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  • Organization Theory – 3

    In the last blog, we looked at the importance of an organization. In today’s blog we begin to understand a perspective which could be used to analyze organization – we try to understand an organization as a “system”.
    We could define a system as a set of interacting elements that acquires inputs from the environment, transforms them into output to the external environment. It is also clear that this system would have multiple subsystems – like production, maintenance etc. In fact these sub systems link very well to the earlier blog we have had about business functions.
    When we take an organization in isolation, completely secluded from the surrounding environment, i.e. we consider the organization to be sealed off from the outside, it functions autonomously – we could call it as a closed system approach to understanding an organization. Such an organization is more hypothetical, and we need to include a lot of interactions with the external world – thus an “open system” is a better approach to understand the organization.
    An organization would have to interact with the environment to survive; it has to adapt itself to the changes in the environment. The complexity of analyzing the open system is really enormous, and it is quite easy to understand that the internal systems approach is just a minor part of the larger open system analysis.
    In the next blog, we shall pictorially understand this blog so that it is easier to remember.
    Read in Kannada:

  • Organization Theory – 2

    In the last blog we looked at some of the characteristics of an organization. In today’s blog, we continue understanding the concept of organization further. 
    The concept of organization as we know and understand today is a product of the industrialization era and the phases subsequent, so it’s not very old when compared to the human history. Post these organizations coming into existence, there have been a lot of strengthening on the legal aspects too to ensure that the interest of people is sufficiently taken care of. The forms of organization themselves have modified to suit the varying need.
    Organizations in their present day understanding could be seen as existing for the following purpose:

    • Bringing together resources to achieve desired goals and outcomes
    • Produce goods and services effectively
    • Facilitates Innovation 
    • Use modern manufacturing and information technologies 
    • Adapt to and influence a changing environment
    • Create value for owners, customers and employees
    • Accommodate ongoing challenges of diversity, ethics and the motivation and coordination of employees

    It’s very critical for a manager to understand these points – organizations shape our lives, and well informed managers can shape organization.
    Read in Kannada:

  • Organization Theory – 1


    In the earlier blog,
    we learnt about the objectives of cost accounting and mentioned its relevance
    towards decision making. From today’s blog, we would take a small detour to
    discuss various aspects of organization theory to really set the context for our
    discussion on other topics including finance in the future.

    Before we begin this
    journey into understanding organization theory, it would be apt to look at the
    definition of organization. So this blog focuses on understanding and defining
    the term “organization”.

    Every day, we
    encounter numerous “organization” – the schools, hospitals, Infosys
    etc; all these have some characteristic in common. They are all:
    • Social entities
    • Goal Directed
    • Are designed as
      deliberately structured and coordinated activity systems
    • Are linked to
      external environment


    It is common to see
    that every organization has policies and procedures that help scale up
    operations and grow, however it is people whom we find really driving organizations.
    It is their relationship with one another, their interaction that really
    enables organizations to attain their goals. It is this that organization
    theory deals with.

    We will explore more
    about this as we begin discussing this further.

    Read in Kannada:
    http://somanagement.blogspot.com/2011/10/blog-post_8909.html

  • Finance and Management – 39

    In the last blog we began looking at cost accounting and mentioned that at various points in time of the discussion series we might temporarily take detours to get other related concepts relevant to the discussion. In today’s blog we discuss the objectives of cost accounting.
    A source on the internet defined cost accounting as: “Cost accounting is an expanded phase of the general or financial accounting of a business concern which provides management promptly with the cost of producing or selling each article or of rendering a particular service”. 
    Thus, Cost accounting serves the following major objectives to achieve:

    • Determining the Selling Price
    • Controlling cost
    • Providing information for decision making
    • Ascertaining Costing Profits
    • Facilitating preparation of financial and other statements

    Since in our first blog we have mentioned that management relies heavily on decision making hence we would like to make specific mention that cost accounting would assist decision making by the manager in the following ways:

    • Determination of cost-volume-profit relationship
    • Make or buy decision
    • Shut down or continue operations at loss
    • Continuing with the existing machinery or replacing them by improved and economical machines.

