Why do organizations exist?

Why transactions take place?

Why firms do business?
What is the need for a Reliance Industries to exist?
What is the need for an Indian Oil Corporation to exist?
Why transactions take place?
Why should HDFC Bank have a transaction with let us say HPCL or BPCL or any other
entity out there?
And why firms do business?
Whenever transactions take place, whenever two different entities come together and cost of
doing business goes down.
Transactional cost economics.
It has been created by Coase in the year 1937.
Coase clearly said that whenever transactions take place, it results in whenever the cost of
doing transactions take place and the cost of doing it reduces, it makes sense for individuals
to come together and let us say make cloth, instead of each one doing it individually at a
cheaper cost, at a cheaper price, transactions will take place. And that is how it results in
organizations to exist.
And it also results in two different firms and two different entities doing business with each
other because each one's size will be more
it would make sense for some specialists to come together and do it. So for example there
can be a dating business, there can be an iron and steel business, there can be a business
which is into retailing, there can be businesses which are into for example even these days
matrimonial is a specific business like shadi.com matrimonial.com etc so I hope you caught
the gist of why organizations exist.
Organizations exist as the cost of doing business by them a cost of manufacturing something
or either a a group or a service goes down as individuals with specific specializations come
together and do it. That essentially ensures, makes us understand the existence of firms and
the need for firms to do business with each other.
What is finance
What is the need for financial equipment for me?
Finance essentially is got something to do with money. Anything which essentially results in
a implicit or explicit benefit and gives a material value to the organization essentially has to
do with finance.
In America or India or most of the world, if you observe at the lower level, the male-female
ratio especially in the middle management level, if you see the representation of women vis-
a-vis men, it is 50-50%.
But as we move up from middle management as someone moves up to the senior
management and to what we call as the top management, this particular ratio gets skewed
towards one gender you'll be surprised to know even in America the it result in this particular
ratio essentially goes down to just about 15% and less than 15% for females and over 85%
for males now what is that what is it that essentially makes, what is the reason, have you ever
thought that in the middle management and professional positions, we have a gender equality
out there of 50-50%?
But as one looks at the hierarchy up beyond this junior and middle management positions,
this ratio starts getting skewed towards certain gender and the other gender's representation
goes on decreasing.
The quick answer to it is known as the missing 33% or largely speaking it is a result of lack
of business acumen, strategic acumen and most importantly financial equipment.
This is the key reason which has resulted in this keenness out there.
financial acumen are the reasons behind why one gender possibly becomes short of this
financial acumen and the other gender possibly keeps picking on it. Some of the reasons is
essentially There is little prior experience.
lack of financial acumen is one of the key reasons which Susan Colantuono a leading woman
founder says
What is this lack of financial acumen?
Essentially lack of that particular acumen to take decisions by having finance built into your
mindset at the time of taking decisions
Why does that happen? It happens because of little prior experience Possibly the advice is not
being given to them at the right age at the right time and it is to be very very specific because
of the unexamined mindset of mentors both at home and in offices.
results in such skewed difference at the top wherein 15% is by one gender and the other
gender is 85%. What does it mean to us? It means that it is very important for us to learn
finance, appreciate it, grasp it and enjoy the process of learning it as time flies.
how can I learn finance? In other words, as you pick up financial acumen, you will be able to
appreciate stuff which is in pink paper like top line is vanity, bottom line is sanity and cash in
the bank is reality.
What is this top line vanity, bottom line sanity and cash in the bank in this reality.
It also will help you decide whether to exercise employee stock options or not, whether to
pick more of invest some of your money in a certain asset class or not. It also will make you
appreciate make you mentally present in business meetings.
 Imagine you being present in a business meeting and the discussion talks about things like
IRR, NPV, depreciation, amortization and you suddenly feel clueless about it.
It also is going to make you appreciate very simple things like what is the difference between
contractual liabilities and contingent liabilities.