Define the term- how are businesses organised, Financial Accounting

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Define the term- How are businesses organised

Nearly all businesses which involve more than a few owners and/or employees are set up as limited companies. This means that finance would come from the owners (shareholders) both in the form of a direct cash investment to purchase shares (in the ownership of business) and through owners allowing past profits, which belong to them, to be reinvested in business. Finance will also come from lenders (banks, for instance), who earn interest on their loans and from suppliers of services and goods being prepared to supply on credit, with payment occurring a month or so after the date of supply, generally on an interest-free basis. In larger limited companies, owners (shareholders) aren't involved in daily running of the business; In its place they appoint a board of directors to manage business on their behalf. Board is charged with three major tasks:

? Setting the overall strategy and direction for business;

? Monitoring and controlling its activities;

? communicating with owners and others connected with business.

 


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