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Class 12 AHSEC 2022 Business Studies Question Paper Solved English Medium
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BUSINESS STUDIES
2022
BUSINESS STUDIES OLD QUESTION PAPER SOLVED
1. (a) Who introduced the concept of ‘differential price-rate-wage system’?
Ans: F.W. Taylor.
(b) Under which environmental factor does fiscal policy fall?
Ans: Economic environment.
(c) Write a difference between policy and procedure.
Ans: 1. Policy is a guide for thinking and action.
2. Procedures are guide for action. They show the method of doing a task.
(d) What is an informal organization?
Ans: An informal organization is a group of people who share a common identity and are committed to achieving a common purpose.
(e) What is Orientation?
Ans: Orientation refers to a process of introducing new employees to the company and assimilating them with its policies, benefits and culture.
(f) Who proposed the “Need Theory” of motivation?
Ans: David McClelland.
(g) Can working capital become negative?
Ans: When the current liabilities exceed the current assets, and the working capital is negative.
(h) What is SEBI?
Ans: SEBI is a Securities and Exchange Board of India.
2. What is Trade Mark?
Ans: A trademark is a type of intellectual property consisting of a recognizable sign, design, or expression that identifies products or services. from a particular source and distinguishes them from others.
3. Write the meaning of Management Audit.
Ans: A management audit is an independent and systematic analysis and evaluation of a company’s overall activities and performances. It is a valuable tool used to determine the efficiency, functions, accomplishments and achievements of the company.
4. Write two rights of a consumer.
Ans: Two rights of a consumer:
1. the right to choose and the right to be heard.
2. the right to safety.
5. What are two important functions of top-level management?
Ans: Functions performed at top level of management are :
1. Taking decisions regarding activities to be performed.
2. Responsible for welfare and survival of the organisation.
6. What is meant by ‘Unity of Command’?
Ans: Under the principles of war, unity of command means that all the forces fall under one responsible commander. It requires a single commander with the requisite authority to direct all forces in pursuit of a unified purpose. Simply put, it means one mission, one boss.
7. How does social environment influence the working of a business?
Ans: The social environment of a business can also have an impact on the type and number of customers it attracts. In a business environment where employees are generally positive, upbeat and cooperative, customers are more likely to appreciate the atmosphere they experience when interacting with employees.
Customers who experience a negative social environment may be more likely to avoid a business altogether, especially if the business has a competitor that is conveniently located near the customer. Customers choose which business to patronize based on various factors, and the social environment can be the deciding factor for some.
8. Write three limitations of planning.
Ans: Three limitations of planning:
1. Planning Creates Rigidity: Although the quality of flexibility is inherent in planning, meaning thereby that in case of need changes can be brought in, but it must be admitted that only small changes are possible.
2. Planning Does Not Work in a Dynamic Environment: Planning is based on the anticipation of future happenings. Since future is uncertain and dynamic, therefore, the future anticipations are not always true. Therefore, to consider planning as the basis of success is like a leap in the dark.
3. Planning Reduces Creativity: Under planning all the activities connected with the attainment of objectives of the organisation are pre-determined. Consequently, everybody works as they have been directed to do and as it has been made clear in the plans.
9. Outline three merits of divisional organizational structure.
Ans: 1. Each division gets adequate freedom.
2. Division managers become experts in their area.
3. Separation of strategics and operating control.
4. Good training ground for strategic management.
Or
Write three merits of internal recruitment.
Ans: There are Three merits of internal recruiting:
1. Internal Promotion: By promoting an employee, there’s an upward shift in responsibilities.
2. Transfer: You can transfer an employee from one department or role to another.
3. Reorganization: There can be times when businesses restructure their operations. At these times, businesses can revamp how their departments are run and how employees are managed.
10. Write three differences between directives and supervision.
Ans: Differences between directives and supervision are:
| Directives | Supervision |
| It means guiding, instructing, motivating and overseeing the people, so that they may work efficiently. | It means guiding and controlling the activities of subordinates, so that desired results may be achieved. |
| It is a wide term. It includes supervision, motivation, leadership and communication. | Scope of supervision is limited. It is a part of directing. |
| It is an executive function. | It is an operative function. |
Or
Write a note on Budgetary control.
Ans: Budgetary control is financial jargon for managing income and expenditure. In practice it means regularly comparing actual income or expenditure to planned income or expenditure to identify whether or not corrective action is required.
For example most University departments are given annual chest budgets for general equipment. By regularly comparing actual expenditure on this budget to planned expenditure a department will be aware of whether a particular item can be afforded.
11. Write any three factors affecting dividend decision.
Ans: The Three factors affecting dividend decisions are discussed below :
1. Legal requirements: There is no legal compulsion on the part of a company to distribute dividend. However, there certain conditions imposed by law regarding the way dividend is distributed. Basically there are three rules relating to dividend payments. They are the net profit rule, the capital impairment rule and insolvency rule.
2. Firm’s liquidity position: Dividend payout is also affected by firm’s liquidity position. In spite of sufficient retained earnings, the firm may not be able to pay cash dividend if the earnings are not held in cash.
3. Repayment need: A firm uses several forms of debt financing to meet its investment needs. These debt must be repaid at the maturity. If the firm has to retain its profits for the purpose of repaying debt, the dividend payment capacity reduces.
Or
Write three features of OCTEI.
Ans: 1. Ringless Trading: Over the Counter Exchange has eliminated the traditional trading ring with a view to have greater accessibility to the investors. Trading will instead take place through a network of computers (screen based) of Over the Counter dealers at located several places within the same city and even across cities. These computers allow dealers to quote, query and transact through a central Over the Counter computer using telecommunication links.
2. National Network: Unlike other Stock Exchanges, the Over the Counter Exchange will have a nationwide reach enability widely dispersed trading across the cities, resulting in greater liquidity. Companies, thus, have the unique benefit of nationwide listing and trading of their script by listing at one exchange, Over the Counter Exchange.
3. Computerized Totally: All the activities of the Over the Counter trading process will be computerized, making for more transparent, quick and disciplined mark. The trading mechanism brings on these features of the system.
12. Write five advantages of branding.
Ans: 1. Customer Recognition: In the world of ads, when a customer recognizes a brand’s color, theme, logo, etc. they are more likely to choose that product over all others. This is because they are already familiar with your brand and what it stands for. From something simple and minimalistic to something wild and eye-popping, a good brand will always be recognized in a sea of others.
2. Customer Loyalty: Once a customer begins to recognize and buy a product or a service, good branding will keep them coming back for more. A good company with great products combined with effective branding hits all the right notes with customers.
3. Credibility: Every customer has their trust issues whenever it comes to trying a new product or service, However, a strong brand can help you set yourself apart as a well-established business with strong values that customers can resonate with.
4. Improve Company Values: If your brand has a personality, it is easier for people to relate to your company’s values and motives. When people relate to your company values, they are more likely to want to do business with you. Take Toms’ shoes, for instance.
5. Brand Equity: One of the most important benefits of branding is that it helps to promote new products and services. If people are loyal to a brand, they are automatically interested in whatever new the brand has to offer.
13. What are the fundamental features of management?
Ans: 1. Management is a Goal Oriented Process:
Each and every organisation is established to achieve certain goals. Every business enterprise has different set of goals depending upon the nature of organization. For example, the goal of a newly established school may be to enroll at least 100 students every year while goal of a company may be to sell 200 units of its product daily.
2. Management is all Pervasive or Universal: Whether it is a commercial organisation or non commercial, big or small, all require management to manage their operations. The activities in management are applicable to every type of organisation whether economic, social, charitable, religious or political.
3. Management is Multi Dimensional: Management is a complex activity and involves three main dimensions viz.
(a) Management of work.
(b) Management of people.
- Management of Work: In each and every organization, certain types of jobs are to be performed.
- Management of People: Management is concerned with “getting things done through people”, which itself is not an easy task at all.
4. Management is a Continuous Process: Management is a continuous process consisting of a series of functions like planning, organising, directing, staffing, and controlling. All the managers perform these functions regularly. Management does not stop anywhere. It continues without breaks and exists as long as organisation exists. There is an ongoing series of functions in which a manager is involved.
5. Management is a Group Activity: The management consists of a number of persons who work as a group. Efforts of all the members of group are directed towards achievement of common organisational goals. Members of any organisation may have different purpose for joining the organisation but as its members they have to initiate, communicate, coordinate and join their hands for the achievement of organisational goals. Hence, it is a group activity.
14. Write the principles of scientific management.
Ans: Taylor’s scientific management is based on the following four principles:
1. Science not Rule of Thumb: Taylor focused on the scientific study and analysis of each and every element of a work to replace the old rule of thumb method or hit and trial method. Rule of thumb is not based on science or exact measurement. Scientific method is based on cause and effect, whereas rule of thumb was based solely on the discretion of managerial decisions. Taylor focused that managers should scientifically analyze each and every component of work.
2. Harmony, Not Discord: Taylor recognized the class conflict that existed between the workers and managers. He emphasized that there should be no conflict between the workers and managers. Both of them should realize the importance of each other and should work together for organizational goals. In order to achieve this harmonious relation, he focused on ‘Mental Revolution’, which means that workers and managers should transform their thinking. In such a situation, management aims at providing better working environment for the employees, and sharing the gains of the company, etc.
3. Cooperation, Not Individualism: According to this, there should be cooperation between management and workers instead of individualism. This principle is an extension of Principle ‘Harmony, Not Discord’. Both management and workers should realize that they need each other. There should be cooperation between them, and competition should be replaced by cooperation.
4. Development of workers to their greatest efficiency and prosperity: Taylor focused on the efficiency of workers. According to him, every organization should follow scientific method of selection of workers, and each worker should be scientifically selected.
4. Development of each Man to his Greatest Efficiency and Prosperity: Under ‘Scientific Management’, workers are selected and trained in accordance with the requirements of jobs to be performed by them. With this end in view, physical, educational and psychological requirements of each job are clearly specified, and then the person who is most suitable for the job in question is selected.
Or
Explain the process of liberalization in India.
Ans: Meaning of Liberalisation: Liberalisation is the process or means of the elimination of control of the state over economic activities. It provides a greater autonomy to the business enterprises in decision-making and eliminates government interference.
Liberalisation in India: Since the adoption of the New Economic Strategy in 1991, there has been a drastic change in the Indian economy. With the arrival of liberalisation, the government has regulated the private sector organisations to conduct business transactions with fewer restrictions.
Objectives Liberalisation:
- To boost competition between domestic businesses.
- To promote foreign trade and regulate imports and exports.
- To improve the technology and foreign capital.
Impact of Liberalisation:
Positive Impact of Liberalisation in India:
Free flow of capital: Liberalisation has enhanced the flow of capital by making it affordable for the businesses to reach the capital from investors and take a profitable project.
Diversity for investors: The investors will be benefitted by investing a portion of their business into a diversifying asset class.
Impact on agriculture: In this area, the cropping designs have experienced a huge change, but the impact of liberalisation cannot be accurately measured. Government’s restrictions and interventions can be seen from the production to the distribution of the crops.
Negative Impact of Liberalisation in India:
The weakening of the economy: An enormous restoration of the political power and economic power will lead to weakening the entire Indian economy.
Technological impact: Fast development in technology allows many small scale industries and other businesses in India to either adjust to changes or shut their businesses.
Mergers and acquisitions: Here, the small businesses merge with the big companies. Therefore, the employees of the small companies may need to enhance their skills and become technologically advanced.
15. Explain the term ‘Authority’, ‘Responsibility’ and ‘Accountability’.
Ans: Authority: Authority is nothing but the rights or the powers with the executives which the organization provides them with the aim of accomplishment of certain common organizational goals.
Hence, it includes the powers to assign duties to the subordinates and make them accept and follow it.
Without authority, a manager ceases to be a manager because he will be able to make his juniors or subordinates work towards the accomplishment of the goals.
Definition of Authority: As per Henri Fayol, “Authority is the right to give orders and the power to exact obedience.”
Responsibility: Responsibility is nothing but the duty that comes along with the job. In other words, it is the obligation of the person to complete the task given to him/her.
It becomes his responsibility. Moreover, it shows that the authority is properly used and work is done accordingly. Under this, a person is eligible to delegate the work to the subordinate but not the ultimate accountability.
That means, even if he transfers his work, he will remain responsible for the obligation of the accomplishment of the work.
Definition of Responsibility: As per Davis, “Responsibility is an obligation of an individual to perform assigned duties to the best of his ability under the direction of his leader.”
Accountability: It is nothing but the liability created for the transfer of authority. Accountability creates the obligation of the subordinate and makes him answerable for the work done by him/her.
Hence, it is the answerability for the performance of the assigned duties. Once a person accepts authority, he deems to accept Responsibility and Accountability at that time only.
Definition of Accountability: As per McFarland, “accountability is the obligation of an individual to report formally to his superior about the work he has done to discharge the responsibility.”
Or
Write any five functions of consumer organization.
Ans: 1. Accelerating Consumer Awareness / Educating Consumers: The first priority of a consumer organisation is to accelerate consumer awareness towards their rights.
To accomplish this task following efforts are made:
(i) To publish brochures, journals and monographs.
(ii) To arrange conferences, seminars and workshops.
(iii) To educate consumers to help themselves.
2. Collecting Data on Different Products and testing them: These organisations collect samples of different products from time to time and test them. After that the results of the tests are declared to public. In this way, these organisations provide prior information to consumers about the authenticity of product and protect them. Apart from this, these organisations also work in conducting investigation/ research on consumer’s problems.
3. Filing Suit on Behalf of Consumers: Whenever a consumer fails to raise his voice of protest regarding his complaints, these consumers’ organisations come to his rescue and file a case in the court. By rendering this service to the consumers, the consumers get a feeling that they are not alone in their struggle. They also run voluntary complaint centres for the guidance of consumers.
4. Organising Protests against Adulteration etc.: The consumers’ organisations play a significant role in eliminating the evils of adulteration, hoarding, black- marketing, and under-weight selling. Whenever there is an unnecessary rise in the prices of certain things, the consumers’ organisation raise a voice of protest against it.
Consumer organisations prepare films and cassettes related to adulteration in food products, ill effects of medicines and Acts related to consumer protection. Many a times exhibitions are arranged to bring awareness among the consumers against spurious and adulterated products. Nowadays consumer organisations are playing a major role in encouraging consumers to raise their voice against faulty and inferior products.
5. Helping Educational Institutions: These organisations tell the educational institutions the way to prepare courses of study keeping in view the interests of the consumers. They stress the fact that a special article on consumers’ interest should always be added to the courses on general study.
16. Write five objectives of entrepreneurship development programme.
Ans: 1. To Promote First Generation Businessman and Industrialists: We know that the son of a businessman has the tendency to become a businessman, owing to family traditions, as they are hearing and looking the intricacies of business, since birth, the habit of bearing loss is in their blood and the nature for making investments in developed, by way of inheritance.
But for persons of such families were where the business does not exist, the environment of business is lacking, who does not know anything about business, then entrepreneurial development programmes provide inspiration to enter into a trade, industry, and business.
2. To Create Awareness about Availability of Resources: Various and special types of resources, like raw material, labor, techniques, and technologies are available in all parts of our own country and in foreign countries.
But, due to a lack of proper knowledge about them, these remain underutilized or even utilized.
Hence, entrepreneurial development programmes (EDP) aim at providing information to people about these resources, so that their proper utilization is possible.
3. To Promote Small, Cottage & Local Industries: The aim of the entrepreneurial development programme is to provide inspiration to people for setting up small, local Industries, by utilization of resources available in the nearby areas and areas of their links.
Local resources may be channelized into industrial development.
4. To Encourage Self Employment Tendencies: Persons have two sources of livelihood, either by service or their own business, which are known as wage employment and self-employment, respectively.
The entrepreneurial development programmes aim at inducing people for self-employment, in place of service, so that they may become the master of his own business and may be able to provide employment to other persons by establishing the business.
5. To Provide Knowledge about Government Plans and Programmes: The government has introduced various schemes for self-employment.
But, they become significant only when people have sufficient knowledge about them.
Hence, entrepreneurial development programmes (EDP) aimed at dissemination of detailed knowledge and information about self-employment, like how to make use of the government schemes, where from and how to obtain the required reliable information, which department will provide information and assistance about finances, techniques, and technologies, etc.
Or
Write five external sources of recruitment.
Ans: 1. Online job boards Self-explanatory. Think of websites or any other page that lists job posting. These can either be free or paid, targeted or broad. Find out where your ideal candidates typically search for jobs and get your ads posted.
2. These are similar to job board postings but are broader and don’t necessarily need to be online. Think of all the websites, newspapers, magazines, and even physical places your candidates likely visit on a daily basis and post some appealing job ads. These are typically paid placements, but the right location can yield great results if targeted properly.
3. Applicant Tracking Systems (ATS) or other recruitment software. Take a deep dive into the candidate pools you’ve collected from previous search efforts to see if there are any qualified applicants you can reach out to. Use an ATS like Recruitee to search for specific parameters to narrow down your efforts.
4. Educational institutions. Makes connections with universities, colleges, and trade schools and invite new graduates into your company for internship positions. These are great future high performers that you can scoop up early in their careers.
5. Trade associations, conferencing, and network events. Where industries hold particular professional or trade associations, accessing a database of members could open a host of new potential hires. Trade magazines and journals are also options as fresh job role advertising opportunities. These areas are ideally placed for locating experienced and skilled candidates.
17. Write five importance of communication.
Ans: 1. Basis of Co-Ordination: The importance of communication in the context of modern industrial set up is enormous. The big organisations are designed on the basis of specialisation and division of labour. The work of the organisation can be carried out without interruption only through co-ordination.
Co-ordination is a must for the efficient functioning of an enterprise. Co-ordination requires mutual understanding about the organisational goals, the mode of their achievement and the inter relationships between the work being performed by various individuals and all this can be achieved through communication only.
2. Smooth Working of An Enterprise: Communication makes possible the smooth and unrestricted running of the enterprise. All the organisational interactions depend upon communication. If the persons engaged in performing the various tasks understand it exactly in the same sense in which they are required to perform, it can help in smooth running of an enterprise.
It is only the process of communication which makes co-operative action possible. What objectives are desired, what activities are required, how they will be done, who will do what and when, how people will react to this, all depends upon the process of communication.
3. Basis of Decision-Making: Communication is the basic requirement for making decisions. In its absence it may not be possible for the top management to take any decision. Information must be received before any meaningful decision can be made. Again to implement the decision effectively it becomes necessary to have a good communication system.
Without effective communication it may not be possible to issue instructions and taking effective steps to appraise the performance achieved. Chester I. Barnard says that first executive function is to develop and maintain a system of communication.
4. Enhances Managerial Efficiency: Communication is essential for quick and systematic performance of managerial functions. The management conveys through communication only the goals and targets, issues, instructions, allocate jobs and responsibility and looks after the performance of subordinates. In the modem days, the skill of communication has become an essential component of successful management.
5. Promotion of Co-Operation and Industrial Peace: Better and economical production is the aim of prudent management. It can be possible only when there is industrial harmony between management and workers. The two way communication promotes co-operation and mutual understanding between the parties.
The downward communication helps the management to tell the subordinates what management actually expects of them. The upward communication helps the workers in putting up their grievances, suggestions and reactions before management which ultimately helps in achieving co-operation of employees.
Or
Write features of New Issue market.
Ans: 1. Public Issue: The company that issues its stocks offers them directly to the public.the company offers a fixed number of shares, and capital is mentioned in the company’s prospectus.
When the company issues its share in the market, interested investors take the company’s prospectus. In the prospectus, investors can see details of the company, which will help the investor to decide.
The organization guarantees the issue shares at the market value.
2. Offer for Sale: The company sells its shares through brokers or issue houses. the sale of shares of the company is guaranteed by the underwriters.
The companies offer shares to the brokers at lower prices, and brokers earn huge interest by selling the shares.
3. Private Placement: Some investors are involved in private placements, such as insurance companies, mutual funds, and banks.
In the public issue, the shares are issued to the public, but it doesn’t happen in a private placement. in private placement, there is no role of underwriters and prospectus.
The brokers and issue houses take responsibility for selling the company’s shares.
4. Right Issue: When an old company that already has shareholders wants to release more shares in the market is called the right issue.
The company takes permission from SEBI and then issues its right shares in the market.
5. Book Building: The underwriter analyzes the demand and supply of the company shares during the initial public offering.
In book building, the company invites bids from merchants to sell their shares instead of offering shares to the public.
After buying the shares, it is the responsibility of the merchant to sell the shares of the company.
18. Write five factors affecting requirements of working capital.
Ans: 1. Length of Operating Cycle: The amount of working capital directly depends upon the length of operating cycle. Operating cycle refers to the time period involved in production. It starts right from acquisition of raw material and ends till payment is received after sale.
The working capital is very important for the smooth flow of operating cycle. If operating cycle is long then more working capital is required whereas for companies having short operating cycle, the working capital requirement is less.
2. Nature of Business: The type of business, firm is involved in, is the next consideration while deciding the working capital. In case of trading concern or retail shop the requirement of working capital is less because length of operating cycle is small.
3. Scale of Operation: The firms operating at large scale need to maintain more inventory, debtors, etc. So they generally require large working capital whereas firms operating at small scale require less working capital.
4. Business Cycle Fluctuation: During boom period the market is flourishing so more demand, more production, more stock, and more debtors which mean more amount of working capital is required. Whereas during depression period low demand less inventories to be maintained, less debtors, so less working capital will be required.
5. Seasonal Factors: The working capital requirement is constant for the companies which are selling goods throughout the season whereas the companies which are selling seasonal goods require huge amount during season as more demand, more stock has to be maintained and fast supply is needed whereas during off season or slack season demand is very low so less working capital is needed.
Or
What is meant by Good Control System? Write its four requirements.
Ans: A good control system must be objective i.e. it must be based on the scientific methods of analysis, and free from the bias, opinions and values of managers; so far as setting standards of performance and comparison of actual performance against standards are concerned.
a. Accuracy: Accuracy must be very high as error arising should be corrected. Accuracy can be improved by the use of feedback element.
b. Sensitivity: A good control system senses quick changes in the output due to an environment, parametric changes, internal and external disturbances.
c. Noise: Noise is a unwanted signal and a good control system should be sensitive to these type of disturbances.
d. Stability: The stable systems has bounded input and bounded output. A good control system should response to the undesirable changes in the stability.
