Creating, Financing, and Marketing a Business Essay - 2

Creating, Financing, and Marketing a Business - Essay Example A second downfall of partnerships is that total profits are shared among the different partners of the business. Finding the right partner is imperative towards the success of a partnership. 2. Discuss funding options for small businesses. Entrepreneurs have various options to fund their business. The business structure of the company affects the alternatives of the business to raise capital. Sole proprietorship can raise capital by investing the personal wealth of the owner. The business can also obtain money by borrowing funds from the bank or other lending institution. A single owner that wants to raise more money for the business can do so by finding an equity partner. A partner can invest money in exchange for participation in the business. When a business grows the company has higher needs for capital. A business structure that is extremely effective at raising capital is public corporations. A company becomes public after undergoing an IPO process. All public companies must be registered with the Securities and Exchange Commission (SEC). Public companies can raise money by selling common stocks in the open market. Firms have to option to sell common and preferred stocks. Common stocks have voting rights, while preferred stocks do not have voting rights but they have guaranteed dividend payments. A second way for public companies to raise money is through the sale of commercial paper. Corporations can sell bonds in the open market to raise money. 3. Determine and discuss how managerial accounting can help managers with product costing, incremental analysis, and budgeting. Unlike financial accounting which focuses on providing precise, relevant and historical accounting information to stockholders, creditors and others who are outside the organization; managerial accounting focuses on providing information to managers who directly control its day to day operations. Managerial accounting helps managers perform their three essential activities: planning, dir ecting and motivating, and controlling. To plan correctly a manager will use cost accounting information to determine all the necessary materials and resources in order to manufacture and assemble a specific product. Without the specific accounting data regarding manufacturing processes, labor costs, materials, and overhead expenditures for a product line it would be very difficult for a manager to determine the real costs of production and a fair allocation of overhead costs for a specific product or service. Managers utilize cost-volume profit analysis as one of the most important tools managerial accountants have in their arsenal. It helps managers understand the interrelationship between price or costs, volume, variable unit costs, fixed costs and how the mix of products affects the overall business. CVP information can help a manager determine which products to manufacture, product costs, pricing decisions, and which specific products and what amounts to produce to include in t he product mix. Incremental analysis can also be performed by managers which will consider only those items of revenue, costs and volume directly related to the new product or service and how the overall profitability of the firm will be affected specifically by those product changes. Without the managerial accoun