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Introduction

Financial Markets

Any economic activity which involves buying/selling with the motive of making profit is called a business.

  • $\rightarrow$ Exchange of goods and services which are need based.
  • $\rightarrow$ Service is an invisible intangible commodity where a customer cannot purchase and use it as and when he wants.
  • $\rightarrow$ There should be continuous activity.
  • $\rightarrow$ Profit motive should be there.
  • $\rightarrow$ Risk involvement: No tech advancement in business could lead to company failing.

Business

  • Industry
  • Commerce

Industrial activity

Raw material $\xrightarrow[\text{Skill}]{\text{Machine}}$ Finished product.

Commercial activity

Between actual manufacturer and customer.

Eliminability of:

  1. Hurdle of people: Trade $\rightarrow$ Sales & retailers.
  2. Hurdle of Time: Transportation ??
  3. Hurdle of place: Warehouses.
  4. Hurdle of Knowledge: Ads: Billboards, digital marketing, publicity (free) paid publicity: Ad. Advertisement Creation of an advertisement attraction.
  5. Hurdle of risk: Insurance.
  6. Hurdle of exchange: Banking.

Industries

  1. Genetic: Eg: Poultry, Animal husband farm, Plant.
  2. Extractive: Mining, oil extraction (ONGC, coal India Ltd, Bharat gold).
  3. Primary: meets primary needs of the public Eg: food.
  4. Construction: No physical mkt for prod.
  5. Manufacturing: Analytical: Cotton refinery (split crude into components) Synthetic: Pharma, Process: textile, assembly: Phone, Regular mfg.
  6. IT / ITES: Eg. TCS.

Ownership of Business

Non-Professional Professional
1. Sole proprietorship 4. Joint stock comp
2. Partnership 5. Co-op society
3. Joint hindu family busi.

1. Single owner:

  • Small business
  • Limitation in capital
  • Sole decision maker (Quick)
  • Secrecy maintained.
  • All profit & loss to one person
  • Unlimited liability

2. Assosiation of 2 or more ppl.

  • Indian partnership act (1932)
  • 2-100 or 2-50 (financial bus.) partners
  • Profit & loss shared among "
  • Conflict is possible.
  • To avoid conflict you can register a partnership with all legal provisions like profit, loss, tenure etc. $\rightarrow$ Optional! For legal help in case of conflict
  • Unlimited liability
  • Types: Active, Passive / sleeping, minor, nominal (only as advisor or promoter), special (consultant)

3. Joint hindu business

  • Among undivided hindu families
  • Hindu succession act $\rightarrow$ Eldest male is Karta
  • Can have conflict
  • If business fails, Karta has unlimited liability, for others liability upto their wealth
  • Family grows $\Rightarrow$ Share decreases

4. Company

A company is a voluntary assosiation of a group of ppl as per the companies act with a seperate legal entity, distinct name, common seal, common capital divided into a common denomination called shares which are transferable formed for the purpose of doing business. Eg: tcs, Infosys.

Feature PVT LTD Public ltd.
No. of shareholders Min: 2, max: 200 Min: 7, max: $\infty$
Directors min: 2, max: — Min: 3, max: 15
Transfer of shares Only among 200 Anyone
Name clause Pvt Ltd is mandatory only Ltd is needed
Fin. stmts X mandatory
General body meetings X mandatory
Director's salary No limit There is a limit as per regulation
Prospectus, MOA, AOA Only prospectus required All 3 mandatory
Regulatory bodies Only company act. Companies act, SEBI, Registrar of companies, FEMA: Foreign ex. management assosiation.
  • MOA: Memorandum of association
  • AOA: Article of assosiation

Public sector undertaking

Majority share is with government.

Ranked:

  1. Maharatna: Eg: ONGC, IOCL, BPCL (max. autonomy)
  2. Navaratna: Eg: BHEL, GAIL, HAL
  3. Miniratna: Eg: BSNL, AAI (T1, T2 T3) Ranked based on a wide variety of criteria like profit, no: of employees etc.

Fundamental docs of public ltd company

  • Prospectus, MOA, AOA
  • $\rightarrow$ Registrar of companies issue
  • $\rightarrow$ Certificate of incorporation
  • $\rightarrow$ Certificate of commencement of business.

5. Co-operative society

Voluntary assosiation of members to meet their needs through mutual help.

6. Joint venture

By 2 or more companies.

Role of money in business

1. Corporate management

  • Office, CEO etc.
  • 24/7 monitoring
  • Huge investment

2. Production

  • Site selection
  • Machinery selection
  • Quality control
  • R & D
  • Material control (purchased inventory)

3. Human capital

  • Recruitment & training
  • Manpower planning
  • Wage and salary
  • Administration
  • Good labour relationship & working condition.

4. Marketing

  • Demand forecasting
  • Distribution & promotion
  • Publicity & advertisement
  • Market strategy.

5. Finance - 5 As

  • Anticipation
  • Acquisition
  • Allocation
  • Appropriation
  • Assessment

Capital Types:

  • My Money $\rightarrow$ Equity capital
  • Other's money $\rightarrow$ Debt $\rightarrow$ Principal & interest.