Organizational structure is a picture showing who reports to whom in the company

1. Organizational structure is a picture showing who reports to whom in the company.

2. Stuffing is a part of an organization structure.

Leadership

Leadership today is not just good management. It is also a matter of establishing values, sharing visions, creating enthusiasm, and maintaining focus on a few, clear objectives.

There are different leadership styles.

Autocratic leadership means making managerial decisions without consulting others, and implies power over others.

Bureaucratic leadership is based on inflexible routine supported by rules, regulations, and policies.

Diplomatic leadership is based on skill and tact in convincing employees to follow the leader's decisions.

Democratic leadership means that managers set work together to make decisions.

Laissez-faire leadership means that managers set objectives and employees are relatively free to do whatever it takes to accomplish those objectives. Many scientists and doctors work best under laissez-faire leadership.

Employee-controlled leadership consists of having employees set objectives, and management handle administrative matters. Many universities are run this way.

Participative management involves employees in setting objectives and making decisions; consultive, democratic and laissez-faire leadership are all forms of participative management.

One manager may use a variety of leadership styles depending on whom he is dealing with and the situation.

Exercise 13. True or false?

1. Autocratic leadership is based on tact in convincing people to follow the leader's decisions.

2. Every manager uses only one leadership style.

3. Democratic management is an example of participative management.

4. Doctors and scientists usually better work under bureaucratic leadership.

Control

The control function involves measuring performance relative to objectives and standards and taking corrective action when necessary. The control function, therefore, is the heart of the management system because it provides the feedback that enables managers to adjust to any deviations from plans and to changes that have occurred in the environment that have affected performance.

Controlling consists of the following steps:

1. Setting clear standards;

2. Monitoring and recording performance (results);

3. Comparing results against plans and standards;

4. Communicating results and deviations to the employees involved;

5. Taking corrective action when needed.

Tasks and skills at different levels

of management

A manager must have three categories of skills.

Technical skills involve the ability to perform tasks of a specific department such as selling or accounting.

Conceptual skills refer to a manager’s ability to picture the organization as a whole and the relationship of various parts to perform tasks such as planning and controlling.

Human relations skills include leadership, communication, motivation, coaching, and training.

The higher up one goes in management, the more time is spent on conceptual and human relations functions and less on technical functions.

Exercise 14. True or false?

1. Top managers spend more time on technical function than on the others.

2. Conceptual skills refer to ability to perform specific tasks.

Part 4. Accounting and Finance

Exercise 15. Match the words and the definitions:

1. Accounting A document reporting the results of company operations over a particular period of time.

2. Income statement A financial statement that reports the financial position of a firm at a specific time.

3. Balance sheet Acquiring funds for the firm and managing funds within a firm.

4. Financing Recording data from transactions and preparing financial statements.

Accounting

Accounting process consists of two major functions:

1. Recording data from transactions;

2. Preparing financial statements.

Transactions include buying and selling goods and services, acquiring insurance, using supplies, and paying taxes. After the transactions have been recorded, they are usually classified into groups that have common characteristics. For example, all purchases are grouped together, as are all sales transactions. Other kinds of accounting documents are: purchasing documents, payroll records, bank documents, travel and entertainment records. The business is thus able to obtain needed information about purchases, sales and other transactions that occur over a given period of time. The methods used to record and summarize accounting data into reports is called an accounting system. One purpose of accounting is to help managers evaluate the financial condition and the operating performance of the firm so that they may take better decisions. Another is to report financial information to people outside the firm such as owners, creditors, suppliers, and the government (for tax purposes).

When recording the original transaction documents in a journal the accountant places them in certain accounts.

Accountants use five major accounts to prepare financial statements:

1. Assets. Assets are what a business owns, property that have money value. Assets include the following:

· Cash (cash on hand and deposits in banks)

· Accounts receivable (money owed to a business from customers who bought goods on credit)

· Inventory

· Investments

· Land

· Equipment

· Buildings

· Motor vehicles

· Patents

· Copyrights

Assets are divided into three categories:

1) Current assets (items that can be converted to cash within one year),

2) Fixed assets (items such as land, buildings and fixtures that are relatively permanent),

3) Other (intangible) assets (patents and copyright).

2. Liabilities. Liabilities are what the business owes to others. They include:

· Accounts payable (money owed to others for merchandise and services purchased on credit, but not paid for yet),

· Accrued expenses payable (expenses the firm owes that haven’t been paid),

· Bonds payable (these represent money loaned to the firm that it must pay back).

Liabilities are divided into two categories:

Current liabilities or obligations that must be paid within one year, such as accounts payable.

Long term liabilities or obligations that will not be paid within one year, such as bonds.

3. Owners’ equity. It is assets minus liabilities. For sole proprietors, owners’ equity means the value of everything owned by the business minus any liabilities of the owners (for example, outstanding loans). For corporation, the owners’ equity account records the owners’ claims to funds they have invested in the firm (capital stock) plus earnings kept in the business and not paid out in dividends (retained earnings).

4. Revenues. Revenues is the value of what is received for goods sold, services rendered, and from other sources. That includes sales revenues, rental revenues, commissions, royalties.

5. Expenses. They are costs incurred in operating the business, such as rent, utilities, salaries and wages, insurance, advertising etc.

Financial documents

The two most important financial statements are: the income statement and the balance sheet.

1. The income statement is also called profit and loss statement. It summarizes all the resources that came into the firm from operating activities (called revenue), money resources that were used up (called cost of goods sold and expenses), and what resources were left after all costs and expenses were incurred (net income or net loss). It reports the results of operating over a particular period of time.

2. The balance sheet is the financial statement that reports the financial position of a firm at a specific time. The words "balance sheet" imply, that the report shows a balance, an equality between two figures. That is the balance sheet shows a balance between assets and liabilities plus owner’s equity.

The formula Assets = Liabilities + Owners’ equity is the basis for the balance sheet.

On the balance sheet, you list assets in a separate column from liabilities and owner’s equity. The assets are equal to or are balanced with the liabilities and owners’ equity.

Exercise 16. True or false?

1. Accountants use two major accounts to prepare financial statements.

2. The main financial statements are purchasing documents and payroll records.

3. Liabilities are what a business owns.

4. Long term liabilities must be paid within a year.

5. The basis of a balance sheet is a formula Assets = Liabilities + Owners’ Equity.

Finance

Finance is the function in a business that is responsible for acquiring funds for the firm and managing funds within the firm (planning, using and controlling money effectively).

A financial plan for a business specifies the amount of money needed for various time periods and the most appropriate sources and uses of funds.

Long-term financing is money, obtained from the owners of the firm and lenders who do not expect repayment within 2 or more years. Long-term capital is used to buy long-term assets such as a plant and equipment and to finance any expansions of the organization. Initial long-term financing comes from three sources: