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By Anjan Mohapatro
• 40,000 • Pay their dues and present financial statements. Active
Small fraction really does business and produces income
USA/Israel/UK/Ge rmany many SB WORLD CLASS .SMALL BUSINESSES Small businesses create employment Blue Chip Companies(Big Dinosaur Firms) create negative employment.
working capital. International and multilateral investment sources.SMALL BUSINESSES ADMINISTRATION(SBA) Organize funding for all their needs:infrastructure. local banking community and private investors They act as a capital brokers at a fraction of the costs compared to market charges Assist in preparation of business plans.capital goods.Reduce Bureaucracy . local VC. land and equipment. feasibility studies One stop shop. license and patent fees etc Access to Govt funds.
PHASES OF NEW BUSINESSES Formation of an Idea Proper legal entity and Accounting Development of Product and manufacturing Marketing & Sales .
FORMATION OF AN IDEA A Person or group of people join forces centered around an exciting invention. process or service Fill the needs of a market niche Innovative solution to a problem Create market for a totally new product Provide solution to a problem which is solved in a less efficient manner At this stage they require support of Marketing experts Financials expert Technical expert .
It has tax implications and capabilities of the firm to raise funds. Lawyer must be consulted .TOWARDS NEST STEP Once the Idea is freezed the next step is formation of legal entity Raises many possibilities A Partnership firm A Corporation Stock or non stock company A Foreign company or a local entity The decision is very important .
registered with all regulatory authorities and has appointed an accounting firm It should – Commence developing new products and services Good entrepreneurs may not be good managers/management techniques are learnt and assimilated Market do not always react the way entrepreneurs expect them to react.well recognized brands which sell well side by side with Innovative Products . disappear and reappear. Hard to predict. develop.TOWARDS NEST STEP Once the legal entity is formed . Markets are evolving creatures they change. Product mix.
HOW GOVT CAN HELP Entrepreneur’s One stop shop Presents his case and business which he wants to develop Receives all necessary permits and license within a reasonable time Receive a list of all sources of capital aviliable both locally and International sources Entrepreneur selects the sources of funds most suitable to his requirements Experts to prepare all necessary documents to raise funds A Mentor is attached who will escort from first phase to the last phase Transform person to a businessman .
Owner – wealth creation.TRADE OFFS Conflict between owners and managers of a company Managers want large salary.Profit Maximization Through ESOPS . Manager. owners want to reduce cost.
. Employers gives subsidized loans Provides a free share against a share purchased Purchase the share of the company at discounted price. Provides an incentive to work only for the company An option to purchase stocks less than the market price for a given period of time Dividends received may be used to purchase the shares A Portion of salary is set off to purchase the shares..STOCK OPTIONS A Stock option is an organized program for the employees of a corporation allowing them to buy its shares.
STOCK OPTIONS A Stock option is an organized program for the employees of a corporation allowing them to buy its shares. Employers gives subsidized loans Provides a free share against a share purchased Purchase the share of the company at discounted price. Provides an incentive to work only for the company An option to purchase stocks less than the market price for a given period of time Dividends received may be used to purchase the shares A Portion of salary is set off to purchase the shares.. .
INSOLVENCY / BANKRUPTCY It starts by defaulting of an obligation Money owed to the creditors not paid in time Interests payments due on the bank loans Corporate bonds issued to the Public Temporary or a permanent problem Creditors gear up and litigate in the court of law or arbitration which leads to Technical or equity Insolvency status Liabilities outweigh its assets it is called Bankruptcy Insolvency. Valuations of assets – Market Price /Book value .
.creditor receives value of the property secured as a co lateral.the company itself can file for bankruptcy in a voluntary bankruptcy filing Court officials work hand in hand with the creditors representative and management of the defunct company.VOLUNTARY BANKRUPTCY FILING If the negotiation with the creditors fails . Should they liquidate the company Value yielded by liquidation exceeds the money the company as a going concern Company goes into a straight bankruptcy .
Administrative debts.VOLUNTARY BANKRUPTCY FILING Once the assets of a company is sold . taxes. rents etc . unpaid wages. uninsured pension claims. the first to be fully paid off is the secured creditors and then the priority creditors are paid wholly or partially Priority creditors.
