Sunday, 6 November 2016
Monday, 4 July 2016
Business Combinations
system is towards development of mass production, growth
of specialization, use of automatic mechinery and electronic
computers. there is also stiff competition among the competition
among producers has given place to business combinations.
What is business combinations?
business combinations is voluntary association of firms
for the achievement of common objectives. the combination
among the firms may be temporary or permanent. the combination
may be formed by a written agreement among the firms, or there
may be oral understanding among themselves to unite for enjoying
the advantages of monopoly. the firms may have a loose type of
combniation having control in the internal administration or they
may decide to completely merge themselves into one unit. In such a case,
the uniting firms lose their separate entities.
Causes of business combinations: There are multiple causes which have led the formation of business combinations. they, in brief, are as follow.
1. Elimination of competition: Nowadays, a large number of firms produce a particular type of commodity. The competition among the rival firms lead to goods being sold at cut throat prices. the stiff competition among the producers has increased the capital risk and lowered the profits of the firms. some firms do not survive the competition and finally close the business. the over extension of plant and equipment and unrealistic pricing has forced the operating enterprises to unite and save themselves from the competition.
2. Economies of large scale production: The rival units combine together to reap the benefits of large scale production. they purchase raw material in bulk, produce standard goods with specialized knowledge, reduce the operational costs of business and sell produce at a price which gives them maximum profit.
3. Changes in economic policy: if there is political instability in the country and the economic policies of the govt. are subject to frequent changes, it promotes businessmen to combine and chalk out policies which reduce risk in business
4. Fluctuations in business activity. if the economy is passing through a phase of low production, low prices, low employment, low capital, the firms then make efforts to combine together to save themselves from the bad effects of depression. similarly, if the prices are rising and the margin of profit is high, it gives incentive to the firms to combine and enjoy the benefits of monopoly.
5. Influence of Tariffs: The imposition of custom duties on the imported goods is also an important fector in the formation of combination. the protected industries having no fear of the competition of foreign goods combine together and are able to sell the goods at a price higher then the competitive market.
6. Formation of joint stock companies: The small scale industries lay scattered and cannot combine easily. the big concerns operated through joint stock companies. they can easily contact each other by direct telephone, telegrams and can also call a joint meeting at a very short notice. they formulate policies of protecting their economic interests and carry them effectively through combinations.
7. Transportation Developments: the development of fast means of transport has made it possible to build up large business in various parts of the country. these big industrial units, being small in number, easily form industrial combinations.
8. Patent Laws: patent laws have also led to the growth of business combination. patent laws give monopoly position to concerns and also lead to the formation of cartels to resist competition of the outsiders.
9. Rationalization: the business units may combine for standard of products, planned utilization of resources and introduction of automation in industry.
10. Respect for bigness. The business units of bigger size command more respect than of smaller units. the business units therefore, aspire to combine to have respect for bigness.
Sunday, 3 July 2016
Patnership and its characteristics
Definition of partnership.
partnership or firm as it is often called is the 2nd stage in the
evolution of forms of business organization. partnership as a form of business organization grew out of the limitations of individual proprietorship.
in sole proprietorship, the financial resources, managerial skill, risk
bearing capacity were limited. when business activities started expanding,
there arose a need for more capital, more persons to supervise the business
affairs. The partnership form of organization was developed to overcome the
draw backs of sole trading organization and to meet the expanding needs of
a business requiring a moderate amount of capital. here two or more persons
(not exeeding 20) form partnership by making a written or oral agreement
that they will jointly assume full responsibility for the conduct of business
L.H. Haney defines partnership in the following words.
Partnership is the relationship between persons who agree to carry on a
business in common with a view to private gain."
Elements of partnership.
The essential elements of partnership as a form of business
organization are as follow
(i) Association of at least two persons. Atleast two persons must joint
together to form a partnership.
(ii) Contractual relation. There must be an agreement between persons
desirous of forming a partnership.
(iii) Earning of profit. The agreement must be to share profit/loss of
a business.
