Polytechnic University of the Philippines

San Juan Campus

BUSINESS FINANCE

Lesson 1: Overview of Business

Business
• investment agencies or intermediaries
• an entity designed to utilize raw materials, labor, and machines, which produces good and
services
• activity of making, buying, or selling goods or providing services in exchange for money

Factors of Production
• Land – resources and raw materials essential to produce goods
• Labor – mental and physical efforts of all workers
• Entrepreneurship – people willing to accept opportunities and risks of putting up a business
• Capital – buildings, machinery and tools used to produce goods and services

Types of Businesses
• Manufacturing – companies involved in the conversion of raw materials into tangible
products
• Merchandising – companies involved in selling of finished goods produced by other
businesses
• Service – companies that provide intangible products to customers
• Hybrid – companies involved in more than one type of activity

Legal Forms of Business Organization

• Sole Proprietorship – organization owned and operated by a person called the owner
Advantages Disadvantages
• Ease of entry and exit • Unlimited liability
• Full ownership and control • Limitations in raising capital
• Tax savings • Lack of continuity
• Few government regulations

• Partnership – formed by 2 to 5 individuals called partners

Advantages Disadvantages
• Ease of formation • Unlimited liability
• Additional sources of capital • Lack of continuity
• Management base • Difficulty in transferring ownership
• Tax implementation • Limitations in raising capital

o General Partnership – one in which each partner has unlimited liability for the debts
incurred by the business; usually manage the firm and may enter contractual
 obligations on the firm’s behalf; profits and asset ownership may be divided in any
way agreed upon by the partners
o Limited Partnership – one containing one or more general partners and one or more
limited partners; the personal liability of a general partner for the firm’s debt is
unlimited while the personal liability of limited partners is limited to their
investment; limited partners cannot be active in management

• Corporation – organization with a legal personality separate and distinct from the owners
who are called stockholders;
Advantages Disadvantages
• Limited liability • Time and cost of formation
• Unlimited life • Regulation
• Ease in transferring ownership • Taxes
• Ability to raise capital

the incorporation process is initiated by filing the articles of incorporation and other
requirements with the SEC; articles of incorporation includes the following:
o Incorporators
o Name of the Corporation
o Purpose of the Corporation
o Capital Stock
o Authorized Shares

• Cooperative – duly registered association of persons with a common bond of interest, who
have voluntarily joined together to achieve a lawful common social or economic end,
making equitable contributions to the capital required and accepting the fair share of the
risks and benefits of the undertaking in accordance with universally accepted cooperative
principles