19. Write notes on the following:
(a) Wealth maximisation is the objective of financial management.
Ans: Wealth maximization: Wealth maximization (shareholders’ value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give a maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. So, the finance manager must try to maximize shareholder’s value.
The most direct evidence of wealth maximization is changes in the price of a company’s shares. For example, if a company spends funds to develop valuable new intellectual property, the investment community is likely to recognize the future positive cash flows associated with this new property by bidding up the price of the company’s shares. Similar reactions may occur if a business reports continuing increases in cash flow or profits.
It is, therefore, clear that wealth maximisation is possible only when market price of the shares rises. Question arises what steps should be taken by the financial manager to raise the market price of his company’s shares? Answer to this question is that he should take all the three main financial decisions as under:
(i) Optimum Investment Decision: It means he should take such decisions regarding investment as are relatively more profitable.
(ii) Optimum Financing Decision: It means that he should make such a mix of debt capital and share capital as has the minimum cost of capital.
(b) “Money market and its instruments”.
Ans: Money Market is a financial market where short-term financial assets having liquidity of one year or less are traded on stock exchanges. The securities or trading bills are highly liquid. Also, these facilitate the participant’s short-term borrowing needs through trading bills. The participants in this financial market are usually banks, large institutional investors, and individual investors.
There are a variety of instruments traded in the money market in both the stock exchanges, NSE and BSE. These include treasury bills, certificates of deposit, commercial paper, repurchase agreements, etc. Since the securities being traded are highly liquid in nature, the money market is considered as a safe place for investment.
The Reserve Bank controls the interest rate of various instruments in the money market. The degree of risk is smaller in the money market. This is because most of the instruments have a maturity of one year or less.
Some of the common instruments of the money market are as follows:
1. Call Money: The money borrowed or lent on demand for a short period of time (generally one day) is known as Call Money. The term of the call money does not include Sundays and other holidays. It is used mostly by banks. It means that when one bank faces a temporary shortage of cash, then the bank with surplus cash lends the former bank with money for one or two days.
2. Treasury Bills (T. Bills): On behalf of the Government of India, Treasury Bills are issued by the Reserve Bank of India (RBI). With the help of T. Bills, the Government of India can get short-term borrowings, as they are sold to the general public and banks.
3. Commercial Bills: Commercial Bills also known as Trade Bills or Accommodation Bills are the bills drawn by one organisation on another. Commercial Bills are the common instruments of the money market, which are used in credit sales and purchases.
4. Commercial Paper (C.P.): An unsecured promissory note issued by private or public sector companies with a fixed maturity period varying from 15 days to one year is known as a Commercial Paper.
Or
Discuss eight leading functional areas of marketing.
Ans: 1. Selling: It is core of marketing. It is concerned with the prospective buyers to actually complete the purchase of an article. It involves transfer of ownership of goods to the buyer. Selling plays an important part in realising the ultimate aim of earring profit. Selling is enhanced by means of personal selling, advertising, publicity and sales promotion. Effectiveness and efficiency in selling determines the volume of company’s profits and profitability.
2. Buying and Assembling: It involves what to buy, of what quality, how much from whom, when and at what price. People in business buy to increase sales or to decrease costs. Purchasing agents are much influenced by quality, service and price.
The products that the retailers buy for resale are determined by the needs and preferences of their customers. A manufacturer buys raw materials, spare parts, machinery, equipment’s, etc. for carrying out his production process and other related activities. A wholesaler buys products to resell them to the retailers.
Assembling means to purchase necessary component parts and to fit them together to make a product. ‘Assembly line’ indicates a production line made up of purely assembly operations.
Assembly line is an arrangement of workers and machines in which each person has a particular job and the work is passed directly from one worker to the next until the product is complete. On the other hand, ‘fabrication lines’ implies a production line made up of operations that form or change the physical or sometimes chemical characteristics of the product involved.
3. Transportation: Transportation is the physical means by which goods are moved from the places where they are produced to those places where they are needed for consumption. It creates place, utility. Transportation is essential from the procurement of raw material to the delivery of finished products to the customer’s places. Marketing relies mainly on railroads, trucks, waterways, pipelines and air transport.
The type of transportation is chosen on several considerations, such as suitability, speed and cost. Transportation may be performed either by the buyer or by the seller. The nature and kind of the transportation facilities determine the extent of the marketing area, the regularity in supply, uniform price maintenance and easy access to the supplier or seller.
4. Storage: It involves holding of goods in proper (i.e., usable or saleable) condition from the time they are produced until they are needed by customers (in case of finished products) or by the production department (in case of raw materials and stores); storing protects the goods from deterioration and helps in carrying over surplus for future consumption or use in production.