(iv) Mutual agency. The business of partnership may be carried on by all
the partners or by any of them acting for all. thus every partner is an
agent of other partners and at the same time of the firm.
Section 4 the partnership Act of 1932 as adopted in pakistan defines partnership in the following words "partnership is the relation between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all. persons forming partnership are individually known as partners and collectively 'a firm' .
Marine Insurance
1. Marine InsuranceMarine insurance is the oldest type of insurance dating 5000 years back. it was originally meant for giving insurance coverage to the loss of ships and cargo at sea. in more recent times, it has been split up into two major forms of transportation coverage. (a) Ocean Marine (b) Inland Marine.
(a) What is an Ocean Marine? The ocean marine insurance is a highly specialized business in its
operation and is primarily operated by big insurance companies.
ocean marine insurance covers almost all losses to the ship and
cargo while in port or at sea. The main ocean perils include sinking,
capsizing, stranding, collision, theft and fire etc. in each marine
insurance contract, the insurer (insurance company) on the payment
of a premium by the insured, undertakes to give coverage against loss
due to maritime perils. the terms and conditions of the contract are
written in a document called marine insurance policy. In an ocean marine
insurance, coverage is provided for (1) ships interested party.
(b) Inland Marine. Inland marine insurance provides coverage to the
transportation of goods by rail, truck, theft, fire, windfall, flood,
lightning etc.
the inland marine insurance policy is written on all risks basis of it
may be written to insure only against specified inland marine perils.
The procedure of getting marine insurance is very simple. the person
who wants to get the cargo insured, writes to a few financially sound
companies to quote their lowest rates of risk. on receipt of quotations,
he contracts the company which quotes the lowest rates. the company
fills up the necessary forms and on receipt of premium accepts the
marine risk. the marine insurance policy is then given to the insured
to recover the claim in the event of a loss.
Marine Insurance .
Marine insurance is the oldest type of insurance it covers
(1) Ocean marine and
(2) Inland Marine
(1) Ocean Marine insurance. it is a highly specialized business. the insurance companies covers practically all perils of shipments on the high seas. in the ocean marine insurance, the coverage is provided for ship and its contents.
(2) Inland Marine Insurance. An inland marine insurance policy provides coverage to losses caused by fire, theft to goods being transported by rail, truck, etc
Types of marine insurance.
There are three types of marine insurance (i) cargo insurance (ii) hull insurance (iii) freight insurance.
(i) Cargo insurance. It is an insurance of the goods shipped by the shipper.
(ii) Hull insurance. it is an insurance of ship itself against sea perils
(iii) Freight insurance. in many cases, freight is paid on the arrival of ship at the port of destination. if the cargo is damaged or lost, the shipping company will lose the freight. Freight is, therefore, also covered in marine policy. etc
Saturday, 2 July 2016
Advantages of life insurance
The main advantages of life insurance are summed up as under.
1. Financial Protection to the Family members. life insurance gives protection to the family members of the insured against the loss of future earning power. the compny on the death of the policy holder make payment equal to the face value of the insurance policy to the beneficiary named therein. the family thus gets a timely financial protection which may restore them and place them on a sound financial footing.
2. Promotion of thrift. The insured has to make a periodic payments to the life insurance company. He, therefore, economizes in his expenditure and saves money to pay the insurance premium regularly.
3. Provision of funds. if the policy holder survives, he then on the maturity of the policy gets a lump sum of money to build or purchase a house, meet the expenditure of marriage, education of his children etc.
4. Loan against policy. The life insurance policy has the advantage that the policy holder can obtain loan against the insurance policy for meeting urgent needs.
5 Peace of mind. The death of a man is certain. if it is sudden and premature, the family loses the man as well as a person who was a source of income for them. the life insurance provides a little relief, a peace of mind to the dependants that they will be financially cared for.
Business use of life insurance.
1. Effect on business. if the sole proprietor has insured himself for a big amount and he dies before the attainment of specified age in the contract, the beneficiaries can operate the business on receiving the claim from the insurance company. the business in thus not closed.
