3. Chapter Learning Objectives
This lecture will continue with
the previous lecture problem
and then chapter deals with the
teething problem that a newly
established company faces.
4. Cash Flow Analysis
Cash flow is essentially the
movement of money into and out of
your business; it's the cycle of cash
inflows and cash outflows that
determine your business' solvency.
5. Cash Flow Analysis….
Cash flow analysis is the study of
the cycle of your business' cash
inflows and outflows, with the
purpose of maintaining an adequate
cash flow for your business, and to
provide the basis for cash flow
management.
6. Source of Funds
1. Short Term Loans
Net trade credit
Commercial loans
2. Intermediate loans
3. Long term loans
4. Equity
7. Anticipated return on investment
Financial feasibility is adjudged on the
basis of satisfactory yield on investment.
It can be calculated by relating the
average earnings expected over a given
period to either the total amount of
investment or net worth of organization
(Return on equity). Both are compared
with potential yield from alternative
investment opportunities to ascertain the
acceptability or otherwise of a new
venture.
8. Assessment of Personal Requirements
and Organizational Capabilities
Human beings provide the motive
force to an enterprise. For this
purpose, it is necessary to consider
the available talent and skills
consonants with the organization
structure. An inventory must be
made of the skills needed for
effective implementation of new
venture.
9. Assessment of Personal Requirements
and Organizational Capabilities…….
The steps in undertaking the exercise
relating to determination of personal
requirements and designing the initial
organizational structure are described
below:
a) Ascertaining the anticipated workflow
and the various activities (called activity
analysis). At this stage, the total range of
activities and level of skills are identified.
10. Assessment of Personal Requirements
and Organizational Capabilities…….
b) Grouping the activities into set of
tasks that individuals can handle
effectively.
c) Categorization of various tasks to
form the basis of structure of
organization.
d) Determination of interrelationship
between different positions and
designing of organizational hierarchy.
11. Analysis of Competition
In order to ensure the survival and
growth of enterprise, it is essential
to make competition analysis.
Generally, every organization to
face two types of competition:
a) Direct competition from similar
products.
b) b) Indirect competition from
substitutes.
12. Analysis of Competition….
Competitor analysis in marketing
and strategic management is an
assessment of the strengths and
weaknesses of current and potential
competitors. This analysis provides
both an offensive and defensive
strategic context to identify
opportunities and threats.
13. Problems faced by Small Business
Small businesses often face a
variety of problems related to
their size. A frequent cause of
bankruptcy (lack of resources) is
undercapitalization. This is often
a result of poor planning rather
than economic conditions.
14. Problems faced by Small Business….
It is common rule of thumb that the
entrepreneur should have access to
a sum of money at least equal to
the projected revenue for the first
year of business in addition to his
anticipated expenses.
15. Problems faced by Small Business….
Another problem for many small
businesses is termed the
'Entrepreneurial Myth' or E-Myth.
The mythic assumption is that an
expert in a given technical field will
also be expert at running that kind
of business. Additional business
management skills are needed to
keep a business running smoothly.
16. Problems faced by Small Business….
Still another problem for many
small businesses is the capacity
of much larger businesses to
influence or sometimes
determine their chances for
success.
17. Field Problems of Starting a New
Enterprise
Identification of a venture after a thorough
analysis of the five major aspects
described earlier should not be regarded
as the end of all problems. Rather the real
problems have been summarized in the
following paragraphs.
1. Pre-Operator Problems
2. Problems during the construction phase
18. 1. Pre-Operator Problems
a. Problem of selecting an
appropriate form of business
organization.
b. Problems related with the
acquisition of basic facilities such
as sources of raw materials,
power, transport etc.
19. 2. Problems during the construction
phase
These would be connected with:
I. Acquisition of land;
II. Construction of building and other
aspect of civil works;
III. Acquisition of machinery and its
installation;
20. 2. Problems during the construction
phase…….
IV. Preliminary work about the sources of
supply of raw materials , labor and
managerial inputs;
V. Prospecting about marketing;
VI. Preliminary work regarding sources of
working capital;
VII. Coordination problem connected with
the acquisition of different kinds of assets
or completion of jobs;
