8. Decisions about the gearing the company.

When a company is said to be "high geared", the level of borrowing is higher than its ordinary share capital. Main source of funds for high-gearing are long-term loans from banks and pension funds.

Advantages: secured over fixed assets, better return on net profits in prosperous times.

Disadvantages: high interest payments in difficult times.

A lowly-geared company has borrowings which are relatively low.

Main source of funds of low- gearing are: owners capital, venture capital, unlisted securities market and stock exchange.

Advantages: low gearing claim on all profits, does not interfere in company, outside investors? No loss of control.

Disadvantages: low gearing demand very high rate and it is most exposed.

9. Accounting and accountancy (3.3)

Accounting is the art of organizing, maintaining, recording, and analyzing financial activities. Accounting is generally known as the ‘language of business’. The accountant translates the accounting information into meaningful terms that are used by interested parties. Every organization – profit, nonprofit, charitable, religious or governmental – requires the services of accountants in providing accounting information.

Accountants and the statements they generate are primary source of information on economic and business activity. Accounting information is used by everyone. The accountant keeps track of all business transactions. A business transaction is any business activity that affects what a business owns or owes as well as the ownership of that business. Most accounting information is stated in monetary terms and is designed to be useful in making economic decisions. These decisions are made both within and outside the firm.

The manager of organization, who is charged with the responsibility of seeing that the enterprise is properly directed, relies upon accounting information provided to make appropriate decisions. The accounting information specifically prepared to aid managers is called managerial accounting information, and it is used in three management functions: planning, implementation, control. The decisions managers make can be classified into four major types: financing decisions, resource allocation decisions, production decisions and marketing decisions.

10. Managerial accounting (3.3)

The accounting information specifically prepared to aid managers is called managerial accounting information, which are included in managerial account. It is used in 3 management functions: 1) planning; 2) implementation; 3) control.

Planning is the process of deciding what actions should be taken in the future. An important form of planning is budgeting. It is the process of planning the overall activity of the organization for a specified period of time, usually a year. Planning involves making decision. Accounting information is especially useful in the analysis step of the decision-making process.

Implementation. Each manager must take actions in order to achieve the planned results. Although much of this activity is routine, the manager also must react to unanticipated events, changing previous plans.

Control. It is the managers` responsibility to see that the work is done, and done properly, by the employees of organization. Accounting information is used in the control process as a means of communication, motivation, attention-getting and appraisal.

Managerial accounting provide information for different decisions that managers make (financing/marketing, product and resource allocation decisions).

For internal use by management, managerial accounting information generally is narrow in focus. It is usually relates to a part of the company`s operation.