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Epekto Ng Walang Magulang Essay Sample

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1. Vertical Business Combination: When various departments large industrial units combine together under single management is called vertical combination. Under this combination from purchasing of raw material to selling of product all the stages are linked up by the units.For examp0le, all the business units engaged in publishing books can make vertical combination as under :

Objectives or Advantages of Vertical Business Combination :-
1. To minimize the cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.Other Advantages:

* Some economies of scale such as risk bearing economies, financial economies. Lower costs could lead to lower prices for consumers. * Firm not subject to losing control of supply. e.g. they can’t be held to ransom by suppliers demanding higher price at critical time. * Maybe some overlap of technology and expertise. e.g. A bookshop may know what kind of books sell well so they can develop the right kind of paper and attractive design. * Arguably the splitting up of the rail network created more confusion and less incentive to look after the track. It would make more sense for train operating companies to be responsible for the track as they would have greater interest in maintaining it satisfactorily.

Other Disadvantage/s:

Vertical mergers will have less economies of scale because most of the production is at different stages of production. There is still scope for monopoly power. Also a vertical merger can lead to monoposony power. e.g. tied pubs can charge higher price to consumers and they have less choice of beer. Source: http://www.economicshelp.org/blog/410/monopoly/vertical-integration-advantages-and-disadvantages/

2. Horizontal Business Combination :-
It is also voluntary association which two or more than two similar nature business units combined them selves under the one management, it is called horizontal combination. For example, if four tea industrial units are at the same stage of production. The are engaged in same activity. They sell wholesale. They sell the product in the same market. Their combination will be called horizontal combination. Objectives or Advantages of Horizontal Business Combination :-

1. To minimize the Cost per unit.
2. To eliminate competition.
3. To hire the services of experts.
4. To supply the goods at lowest price.
5. To avoid over production.
6. To use improved methods of production.
7. To achieve the benefits of large scale.
8. To find proper market for their product.
9. To supervise the management.
10. To reduce the middleman commission.
11. To earn maximum profit.

3. Circular or Mixed Business Combination :-
When different types of business units combine themselves under the one management it is called circular combination. Objects :- The main object of mixed combination is to secure the benefits of administrative ability through common management. 4. Diagonal Business Combination :-

When two or more than two business units performs subsidiary services, if they combine themselves under the main industry it is called diagonal combination.. Objects :- The main object and advantage f this combination is that it makes the business unit very large and self sufficient. Source: http://studypoints.blogspot.com/2011/06/discuss-various-types-or-kinds-of_8600.html 5. Territorial combination: When similar production industry of a particular area combined is called territorial combination. Its main objective is to increase their dominaty / occupity. Source: : http://scribd.com/doc/74544368/53/Types-of-business-combination

Valuation Method
1) Asset-based approaches
Basically these business valuation methods total up all the investments in the business. Asset-based business valuations can be done on a going concern or on a liquidation basis. * A going concern asset-based approach lists the business net balance sheet value of its assets and subtracts the value of its liabilities. * A liquidation asset-based approach determines the net cash that would be received if all assets were sold and liabilities paid off.

2) Earning value approaches
These business valuation methods are predicated on the idea that a business’s true value lies in its ability to produce wealth in the future. The most common earning value approach is Capitalizing Past Earning. With this approach, a valuator determines an expected level of cash flow for the company using a company’s record of past earnings, normalizes them for unusual revenue or expenses, and multiplies the expected normalized cash flows by a capitalization factor. The capitalization factor is a reflection of what rate of return a reasonable purchaser would expect on the investment, as well as a measure of the risk that the expected earnings will not be achieved. Discounted Future Earnings is another earning value approach to business valuation where instead of an average of past earnings, an average of the trend of predicted future earnings is used and divided by the capitalization factor. 3) Market value approaches

Market value approaches to business valuation attempt to establish the value of your business by comparing your business to similar businesses that have recently sold. Obviously, this method is only going to work well if there are a sufficient number of similar businesses to compare. Although the Earning Value Approach is the most popular business valuation method, for most businesses, some combination of business valuation methods will be the fairest way to set a selling price.

Source: http://sbinfocanada.about.com/od/sellingabusiness/a/bizvaluation.htm

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