Assignment on INTRODUCTION TO BUSINESSCouse Code :BUS 101

Submitted To : Fozle Elahi Mohhamed Foysal Department of Business Administration Shahjalal University Of Science And Technology Submitted By: Ikramul Hasan ID:1301010028 Department: Business Administration Semister : Spring 1st Date of Submission: 9th February 2013 Acknowledgement:This is Ikramul Hasan.At first I want to thank Almighty ALLAH for giving me the knowledge and ability.Now I am giving my heartiest thanks to my honorable teacher to give me chance to show my assignment on Introduction To Business.

TOPICS1)Business,2)Goal of Business,3)Wealth maximization,4)Price Determination,5)Management,6)Marketing,7)Finance,8)Decisions Of Finance,9)Debt Financing & Equity Financing,10)Earning Per Share ( EPS) ,11)Bond & Share,12)Types of Business,13)Effectiveness & Efecency

(PTO) 1) Business: Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.Besides we can say Business is an organization or economic system where goods and services are exchanged for one another or for money. Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit. Businesses can be privately owned or state-owned. Human beings are continuously engaged in some activity or other in order to satisfy their unlimited wants. Every day we come across the word 'business' or 'businessman' directly or indirectly. Business has become essential part of modern world. All of us need food, clothing and shelter. We also have many other household requirements to be satisfied in our daily lives. We met these requirements from the shopkeeper. The shopkeeper gets from wholesaler. The wholesaler gets from manufacturers. The shopkeeper, the wholesaler, the manufacturer are doing business and therefore they are called as Businessman.Stephenson defines business as, "The regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants."According to Dicksee, "Business refers to a form of activity conducted with an objective of earning profits for the benefit of those on whose behalf the activity is conducted."Lewis Henry defines business as, "Human activity directed towards producing or acquiring wealth through buying and selling of goods."Thus, the term business means continuous production and distribution of goods and services with the aim of earning profits under uncertain market conditions. (PTO)

2)Goals of Business:Business owners do not normally work for money either. They work for the enjoyment of their competitive skill, in the context of a life where competing skillfully makes sense. The money they earn supports this way of life. The same is true of their businesses. One might think that they view their businesses as nothing more than machines to produce profits, since they do closely monitor their accounts to keep tabs on those profits.Mainly the goal of a business is to earn profit and wealth maximization.Though all most everyone think that only the profit maximization is the main goal.But it is a wrong idea.The ultimate target of a business is wealth maximization.Wealth maximizing means the increasing of a share price.Share price increase when a company can give a huge amount of profit.Than people are interested to buy the share of those companies.Secondary share are sold in share market.If the company gives a lot of profit than everyone interested to buy this company share but share number are fixed.So gradually the share price increased.Goal of business is fixed by the owners or share holders of company.They give a target to the manager and the manager will fill.Everyones target may not be same.One can target a huge profit by selling his goods at a high price but selling a few.Another can target a huge profit by selling his goods at a low price but selling a lot.Though their profit gaining rate is same but their target was totally difference.Sometime we get some person who do business for reputation not for profit.Its difference.But the main target or a goal of a business is profit.Wealth maximization is also a goal.

(PTO)3)Wealth Maximization:Wealth maximization is a modern approach to financial management. Maximization of profit used to be the main aim of a business and financial management till the concept of wealth maximization came into being. It is a superior goal compared to profit maximization as it takes broader arena into consideration. Wealth or Value of a business is defined as the market price of the capital invested by shareholders.

