6.4Corporate Activity and Legal Affairs

Corporate activity and legal affairs rest on two pillars: the ability to read numbers (accounting, OR/IE) and the ability to follow the rules (intellectual property rights, various regulations). Even as an IT engineer, you often need to judge a project's profitability numerically, or properly handle rights around outsourced work and deliverables—at the associate level these are tested through practical judgment.

6.4.1Corporate organization and accounting

• Corporate organization is the structure for decision-making and executing work. Forms include a functional organization, which divides departments by function; a divisional organization, which creates independently accounting units by product/region/customer; and a matrix organization, which layers cross-functional project teams atop the normal chain of command.
• The income statement (P/L) is a financial statement showing revenue, expenses, and the profit that is their difference over a period. The balance sheet (B/S) is a financial statement showing the balance of assets, liabilities, and net assets at a point in time (assets = liabilities + net assets). Distinguish P/L as "performance over a period" from B/S as "financial position at a point in time."
• The break-even point is the sales revenue or unit volume at which sales revenue and total cost (fixed cost + variable cost) exactly match, making profit zero. Break-even sales revenue = fixed cost / (1 - variable cost ratio). Reducing fixed cost or lowering the variable cost ratio lowers the break-even point, making the business less prone to loss. At the associate level, questions have you calculate and judge the break-even point from concrete figures, such as assessing the payoff of a new system investment.