2. Availability of credit. The solo proprietor can obtain loan for meeting the operating cost of a business against the life insurance policy.
3. Staying Power. if the beneficiary is not able to run the business on the premature death of insured. he can at least stay in the business for a short period and sell the business in the running condition which certainly fetches a better price.
4. Shock absorber. The death of a solo proprietor completely upsets the business. the payment of claim by the insurance company acts as a shock absorber and promotes financial security for operating the business.
5. Payment of debts. if the sole proprietor is insured, the creditors have insurable interest in him. they can receive the amount of loan on the settlement of claim on the sudden death of the proprietor.
6. Financial strength. The periodic payments by the policy holder accumulates large saving which provides financial strength to the sole proprietor.
7. Partnership Insurance. In a business partnership, if the partner have obtained a joint life policy, the surviving partner is not financially affected. he can purchase the interset of the deceased partner.
8. Benefit to stock holders. The stock holders in a close corporation may also have a joint life policy and thus ensure the availability of funds for the business.
9. Insurance of key executive. The life insurance companies also provide the benefit of insuring the key executive of the firm. if the key executive dies before the specified age, the firm is compensated of the loss as caused in the disruption of the company.
10. Group life insurance. The firm can provide an added benefit to its employees by giving them a group life insurance policy. in the group insurance, the maximum limit of payment on the death of an employee is fixed by the insurance company. the employees thus also benefit from life insurance companies.
Kind of life insurance policies
Kind of life insurance policies
The principal types of life insurance policies which
are ordinarily issued are as under:
(1) Whole life policy. The whole life policy runs for the
whole term of the life of the insured. the insured pays
premium throughout his life time. it is paid to the
beneficiary when the insured dies. there are there types
of whole life policies
(a) Straight life
(b) Limited Payment life
(c) Single premium life
(a) straight life. straight life is the policy in which
the premiums are payable every year as long as the insured
lives in th world.
(b) Limited Payment life. If the insured is to pay the premium
for a stated number of years, the insurance is called
limited payment life.
(c) Single premium Life. Single premium life involves
only one premium payment by insured.
(2) Endowment Life Policy. This policy runs for a
particular period or upto a specified age. the payment
of the stated money becomes payable at the end of the
period mentioned in the policy. In case the insured dies
before the policy matures, the payment of stated sum of
money in the policy, becomes payable to the beneficiary.
However, the premium have to be paid till the time of
maturity. The advantage of this policy is that it combines
saving for old age and also gives protection to the insured
family in the event of premature death.
(3) Term life policy. Term policy as the name say maximum
for ten years Maximum signifies is an insurance policy
for a specified period of time say maximum for ten years maximum.
if the assured person dies before a certain date or age,
the insurance company will pay the face value of policy
to the beneficiary. Term policy can be compared to a fire
or marine policy which gives insurance coverage within the
time limit of the policy. if a provision is made in the
terms of the policy, the term policy can also be converted
into or wholo life or endowment policy.
(4) Annuity Insurance. In this type of insurance, the insured pays
premium over a number of years or in lump sum to the insurer. the
insurance company then promises to make a regular series of payment, usually monthly for the no dependents.
(5) Group life insurance. The purpose of group life insurance is to cover the employes of a business concern. group life insurance is usually written on or one year renewable term plan.
(6) Joint life insurance. This policy covers the lives of two persons e.g. husband and wife or two partners in a business. if any one of the person or partner dies, the claim will be paid to the other person. this policy helps to save the family or other partner from financial worries atleast for a cartain period.
(7) Sinking Fund policy. This policy is taken by the insured for making payment of a liability or replacement of an asset.
(8) Double Accidental indemnity policy. according to this policy, if the insured dies, due to an accident, his survivors will get double the amount of the policy.
(9) Children deferred insurance. This contract between the insurer and the insured provides insurance coverage to the children who needs protection. A father, for instance, gives insurance coverage to his children up to the complection of studies or marriage.