    Read in Kannada:
    http://somanagement.blogspot.com/2011/10/blog-post_03.html

  • Finance and Management – 38

    As mentioned in the last message, we would continue our discussion with the cost accounting concepts, however at various stages; it would be necessary to get to other concepts of organization and processes etc to really make the understanding of cost accounting really useful.  In today’s blog we begin to understand the need for cost accounting.
    Management to a great extent as we defined earlier is all about decision making. All the various specializations in management are essentially knowledge enhancements that would ease the dilemma for a manager. We began with discussing general accounting to assist the manager make decisions and see if the accounting practice used is apt in scenarios. Today we move to a more relevant managerial tool in the financial world called – cost accounting. It is generally also called managerial accounting given its utility to managers in decision making. There are still certain differences between the two, but for all practical purpose we will go by the understanding that both these are same.
    Information about costs is very critical to a manager. The manager generally takes decisions only for the company he works for; there is no need for the information to be comparable to similar information from other organizations. The interest in the costs is primarily because the costs affect the price of the organizations’ offering to its customers and there by the profit that it realizes.
    We could continue this discussion in the next few blogs to clearly understand the concept.
    Read in Kannada:
    http://somanagement.blogspot.com/2011/10/blog-post_65.html

  • ಹಣಕಾಸು ವ್ಯವಸ್ಥೆ ಮತ್ತು ನಿರ್ವಹಣೆ – ೨೮

    ಈ ಹಿಂದಿನ ಅಂಕಣದಲ್ಲಿ ನಾವು Investment Allowance Reserve ಬಗ್ಗೆ ಅರಿತೆವು. ಇಂದಿನ ಅಂಕಣದಲ್ಲಿ ನಾವು Appropriation ಬಗ್ಗೆ ಅರಿಯೋಣ.

    Appropriation ಸಾಮಾನ್ಯ ಅರ್ಥದಲ್ಲಿ ಹಣವನ್ನು ಒಂದು ಉದ್ದೇಶಕ್ಕೊಸ್ಕರ ಮೀಸಲಾಗಿ ತೆಗೆದಿಡುವುದು. ಕಂಪನಿಯು ಯಾವ ರೀತಿಯಲ್ಲಿ ಹಣವನ್ನು ಪಾಲು ಮಾಡಿಕೊಂಡಿದೆಯೋ ಅದು ಒಬ್ಬ ಹೂಡಿಕೆ ದಾರನಿಗೆ ಕಂಪನಿಯು ಹೇಗೆ ತನ್ನ ಹಣದ ವಿನಿಯೋಗವನ್ನು ನಿರ್ವಹಿಸುತ್ತಿದೆ ಎಂಬುದನ್ನು ಹೇಳುತ್ತದೆ.

    ಇದನ್ನೇ ಅಕೌಂಟ್ ನ ಭಾಷೆಯಲ್ಲಿ ಸಾಮಾನ್ಯ ಅಭ್ಯಾಸವಾದ, ಕಂಪನಿಯ ಲಾಭ & ನಷ್ಟದ ಖಾತೆಯ ಹಣವನ್ನು ವಿವಿಧ ರಿಸರ್ವ್ (generall reserve, contingency reserve etc.) ಗಳಿಗೆ ಹಂಚುವುದು. ಆದರೆ ಕಂಪನಿಯ ಡಿವಿಡೆಂಡ್ ಕೊಡುವುದು ಇದರಿಂದ ಬದಲಾಗದು. ಕಾರಣ, ಕಂಪನಿಯು ಡಿವಿಡೆಂಡ್ ನ್ನು ಇಂದಿನ ಅಥವಾ ಹಿಂದಿನ ಯಾವುದೇ ಲಾಭದಿಂದ ಖಾತೆಯ ಹೆಸರನ್ನು ಗಣನೆಗೆ ತೆಗೆದುಕೊಳ್ಳದೆ ಕೊಡಬಹುದು.