Goods may be stored in various warehouses situated at different places, which is popularly known as warehousing. Warehouses should be situated at such places from where the distribution of goods may be easier and cheaper. Situation of warehouses is also important from the view of prompt feeding of emergency demands. Storing assumes importance when production is regional or consumption may be regional. Retail firms are called “stores”.
5. Standardization and Grading: The other activities that facilitate marketing are standardisation and grading. Standardisation means establishment of certain standards or specifications for products based on intrinsic physical qualities of any commodity.
This may involve quantity (weight or size) or it may involve quality (colour, shape, appearance, material, taste, sweetness etc.) Government may also set some standards, for example, in case of agricultural products. A standard conveys a uniformity of the products.
6. Financing: It involves the use of capital to meet financial requirements of agencies dealing with various activities of marketing. The services to provide the credit and money needed, the costs of getting merchandise into the hands of the final user is commonly referred to as finance function in marketing.
In marketing, finances are needed for working capital and fixed capital which may be secured from three sources—owned capital, bank loans and advance and trade credit. (Provided by manufacturers to wholesaler and by the wholesaler to the retailers.) In other words; various kinds of finances are short-term finance, medium-term finance, and long-term finance.
7. Risk Taking: Risk means loss due to some unforeseen circumstances in future. Risk bearing in marketing refers to the financial risk interest in the ownership of goods held for an anticipated demand including the possible losses due to a fall in prices and the losses from spoilage, depreciation, obsolescence, fire and floods or any other loss that may occur with the passage of time.
From production of goods to its selling stage, many risks are involved due to changes in market conditions, natural causes and human factors. Changes in fashion or inventions also cause risks. Legislative measures of government may also cause risks. Risks may arise during the course of transportation.
They may also be due to decay, deterioration and accidents, or due to fluctuation in the prices caused by changes in their supply and demand. The various risks are usually termed as place risk, time risk and physical risk, etc.
8. Market Information: The importance of this facilitating function of marketing has been recognised only recently. The only sound foundation on which marketing decisions may be based is correct and timely market information. Right facts and information reduce the aforesaid risks and thereby result in cost reduction.
Modern marketing requires a lot of information adequately, accurately and speedily. Marketing information makes a seller know when to sell, at what price to sell, who are the competitors, etc. Marketing information and its proper analysis has led to marketing research which has now become an independent branch of marketing.
Business firms collect, analyse and interpret facts and information from internal sources, such as records, sales-people and findings of the market research department. They also seek facts and information from external sources, such as business publications, government reports and commercial research firms.
Retailers need to know about sources of supply and also about customers “buying motives and buying habits”. Manufacturers need to know about retailers and about advertising media. Firms in both these groups need information about ‘competitor’ activities and about their markets.
20. Discuss the various steps involved in the process of organising.
Ans: The following steps are to be undertaken in the organising process.
(i) Identification and Division of Work: The first step in the process of organising involves identifying and dividing the work that has to be done in accordance with previously determined plans. Work is divided into manageable tasks so that duplication can be avoided and workload can be shared among employees.
(ii) Departmentalisation: Once, work has been divided into small and manageable activities, then those activities which are similar in nature, are grouped together. This process is called departmentalisation. Departments can be created on the basis of products, functions and territory.
(iii) Assignment of Duties: Once the departments are created, each department is placed under the charge of an individual, called departmental head. Then, each job is allocated to an individual, according to his knowledge and skill. There should be a proper match between the nature of jobs and the ability of an individual.
(iv) Establishing Reporting Relationships: In the organisation, each employee has some authority as well as responsibility. It is necessary that every individual must know whom he has to take orders from and to whom he is answerable. This creates superior subordinate hierarchy and helps in coordinating various activities in the organisation.
Or
Discuss the relationship between Planning and Control.
Ans: The relationship between planning and control can be explained as follows:
1. Planning Originates Controlling: In planning the objectives or targets are set in order to achieve these targets control process is needed. So planning precedes control.
2. Controlling Sustains Planning: Controlling directs the course of planning. Controlling spots the areas where planning is required.
3. Controlling Provides Information for Planning: In controlling the actual performance is compared to the standards set and records the deviations, if any. The information collected for exercising control is used for planning also.
4. Planning and Controlling are Interrelated: Planning is the first function of management. The other functions like organizing, staffing, directing etc. are organized for implementing plans. Control records the actual performance and compares it with standards set. In case the performance is less than that of standards set then deviations are ascertained. Proper corrective measures are taken to improve the performance in future. Planning is the first function and control is the last one. Both are dependent upon each other.
