Business Management and Finance Essentials
Chapter 9: Financing Business Activity
Business Stages and Financing Needs
- Starting up a business
- Expanding an existing business
- A business in difficulties
Start-up Capital
Start-up capital is the finance needed by a new business to pay for essential fixed and current assets before it can begin trading.
Capital Expenditure vs. Revenue Expenditure
Capital expenditure is money spent on fixed assets which will last for more than one year.
Revenue expenditure is money spent on day-to-day expenses which do not involve the purchase of a long-term asset, for example, wages or rent.
Sources of Finance
Internal Finance
Internal finance is the money obtained from within the business itself. The most common examples are:
- Retained profits
- Sale of existing assets
- Running down stocks to raise cash
- Owner’s savings
External Finance
External finance is the money obtained from individuals or institutions outside of the business. The most common forms of external finance are as follows:
- Issue of shares
- Bank loans
- Selling debentures
- Factoring debts
- Grants and subsidies from outside agencies (such as the government)
Types of Finance Based on Duration
Short-term Finance
Short-term finance provides the working capital needed by businesses for day-to-day operations. Examples include:
- Overdrafts
- Trade Credit
- Factoring of debts
Medium-term Finance
Medium-term finance is available for between three to ten years. It is usually used to purchase machinery and vehicles, which often have useful lives for this period. The three most common examples of medium-term finance are:
- Bank loans
- Hire Purchase
- Leasing
Long-term Finance
Long-term finance is available for more than 10 years. It is usually taken to buy long-term assets:
- Issue of shares
- Long-term loans or debt finance
- Debentures
Chapter 11: Managing a Business
Effective Managers
Tasks
- Plan for the future
- Organize and delegate
- Coordinate departments
- Command and guide others
- Control and assess the work of departments
Qualities
- Intelligence
- Self-confidence
- Determination
- Initiative
- Good communication skills
- Enthusiasm
Types of Decisions
Strategic decisions are very important decisions which can affect the overall success of the business.
Tactical decisions are decisions which are taken more frequently and which are less important in comparison to strategic decisions.
Operational decisions are day-to-day decisions which will be taken by a lower level of manager.
Chapter 12: Communication in Business
Communication Process
Communication is the transferring of a message from the sender to the receiver, who understands the message.
- Message: The information or instructions being passed by the sender to the receiver.
- Transmitter/Sender: The person starting off the process by sending the message.
- Medium: The method used to send a message, for example, a letter is a method of written communication and a meeting is a method of verbal communication.
- Receiver: The person who receives the message.
- Feedback: The reply from the receiver which shows whether the message has arrived, been understood and, if necessary, acted upon.
Types of Communication
- One-way communication: Involves a message which does not call for or require a response.
- Two-way communication: When the receiver gives a response to the message and there is a discussion about it.
- Internal communication: When messages are sent between people working in the same organization.
- External communication: When messages are sent between one organization and another organization or outside individual.
Communication Nets
Communication nets are the ways in which members of a group communicate with each other. The three types are:
- Chain network
- Wheel network
- Connected network
Barriers to Communication
- Problems with the sender
- Problems with the message
- Problems with the receiver
- Problems with the feedback