Wealth maximization simply means maximization of shareholders wealth. It is combination of two words viz. wealth and maximization. Wealth of a shareholder maximize when the net worth of a company maximizes. To be even more meticulous, a shareholder holds share in the company /business and his wealth will improve if the share price in the market increases which in turn is a function of net worth. This is because wealth maximization is also known as net worth maximization.Finance managers are the agents of shareholders and their job is to look after the interest of the shareholders. The objective of any shareholder or investor would be good return on their capital and safety of their capital. Both these objectives are well served by wealth maximization as a decision criterion to business.When business managers try to maximize the wealth of their firm, they are actually trying to increase their stock price. As the stock price increases, the individual who holds the stock wealth increases. As the stock price goes up, the value of the firm increases and the net worth of the individual who owns the stock increases.When maximizing profits, remember that at certain points in your business's life cycle, it may not be possible to achieve the results you desire. There are often economic factors that you have no control over which will inhibit the growth and profitability you desire. (PTO)4)Price Determination:Price is determined at the point of equilibrium. Equilibrium is a point of balance. In other words, equilibrium is the point at which quantity demanded and quantity supplied is equal. That is, market equilibrium refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is called equilibrium price.On the demand side it is buyers and on the supply side it is sellers who take part in the process of determining prize. The buyers are always willing to offer lower price and the sellers always like to sell at a high price. Transaction will be effective only when price is acceptable to both the opposite parties.The twin forces of market demand and market supply determine price. The level of price at which demand and supply curves interact each other will finally prevail in the market. The price at which quantity demanded equals quantity supplied is called equilibrium price. The quantity of the good bought and sold at this price is called equilibrium price. Thus the interaction of demand and supply curves determines price-quantity equilibrium. At the equilibrium price the buyers and sellers are satisfied.Any price at the price TK 12 quantity demanded is 3 and quantity supplied is 15. When supply exceeds demand price falls. If the price is Rs 4 quantity demanded is 10 but the quantity supplied is 5 when demand is more in relation to supply price rises.Thus the forces of demand and supply push up and down the price to a point at which demand and supply are balanced. The price at which demand and supply are equal is Tk 6 and it is called equilibrium price. The equilibrium price is one at which quantity demanded equals quantity supplied and there is no tendency for the price to rise or fall. There is neither surplus nor shortage of the commodity at the equilibrium price. (PTO)5)Management:Management issues are fundamental to any organization.How do we plan to get things done,organize the company to be efficient and effective,lead and motivate employers and put in place controls to make sure our plans are followed and our goals are met.Good management is basic to starting a business, growing a business and maintraining a business once it has achived some measure of success. According to Harold Koontz,"Management is the art of getting things done through and with people in formally organised groups." According to Henri Fayol,"To manage is to forecast and to plan, to organise, to command, to co-ordinate and to control." According to Mary Parker Follet,"Management is the art of getting things done through people."Management is an individual or a group of individuals that accept responsibilities to run an organisation. They Plan, Organise, Direct and Control all the essential activities of the organisation. Management does not do the work themselves. They motivate others to do the work and co-ordinate (i.e. bring together) all the work for achieving the objectives of the organisation.Management brings together all Six Ms i.e. Men and Women, Money, Machines, Materials, Methods and Markets. They use these resources for achieving the objectives of the organisation such as high sales, maximum profits, business expansion, etc.

(PTO)6)Marketing:Marketing is defined as the process of determining the needs and wants of consumers and being able to deliver products that satisfy those needs and wants.Marketing includes all of the activities necessary to move a product from the producer to the consumer. Think of marketing as a bridge from the producer to the consumer. Marketing starts with market research, a learning process in which marketers get to know everything they can about the needs and wants of consumers, and it ends when somebody buys something. Many companies feel that services provided to customers after the purchase also are an important part of marketing. All of these enterprises production, advertising, transportation, processing, packaging, and selling are included in the marketing process.Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. (American Marketing Association)Marketing is far more than tactics. Marketing is analysis, and a sound marketing strategy is based on this analysis.analysis about customers, for example. Having a solid understanding of customers means having a solid understanding about how customers behave, their motivations, their perceptions and preferences. It means segmenting the market correctly and not in the way that most companies think about segmentation (if they ever do).A marketing strategy identifies customer groups which a particular business can better serve than its target competitors, and tailors product offerings, prices, distribution, promotional efforts and services toward those segments. Ideally, the strategy should address unmet customer needs that offer adequate potential profitability. A good strategy helps a business focus on the target markets it can serve best.

