ENTERPRENEURSHIP has a direct impact on the amount

ENTERPRENEURSHIP

Company Trends

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Company trends involve
the statistical analysis of historical data over a period of time. If the data
shows increase, decrease, or constant figures, then there exists a trend.
Different businesses of different sizes predict their future performance using
such data.

There are different
aspects of a company’s trend. They include:

1.     
Financing

There are various sources of finance in the business
market. A company may raise funds through

      
i.           
Retained earnings- any given company, the
amount of earnings retained within the business has a direct impact on the
amount of dividends. Profit re-invested as retained earnings is profit that
could have been paid as a dividend.

 

      ii.           
Bank borrowing-
Borrowings from banks are an important source of
finance to companies. Short term lending may be in the form of

1.     
An overdraft which a company should keep within a limit
set by the bank. Interest is charged (at a variable rate) on the amount by
which the company is overdrawn from day to day

2.     
A
short-term loan, for up to five years

3.     
Medium-term
loans are loans for a period of from three to ten years. The rate of interest
charged on medium-term bank lending to large companies will be a set margin,
with the size of the margin depending on the credit standing and riskiness of
the borrower. A loan may have a fixed rate of interest or a variable interest
rate.

 

 

   
iii.           
Capital markets-
capital markets are markets for buying and selling equity and debt tools. This
can be done so by a company selling its shares to the general public or to
another company. This is another source of finance trend a company can use.

 

2.     
Structured Formalities

Making the right choice
for your business will generally depend upon the type of business, how you want
the business to be run, how many owners the business will have, and the financial
situation of the business. A business can be: a partnership, sole proprietorship,
or corporation – depending on your preferences and the type of your business. Business
structures vary but there are some criteria that one can use to find which one
works best.

These criteria are:

·        
The different
types of liabilities that come with each business structure

·        
The expenses and
procedures associated with establishing and continuing to run the various
business structures

·        
Income tax
payment

·        
Investment needs

 

Varied Liability

Different types of businesses come with varied
liabilities. For instance, limited
liability companies allow business owners a type of “limited
liability,” where anyone seeking claims against the business will have a
very hard time placing personal liability to the owner. Unlike, if you were to
organize your business as a partnership or a sole proprietorship, you could be
personally responsible for anything the business did wrong.

In a partnership, every
partner can be held personally liable for any claims against the business.
Basically every partner has some percentage of liability therefore liability is
shared.

Expenses and
Procedures

Sole proprietorships and partnerships do not have a
lot of paper work as compared to limited companies and corporations. They are
quite difficult and expensive too to establish and maintain.

 

In order to establish a
corporation or limited liability company, you must file “Articles of
Incorporation” with your secretary of state and pay fees associated with
the incorporation. In addition, when deciding to form a corporation or LLC, the
owners of the business must decide which officers to elect to run the company.
The officers typically must include at least a president, vice president and
secretary. LLCs and corporations must keep specific and detailed records of any
important business decisions, and follow many other formalities that are
associated with these business structures.

Income Tax
Payment

There is a tax benefit
to forming your business as a corporation. The owners of a corporation do not
pay taxes on any profits that the corporation keeps, and the corporation pays
taxes at a lower rate than do some individuals. This means that a corporation
and its owner may pay less in the form of taxes than if the owner had organized
his business as a sole proprietorship, or any of the other business structures.

A corporation is a
separate tax entity, it must pay taxes on any profits that remain within the
company during a tax year, and also on any profits that it pays out in the form
of dividends to shareholders.

Investment Needs

Structuring a business
as a corporation allows a business to sell shares of ownership in the business
through stock offerings. This is different than the other three business
structures, which do not allow the selling of part of the business through the
sale of stocks. Because of this investment scheme, it may allow owners of a
corporation to attract investors and retain employees more easily by offering
stock.

If you desire the
limited personal liability that comes from a corporation, you could instead
form your business as a LLC. An LLC provides many of the advantages of a
corporation while remaining more flexible.

3.     
Cultural Dynamism

The surrounding community culture in which an
entrepreneur sets up a business will determine the business operations. The
business should not go against the cultural practices of the community. For
example one should not open a pork butchery in an Islamic community.

 

4.     
Disruptive innovation

This is a business strategy in which new market is
created and value which disrupts the existing market.

Disruptive innovation describes
a process by which a product or service takes root initially in simple
applications at the bottom of a market and then relentlessly moves up market,
eventually displacing established competitors.

Companies pursue such
innovations which helps them succeed in the market.
By charging the highest prices to their most
demanding and sophisticated customers at the top of the market, companies will
achieve the greatest profitability. Below are some characteristics of a
disruptive business at initial stages

Characteristics
of disruptive businesses

1.      Lower
gross margins

2.      Smaller
target markets

3.      Simpler
products and services

 

Eventually the company will end up
producing products or services that are actually too sophisticated, too
expensive, and too complicated for many customers in their market.

 

 

 

 

 

 

 

References

1.     
Haines Watts https://www.hwca.com/app/uploads/2015/02/Sources_of_Finance.pdf

2.     
Ronstadt, R.C. (1984). Entrepreneurship, Dover, MA: Lord
Publishing Co., pg. 28

3.     
Dr. Anrug Pahuja, Rinku Sanjeev
(March, 2015) Introduction to
Entrepreneurship, https://www.researchgate.net/publication/301659818_Introduction_to_Entrepreneurship

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