Organization structure is important for businesses to function properly. It defines responsibilities and roles to allow for coordination between departments and workers. There are different types of organization structures such as line, line and staff, and functional, each with their own advantages and disadvantages. Financing is also crucial for businesses, as most problems stem from insufficient capital. Capital can come from owners or lenders, and businesses often use a combination of both to meet their fixed, working, and expansion capital needs. Proper organization structure and financing are essential for business success.

1. Organization
Structure
Chapter VII

2. Introduction…
A business venture is undertaken by an organization
formed and developed by the management to carry on
day-to-day activities.
Organization – is composed of men and women who do all
the work necessary so that the enterprise may achieve its
objectives.

3. Introduction…
Because of the number of the persons who are going to
work in an organization, there must be an orderly
distribution of specific functions and responsibilities and
each of the worker must have a clear understanding of his
working area, where he stands in the organization and
how he can contribute to better coordination and
achievement.

4. What is Organization
Structure?
Organization structure is the division of
activities into defined functions and
responsibilities for executives,
departments, and group of workers

5. Why should there be an
organization structure in
an enterprise?
This is for the company to be visualized as a whole, how
every department or function is properly related to the
rest and in any weakness is revealed for correction.
The organization structure serves to relate supervisors to
their associates.

6. Why should there be an
organization structure in
an enterprise?
Organization structure answers the question;
What’s my job?
Where do I belong?

7. Span of Supervision…
Span of supervision refers to the area of responsibility
and the number of subordinates assigned to an individual
supervisor.
This is a factor in designing an organization structure
which will affect to the number of supervisors required
and the effectiveness of each supervisor.

8. Span of Supervision…
As the enterprise grows in size and as labors becomes
more intensive, the organization structure gets more
complex where there’s a tendency for the positions and
titles to proliferate thus supervisors require higher-
sounding designation and more assistants. This should be
avoided.

9. Span of Supervision…
There is no set number of persons which one supervisor
can effectively supervise. It would always depend on:
Capability of the leader
Attitudes and level of education of the subordinates
Complexity of the work
Time constraints
Territorial spread
Financial involvement

10. Types of Organization
Based on the nature and scope of the work of each
organizational sub-division and their relationship three
principal types of organization arise:
Line organization
Line and staff organization
Functional organization

11. Types of Organization:
Line Organization
Line Organization
The line organization is the simplest in form.
Direct straight-line responsibility and control is
established from general manager to the department head,
until the workman is reached.

13. Types of Organization:
Line Organization
Line Organization: Its advantages
There is centralization of authority.
Simple and direct lines of authority make it easy to define
responsibility.
Single accountability can be maintained and better
control is achieved.
Overhead expenses tend to be lower because
functionalization is not complex.

14. Types of Organization:
Line Organization
Line Organization: Its disadvantages
If the organization continues to grow, the load on each
executive increases.
Instructions are not given directly to the worker who is to
execute the orders, but these have to flow through
channels.
The lack of managerial specialization may weaken the
competitive composition of the concern.

15. Types of Organization:
Line Organization
Line Organization: Its disadvantages
Excessive centralization of authority hampers the
development of supervisors at the lower levels.

16. Types of Organization:
Line and staff Organization
Line and Staff Organization
As the enterprise continues to grow, the managerial
functions become more complex thus, the need for specialists to
assist in certain of these functions becomes pressing and the need
of modification the line organization structure into Line and staff
organization structure comes in.
Most large organisations belong to this type of organisational
structure. These organisations have direct, vertical relationships
between different levels and also specialists responsible for
advising and assisting line managers. Such organisations have
both line and staff departments. Staff departments provide line
people with advice and assistance in specialized areas (for
example, quality control advising production department).

18. Types of Organization:
Line and staff Organization
The Staff Executive
The general functions of staff executives are to
assist, to advise and to coordinate the function on a
company-wide level. He is seldom responsible or the
execution of line functions, these remain with the line
executives.