CHAPTER 11 11 of Bankruptcy Act – 1994 Allows for a reorganization Must be approved by 2/3 rd of the creditors Voluntarily initiated by the company Involuntarily initiated by the creditors Chapter .
GOALS OF BANKRUPTCY LAWS Provide fair and equitable treatment to the holders of various classes of security. Owners of subordinated debentures becomes shareholders Share holders does not receive any claims. Allows arrange . Eliminate burdensome debt obligations To make sure that the new claims received by the creditors equal to at least what they would have received in liquidation. Long term bonds interest payable from profits.
sold separately.CHAPTER 11 In favor of maintaining the company as an ongoing concern. A whole is larger than the sum of its parts and a living business is sometimes worth more than the sum of its assets. Chapter 7(1978) Liquidation act A district court appoints a trustee with broad powers/at the request of the creditors Liquidate property and distribution Management changes Unsecured financing Operates debtors business to arrest further losses By filing a bond the debtor is able to regain its possession of the business from its trustee .
CHAPTER 11 Re organization Unless the court rules otherwise the debtor remains in possession of the business. Creditors are allowed to work flexibly with owners to reach a compromise Age old “ Absolute Priority” Interests of the creditors to be balanced with the interests of the debtors and society at large. Restructuring of old debts Granting of new loans .
British law is much more in favour of creditors. England: Official receiver is appointed by the law. Manage business of the debtors and assess the assets.Takes possession of the business not the deeds.CHAPTER 10 Hybrid of chapter 7 and 11 Allows reorganization under a court appointed independent trustee for filing of reorganization plans with the court. . Goal is maxm value for the liquidation.
BANKRUPTCY – Bankruptcy is automatically triggered .Debt for equity swaps are not allowed. Poland Reorganization and debt consolidation Sale of corporate liabilities in auction Classic bankruptcy . Czech Republic Hungary Debt for equity swaps Consolidation bank can buy the obligations at 60% par. Provides a very short time for reorganization.
adherence to the budget.FUNCTIONS OF A CFO To implement continuous financial audit and control systems to monitor the performance of the firm. cost of sales and other items. its flow of funds. income. the expenditures. Budget sets goals of the firm New products to develop New markets to penetrate New management techniques Possible collaboration Identification of competition Scarce resource for optimum utilization .
other which is presented to Tax Authorities In a position to Blackmail Develops a cognitive dissonance.supervise and implement a timely . Developing countries Books does not reflect the reality as they are tax driven Maintain two books.lie to the state .Honest to superiors.the real one.full and accurate set of accounting books of the firm.FUNCTIONS OF A CFO To regulate .
income. the expenditures. Budget sets goals of the firm New products to develop New markets to penetrate New management techniques Possible collaboration Identification of competition Scarce resource for optimum utilization .FUNCTIONS OF A CFO To implement continuous financial audit and control systems to monitor the performance of the firm. adherence to the budget. its flow of funds. cost of sales and other items.
financial statements and reports as required by the pertinent laws and regulations. regularly and duly prepare and present to the board of directors .FUNCTIONS OF A CFO To timely. Political insecurity Corporate insecurity Personal insecurity .
FUNCTIONS OF A CFO To Comply with all reporting. financial plans. business plans. lacuna in the financial systems . lack of adherence. lack of compliance. To prepare and present for the approval of the board of directors an annual budget. accounting and audit requirements imposed by the capital markets or regulatory bodies of capital market in which the securities of the company is traded. feasibility studies and other financial documents To alert the Board of directors and warn regarding irregularity.
the attainment of its development plans and investments. auditors. IT integrated system . financial consultants. underwriters and brokers.FUNCTIONS OF A CFO To collaborate and co ordinate the activities of outside suppliers of financial services hired or contracted by the firm. including accountants. financial institution and capital markets with the aim of securing funds necessary for the operations of the firm. the banking system and other financial venues To maintain a working relationship and to develop additional relationships with banks.
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income.FUNCTIONS OF A CFO To implement continuous financial audit and control systems to monitor the performance of the firm. cost of sales and other items. Budget sets goals of the firm New products to develop New markets to penetrate New management techniques Possible collaboration Identification of competition Scarce resource for optimum utilization . its flow of funds. the expenditures. adherence to the budget.
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