Course Code : COM-405

Course Title : INTRODUCTION TO BUSINESS FINANCE

Credit Hours : 3(3-0)
 Teacher Name : Moeez Ul Haq
 Class : Lecture Room (Wed)
 Class Time : 08:00 Am To 10:30 Am
 Email address : moeez5338@gmail.com
 Link for Notes :
https://drive.google.com/drive/folders/1yt22B8epsWPJI
xWPvT4CzIghCJWuprIz?usp=sharing
Forms of Business Organization

 Economic Activity:
These include all commercial and industrial activities which
are connected with the production or acquisition of wealth.

Finance
The management of money and includes activities such as
investing, borrowing, lending, budgeting, saving, and
forecasting.
Forms of Business Organization
 Financial Management
Financial management refers to the strategic planning,
organizing, directing, and controlling of financial
undertakings in an organization or an institute. It also
includes applying management principles to the financial
assets of an organization, while also playing an important
part in fiscal management.
 Financial Manager:
Financial managers perform data analysis and advise senior
managers on profit-maximizing ideas. Financial managers are
responsible for the financial health of an organization.
Forms of Business Organization

Business:
All economic activities connected with production
and exchange of good and services to earn profit or
source of income are called business.
Any legal activity undertaken or preformed for the
purpose of earning profit is called business.
Forms of Business Organization

Types of Business organizations

1. Sole Proprietorship
2. Partnership
3. Joint Stock Company or Company
Forms of Business Organization

 Sole Proprietorship
The simplest and most common form of business ownership,
sole proprietorship is a business owned and run by someone
for their own benefit. The business’ existence is entirely
dependent on the owner’s decisions, so when the owner
dies, so does the business.
Forms of Business Organization

 Advantages of Sole Proprietorship:

1. All profits are subject to the owner

2. There is very little regulation for proprietorships
3. Owners have total flexibility when running the business
4. Very few requirements for starting—often only a business
license
Forms of Business Organization

 Disadvantages of Sole Proprietorship:

1. Owner is 100% liable for business debts

2. Equity is limited to the owner’s personal resources
3. Ownership of proprietorship is difficult to transfer
4. No distinction between personal and business income.
Forms of Business Organization

 Partnership

A partnership is an arrangement between two or more

people to oversee business operations and share its profits
and liabilities.
Mostly it have two types:
1. General Partnerships
2. Limited Partnerships
Forms of Business Organization

 Partnership

In general partnerships, both owners invest their money,

property, labor, etc. to the business and are both 100% liable
for business debts. In other words, even if you invest a little
into a general partnership, you are still potentially
responsible for all its debt. General partnerships do not
require a formal agreement—partnerships can be verbal or
even implied between the two business owners.
Forms of Business Organization

 Partnership
Limited partnerships require a formal agreement between
the partners. They must also file a certificate of partnership
with the state. Limited partnerships allow partners to limit
their own liability for business debts according to their
portion of ownership or investment.
Forms of Business Organization

 Advantages of partnerships:

1. Shared resources provides more capital for the business.

2. Each partner shares the total profits of the company.
3. Similar flexibility and simple design of a proprietorship.
4. Inexpensive to establish a business partnership, formal or
informal.
Forms of Business Organization

 Disadvantages of partnerships:

1. Each partner is 100% responsible for debts and losses.

2. Selling the business is difficult—requires finding new
partner.
3. Partnership ends when any partner decides to end it.
Forms of Business Organization

 Joint Stock Company Or Company

A company is an artificial person created by law with a

perpetual succession and common seal. It has legal entity
separate from the persons composing it. It can be sue and be
sued in its own name.
Forms of Business Organization

 Advantages of Company

1. Liability for shareholders is limited.

2. It's easy to transfer ownership by selling shares to another
party.
3. shareholders (often family members) can be employed by the
company.
4. The company can trade anywhere freely.
5. Taxation rates can be more favorable.
Forms of Business Organization

 Disadvantages of Company

1. The company can be expensive to establish, maintain and

wind up.
2. The reporting requirements can be complex.
3. Your financial affairs are public.
Forms of Business Organization

 Types of Company

1. Public Limited Company

2. Private Limited Company
3. Company Limited by Guarantee
Forms of Business Organization

 Public Limited Company

A public limited company is a business that is managed by

directors and owned by shareholders. A public limited company
can offer shares to the public. A public limited company is also
listed on the stock market

Minimum Members 7 Maximum Member No limit

Forms of Business Organization

 Private Limited Company

A private limited company is a privately-held business entity. It is

held by private stakeholders. The liability arrangement in these is
that of a limited partnership, wherein the liability of a shareholder
extends only up to the number of shares held by them.

Minimum Members 2 Maximum Member 50

Forms of Business Organization

 Company Limited by Guarantee

A company limited by guarantee means the company having the

liability of its members limited by memorandum to such amounts
as the members may respectively undertake to contribute to the
capital of the company in the event of its winding up. A company
limited by guarantee is usually formed on a 'non profit basis'.
Forms of Business Organization

 Share Capital

Share capital is the money a company raises by issuing common

or preferred stock. The amount of share capital or equity
financing a company has can change over time with additional
public offerings. It means the total amount raised by the company
in sales of shares.
Forms of Business Organization

 Paid-up Capital

Paid-up capital is the amount of money a company has received

from shareholders in exchange for shares of stock. Paid-up
capital is created when a company sells its shares on the primary
market directly to investors, usually through an initial public
offering (IPO).
Question Answer session