Реферат: Бизнес (Talking Business)

<span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight: bold"><span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight: bold">Ministry of EducationChuvashState University after I.N.UlyanovFacultyof Business and Management<span Times New Roman",«serif»"><span Times New Roman",«serif»"><span Times New Roman",«serif»">


Talking BusinessStudent: N.I. Nikitin, FBM-61-02Advisor:  M.V. Emelyanova                                                         Cheboksary – 2003<span Times New Roman",«serif»; mso-fareast-font-family:«Times New Roman»;mso-ansi-language:EN-US;mso-fareast-language: EN-US;mso-bidi-language:AR-SA">
<span Times New Roman",«serif»"><span Times New Roman",«serif»">PLAN:<span Times New Roman",«serif»"><span Times New Roman",«serif»; font-weight:normal;mso-bidi-font-weight:bold">Introduction….…..<span Times New Roman",«serif»; font-weight:normal;mso-bidi-font-weight:bold">……………………………………...……….…….….…….…<span Times New Roman",«serif»; font-weight:normal;mso-bidi-font-weight:bold">3<span Times New Roman",«serif»; mso-ansi-language:EN-GB;font-weight:normal;mso-bidi-font-weight:bold">

Chapter 1. Setting up abusiness………………….………………..……..….4

Chapter 2. Companyperformance.….……..…………………….…………..6

Chapter 3. Thestock market...…….……..…..….….…..……….……….…..8



<span Times New Roman",«serif»"><span Times New Roman",«serif»"><span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight:bold">Introduction<span Times New Roman",«serif»;mso-fareast-language:RU;font-weight: normal;mso-bidi-font-weight:bold">The given course paper represents a briefmaterial. It has the recommendations of successful management of business. Theexperience of the entering business and the achievements of positive resultsare generalized in it. I have chosen the theme of my course paper as I thinkthat each person has an opportunity of opening his own business in our countrynow, but not everyone can do it. And that's why I have decided to help thebeginning businessmen to earn money.

The given course paper consists of three parts. In the firstpart it is considered preparatory steps of the setting up of business. Work ofthe company is analyzed in the following chapter of the course paper.   And I have tried to study the stock marketin the third chapter.

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<span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight:bold">Settingup business

If a person wishes tolaunch a new business, he has to make some preparatory steps. The first step isthe selection of an appropriate legal form. In various countries these formsdiffer. But usually they are as follows: a limited liability company, apartnership and a sole proprietor.

There is a basicdifference between these forms. A limited liability company is a legal entity(legal person). In case of a bankruptcy, it has to reimburse (cover) its debtswith all its assets, but the creditors cannot seize the assets owned by thecompany’s shareholders.

Sole proprietors orpartners do not form a legal entity and have unlimited liability. If theirbusiness goes bankrupt, they have to reimburse the debts not only with thefirm’s assets but also with their personal belongings: money, houses, cars,etc.

For this reason, mostbusinesses are set up as limited liability companies. The name of such acompany ends with “Limited” in the UK or Canada and with “Inc.”, “Corp.” or“LLC” in the USA.

A limitedliability company may be private or public. A private company is usuallyfounded by a small group of people who know each other and intend to dobusiness together. A private company cannot sell its shares to the public andif it the business is not successful the founders loose their own money only.

A publiccompany’s shares are traded on the stock market and may be purchased bymillions of people all over the world. These shareholders are not aware of thecompany’s day-to-day performance and must rely on the professionalism of thecompany’s managers and their reports. If the management is poor or in case ofthe managers’ fraud, the shareholders may loose billions of dollars.

Many countrieshave special regulatory bodies to supervise public companies, such as the USSecurities Exchange Commission. Yet, corporate disasters sometimes happen. Oneof the most recent examples is the bankruptcy of Enron Corporation, a giant supplierof energy resources in the Western part of the United States.

The secondstep in setting up a business is the preparation of various documents, such as:Memorandum of Association, Articles of Association and Resolution of thefounders on the appointment of directors. The Memorandum contains theconditions, on which the founders agree to set up this business, and theArticles set out the principles of the company’s formation and management: itsname, objectives, share capital, rules of management, etc. The founders have tomake the initial investment and may either hire the directors of the company orappoint themselves as the directors.

Every newbusiness is to be registered with the official company register. The UK hassuch registration offices in London and in Edinburgh, while in the USA each ofthe 50 states has its own register.

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<span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight:bold">Companyperformance

Anybusiness is set up to make profit. But the founders sometimes do not haveenough experience or make serious mistakes, which result in losses. Thefinancial results of the company’s operations can be seen from its financialreports.

There are at least three reasonsfor preparing such reports. First, every government needs to collect taxes andtherefore requires detailed information on the company’s performance, revenuesand expenses. Second, the shareholders need to know, whether the company’smanagement is professional enough, and ask for confirmation with facts andfigures. Third, the company’s top executives must control the efficiency of thecompany’s various departments and the input of each department in the company’soperational results. The reports prepared by the company’s accountingdepartment are often verified by an auditor, which is an independent publicaccountant. The auditor has to confirm that the reports comply with legalrequirements and they reflect the company’s actual performance.

There are a lot of reportssubmitted annually, semi-annually and quarterly. The most important one is thebalance sheet, which describes the company’s assets and liabilities as on thelast date of each year. The assets are the values, which the company owns:money, buildings, equipment, raw materials, computer hardware and software,trade marks. The liabilities specify what the company owes, such as: sharecapital, credits received from banks and suppliers, other debts. If the amountof assets is higher than that of the liabilities, the company has profit. Ifthe liabilities are higher than the assets, the company has losses. In thelatter case they say that the company is “in the red”.

Money transfers between the companyand its partners during the year are shown on the statement of cash flows. Cashis the most liquid asset, which is as important for the company’s activities asblood for a human body. If a company has huge fixed assets (land, buildings,equipment) but does not have enough money, it is a sign of financial problems.

There are many other reports,letters, notes and messages, which a company has to submit. Some of them areverycolourful, with photographs and illustrations and look likeadvertising material. But their contents are usually a summary of the above twodocuments and additional comments to them.

If we deduct the company’s expensesfrom its revenues, the result is gross profit before    taxes. If we further deduct taxes from thegross profit, the result is   net profit,which may be distributed among the shareholders as their dividends or may bereinvested. The shareholders adopt a resolution on this matter at their annualmeeting. Often they decide to    usehalf   of the net profit for dividendsand to reinvest the other half. The net profit may also be carried forward tothe next year. The amounts brought forward from the previous year are known as“retained earnings” of the company.

Companies are usuallyreluctant (do not wish) to pay taxes and there are legal ways to avoid some ofthem. The company’s ability to save on taxation depends on the professionalismof its accountants. The easiest way to avoid taxes is to increase expensesthrough purchasing new machinery, investing in new technologies, making moneytransfers to charity foundations.

While tax avoidance isallowed, tax evasion is a crime. The company’s executive body (the board ofdirectors) is responsible for the correctness of the information submitted tothe government. The personal liability is on the chief executive officer (theboard chairperson) and the chief financial officer who sign the reports. Ifthe    information contained in thedocuments is not correct and if the company tries to evade taxes, these personsmay be fined or even jailed. Otherwise, they may escape to another country,which sometimes happens.

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<span Times New Roman",«serif»;font-weight:normal;mso-bidi-font-weight:bold">Thestock market

A century ago, the size ofenterprises was rather small, each of them usually employed several dozenworkers, and most business companies were family-owned. Further industrialgrowth required more intensive financing and family capitals becameinsufficient. This gave birth to share capital, which can combine financialresources of many people into a pool for starting a big project.

The most visiblerepresentatives of share capital are public limited companies, such as BritishPetroleum, Royal Dutch Shell or General Motors. They raise money on the stockmarket by issuing securities, mostly shares and bonds.

Ordinary shares (commonstock in USA) form the largest part of the whole securities market. Ashareholder owning ordinary shares can vote at the annual shareholders’meeting, which reviews the company’s reports, takes decisions on the company’splans and the distribution of the company’s profit. The meeting may decide todistribute the dividends to the shareholders or to reinvest the profit. If thecompany has no profit or has losses, the owner of ordinary shares will receiveno dividends.

Each ordinary share hasits face value and its market price. The face value is indicated on the sharecertificate but one cannot sell or buy the share at the face value. The marketprice is established at the stock exchange, where the shares are quoted andtraded. The market price may be several times higher or lower than the facevalue because it depends on the general market situation and on the performanceof the company.

When the country’s economygrows, the stock market usually has an upward trend, the market prices ofshares go up and the stock exchange traders say that the market is“bullish”.  If the market has a downwardtrend, the market prices of shares go down and the market becomes “bearish”.

Many companies issuepreference shares (preferred stock in USA). These shares give the shareholder aguaranteed, stable income fixed as a percentage of their face value. Butpreference shares do not let their owner to vote at the shareholders’ meetings.

Some companies issuebonds. These securities provide their owner with stable income, the same aspreference shares do. But unlike ordinary or preference shares, bonds areredeemable. It means that the company issuing bonds has an obligation to redeemthem or buy them back at the face value after a certain period of time, usuallyafter several years.

There was a stock marketboom during the latest decade of the twentieth century. Many people becameactive in shopping for financial products and invested much of their wealth insecurities. They expected that the markets would grow rapidly in the comingyears and hoped to earn money through buying securities at lower prices andselling them at higher prices.

But these expectationswere ruined by a sudden economic crisis. Now the Western economies have been inrecession for about two years and the market price of most securities is muchlower than their face value. It is a very sad situation for the shareholders,because they cannot return their shares to the issuing companies and get theirmoney back. They can only sell these shares at their market price, if somebodywill buy them.


Inthe conclusion I want to tell, that the knowledge of the basic economicprinciples creates conditions of safe existence for the person. The publicphenomena, which are studied with the economic theory, influence various layersof the population. The size of the received income plays an important role inthe position of the person in the society.

Certainly, I cannot say thatif you study the basic economic principles, you will understand allessence of economic events.

I hope that my work will help the beginning businessmen inthe future.

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1.<span Times New Roman"">    

B.Kolhass. Financial management of theenterprise. – Moscow: «Finance», 1997.

2.<span Times New Roman"">    

Osipov J.M.Bases of enterprise activity. –Moscow,1992.

3.<span Times New Roman"">    

Bulatov A.S. The economic theory (2edition). – Moscow, 1997

4.<span Times New Roman"">    

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