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.
Life insurance
Life insurance is different from fire, marine and other kinds of insurances. in all other forms of insurances except life. the insurance company undertakes to indemnify the loss caused by hazards mentioned in the policy to the policyholder. the risk involved in fire, marine and accident insurance policies are uncertain. The house may or may not catch fire.
So if the insured suffers no loss from etc. during the period of insurance policy, no payment will be made to the insured. in case of life insurance, The contingency insured against is death. Death is universal and certain. The uncertainty is about the place and time of occurrence. Life insurance is primarily designed to cover the death and affers financial protection to the dependants in case of the death of the insured.
The insurer or assured takes out a policy for a
specified number of years.if he survives to the
end of the period,he receives the amount paid
as premium along with any bonus his policy has
earned. In case he dies within the period insured,
full amount of the policy will be paid to the nominee
of the deceased (insured)
Dafinition of life insurance
life insurance is defined as a contract whereby
the insurer in consideration of a premium paid in
lump sum or in periodic instalments undertakes to
pay a specified sum either on the death of the
insured or on the expiry of specified number of years
in the policy."
Sources Of Company Financing
Financial requirements of a company
Sole proprietorship and partnership forms of business organizations are mostly run on small scale bsis. they generally meet their fixed and working capital requirements from their owned capital. It is only the company form of organization which is run on large scale basis. It requires huge amount of funds to purchase fixed assets meeting day to day expenses of business (working capital) and for modernization and replacement of machinery.
Financial requirements of a company
Sole proprietorship and partnership forms of business organizations are mostly run on small scale bsis. they generally meet their fixed and working capital requirements from their owned capital. It is only the company form of organization which is run on large scale basis. It requires huge amount of funds to purchase fixed assets meeting day to day expenses of business (working capital) and for modernization and replacement of machinery.
Sources Of business Funds
There are two principal sources of raising funds for a company (1) Owners and (ii) Creditors. the capital which is supplied by the owners themselves is called owned capital and that which is provided by the creditors is described as borrowed Capital.
l- Owners Capital
Owner's fund also called owned capital or ownership capital consists of the amount contributed by owners as well as the profits invested in business. Owners fund provide risk capital. it provides the basis on which owner acquire their right of control over managment. owner's found also provide permanent capital to the business. A company can raise owned capital in the following ways.
(1) Issue of equity shares. A company can raise owned capital by issue of ordinary shares also called equity shares. the equity shares are a very good source of long term finance for a compny. They are only paid back when the assets of a company.
(2) Ploughed back profits. A good running company retains some of the profits in the business at the end of the year. these are not distributed to the shareholders. the portion of the profits retained every year accumulates in the from of reserve. These receipts are utilized for meeting working capital requirements and for expansion of business.
ll-Borrowed Capital The second source of funding to a business is the borrowed fund. Borrowed fund consists of the amount raised by way of loans or credit. The borrowed fund is procured from the following sources.
(1) Debentures. It is an instrument of credit acknowledging debt. it is issued by the company under its common seal. debenture carries a contract for payment of fixed rate of interest and repayment of the principal after a certain number of year. Debenture enables the company to raise long term finance without giving control of the company to debenture holders.
The amount raised through debenture is generally used for financing fixed investment specially for balacing, modernization and expansion of the industrial units. Debenture financing in pakistan has been replaced by issuance of a new corporate security called participation term certificate (PTC).
The merits of debentures are that they are generally low cost. the debenture holders do not have any control or interference in the management of the company. The company has also the advantage of trading on equity.
(2) Bank Loans. Traditionally, the commercial bank used to give short term loans nowadays, the have extended their loan operations into medium and long term finance. There are generally five types of credit available to business from bank (1) Overdraft (2) Cash credit (3) Advances against bill (4) short term loans against security and (5) Long period mortgage loans.
(3) Loans from specialized financial institutions.. There are a number off specialized financial institutions which provide medium and long term finance to business. The loans are provided both in the local and foreign currency for setting up new industries, modernization and replacement of existing units etc.
(4) Other long term financial institutions. There are also a number of other financial institutions which have suffcient funds to invest in long term financing. these are saving centres, life Insurance companies, Mutual funds etc.These institutions are primarily concerned for the purchase of shares of the well reputed companies, bonds also long term loans.
The diagram shows two sources of the capital requirements of a
business (1) owners and (2) Creditors. The capital required is used
to purchase fixed assets and current expenses of the business.
How much and what type of capital is required depends upon the
nature of the company.
business (1) owners and (2) Creditors. The capital required is used
to purchase fixed assets and current expenses of the business.
How much and what type of capital is required depends upon the
nature of the company.
Friday, 1 July 2016
Financial Needs OF Business
Every business needs capital. Capital is required at the time of starting a business. it is also needs when the business is in operation. As an enterprise requirements for business is classified under two main needs.