(10) With Profit's policy. in the case of with profit's policy, the assured or his beneficiary gets the claim along with profits declared by the company from time to time. if it is a non profit policy, then the holder gets only the actual amount assured.
The principal types of life insurance policies which
are ordinarily issued are as under:
(1) Whole life policy. The whole life policy runs for the
whole term of the life of the insured. the insured pays
beneficiary when the insured dies. there are there types
of whole life policies
(a) Straight life
(b) Limited Payment life
(c) Single premium life
(a) straight life. straight life is the policy in which
the premiums are payable every year as long as the insured
lives in th world.
(b) Limited Payment life. If the insured is to pay the premium
for a stated number of years, the insurance is called
limited payment life.
(c) Single premium Life. Single premium life involves
only one premium payment by insured.
(2) Endowment Life Policy. This policy runs for a
particular period or upto a specified age. the payment
of the stated money becomes payable at the end of the
period mentioned in the policy. In case the insured dies
before the policy matures, the payment of stated sum of
money in the policy, becomes payable to the beneficiary.
However, the premium have to be paid till the time of
maturity. The advantage of this policy is that it combines
saving for old age and also gives protection to the insured
family in the event of premature death.
(3) Term life policy. Term policy as the name say maximum
for ten years Maximum signifies is an insurance policy
for a specified period of time say maximum for ten years maximum.
if the assured person dies before a certain date or age,
the insurance company will pay the face value of policy
to the beneficiary. Term policy can be compared to a fire
or marine policy which gives insurance coverage within the
time limit of the policy. if a provision is made in the
terms of the policy, the term policy can also be converted
into or wholo life or endowment policy.
(4) Annuity Insurance. In this type of insurance, the insured pays
premium over a number of years or in lump sum to the insurer. the
insurance company then promises to make a regular series of payment, usually monthly for the no dependents.
(5) Group life insurance. The purpose of group life insurance is to cover the employes of a business concern. group life insurance is usually written on or one year renewable term plan.
(6) Joint life insurance. This policy covers the lives of two persons e.g. husband and wife or two partners in a business. if any one of the person or partner dies, the claim will be paid to the other person. this policy helps to save the family or other partner from financial worries atleast for a cartain period.
(7) Sinking Fund policy. This policy is taken by the insured for making payment of a liability or replacement of an asset.
(8) Double Accidental indemnity policy. according to this policy, if the insured dies, due to an accident, his survivors will get double the amount of the policy.
(9) Children deferred insurance. This contract between the insurer and the insured provides insurance coverage to the children who needs protection. A father, for instance, gives insurance coverage to his children up to the complection of studies or marriage.
(10) With Profit's policy. in the case of with profit's policy, the assured or his beneficiary gets the claim along with profits declared by the company from time to time. if it is a non profit policy, then the holder gets only the actual amount assured.
How to get life insurance policy
The method of procuring life insurace policy
is very simple. The main steps involved in effecting
the life insurance policy are as under:
1. selection of the company. A person who wants to get
his life insured must select an insurance company which
has a good credit standing.
2 Proposal. The person desirous of being insured has to
fill in the proposal form. he has to abide by the basic
principles of insurance explaining the true facts. the
concealment of facts will lead to the cancellation of
contract.
3 Medical Examination. The company on receipt of the
proposal form will get the proposer medically checked
up. On receipt of the doctor's report, the company
will consider the proposal.
4 Acceptance of the proposal. On receipt of the proposal
form and the satisfactory medical report, the company
will issue a letter of acceptance requesting to complete
the transaction at the earliest so that the protection
and security guaranteed by the policy is issued to him
by the company.
5 Payment of premium. The risk of life is covered from
the date, the premium is paid. The premium may be paid in
easy instalments monthly, quarterly, half yearly, or
annually.
6 Issue of policy. On receipt of the premium, the executive
director of insurance company issues the life insurance,
policy of the insured which states,name,policy number,
commencement date, maturity date, amount of premium,
name of the nominee.
