1. Starting a business Sources of capital
VOŠ – 3. ročník – 2. semestr
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2. Definition
when entrepreneurs start a business, they begin to produce some goods or to provide some services
most businesses are privately owned
businesses are typically formed to make a profit and grow the personal wealth of their owners
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3. Business organization
The major factors affecting how a
business is organized are usually:
the size and scope of the business
the sector and country
limited liability
tax advantages
   
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4. Business factors capital and reserve funds location
premises such as land or buildings
fitting
knowledge about the trade
skilful staff
advertising
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5. Management
it is the study of the efficient and effective operation of a business
main branches of management are:
financial management
marketing management
strategic management
production management
service management
information technology management
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6. Capital
capital is money used by businesses to buy what they need in order to make their products or provide their services
initial capital – needed to start a business
additional capital – needed to run a business
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7. Raising the capital
raising of capital depends on the state of the firm, of the national economy, government and banking policies
it can include:
personal savings
personal loans – guarantees in form of mortgages on property and premises are needed
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8. Sources of capital the most common sources of capital are:
Bank overdraft
Bank loan
Leasing
Factoring
Ploughing back profits
Trade credits
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9. Bank overdraft
occurs when withdrawals from a bank account exceed the available balance which gives the account a negative balance
it is used to pay for current assets such as material or stock
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10. Bank loans
it is the redistribution of financial assets over time, between the lender and the borrower
a loan is a type of a debt
it is used for buying specific assets such as fittings and machinery
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11. Leasing
is the right to use personal property or real property given for a fixed or indefinite period of time
the lessee obtains possession of the property in return for paying the fixed or determinable payment
at the end of the lease the firm can buy the property at a low price
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12. Factoring
is a form of commercial finance when a business sells its debts at a discount
the business is no longer dependent on the debt from customers
businesses benefit from the acceleration of cash flow by obtaining cash from the factor
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13. Ploughing back profits
profits made by the company are immediately invested back into the enterprise
the money gained as profit is not used to repay loans or other debts
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14. Trade credits
one firm provides goods or services to a customer with an agreement to bill them later or receives a shipment or service from a supplier under an agreement to pay them later
is the largest use of capital for a majority of business to business sellers
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15. Other sources of capital
credit cards
the user is able to make purchases from merchants accepting that credit card up to a pre- established credit limit
cheques
enable to pay a specific amount of a specific currency from a specific demand account held in the depositor's name with the bank
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16. Starting a new business
Low taxes
Skilled staff
Low interest rates
Cheap rents
Stable economy
Good transport
Training courses
High unemployment
A strong currency
Government grants
Which of the following items are important for people starting a new business? Choose three most important. Can you think of some others?
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17. Types of ownership Post office TV/newspaper Energy Cars Rail Water
Telecoms
Airlines
In many countries there is a mix of public and private sector businesses. Think of Czech and foreign companies in the areas above. Which of them are public and which are private? In which area would you like to start your own business and why?
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18. Listening
Imagine that you are going to open your own clothes shop in your home town.
What kinds of office equipment and supplies do you think you will need to run your business?
What source of capital will you use to start your business? What sources of capital will you use to run your business?
At a clothes shop
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19. Imagine the following situation
You are a producer of electronics and would like to expand your company and start up an overseas branch, which of the following countries would you choose and why? Discuss with your partner.
Country A
Economic growth: 2%
Inflation: 5%
Unemployment: 30%
The country has a lot of debt and old infrastructure
Transport: good railways, poor roads
Labour: unskilled workers, low wages
The country has military government and political problems.
Country B
Economic growth : 1,5%
Inflation: 0,5%
Unemployment: 3%
Modern industrial economy
Transport: good roads and railways, international airport
Labour: not a lot of skillful workers, high wages
The country has a stable government.
Country C
Economic growth : 8%
Inflation: 10%
Unemployment: 12%
Transport: good sea transport, poor roads, small airport
Labour: nor much skilled workers, fast rising wages
Democratic government, not much paperwork required for exporting goods, but limits on profits of foreign companies.
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20. Resources
English in Economics, Miroslav Kaftan, Libuše Horáková:, Karolinum 2004
Market Leader, D. Cotton, D. Falvey, S. Kent, Pearson Longman, 2007
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