(PTO)7)Finance:Finance is a branch of economics, a science that studies the management of funds (money and other assets). More specifically, through financial analysis, decisions and corrective actions can be taken regarding the collection and use those funds as to optimize their use toward the objectives of an organization (states, companies and businesses) or individual.If we trace the origin of finance, there is evidence to prove that it is as old as human life on earth. The word finance was originally a French word. In the 18thcentury, it was adapted by English speaking communities to mean the management of money. Since then, it has found a permanent place in the English dictionary. Today, finance is not merely a word else has emerged into an academic discipline of greater significance. Finance is now organized as a branch of Economics.At present, we cannot imagine a world without Finance. In other words, Finance is the soul of our economic activities. To perform any economic activity, we need certain resources, which are to be pooled in terms of money (i.e. in the form of currency notes, other valuables, etc.). Finance is a prerequisite for obtaining physical resources, which are needed to perform productive activities and carryingbusinessoperations such as sales, pay compensations, reserve for contingencies (unascertained liabilities) and so on.

(PTO)8)Decissions of Finance:A financial manager have to take four decisions.These are 1)Investment decision,2)Finincial decision,3)Dividend decision4) Liquidity decision.These are describing shortly below.1)Investment Decision:One of the most important finance functions is to intelligently allocate capital to long term assets. This activity is also known as capital budgeting. It is important to allocate capital in those long term assets so as to get maximum yield in future.2) Financial Decision:Financial decision is yet another important function which a financial manger must perform. It is important to make wise decisions about when, where and how should a business acquire funds. Funds can be acquired through many ways and channels.3) Dividend Decision:Earning profit or a positive return is a common aim of all the businesses. But the key function a financial manger performs in case of profitability is to decide whether to distribute all the profits to the shareholder or retain all the profits or distribute part of the profits to the shareholder and retain the other half in the business. It's the financial manager's responsibility to decide a optimum dividend policy which maximizes the market value of the firm.4) Liquidity Decision:It is very important to maintain a liquidity position of a firm to avoid insolvency. Firm's profitability, liquidity and risk all are associated with the investment in current assets. In order to maintain a tradeoff between profitability and liquidity it is important to invest sufficient funds in current assets. 9)Debt Financing & Equity Financing:DEBT FINANCINGDebt financing takes the form of loans that must be repaid over time, usually with interest. Businesses can borrow money over the short term (less than one year) or long term (more than one year). The main sources of debt financing are banks and government agencies, such as the Small Business Administration (SBA). Debt financing offers businesses a tax advantage, because the interest paid on loans is generally deductible. Borrowing also limits the business's future obligation of repayment of the loan, because the lender does not receive an ownership share in the business.However, debt financing also has its disadvantages. New businesses sometimes find it difficult to make regular loan payments when they have irregular cash flow. In this way, debt financing can leave businesses vulnerable to economic downturns or interest rate hikes. Carrying too much debt is a problem because it increases the perceived risk associated with businesses, making them unattractive to investors and thus reducing their ability to raise additional capital in the future.EQUITY FINANCING:Equity financing takes the form of money obtained from investors in exchange for an ownership share in the business. Such funds may come from friends and family members of the business owner, wealthy "angel" investors, or venture capital firms. The main advantage to equity financing is that the business is not obligated to repay the money. Instead, the investors hope to reclaim their investment out of future profits. The involvement of high-profile investors may also help increase the credibility of a new business.The main disadvantage to equity financing is that the investors become part-owners of the business, and thus gain a say in business decisions. 10)Earning per share (EPS):The termearnings per share (EPS)represents the portion of a company'searnings, net oftaxesand preferredstock dividends, that is allocated to each share ofcommon stock. The figure can be calculated simply by dividingnet incomeearned in a given reporting period (usually quarterly or annually) by the total number ofshares outstandingduring the same term.Rule of EPS is given below Sales(-)costs of goods sold Operating profit(-)operating expenses Opening income (EBIT)(-)InterestEarning before tax(-)TaxEarning after tax(-) P.dNet income No of share holders = EPS