(a) Fixed capital
(b) Working capital
(a) Fixed capital
No business can be started without an adequate amount of fixed capital fixed capital as the name signifies are necessary for conducting the operation of a business. these fixed assets are land, building machinery, equipment. the fixed assets normally do not change their from and cannot be withdrawn from the business at a short notice. they can, however, be disposed of. Fixed capital thus are the funds required for the purchase of those assets that are to be used over and over for a long period such as land, building, machinery, etc.
investments in non current assets such as goodwill, patent rights, copyright, long term receivables etc also from a part of fixed assets. the amount of capital required for investment in fixed assets varies with the nature of a business, size of business unit and technique of production. large scale industries, like railways, oil drilling, operations, hydro and thermal electricity project etc. require more fixed capital, "Summing up fixed capital comprises of fixed assets and other non-current assets.
Importance of fixed capital. The importance of fixed capital can be judged from the fact that a business cannot be made aperative without it. right from the very beginning i.e. conceiving an idea of business, purchase of land, construction of building, purchase of machinery etc. capital is needed. further, for have an adequate amount of fixed capital in an enterprise.
(b) Working capital
In Balance sheet terms, working capital is the difference between current assets and current liabilities of a business. current asses are those assets, which in the ordinary cours of business, can be converted into cash within a short period of normally one accounting year. Current assets include cash in hand and bank balances, bills receivable, short term investments, inventories of stocks. while current liabilities are those which are intended to be paid withen a short period of one acountng year out of the current assets. the current liabilities include bills payable, short term loans, bank overdraft, dividends payable, taxes payable etc.
Working capital also called circulating capital is the life blood and nerve centre of a business. working capital is mostly used for the purchase of new material, payment of wages and bill, seasonal urgent demands of the business, purchase of more goods for sale, meeting the expenses of advertising, providing credit facilities to the customers etc. etc.
Example: Current assets - Current liabilities = Working capital
Rs. 1.50 Crore - 1.30 Crore = 20 lakhs
The difference between the current assets and current liabilities is surplus, then business has a positive working negative or deficient working capital.
Importance of working capital
The advantages of working capital in brief are as under:--
(1) Solvency of business. if helps in Solvency of business. the
flow of production remains uninterrupted.
(2) Good will. The entrepreneur is able to pay wages to the workers and other bills in time. this helps in creating goodwill of business.
(3) Loans on favourable terms. A business with high solvency and greater goodwill can easily obtain loans from bank.
(4) Cash discounts. A business with adequate working capital
can obtain cash discounts on the purchase. this helps in reducing
cost.
(5) Enables to face crisis. An adequate working capital enables
an enterprise to face business crisis.
(6) Regular payment of dividend. A sufficient amout of working capital enables a business to earn profit and pay
dividend to investors in time.
Businees Finance
Businees Finance
Finance is the life blood of any business. in the early stages of development, the business were small. the methods of production were simple. the labour intensive. as time passed on, the business began to grow both in size and in methods, of production. The use of expensive machinery, round about methods of production, the employment of large number of workers, the bulk purchase of raw material, the marketing of goods at the national and international level etc. have made the business now capital intensive. The company from of organization is being relied upon more now.
Need for Finance.
Finance is the life blood of any business. in the early stages of development, the business were small. the methods of production were simple. the labour intensive. as time passed on, the business began to grow both in size and in methods, of production. The use of expensive machinery, round about methods of production, the employment of large number of workers, the bulk purchase of raw material, the marketing of goods at the national and international level etc. have made the business now capital intensive. The company from of organization is being relied upon more now.
What is business Finance?
Finance is the base of business. It is required to purchase assets and for the flow of economic activities. It is infact the life blood and nerve center of industrial and commercial enterprises.
Definition. business finance may be defined as the provision
of money at the time when it is needed by a businees.
According to howard and upton, "Finance may be defined
as that administrative area or set of administrative
functions in an organization which relate arrangement
of cash and credit so that organization may have the
means to carry out the objectives as satisfactorily
as possible.in the words of B.O. wheeler, "businees
financeis that businees activity which is concerned
with the acquisition and conservation of capital funds
in meeting the financial needs and overall objective
of businees enterprise." in the light of the definition
given above, the main characteristics of businees finance
are as under:
i) Includes all types of funds. businees finance covers all
types of funds employed in businees; for example (a) Owned funds
(ii) borrowed funds.
ii) Required by all types of organization businees. Finance is
required by all types of organization whether they are operating
on large or small scal,commercial or industrial enterprises.i) Includes all types of funds. businees finance covers all
types of funds employed in businees; for example (a) Owned funds
(ii) borrowed funds.
ii) Required by all types of organization businees. Finance is
required by all types of organization whether they are operating
on large or small scal,commercial or industrial enterprises.
iii) Amount required varies. the amount of business finance required
varies with the nature and size of the organization. the larger the
size of business undertaking, the larger is the amount of finance
required vica varies.
iv) Funds required vary from time to time. the amount of business
finance required varies from time to time when business is expanding,
it needs larger funds and vice versa.
