Question

Describe providing an explanation of 200 words for each topic:

1. What are the forms of a business organization and explain each

2. What Is Financial Planning and how does it affect the organizations growth?

Answer 1

ANSWER 1: Following are the basic forms of business organisation:-

1. Sole Proprietorship: It is the form of business organization which is formed by a single person who is designated as Sole Proprietor. It is easy to set up and economical and is preferable for small scale entities. However the liability of Sole Proprietor is unlimited as he is the only person governing the organization.

2. Partnership: The business organization formed and owned by two or more persons who contribute resources in the same entity and have share in profits is called partnership. It is feasible for medium sized entities.

3. Hindu Undivided Family (HUF): This form of business organization involves partnership between male adults of a family for a mutual purpose. An HUF is headed by Karta (eldest male member of the family). The other members of HUF are called coparceners. Karta has unlimited liability whereas the liability of other members is restricted to their share of interest in the firm.

4. Company: This form of business organization is for entities working on large scale. It is of 2 types: A. Private Company which is owned by minimum 2 people and maximum 200 people. The liability of the members is limited. B. Public Company is owned by more than 2 people. Public Company operates at larger scale as compared to private companies.

5. Cooperative: It is a business organization owned by a group of individuals and is operated for their mutual benefit. Cooperatives may be incorporated or unincorporated.

ANSWER 2: Financial Planning is the process of determining how much resources are needed to achieve the strategic goals and objectives of the business organization. Financial Planning is done immediately after the vision and objectives of the organization have been set. Financial Planning is about preparing in advance for meeting the financial requirements of the business. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise. Financial Planning is one of the core areas which does have an impact on organizations growth.

a. Financial Planning helps in understanding the financial needs of the organization which enables the organization to schedule their debt payment and thus improves credibility of the organization which is very important for organization growth

b. Financial Planning helps in maintaning liquidity of funds which is useful during emergency times thereby ensuring organization growth.

c. By using financial planning tools, you can calculate variance in actual and budegeted targets which gives an idea about the progress the company is making and the growth prospects.