Completed notes of the course

Pagina 1

1 WHAT IS A COMPANY? A company can be a small business, a large corporation, a public sector organiz ation or a non-for- profit-organization. In this course we will focus on companies whose objective is to make profit, in fact, our unit of analysis is the profit-oriented organization responsible for the economic and financial results. A company is like a “machine” that receives Inputs (Human, Technological, Financial Resources) and produces Output (Products and Services). Each company and its structure can be described with 3 different dimensions: • Outputs: a company can realize single or a diversified portfolio of outputs; • Activities: a company can be vertically integrated or it can outsource many activities; • Geographical orientation: a company can serve a single geographical market or several country (Internationalization). It’s a matter of competitive position and customers. How to measure a company: Companies can be measured depending on their size by looking at different indicators, in fact, there exist 3 different main indicators used in order to have a wider picture of companies: 1) Size of companies by MARKET CAP: The market cap is an indicator that evaluates the shares on the market, that is, the number of stocks by stock price. 2) Size of companies by REVENUE: This of course indicates the size of the company according to their revenue, if we look at the real world situation we might see that the first company is Walmart, followed then by other companies mainly related to oil and gas or automotive industries. 3) Size of companies by EMPLOYEES: Companies can also be measured by the quantity of employees working in it; al so in this case Walmart constitutes the first company by number of employees. A company is a legal entity , that is, a legal construct…