Mintzberg’s Model of Organizational Structure

Management expert Henry Mintzberg  proposed that traditionally organizations (profit making or not for profit) can be divided into five components. In practice organizational structure may differ from proposed model. Factors influencing organizational structure are industry norms,  size, experience, culture, external forces (competition, inflation, minimum wage legislation etc). Components identified by Mintzberg is useful for understanding the workflow of organizations.

The structure of an organization can be defined simply as the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them” – The Structuring of Organizations, Henry Mintzberg.

1. Strategic Apex

Strategic  apex is the most senior level in the organization. Management working at this level is referred as board of Directors (chairman, CEO, executes and non executive directors). They set the objectives (increase sales by 10% in one year) and strategic direction (new product and markets developments) of the organization. They take major investing (takeovers) and financing (Shares issue) decisions. They are not involved in day to day operations of the business. They do not deal with customers and suppliers except in exceptional cases (dealing with complaints). They represent the organizational face to external stakeholders (person have interest in the organization like government). Integrity of organization can be judged by integrity of its board of directors.

2. Middle Line

Middle line managers interprets objectives and strategies of the strategic level management into feasible plans and standards to get the work done through operational managers. They set budget, receives reports from management accountants, monitors performances and take corrective actions where necessary.… Read the rest

An Overview of Indian Capital Market – History of Indian Capital Market

The capital market in India is a market for securities, where companies and governments can raise long term funds. It is a market designed for the selling and buying of stocks and bonds. Stocks and bonds are the two major ways to generate capital and long term funds. Thus, the bond markets and stock markets are considered as capital markets.  The Indian securities market consists of primary (new securities) market and secondary (stock) market in both equity and debt. The primary market provides channel for sale of new securities while the secondary market deals in trading of previously issued securities. The issuers of securities issue new securities in the primary market to raise funds for investment. They do either through the public issue or private placement. There are mainly two types of issuer who issue securities. The corporate entities mainly issue equity and debt instruments (Shares and debentures) while the Government (Central/State) issue debt securities. The secondary market enables participants who hold securities to adjust their holding (Portfolio) in response to changes of their assessment of risk & return.

The Indian Equity Market depends mainly on monsoons, global funds flowing into equities and the performance of various companies. The Indian Equity Market is almost wholly dominated by two major stock exchanges -National Stock Exchange of India Ltd. (NSE) and The Bombay Stock Exchange (BSE). The benchmark indices of the two exchanges – Nifty of NSE and Sensex of BSE are closely monitored by the investors. The two exchanges also have an F and O (Futures and options) segment for trading in equity derivatives including the indices.… Read the rest

Difference Between Money Market and Capital Market

In order to understand what the differences between things are you first need to understand what each of the items is. In this case before you can understand the difference between money market and capital market you are going to need to understand what money market is and what capital markets is. Once you understand the two items are it will be easier to see what the difference or differences are between the two markets.

What is Money Market?

Basically the money market is the global financial market for short-term borrowing and lending and provides short term liquid funding for the global financial system. The average amount of time that companies borrow money in a money market is about thirteen months or lower. Some of the more common types of things used in the money market are certificates of deposits, bankers’ acceptance, repurchase agreements and commercial paper to name a few. Basically what the money market consists of is banks that borrow and lend to each other, but other types of finance companies are involved in the money market. What usually happens is the finance companies fund themselves by issuing large amounts of asset backed commercial paper that is secured by the promise of eligible assets into an asset backed commercial paper conduit. Your most common examples of these are auto loans, mortgage loans, and credit card receivables.

What is Capital Market?

Basically the capital market is a type of financial market, it includes the stocks and bonds market as well.

