Accounting and Business: Analyzing Enterprises and Long Term Finance

This report discusses various types of business enterprises, including sole proprietorships, partnerships, and public limited companies, highlighting their existence and operational differences. It analyzes share capital, differentiating between equity and preference shares, and explores long-term debt options such as bonds and debentures. The report concludes by emphasizing the importance of selecting the appropriate business enterprise and long-term financing methods based on the company's specific needs and goals. Desklib provides access to this and many other solved assignments for students.

Accounting and
Business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
What are different types of business enterprises and why do they exist. Explain using
examples.................................................................................................................................3
TASK 2 ...........................................................................................................................................5
Critically analyze the two forms of share capital and long term debt with mention to the long
term sources of finance accessible for listed companies........................................................5
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
A business enterprise is a sort of body which provides the public with commodities with the
primary content of earning a profit. It is practical to every else firm who sells different
commodities and services in the market. This report highlights the three main types of business
enterprises which can be used by the businessperson to start an enterprise (Mohammadi, 2020).
The report further talks about how these business enterprises can be supported and can work
efficiently with the funds supplied.
TASK 1
What are different types of business enterprises and why do they exist. Explain using examples.
Business is a form of activity which is commercial in nature, it has two or more parties and
trading of some kinds of goods in relation to monetary exchange is done. The main purpose of
business is earning profits. Profit is the consequence for endangerment understood, there are
different kinds of business enterprises that can help the businessperson gain profits. The
existence of these different enterprises is there due to the varied interests of the owners of these
business. Some businessperson wants to invest themselves and manage too, some wants to invest
less but manage in a group, some just want to invest and does not want to manage the business.
The distinction also occurs as these people also invest according to the short, medium and long
term returns from the business.
Sole Proprietorship refers to that kind of business which is owned and managed by one
individual only. This indiviual is called the owner/ sole proprietor of thus business unit and they
only are responsible for all the daily activities in the business (Debela, 2019). All the decision-
making power in respect to the business lies in the hand of this individual person. This kind of
business enjoys tax benefits and the proprietor have unlimited liability. For example general
store, cycle repair shop etc.

Partnerships refers to that type of business in which two or more individuals come together to
run a business enterprise. These individuals invest in the business in a proportion and they are
the ones who operate the business. They form this business in the view of managing medium
term business with short investment per head.
For example of this is Levi's & Pinterest, Maruti Suzuki.
Public Limited Company is a type of legal business enterprise which is created in the view of
long term working in the market (Mahmoud-Jouini, Duvert, and Esquirol, 2018). This enterprise
can legally offer its share capital in form of stocks to the general public and is liable to disclose

all the business related information to the public. Owners and managers of this type of business
are different and it is solely managed by the management team but this management team is
accountable to the owners of the company which are its shareholders (Flower and Ebbers, 2018).
Examples are Marks & Spencer Group Plc, Rolls-Royce Holdings Plc. The main characteristic of
this type of business is that the shareholders can easily transafer the ownership of their shares to
other individuals.
TASK 2
Critically analyze the two forms of share capital and long term debt with mention to the long
term sources of finance accessible for listed companies.
Long term finance means the inflow of funds in the business for a period of more than a
year. These funds are to be paid back after an year or more depending upon the contract they
were raised in. The business is required to pay the owners of these funds some kind of interest or
dividend. These can be in many forms like, loans and advances, leases or share capital.
Share capital refers to those funds that are owned by the company but are invested in the
firm by shareholders in the view of earning dividends and enjoy the ownership of the business.
Following is the critical analysis of the types of share capital and types of debts.

Types of Share capital
 Equity Shares- These refers to that capital of the firm which gives voting rights to its
owners. These people are considered as the owners of the business and they receive the
share in profits in form of dividends. These dividends does not have a fixed rate.
 Preference shares- These are those components of share capital whose owners enjoy
preference over the equity shareholders. They receive a fixed rate of divided if the
company has enough funds after meeting the compulsory payments. Due to this, the
company does not dilute its ownership (Carbon, and Gomez, 2018).
Types of Debts
 Bonds- These refers to a kind of debt security which is issued by a company. These are
secured against some asset. One advantage of this is that the company issuing these
securities can sell/buy back them anytime in response to maintain the liquidity in the
business. These are the loans that are issued by company by securing them against some
physical asset. But these securities are highly volatile in the market.
 Debentures- These refers to a kind of loan that does not require any kind of security.
These loans are provided to the company at a fixed rate and the company has to pay them
irrespective of level of profit the company earns in a financial period. The advantage of
this finance is that the funds can be utilized in a long term. One disadvantage of this is
that these create a long term liability on the business.
CONCLUSION
The above mentioned report concludes that the entrepreneurs can go with any one of the
business enterprises which are sole proprietorship, partnership and companies. The entrepreneur

can select from these pool of enterprises if they want to start a business. These enterprises are
distinct from each other but are done to earn profits. The report also describes the long term
mode of finances that the businesses can go with. It highlights how the companies arrange their
long term funds from the two sources that are debts and share capital. The listed companies
arrange their funds from the general pubic. The selection of this method also depends on the
need of companies.

REFERENCES
Books and Journals
Carbon, P.B.D. and Gomez, C., 2018. Reform of the banking monetary system: The swiss
proposal. World Affairs: The Journal of International Issues. 22(2). pp.60-73.
Debela, G.Y., 2019. Critical success factors (CSFs) of public–private partnership (PPP) road
projects in Ethiopia. International Journal of Construction Management, pp.1-12.
Flower, J. and Ebbers, G., 2018. Global financial reporting. Macmillan International Higher
Education.
Mahmoud-Jouini, S.B., Duvert, C. and Esquirol, M., 2018. Key Factors in Building a Corporate
Accelerator Capability: Developing an effective corporate accelerator requires close
attention to the relationships between startups and the sponsoring company. Research-
Technology Management. 61(4). pp.26-34.
Mohammadi, O., 2020. Wrong Turn; Agricultural Policy in Iran. Agricultural Policy in Iran
(January 27, 2020).