BUS ORG STRUC, GOVN AND MGT Flashcards Preview

ACCOUNTANT IN BUSINESS > BUS ORG STRUC, GOVN AND MGT > Flashcards

Flashcards in BUS ORG STRUC, GOVN AND MGT Deck (25)
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1

organisation

a SOCAIL ARRANGEMENT which pursues collective GOALS, which CONTROLS its own performance and which has a BOUNDARY separating it from its environment

2

The common characteristics of organisations are as follows

(1) Organisations are preoccupied with PERFORMANCE, and meeting or improving their standards.
(2) Organisations contain formal, documented SYSTEMS AND PROCEDURES which enable them to control what they do.
(3) Different people do different things, or SPECIALISE in one activity.
(4) They pursue a VARIETY OF OBJECTIVES and goals.
(5) Most organisations obtain INPUTS (eg materials), and PROCESS them into OUTPUTS (eg for others to buy).

3

Why do organisations exist?

Organisations can achieve results which individuals cannot achieve by themselves.
(1) Organisations OVERCOME PEOPLE'S INDIVIDUAL LIMITATIONS, whether physical or intellectual.
(2) Organisations ENABLE PEOPLE TO SPECIALISE in what they do best.
(3) Organisations SAVE TIME, because people can work together or do two aspects of a different task at the same time.
(4) Organisations ACCUMULATE and share KNOWLEDGE.
(5) Organisations enable SYNERGY: by bringing TOGETHER two individuals their combined output will
exceed their output if they continued working separately.
In brief, organisations enable people to be MORE PRODUCTIVE.

4

How organisations differ

(1) Ownership
(2) Control
(3) Activity
(4) Profit or non-profit orientation
(5) Legal status
(6) Size
(7) Sources of finance
(8) Technology

5

What the organisation does

(1) Agriculture: Producing and processing food
(2)Manufacturing: Acquiring raw materials and, by the application of labor and technology, turning them into a product (eg a car)
(3) Extractive/raw materials: Extracting and refining raw materials (eg mining)
(4) Energy: Converting one resource (eg coal) into another (eg electricity)
(5) Retailing/distribution: Delivering goods to the end consumer
(6) Intellectual production: Producing INTELLECTUAL PROPERTY (eg software, publishing, films, music)
(7) Service industries: Including retailing, distribution, transport, banking, various business
services (eg accountancy, advertising) and public services such as
education, medicine

6

Profit vs not-for-profit orientation

An important difference in the list above is between profit orientated ('commercial') and not for profit orientated ('non-profit') organisations.

7

Private sector

Organisations not owned or run by central or local government, or government
agencies

8

Public sector

Organisations owned or run by central or local government or government
agencies

9

Legal status

Someone setting up a business can choose to go into business ALONE, take on one or more PARTNERS who also share the profits of the business, or set up a LIMITED COMPANY

10

Limited company

a separate legal personality from its owners (shareholders).

11

limited liability

restricted to the amount that they have invested in the company when buying the
shares

12

Characteristic of Limited company

The ownership and control of a limited company are legally separate even though they may be vested in the same individual or individuals.

13

Shareholders are the owners

limited rights, as shareholders, over the day to day running of the company. They provide capital and receive a return. Shareholders could be large institutional investors (such as insurance companies and pension funds), private individuals, or employees.

14

Directors

appointed by shareholders to run the company and controls management and staff, and is accountable to the shareholders, but it has responsibilities
towards both groups – owners and employees alike

15

Executive directors

participate in the daily operations of the organisation

16

Non-executive directors

invited to join in an advisory capacity, usually to bring their particular skills or experience to the discussions of the board to exercise some overall
guidance.

17

Operational management

consists of career managers who are recruited to operate the
business, and are accountable to the board

18

Types of limited company

private limited companies and public limited companies

19

Differences of 2 types of limited company

(1) Number of shareholders.
(2) Transferability of shares.
(3) Directors as shareholders.
(4) Source of capital
using recognised markets.

20

Number of shareholder (Differences of 2 types of limited company)

Most private companies are owned by only a small number of shareholders. Public companies generally are owned by a wider proportion of the investing
public.

21

Transferability of shares (Differences of 2 types of limited company)

Shares in public companies can be offered to the general public. In practice this means that they can be traded on a stock exchange. Shares in private companies, on the other hand, are rarely transferable without the consent of the shareholders.

22

Directors as shareholders (Differences of 2 types of limited company)

The directors of a private limited company are more likely to hold a substantial portion of the company's shares than the directors of a public company.

23

Source of capital (Differences of 2 types of limited company)

(1) A private company's share capital will normally be provided from three sources.
(a) The founder or promoter
(b) Business associates of the founder or employer
(b) Venture capitalists
(2) A public company's share capital, in addition, can be raised from the public directly, or through institutional investors,

24

Advantages of limited companies

(1) More money is available for investment.
(2) Risk is reduced for investors thanks to limited liability.
(3) They have a separate legal personality. A company can own property, make contracts etc.
(4) Ownership is legally separate from control. Investors need not get involved in operations.
(5) No restrictions on size apply. Some companies have millions of shareholders.
(6) They offer flexibility. Capital and enterprise can be brought together.

25

Disadvantages of limited companies

(1) Legal compliance costs. Because of limited liability, the financial statements of most limited
companies have to be audited, and then published for shareholders.
(2) Shareholders have little practical power, other than to sell their shares to a new group of
managers, although they can vote to sack the directors.