IPRC MUSANZE

Academic Year 2022-2023

Semester II
TVET DIPLOMA OF CONSTRUCTION TECHNOLOGY
Module Name: BUSINESS MANAGEMENT
Module Code: CSTCM601
RTCredits: 5
Sector: CONSTRUCTION AND BUILDING SERVICE
Lecturer: MUKESHIMANA Eric

NAME:
11. IZABAYO Jean Claude 21RP 06196

GROUP ASSIGNMENT OF BUSINESS MANAGEMENT

Q1.Identify clearly forms of business and discuss clearly the
features; advantages and disadvantages of each
SOLUTION
First what a business is ?
 Business refer to the economic activities of buying and
selling goods and services with the aim of getting profit.
 Form of busines organization this refer to the entity that is
formed for the purpose of carrying on commercial
enterprise of selling and buying.
SO, there are four (4) main forms of business
organization ,these are the following:
 Sole proprietorships
 Partnerships
 Join stock companiess
 Franchises

(I) Sole proprietorships: this refer to a business that is run

for single individual who makes all decisions; although
the proprietor may engages employees.
Sole proprietor is apersonally entitiled to all profits and is
responsible for any debits that the business incurs
FEATURES OF SOLE PROPRIETORSHIP
 One man ownership
 No separate business entity
 No separation between ownership and management
 Unlimited liability
 ADVANTAGES OF FORMING SOLE
PROPRIETORSHIP
 Sole proprietorship is simplest and most flexible
business structure
 It has total control and full decision making power over
policies ,profit and capital investment
 It is easy to close down the business
  Profit from the business will be taxed at the sole
proprietor’s marginal tax
DISADVANTAGES OF FORMING SOLE
PROPRIETORSHIP
 Risk that are taken by the sole proprietor may result
in personal bank ruptcy
 The death or prolonged illness of the sole proprietor
will lead to the end of the business
 Due to the limitation of one person business ,the sole
proprietor may not be able to raise additional capital
from outside sources to expand the business.

(II) Partnership refer to the relation which subsist between

persons carrying on a business in common with a view
of profit.
 FEATURES OF PARTNERSHIP
 It is own by many people called partners
 Unlimited liability
 The partners draw a partnership deed(constitution)
 Contractual relationship
 Principal agent relationship
 ADVANTAGES OF FORMING PARTNERSHIP
 It is easier to raise finance as a partnership than as sole
proprietor.
 Partners pay tax on their share of the partnership profits
at their respective marginal tax rates and their share in the
partnership losses can offset against their other income
  DISADVANTAGES OF FORMING PARTNERSHIP
 Partners (other than limited partners partners and
partners of an LLP) do not have the benefit of limited
liability
 Generally speaking , the participation of all the partners is
needed for most legal transactions.

(iii) Join stock company : this refer to a limited liability entity

(enterprise) that has a separate legal personability from its
members

MAIN FEATURES OF JOIN STOCK COMPANY

 It owned by multiple share holders
 Is over seen by a board of directors which hires the
business management staff
 Profit are shared in form of dividends according share
owned.

ADVANTAGES OF STOCK COMPANY JOIN

 An individual can be sole shareholder and sole
director ,and hence has total control and full decision-
making power over the company’s policies and profits
 It is easy to transfer the interest of the business
  The continuity of the business is not affected by the death,
bankruptcy, retirement or mental disorder of any
shareholder.

DISADVANTAGES OF STOCK COMPANY

JOIN
 A company limited shares must pray profits tax at the
corporate rate ,which is higher than the rate for individuals
paid by sole proprietors and partnership
 Share holder can not withdraw their capital at will from
the company(unless they sell their shares to others)
 Potential conflicts of interest may be arise among the
company , its shareholders and its directors
(iv) Franchises : refer t0 an authorized granted by a government
or company to an individual or group enabling them to carry
out specified commercial activities
Example: activity as an agent for a company’s products.

Q2.Demonstrate clearly the sources of business finances

What a business finance is?
Business finance is the act of securing economic support to
supply funds for your business expenses.
The sources of business finances are the following:
 1) Equity finances: this income not spent, different
consumption such as: A) Personal saving: Founder’s
capital
 Assets sales
 Retained earning
 Limiting credit to customers
 Stock reduction
 Depreciation
B) Friends and relatives: this refer to the money received from
friends and
Family members as support to start business
C) Venture capital: refer to to the money that is invested by
venture capital firms in a start-up and small business with
exceptional growth potential
D) Capital invested by wealthy investors in such businesses
with a long – term growth perspective
E) Angel investors: these are individuals who invest their
personal capital directly in start-up
f) Government grants: is a financial award given by the
government authority for a beneficial projects
G) Equity offering: refer to a raising of funds by offering
ownership in a company through the issuing of shares of a
company’s common or preferred stock.
H) Initial public offering: this occur when a company sellers
share on listed exchanges for the first time.
2) Debt financing: this is when the company borrows money to
be paid back at a future date in interest.
 Friends and relatives: these are debts received from
friends and family members
 Banks and commercial lenders
 Commercial financial company
 Government program
 Bonds
 Leases
Q3. Factor to consider when selecting source
 Cash flow position: refer to the liquid cash available in the
business should be considered while sourcing finance for
the business
 Return on investment: this refer to the financial ratio used
to calculate the benefits on investor will receive in relation
to their investment cost
 Cost of debt
 Cost of equity capital
 Floatation costs
 Flexibility(repayment)
 Control
 Stock market conditions
 Capital structure of other companies