    ಕೆಲವು ದೇಶಗಳಲ್ಲಿ ಕೆಲವು ಪ್ರಕಾರದ ರಿಸರ್ವ್ ಗಳಿಗೆ ವರ್ಗಾಯಿಸುವುದನ್ನು ಕಡ್ಡಾಯಗೊಳಿಸಿರುವರು. ಈ ರಿಸರ್ವ್ ಗಳನ್ನೂ ಹಂಚಲು ಸಾಧ್ಯವಿಲ್ಲ

    ಆಂಗ್ಲ ಅಂಕಣ:

    http://somanagement.blogspot.com/2011/08/finance-and-management-28.html

  • The Polyester Prince – Hamish McDonald

    I had got hold of this book from Mumbai road side when I was doing my internship, but had never set reading it until the beginning of this year. And even after I began reading this, I had a lot of distractions which hadn’t let me complete the book earlier. Again the long weekends and frequent travels I have been doing off late have given me ample time to really spend time with my books, and that is how I got to complete this book.
    The book talks about he era of – Dhirubhai Ambani. One of the icons of Indian business. What I loved the most was not the narration, but the links I could see to the history of India post Independence. Having born in this country with rich traditions approximately 35 years after we had gained independence, I have for a long time missed knowing how this country functioned and operated before my birth. I had another agenda when I began reading this book which is about the life of another entrepreneur.
    This book has got me to realize not just the hardships Dhirubhai had to face, but also got me to realize how it was to live in an era of license raj. This book also gave me a peep into the importance of policitical back up for a business when its in a phase of scaline up.
    Over all an interestin read! You would enjoy it, if you are interested in the business-politico history of a country.

  • Message

    Over the last 37 blogs, we have understood some of the relevant concepts with respect to the financial statements. The next few blogs would be regarding the cost accounting which becomes very relevant to the manager in a dynamic environment.
    Wish to see your continued support in our effort.
    Read in Kannada:

  • Finance and Management – 37

    In the last blog, we began understanding the CFS. In today’s blog we continue with the attempt began.
    We learnt that generally cash flows could be classified as being from one of – operating, investing or financing activities. The relative proportion of the cash heads give a good insight into the functioning of the company. If the largest portion of the cash flow is from operations, it indicates that the operations are generating business and that there is enough money to buy new inventory. As an investor, he would be keen to see that the amount of cash available to the company should be plentiful to cover that future loan expense.
    One needs to remember that the final cash flow doesn’t always look healthy, it could be negative too!
    Is it always bad to have a negative cash flow? – Well one can really not decide this by just the numbers. One need to see if this negative cash flow is due to the company’s expansion plans. If it’s so, then it might be really better for company that this cash flow has taken place. So an investor needs to open up and look at the details before jumping into any take on the company’s cash flow.
    Read in Kannada:

  • Finance and Management – 36

    In the last blog, we looked at EBITDA. In today’s blog, we would begin with understanding the cash flow statements.
    The PnL account or Balance sheet can is limited in informing us about the ability of the firm towards giving us information about the operational financial issues. The best one for this understanding is the “Cash Flow Statement” (CFS). CFS is a financial statement that shows how changes in the balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. It reflects a firm’s liquidity.
    One can find the cash flow by looking at the 3 aspects which get in cash:
    • Operations
    • Investing
    • Financing
    Operations: Generally, changes made in cash, accounts receivable, depreciation, inventory and accounts payable are reflected in cash from operations.
    Investing: Changes in equipment, assets or investments relate to cash from investing.
    Financing: Changes in debt, loans or dividends are accounted for in cash from financing.
    Read in Kannada:
    http://somanagement.blogspot.com/2011/10/blog-post_01.html