(PTO)11)Bond And Share:Share: Companies usually divide their capital into small parts of equal value. This smallest part is known as a share. Companies usually issue shares in the public to raise capital. People who buy or are allotted shares are called shareholders. Shares are paper certificates representing part ownership in a company. If a company issues millions of shares and a person has a few shares of the company, he is said to be a part owner of the company. Shares do not have a time period which means they are for perpetuity or as long as the company lasts. It is their value that keeps on changing depending upon the performance of the company.When a company decides to go public, it issues shares that have a face value. Say for example a company issues shares of denomination $1, but in period of time and good performance of the company the share prices go up to $5. This means that a person who has a share of the company owns $5 in the company and he can sell if for that money whenever he so desires.Bond: Bonds are loans made by common people to a company and the company has to pay specified interest to the bond holder till the maturity of the bond. The company also has to repay the principal amount that has been loaned. It is in essence a contract between a person and the company whereby company agrees to pay interest in lieu of loan made by the person. Bonds are instruments used by any company to raise capital from the public. Bondholders use these certificates as a form of investment in a company and they are guaranteed to get interest payable yearly or half yearly from the company. Bondholders have no say in the internal matters of a company but company treats them at a priority when payment of interest is concerned.

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12)Types of Business:There are four types of business.They are :1) SOLE PROPRIETORSHIP, 2)CORPORATIONS, 3)PARTNERSHIP,4)LIMITED LIABILITY COMPANIES.Description of the business types are given below:SOLE PROPRIETORSHIP: The oldest most common form of private business ownership is in the USA is the sole proprietorship.A sole proprietor is simply a person who is engaged in business as an individual.He may recive help from others for operating his business.Typically sole proprietor owns small service or retail operation.CORPORATION:Some industries,such as automobile manufacturing,computer manufacturing,oil refining,natural gas production requires a lot of money to operate business.Typically such vast sums of money are put together by attracting numerous investors.In the eye of law the corporation is an artificial being,invisiable and intangible. PARTNERSHIPS:A partnership occurs when two or more persons combine to operate a business. Normally, the allocation of profits and losses, management and operation of the partnership is set forth in a written "partnership agreem ent" which is signed by all of the partners.LIMITED LIABILITY COMPANIES:The limited liability company or "LLC" is a relatively new form of doing business which is now recognized in most states. The LLC has grown in popularity because it combines the best features of a corporation and a partnership. Like a corporation, the owners (called "members") of the LLC are not personally responsible for the debts of the LLC. Like a partnership, there is no dual taxation and the earnings of the business are taxed directly to the members. (PTO)13)Effectiveness & Effecency:Effectiveness:Effectiveness is the level of results from the actions of employees and managers. Employees and managers who demonstrate effectiveness in the workplace help produce high-quality results. Take, for instance, an employee who works the sales floor. If hes effective, hell make sales consistently. If hes ineffective, hell struggle to persuade customers to make a purchase. Companies measure effectiveness often by conducting performance reviews. The effectiveness of a workforce has an enormous impact on the quality of a companys product or service, which often dictates a companys reputation and customer satisfaction.Efficiency:Efficiency in the workplace is the time it takes to do something. Efficient employees and managers complete tasks in the least amount of time possible with the least amount of resources possible by utilizing certain time-saving strategies. Inefficient employees and managers take the long road. For example, suppose a manager is attempting to communicate more efficiently. He can accomplish his goal by using email rather than sending letters to each employee. Efficiency and effectiveness are mutually exclusive. A manager or employee who's efficient isnt always effective and vice versa. Efficiency increases productivity and saves both time and money.Example:

Suppose that two guys, Mark and John, are trying to change a flat tire on their cars (each one has his own car).

(PTO)Mark starts by taking out the jack and placing it under the car. He quite doesnt know where to position it, so he goes by trial and error and wastes a lot of time doing it. After 20 minutes he finally manages to fix it, so he proceeds to lift the car and change the tire.

As we can see Mark was doing the right thing, but he was doing it poorly. We can say that he was being effective, but not efficient.

John, on the other hand, starts by grabbing a towel and cleaning the tire. He wants to make the thing shiny before he changes it. And mind he is very good and fast at cleaning every little detail of the tire.

We can say that John is being efficient, because he is cleaning the tire fast and throughly, but he is not being effective, because cleaning is a step that is not required at all when changing a flat tire.

Now if we had a third person, Peter, who could change the flat tire using the right steps and doing it quickly, we could say that he was both effective and efficient.