19. Types of Organization:
Line and staff Organization
The Staff Executive
The influence exercised by the staff executive is
mainly one if ideas and recommendations, based on
specialized ability, knowledge, and training whereas the
leadership of the line executives is essentially one of
decision and action based on a broad performance
background, a knowledge of men and experience in actual
operations.

20. Types of Organization:
Line and staff Organization
The Staff Executive
The recommendations of a staff executive should
have the approval of the approval of the line executive
concerned before implementation.

21. Types of Organization: Line
and Staff Organization
Line and Staff Organization: Its advantages
Committee decisions are better than individual decisions.
Better interaction between committee members leads to
better co-ordination of activities.
Committee members can be motivated to participate in
group decision making.
Group discussion may lead to creative thinking.

22. Types of Organization: Line
and Staff Organization
Line and Staff Organization: Its disadvantages
Even through a line and staff structure allows higher flexibility
and specialization it may create conflict between line and staff
personnel.
Line managers may not like staff personnel telling them what
to do and how to do it even though they recognize the
specialists’ knowledge and expertise.
Some staff people have difficulty adjusting to the role,
especially when line managers are reluctant to accept advice.
Staff people may resent their lack of authority and this may
cause line and staff conflict.

23. Types of Organization:
Functional Organization
Functional Structure
Frederick W. Taylor
developed the concept of
functional organization I the
end of the 19th century.
Functional organization
divides managerial activities
so that each head, from
assistant superintendent
down, has few functions a
possible and is thus able to
become an expert in these
few functions.

25. Types of Organization:
Functional Organization
Functional Structure: Its advantages
Decentralized decision making.
Strong product/project co-ordination.
Improved environmental monitoring.
Fast response to change.
Flexible use of resources.
Efficient use of support systems.

26. Types of Organization:
Functional Organization
Functional Structure: Its disadvantages
1. High administration cost.
2. Potential confusion over authority and responsibility.
3. High prospects of conflict.
4. Overemphasis on group decision making.
5. Excessive focus on internal relations.

27. Types of Organization:
Functional Organization
Functional Structure
Authority is delegated according to functions. The
workers take orders from more than superior, but only in
that aspect of the worker over which each particular
supervisor has control.
Because of the serious problems of overlapping authority
and conflicts in supervision, the functional organization
has remained largely a theoretical concept.

28. Any questions?

29. Financing the
Enterprise
Chapter VIII

30. Introduction…
Most of the problems encountered by different businesses
is because of insufficiency of capital or inadequate
financing.

31. Financing the Enterprise:
Capital
Capital
Capital is referred as the total productive assets which can
be utilized to produce or attain the desired business
objectives.

32. Financing the Enterprise:
Capital
Types of Capital
Fixed Capital – refers to land, buildings, machinery,
transport vehicles and other assets having a relatively
long existence ; they are needed to carry on the normal
operations of the business.
Working Capital – is the amount necessary to provide for
the regular flow and orderly marketing goods and
services from producers to consumers an for the day-to-
day conduct of business.

34. Financing the Enterprise;
Capital
Types of Capital
Capital reserves – this type is for the enterprise that has already
established. This is for the meeting of unusually large money
payments or periods of possible operating losses.
Capital for expansion – this is for the business’ future plans of
expansion.

35. Financing the Enterprise;
Sources of Capital
Capital may come from two (2) sources:
The owners of the enterprise
Lenders of capital
The smaller enterprises may depend entirely on owned
capital but among the bigger enterprises it is usual that regular
use is made of borrowed capital.

36. Financing the Enterprise:
Sources of Capital
Sole proprietorship – the owner is the sole source of owned
capital.
Partnership – the various partners contribute the owned capital.
Corporation – the owned capital is contributed by the
stockholders.
Cooperative association – the owned capital comes from the
members.

