Location means selecting a site for business. For starting a business location is also an important factor. It is very difficult to change the location once the business has been set up. For selecting a location of the business, many factors have to be considered. For trading concern nearness to customers is the main consideration. But for industrial concern special precautions should be taken in selecting the site. Hence location is the best in which production and distribution cost per unit is the least, sales are maximum and maximum profit is possible.
Tuesday, March 9, 2010
PROVISION OF CAPITAL
Capital is the life blood of business. No business can be established and conducted without capital. But the volume of capital varies according to the nature and size of the business. Hence before starting a new business requirement of capital and the source for collecting capital should be determined. Every business needs fixed capital in the form of land, building, machinery, furniture, etc. In addition, working capital is required to purchase raw materials and to meet day-to-day business transactions. Thus, capital requirement is estimated by ascertaining the amount essential for fixed capital and working capital relating to the establishment of business. The business should acquire adequate capital. If the capital is less than the requirement, it becomes difficult to conduct the business whereas excess capital cannot earn sufficient profit, which have adverse effect on the business goodwill.
FORM OF BUSINESS ORGANIZATION
The determination of the form of business organization is another important decision to be taken before starting a business. Sole proprietorship, partnership and joint stock company are the various forms of business organization. Each form of business organization has its own merits and demerits. Which type of business organization is suitable for the business depends upon various factors i.e. nature of the business, size, capital, risk, etc. If the business is risky and requires larger amount of capital then joint Stock Company is most suitable. If business is to be conducted on small scale, sole proprietorship may be ideal. Broadly speaking sole proprietorship for small business, partnership for medium business and the company for the big business is the most suitable form of business organization. All the three forms are more suitable to each other in varying circumstances.
