Stock Market Classes

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Category: Stock Market

A stock market classes is a classification used for business units within an enterprise. The essential element of a stock market classes is that it is treated as a unit which is measured against its use of capital, as opposed to a cost or profit classes, which is measured against raw costs or profits. The advantage of this form of measurement is that it tends to be more encompassing, since it accounts for all uses of capital. It is susceptible to manipulation by managers with a short term focus, or by manipulating the hurdle rate used to evaluate divisions. A stock market centre is a centre where responsibility of the organization is taken by this centre; it takes into consideration, profits, cost and also stock market fund.

Companies may choose to classify business units as cost classes, profit classes, or stock market classes. There are some significant advantages to classifying simple, straightforward divisions as cost centre’s, since cost is easy to measure. However, cost centre’s create incentives for managers to underfund their units in order to benefit themselves, and this underfunding may result in adverse consequences for the company as a whole (for example, reduced sales because of bad customer service experiences).Because the cost centre has a negative impact on profit (at least on the surface) it is a likely target for rollbacks and layoffs when budgets are cut. Operational decisions in a contact centre, for example, are typically driven by cost considerations. Stock markets in new equipment, technology and staff are often difficult to justify to management because indirect profitability is hard to translate to bottom-line figures.

A profit classes is a section of a company treated as a separate business. Thus profits or losses for a profit classes are calculated separately profit classes manager is held accountable for both revenues, and costs (expenses), and therefore, profits. What this means in terms of managerial responsibilities is that the manager has to drive the sales revenue generating activities which leads to cash inflows and at the same time control the cost (cash outflows) causing activities. This makes the profit classes management more challenging than cost centre management. Profit classes management is equivalent to running an independent business because a profit classes business unit or department is treated as a distinct entity enabling revenues and expenses to be determined and its profitability to be measured.