37. Financing the Enterprise:
Sources of Capital
Because modern business has grown in volume and
complexity, the amount of fixed and working capital needed by
many enterprise is such that the owners can meet only a part of
the total requirement, the balance of the needed capital must be
borrowed.

38. Financing the Enterprise:
Sources of Capital
It is not a financial weakness if a certain enterprise has to
borrow money or other productive assets for business purposes
for borrowing has become a normal business procedure.

39. Financing the Enterprise:
Capital Requirements
For a business enterprise, there must be enough capital for the
following:
 Equipment
 Merchandise
 Supplies
 Payment for operating expenses

40. Financing the Enterprise:
Capital Requirements
The following are some of the disbursement regularly incurred
and for which there must be enough cash on the dates at which
payment be made:
 Wages and Salaries
 Rent expenses
 Taxes and license fees
 Supplies
 Telephone service
 Postage
 Advertising

41. Financing the Enterprise:
Capital Requirements
The following are some of the disbursement regularly incurred
and for which there must be enough cash on the dates at which
payment be made (con’t.):
 Interest expense
 Mortgage payments
 Installment payments
 Inventory purchases
 Light, power and water
 Printing and stationery
 Repairs

42. Financing the Enterprise:
Capital Requirements
For such periods when cash receipts cannot suffice cash
disbursements, money from other resources will have to be
provided. Working capital insufficiency may be averted or
solved by:
 The owner himself investing enough cash from or investing
additional capital as needed.
 Borrowing the amount of cash required, if the enterprise is still
within its borrowing capacity.
 Inviting others to contribute capital by becoming partners or
stockholders.

43. Financing the Enterprise: The
Use of Borrowed Capital
The practice of borrowing money for interim use as
capital has become general.
Such loans my be for short terms, as working capital
needed for a few day for months, or may extend for
longer terms, to finance the acquisition of fixed assets.
When the part of funds employed is borrowed, the
business is said to be “trading on the equity” since the
owner’s capital is involved.
The use of borrowed capital involves interest expense,
greater risk, and less flexibility than equity capital.

44. Financing the Enterprise: The
Use of Borrowed Capital
Creditors usually impose conditions such as the rendering
of reports and limitations on further borrowing.
Failure to pay interest or principal when due could lead to
foreclosure or reorganization by action of the creditors.
Borrowing is said to be “trading on the equity magnifies
profits and losses”.

45. Financing the Enterprise:
Types of loan
Considering the basis on which the loan is given, loans
may classify into:
 Those based entirely on confidence in the borrower.
 Those based both on the confidence in the borrower and
pledged collateral.
 Those based on the endorsement of another person either as
co-maker or guarantor.

46. Financing the Enterprise:
Types of loan
An applicant for a loan is considered an acceptable credit
risk if he possesses the three (3) C’s of credit:
 Character
 Capacity
 Capital

47. Financing the Enterprise:
Types of loan
Character is the borrower’s reputation as one who honors
his obligations and who can be depended upon to live up
to his word.
Capacity refers to the ability of the borrower to utilize the
money properly and to earn the amount needed to repay
the loan within the loan period.
Capital applies to assets which the borrower is able to
pledge as security or which could answer for the
obligation in the event of non-payment.

48. Financing the Enterprise:
Types of loan
If the conditions for a loan are very favorable, meaning to
say that:
 The applicant has excellent credit standing.
 The purpose if the loan is meritorious.
 The amount applied for can easily be repaid by the
applicant.

49. Financing the Enterprise:
Types of loan
The creditor may not insist on collateral but may approve the
loan entirely on confidence in the borrower.
Conservative lenders, particularly some older commercial
banks, usually require collateral before giving the loan.
The property pledged may be taken over by the creditor to
protect itself in case the borrower is unable to liquidate the
loan on due date.
In other instances, the lender may request a co-maker or
guarantor for a loan.
Commercial loans often have mortgage on real property as
security.

50. Any questions?

52. Thank you!
Geneveve I. Magpatoc BSF-4F1