Understanding Capital, Assets, and Business Operations

Posted on Dec 9, 2024 in Economy

Capital Securities

Securities include stocks, bonds, and public debt securities. Shares are securities representing capital, granting holders equal rights to participate in the company’s performance. The variation in share value is termed equity. Debentures are documents certifying a loan. When a company utilizes the capital market, it may issue new shares or resort to issuing bonds, which represent a loan. Bondholders are entitled to a predetermined fixed rate.

Shares of public debt are similar, but the taxpayer is the state or a public entity:

  • Tangible Capital: Tangible assets (land, machinery, etc.).
  • Intangible Capital: Rights (patents).
  • Equity and Borrowed Capital: Own funding (provided by owners or partners) versus outside financing (loans).

Organization

This is what gives the company a unitary character through:

  • Technical improvement of production.
  • Meeting staple demands of customers in a regular flow of manufacturing.
  • Rational use of manpower and equipment.
  • Adaptation of products to the market.
  • Production at the lowest possible cost.
  • Administration.
  • Organization of accounting.

Heritage

This is the set of goods and rights that belong to a company, as well as the set of obligations that must be addressed. Assets, rights, and obligations must be measurable and linked to the same ownership for the company’s survival.

  • Property: Premises, furniture, etc.
  • Rights: Money owed by clients, loans to employees.
  • Obligations: Money the company owes to its suppliers, loans requested from banks, etc.

Equity = Assets – Liabilities

Heritage is the field of accounting performance as measured by the initial endowment, variations over a period, and its valuation at the end of that period. It is a patchwork of elements.

  • From the legal perspective: Assets, rights, and obligations.
  • From the accounting perspective: Assets and liabilities.
  • From the economic point of view: The source of funds and their applications.

Equity Items

These are the components of a company’s assets.

Mass Property

This is a homogeneous grouping of assets and liabilities.

  • Assets: Assets and rights owned by the company. Materialization, destination, or investment of financial resources.
  • Liabilities: Outside funding sources.
  • Liabilities: Obligations with third parties (borrowings, debts with suppliers).
  • Net Assets: Contributions of the owner’s own funding sources or own resources. Owner’s initial contributions and benefits accrued and not removed.

Assets = Liabilities + Net Assets

A static representation of heritage is called a balance sheet.

Assets

  • Fixed Assets: Equity items intended to serve the company permanently. Permanent investments in the company that remain for more than a year.
  • Fictitious Assets: Expenditures for their operation that the company can amortize over a period of 5 years (establishment expenses).
  • Real Assets:
    • Heritage: Intangible heritage elements of the company (software patents).
    • Material: Tangible elements of the company (land, furniture).
    • Financial: Permanent financial investments, long-term loans to staff.
  • Current Assets: Assets that remain with the company for less than a year.
  • Attainable: Goods for sale, directly or after processing.
  • Accounts Receivable: People who owe the company for daily operations.
  • Short-Term Investments: Owed to the company for any unusual transactions.
  • Available: Liquid funds available to the company, in cash or in bank accounts.

Liabilities

  • Not Required: Net assets. This is the equity and fixed liabilities of the company, consisting of contributions from owners and accrued, undistributed profits.
  • Callable:
    • Fixed Liabilities: Sources of long-term financing (debt from credit institutions).
    • Current Liabilities: Sources of short-term financing (suppliers).

Innovation, Leadership, and Strategic Attitude

  • Change: Any change in the structure, process, and organizational performance.
  • Invention: An idea reflected in a change that is new to all organizations.
  • Creativity: The process facilitating the emergence of new ideas and, consequently, developing inventiveness.
  • Innovation: A change that is new to the organization.

Innovation is the consequence of R&D, the set of new scientific and technological knowledge, and their implementation.

There are three types of innovation:

a) Technological innovation: Product innovation and process innovation.

b) Innovation in management methods.

c) Social innovation.

Leadership

This is the attitude to influence people to willingly strive for the best achievement of the group or organization’s objectives. It involves designing a vision of what the company should be.

It takes into account the following attitudes (Bennis):

1. Control of meaning. 2. Control of attention. 3. Trust. 4. Self-control.

Proper leadership can be perceived by four aspects (Bennis):

1. People feel useful. 2. Learning and competition are important. 3. People feel part of a team. 4. Work is stimulating, exciting, and even fun.

Current Business Strategy Function

Strategic Attitude

The employer’s will to carry out the organization.

Strategic Posture

The way the employer confronts challenges and threats that arise.

Human Resources Activities

Human Resources activities are directed at achieving and maintaining the human resources needed by the organization.

a) Estimating future human resource needs is planned.

b) The right people are recruited, requiring a selection process.

c) People often do not conform exactly to needs, so orientation and training are conducted.

d) Development activities are conducted to ensure people have the necessary skills.

e) Placement activities transfer people from some tasks to others.

f) Performance evaluation and monitoring are conducted.

g) Compensation activities are carried out.

h) Some compensation is imposed by regulations.

i) Relations with unions are maintained.

Human Resources Planning

This process involves the following steps:

1) The first section examines the current situation, determining if the existing staff is appropriate to the needs.

2) The second makes a forecast of future manpower needs.

3) Finally, a program is developed to meet future human resource needs.

Human resources planning requires a clear vision of current and future employees’ capabilities. There are three ways to get this information:

1) Job analysis.

2) Job description, specifying the job’s objectives and working environment.

3) Record of the requirements to occupy the position in terms of physical, mental, and emotional qualities.

Recruitment and Selection

Knowing the needs is one thing; filling them with qualified people is another.

Most companies follow a policy of recruiting internally, first considering their own employees, which has advantages. However, internal recruitment also has drawbacks, as people from outside bring new ideas. Another disadvantage is its limitation, as a growing business may not be able to cover all new positions internally.

The procedure for getting candidates varies by job level. Senior positions may be sourced from universities or executive search firms, while lower-level positions may be sourced from employment offices.

Main Theories on Motivation

Maslow’s Theory

The only reason a person does something is to meet their needs. Based on his research and experience, Maslow divided human needs into five levels:

1. Primary (eating, drinking, etc.).

2. Safety (avoiding risks from ignorance).

3. Social needs (integration with family and groups, giving and receiving affection).

4. Esteem (respect for other people; the individual is assessed in relation to others).

5. Self-actualization (personal satisfaction).

Maslow acknowledged that some people do not conform to this theory and pointed out that a satisfied need may not motivate a worker to seek it because they have other needs.

Alderfer’s Theory (ERG)

Alderfer also considers that people’s needs are arranged in a hierarchy. He proposed three types of needs:

1. Existence (food, shelter, air, etc.).

2. Relatedness (social and interpersonal relationships).

3. Growth (creative or productive contributions).

He added that a frustration-regression process often operates: if an individual is continually frustrated in attempts to meet their growth needs, relatedness needs reappear as the main motivating force.

Herzberg’s Theory

Herzberg arrived at two conclusions:

1. Maintenance factors are necessary to maintain a level of satisfaction (wages, working conditions, job security).

2. Motivational factors are associated directly with the job.

Low-level needs must be covered to avoid dissatisfaction, and motivation should focus on higher-level needs.