This involves the
statistical analysis of historical data over a period of time. If the data analyzed
shows increase, decrease, or constant figures, then there exists a trend.
Different businesses of different sizes predict their future performance using
There are different
aspects of a company’s trend. They include:
There are various sources of finance in the business
market. Funds may be raised through
Retained earnings- the amount of earnings retained within
the business has a direct impact on the amount of dividends. Profit that is
re-invested as retained earnings is profit that could have been paid as
Banks are an important source of finance to
companies. Short term lending may be in the form of
An overdraft which a company should keep within a limit
set by the bank. Interest is charged on the amount by which the company is
short-term loan, for up to five years
loans are loans for a period of from three to ten years. The rate of interest
charged on medium-term bank lending to large companies will be a set margin,
with the size of the margin depending on the credit standing and riskiness of
the borrower. A loan may have a fixed rate of interest or a variable interest
capital markets are markets for buying and selling equity and debt tools. This
can be done by a company selling its shares to the general public or to another
company. This is another source of finance trend a company can use.
Making the right choice
for your business will generally depend upon the type of business, how the
business is to be run, how many shareholders the business will have, and the
financial situation of the business. A business can be: sole proprietorship, a partnership,
or corporation depending on your preferences and the type of business. Different
business have varied structures vary but there are some criteria that one can
use to find which one works best.
procedures associated with establishing and continuing to run the various
Designing a business as
a corporation allows the business to sell shares of ownership in the business
through stock market. This is different than the other business structures,
which do not allow the selling of portion of the business through the sale of
stocks. This is because it may allow owners of a corporation to attract more
investors and retain employees more easily by offering stock.
If you desire the
limited personal liability that comes from a corporation, you could instead
form your business as a Limited liability company. An limited company provides
many of the advantages of a corporation while remaining more flexible.
There is a tax benefit
to forming your business as a corporation. The owners of a corporation do not
pay taxes on any profits that the corporation keeps, and the corporation pays
taxes at a lower rate than do some individuals. This means that a corporation
and its owner may pay less in the form of taxes than if the owner had organized
his business as a sole proprietorship, or any of the other business structures.
A corporation is a
separate tax entity, it must pay taxes on any profits that remain within the
company during a tax year, and also on any profits that it pays out in the form
of dividends to shareholders.
Various types of businesses come with different
liabilities. Limited liability companies
allow business owners a type of “limited liability,” where anyone
seeking affirms against the business will have a very hard time placing
personal liability to the owner. Unlike, if you were to organize your business
as a partnership or a sole proprietorship, you could be personally responsible
for anything the business did erroneous.
In a partnership, every
partner can be held personally liable for any claims against the business.
Basically every partner has some percentage of liability therefore liability is
distributed across board.
Sole proprietorships and partnerships do not have a
lot of paper work as compared to limited companies and corporations. They are
quite difficult and expensive too to establish and maintain.
In order to establish a
corporation or limited liability company, you must file “Articles of
Incorporation” with your secretary of state and pay fees associated with
the incorporation. In addition, when deciding to form a corporation or Limited
liability company, the owners of the business must decide which officers to
elect to run the company. The officers typically must include at least a
president, vice president and secretary. Limited liability companies and
corporations must keep specific and detailed records of any important business
decisions, and follow many other formalities that are associated with these
The surrounding community culture in which an
entrepreneur opens a business will determine the business operations. The
business should not go against the cultural practices of the community. For
example one should not open a pork butchery in an Islamic community.
This is a business strategy in which a new market is
created and value which disrupts the existing market.
Disruptive innovation describes
a process by which a product or service takes root earlier in simple
applications at the base of a market and then relentlessly moves up market,
eventually removing established competitors.
Companies pursue such
innovations which helps them succeed in the market.
By charging the highest prices to their most
demanding and sophisticated customers at the top of the market, companies will
achieve the greatest profitability. Some characteristics of a disruptive
business at initial stages are described below
of disruptive businesses
products and services
In the long run the company will produce
products or services that are actually sophisticated, very expensive, and very complicated
for many customers in their market.
Haines Watts https://www.hwca.com/app/uploads/2015/02/Sources_of_Finance.pdf
Ronstadt, R.C. (1984). Entrepreneurship, Dover, MA: Lord
Publishing Co., pg. 28
Dr. Anrug Pahuja, Rinku Sanjeev
(March, 2015) Introduction to