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Major Participants and Players in Financial Markets

In the financial markets, there is a flow of funds from one group of parties (funds-surplus units) known as investors to another group (funds-deficit units) which require funds. However, often these groups do not have direct link. The link is provided by market intermediaries such as brokers, mutual funds, leasing and finance companies, etc. In all, there is a very large number of players and participants in the financial market. These can be grouped as follows :

  • The individuals: These are net savers and purchase the securities issued by corporates. Individuals provide funds by subscribing to these security or by making other investments.
  • The Firms or corporates: The corporates are net borrowers. They require funds for different projects from time to time. They offer different types of securities to suit the risk preferences of investors’ Sometimes, the corporates invest excess funds, as individuals do. The funds raised by issue of securities are invested in real assets like plant and machinery. The income generated by these real assets is distributed as interest or dividends to the investors who own the securities.
  • Government: Government may borrow funds to take care of the budget deficit or as a measure of controlling the liquidity, etc. Government may require funds for long terms (which are raised by issue of Government loans) or for short-terms (for maintaining liquidity) in the money market. Government makes initial investments in public sector enterprises by subscribing to the shares, however, these investments (shares) may be sold to public through the process of disinvestments.
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Introduction to Financial Instruments

Often investors invest through financial assets or financial instruments or securities. Investments that represent debt, ownership of a business or a legal right to acquire a part of ownership interest in business are called securities. There are a number of financial instruments which are traded in the money market. The important financial instruments are Treasury Bills, Certificates of Deposits, Commercial Bills, Commercial Papers, etc. The money market instruments have maturity period upon one year. Money market instruments are highly liquid, short-term debt instruments which mature in less than 12 months, and normally pay continuously varying returns. These involve no or very little degree of risk. The money market instruments pay return to investors in the form of discount at the time of issue. On the other hand, Capital market has instruments of longer maturity period. These instruments are :

Ownership Securities :

  • Equity Shares,
  • Preference Shares, and
  • Cumulative Convertible Preference Shares.

Debt Securities :

  • Non-convertible Debentures,
  • Partly Convertible Debentures,
  • Zero-Interest Fully Convertible Debentures,
  • Optionally Convertible Debentures,
  • Deep Discount Bonds.

Mutual Fund Units :

  • Income Schemes,
  • Growth Schemes,
  • Sectoral Schemes,
  • Equity Schemes,
  • Money Market Schemes.

Apart from these capital market securities, other investment options available, particularly to individual investors, are Savings Bank accounts, Fixed Deposits in banks, Post-Office Savings Schemes, Unsecured deposits in companies, etc.

A financial instrument (security) is issued under a set of terms and conditions about the payment of interest/dividend to the holder, maturity life, redemption value, etc. Equity shares and debentures are issued by corporate’s under virtually a standard set of terms and conditions-Some of these are statutory terms such as the preference shares in India must be redeemable within a maximum period of 20 years; or rate of dividend on cumulative convertible preference shares need not exceed 10% p.a., or debentures must be credit rated, etc.… Read the rest

Forms and Types of Business Entities

Business can be defined as an organization that provide goods and services to others, who want to do or need them, when people think of business careers, they have to think of job in large wealthy corporation, there are wide verity of career areas in business line. Business Entity is an organization that possesses a separate existence for tax purposes. Some types of business entities include corporations and foreign corporations, business trusts, limited liability companies, and limited partnerships

The two basic types of business entities are sole proprietorship and partnerships.

Sole Proprietorship

Sole proprietorship type of business entity which legally has no separate existence from its owner. Limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors. Also debts of the business are debts of the owner in the case of sole proprietorship type of business. A sole proprietorship essentially refers to a individual doing business in his or her own name and in which there is only one owner and it does not pay corporate taxes.

Advantages of Sole proprietorship:

  • —  No additional work needed to start the business
  • —  There are no legal formalities to forming or dissolving a business
  • —  What the business makes, so does the individual
  • —  Owner makes all the decisions rather than consulting with a partner

Disadvantages of Sole proprietorship:

  • —  Will likely have a hard time raising capital
  • —  Hiring employees may also be difficult
  • —  This form of business will have unlimited liability, so that if the business is sued, the proprietor is personally liable
  • —  The life span of the business is also uncertain
  • —  The business owner must also be an all-rounder
Partnerships

Partnership is a type of business entity, where you partner with other individuals to own and run the business.  … Read the rest