significantly in the US and people turning to healthy eating.
- Role of social responsibility and technology in the marketing function:
Technological advancement and the continuing demand for the social responsibility of firms have significantly influenced the marketing function. While the work of marketers has been to seek long-term profits, they now have the role of contributing to the broader societal needs such as fair labor practices in foreign markets.
Social responsibility in the marketing function also involves local communities and promoting the environment. This promotes the marketing function since consumers now tend to consider products from companies that give back to society and conserve the environment.
In terms of technology, the growth of the internet and the number of users has led to a great revolution in marketing where power has shifted from the producers to final consumers. The rise of internet marketing has also helped businesses deliver better and more customized services, generate new product promotion opportunities and improve working efficiency.
- Forms of business ownership:
Sole Proprietorships
These are businesses owned by one person. The advantage of sole proprietorships is that they are easy to start and least expensive, the owner has complete control in making decisions within the confines of the law, income belongs to the owner and it is easy to dissolve. Limitations of this business include: owners have unlimited liability, they are disadvantaged when raising funds since they can only use loans or savings and may not attract investors since they have no intention of co-owning.
Partnership:
A partnership is business entity formed by two or more people. It is formed following the Uniform Partnership Act. People forming a partnership enter into a partnership agreement, a written or oral contract that states the firm’s business, name and location. Mutual understanding of the roles and duties of each partner, profit and loss sharing, withdrawal from the contract and dissolution are also defined.
A partnership has various advantages such as ease of establishment in raising capital, less legal issues; there is room for specialization if partners are multi-skilled and each partner is taxed individually and not the business.
The disadvantages of a partnership include: joint and unlimited liability of each partner, profits are shared, decision making is hectic in case of disagreements and the partnership is prone to abrupt dissolution incase a partner dies, becomes insane or withdraws from the partnership.Corporations
It is a unique entity separate from the owner and it can be taxed or sued and become signatory to contractual agreements. It is owned by shareholders who elect a board of directors to oversee major policy implementation and decision making.
Advantages of a Corporation:
- Shareholders liability is limited.
- Corporations can get extra funding through sale of stocks.
- Costs of benefits provided to employees and officers may be deducted by the corporation
Disadvantages of a Corporation:
- Long legal processes and higher establishment costs than other ownership forms.
- They are closely monitored by local, state and federal agencies to ensure compliance with regulations.
- Incorporation results in higher taxation overall and shareholders dividends can be taxed twice since they are not deductible from the business income.
Limited Liability Company (LLC):
An LLC combines the limited liability advantages of corporations and the operational flexibility and tax efficiency of partnerships. It is owned by members and its duration is determined at the time of registration. Its duration can be increased upon vote by members.An LLC should not have more than two out of the four characteristics defining a corporation. Its limited liability is confined to assets, continuity, management centralization and free ownership transfer.
- Entrepreneurship and its importance in the U.S. economy of small businesses:
Entrepreneurs identify a business idea, take the necessary risks, fund a business, control and monitor all business activities. Entrepreneurship is thus the state of being an entrepreneur and combining all the necessary factors of production to start a business.
According to Kobe (2007), small business entrepreneurs in the US comprise over 99.7 percent of employer firms and employ more than 50 percent of employees in the private sector. Overall, these firms pay over 44 percent of the United States private industry payroll. In terms of job creation for the past 15 years, entrepreneurs have generated over 64 percent of the net new jobs.
These firms generate more than 50 percent of the non-agriculture private GDP and hire more than 40 percent of technology workers such as engineers, programmers and scientists. In the fiscal year 2007, entrepreneurs constituted a whopping 97.3 percent of the total number of known exporters and generated an Export value of 30.2 percent. Of these small businesses, only 52 percent are local and 2 percent are franchises.
- Basic accounting process and financial statements used in business:
Accounting systems generally track and control business income and expenses. The financial information recorded in these systems is used for decision making after analysis.
The accounting process involves the capture and recording of business transactions, classification of transactions into the appropriate accounts, posting of the financial transactions into their respective ledger accounts and finally summarizing and reporting the ledger account balances in financial statements.
Financial statements give a comprehensive financial status of a company, its operational results, financial conditions, and the origin and use of its finances. There are three basic financial statements: the balance sheet lists all the balances in the Asset, Liability and Owner Equity accounts in a firm. Income statements on the other hand list all balances in the Expense and Revenue accounts. Cash flow statements list all cash inflows and outflows within a specified period of time usually one year for purposes of full disclosure.
- Basic components of the marketing process:
Marketing is a process that consists of a sequence of activities performed by businesses and results in value exchange between the marketers and markets. The basic components include: planning and design of products and services, pricing, product promotion and distribution.
These four components comprise the marketing mix and are employed by marketers in managing the demand for goods and services.
- Issues in business:
In 2010, after the recession, the global financial system was still fragile but economies began to recover. Emerging markets especially continued with their rapid growth.
However, a closer look at worldwide trends reveals six broad and long term trends that are shaping the globe. They include:
- Increased global power of emerging markets
- Clean technology becomes a competitive advantage
- Global banking seeks to recover through transforming the way they do business.
- Improved ties between governments and the private sector
- Rapid technological innovation has led to the creation of a smart and mobile world.
- Major demographic shifts have transformed and redefined the global work force.
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