Management Theory Review

Managers of business companies or organizations in other walks of life are working in pluralistic societies in which many groups represent various interests. Businesses do not live unto themselves alone. They may be interlocking institutions that man has found it beneficial to organize to serve his needs. The family came into existence, then tribe, federal government, army, education, religious beliefs etc. came into existence slowly. The proliferation of institutions and enterprises has proceeded right down to our day, where they often times exist in bewildering confusion.

No ideal situation exists. People or individuals vary from ridiculous to the genius, from the unaggressive to the aggressive, from kind to the cruel, from the slothful to the full of energy, from the cunning to the artless, from the humble to the proud. In an ideal society, the individuals would in concert determine when and which organizations and businesses they might create to better serve themselves. However in practice many institutions and enterprises which were intended to serve them are the products of aggressive leaders-the few who look after many. They may not create always with care motive, they may also take action for self-aggrandizement. O’Donnell and Koontz cite the explanation by economists.

The typical organizational patterns include free business, socialism, communism, and the welfare condition. There is absolutely no doubt whatever that the function of business is to make financial goods and services available for consumption. But it is not to produce economic goods enough; the first duty of business is to produce them efficiently. Efficiency in reference work is undoubtedly achieved through free business. It’s the business of state to ensure through legislation and regulation that the private economy will not fail in its function to effectively utilize resources to increase the satisfaction of consumer wants for financial goods and services.

The states are not able to do it by means of a monolithic bureaucracy as per the available experience. The term technology refers to the sum total of the knowledge we have of ways to do things. The practice of ethics is one of the interpersonal obligations of business. Unethical carry out is publicized whenever it is available highly, but the majority of the “sharp practices” remain concealed within the organizations or their systems.

Morals are traditions with a higher degree of interpersonal acceptance. Koontz and O’Donnell note that widespread propensity of business organizations and professional visitors to adopt codes of carry out has scope to help expand ethical practices and development of technology of ethics. Types of codes of conduct include those of medical, legal and accounting occupations.

The typical reasons are two. In the first place, it is considered that the publication of a code of ethics will improve the confidence of the customer, client, patient, or voter in the quality of service he could expect. Another reason is to make sure standard practices in the relationships between members themselves. McGuire pointed out two additional reasons. They can be used as a crutch by the weak to won’t do unethical serves. They help in detection of unethical behavior in competition and employees also.

A credit line contract is a legal commitment on the part of the bank to provide the stated credit. Such contracts usually cover the borrower’s fiscal calendar year. The interest is lower than for comparable bank loans usually. It is a kind of free credit. It can be issued for really small quantities. The first Webster Bank requires borrowers to keep up a balance of 10% of the line of credit in a non-interest paying account as compensation for providing the credit line. APR shall be less than the mentioned rate.

APR will be suffering from the required balance. 3 million credit line to Capital Corp. The stated rate of interest is 9.5%. Bank Two requires Capital to maintain compensating balances equal to 10% of the quantity of the line. Assuming that Capital wouldn’t normally carry any deposits at the lender normally, what’s the effective annual interest on the loan? The Stant Shoe Company established a line of credit with a local loan company. 100,000 at an annual rate of 5%. A compensating balance of 10% of the total amount borrowed is required.

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What is the biggest sum of money Stant will actually be able to use from the line of credit? 350,000 at mortgage loan of 5%. However, Smith must keep a compensating balance of 10% of any amount borrowed on deposit at Fidelity. Smith will not keep a cash balance account with Fidelity normally. What is the effective annual cost of credit (round to nearest .01 percent)?

300,000 at an annual interest of 5.5%. However, GPC must keep a compensating balance of 20% of any amount lent on deposit at the Trust Company Bank. GPC does not have a cash balance accounts with the Trust Company normally. What is the effective annual cost of credit? Commercial paper interest rates are slightly higher than rates on bank loans usually. Commercial paper is appropriate for companies requiring a limited amount of short-term financing, while banks may offer substantially larger amounts of funds.

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