5. Planning and Control are Forward Looking: Planning and control are concerned with the future activities of the business. Planning is always for future and control is also forward looking. No one can control the past, it is the future which can be controlled. Planning and controlling are concerned with the achievement of business goals. Their combined efforts are to reach maximum output with minimum of cost. Both systematic planning and organized controls are essential to achieve the organizational goals.
6. Controlling improves future planning: By providing information derived from past experience, controlling helps to improve future plans. For example, from deviations noted in the achievement of the previous quarter’s sales targets, the sales managers will delve into the reasons for such deviations and implement steps to improve the performance in the future. Thus, sales targets for the upcoming quarter will be based on the shortcomings identified in the previous quarter. If the manager is hopeful to fix the current issues and expects to increase manpower, he will plan the sales targets for the next quarter accordingly.
21. Write notes on the following:
(a) Management is the art of getting things done.
Ans: According to Harold Koontz, “Management is an art of getting things done through and with the people in formally organized groups. It is an art of creating an environment in which people can perform and individuals and can co-operate towards attainment of group goals”.
According to F.W. Taylor, “Management is an art of knowing what to do, when to do and see that it is done in the best and cheapest way”.
Management is a purposive activity. It is something that directs group efforts towards the attainment of certain pre-determined goals.
“Management” is the process of working with and through others to effectively achieve the goals of the organization, by efficiently using limited resources in the changing world. Of course, these goals may vary from one enterprise to another. E.g.: For one enterprise it may be launching of new products by conducting market surveys and for other it may be profit maximization by minimizing cost.
Management involves creating an internal environment: It is the management which puts into use the various factors of production. Therefore, it is the responsibility of management to create such conditions which are conducive to maximum efforts so that people are able to perform their task efficiently and effectively.
It includes ensuring availability of raw materials, determination of wages and salaries, formulation of rules & regulations etc.
As per this point of view, management is that art through which a manager can easily achieve the objectives by utilising the full capacity of the subordinates. In this reference, following are the main points of its importance:
(i) Management helps in achieving Group Goals: It is the most important characteristic of management that it is a goal-oriented activity. A manager achieves these goals by giving the proper direction to the efforts of all individuals,
(ii) Management Increases Efficiency: A manager increases efficiency through the optimum utilisation of all the resources, such as, Man, Machine, Material and Money.
(iii) Management Creates a Dynamic Organisation: Every organisation works in an ever changing environment. To face the changing environment, many changes need to be made in the organisation as well. But people resist changes. Manager creates a favourable environment through introducing employees to the benefits arising by adapting changes.
Or
Fayol’s principles of management.
Ans: Fayol’s day-to-day managing, seeing what worked and what didn’t, that informed his Principles of Management. By focusing on administrative over technical skills, the Principles are some of the earliest examples of treating management as a profession.
They are:
1. Division of Work: Assign each employee a task that they can become proficient at. Productivity increases as employees become more skilled, assured and efficient. Today, experts still warn against multi-tasking.
2. Authority: Managers must possess the authority to give orders, and recognize that with authority comes responsibility. As well as rank, Fayol argues that a manager’s intelligence, experience and values should command respect.
3. Discipline: Everyone should follow the rules. To help, you can make agreements between the organization and employees clear for all to see.
4. Unity of Command: Fayol wrote that “an employee should receive orders from one supervisor only.” Otherwise, authority, discipline, order, and stability are threatened.
5. Unity of Direction: Teams with the same objective should be working under the direction of one manager, using one plan. That, Fayol wrote, “is the condition essential to unity of action, coordination of strength and focusing of effort.”
(b) Planning is an intellectual process.
Ans: Planning is an intellectual process, as plans are always based on the sound judgement of the top-level management. It is a mental activity in which a manager decides the goals to be achieved and the actions through which those goals are to be achieved.
It is also called an intellectual process because it involves mental exercise, intuition, imagination, ability to analyse and other similar skills. It also requires the planner to take appropriate or proper actions with respect to the situation he/she is in. The planner also takes alternative measures in case the main plan doesn’t work.
Every person is intellectual at a different level and thus everyone can make plans. Therefore, it is the quality and the complexity of a plan that describes how intellectual the person is in terms of planning. Also, it is the high quality plans that work most efficiently and hence, we can say that intellectuals can make good plans.
And finally, planning is absolutely not a guess. It involves setting objectives, making premises, plotting alternative courses of action, comparing all alternative plans and finally implementing the best one. All these require a lot of thinking process.
Or
Steps is an intellectual process.
Ans: It is also called an intellectual process because it involves mental exercise, intuition, imagination, ability to analyze and other similar skills. It also requires the planner to take appropriate or proper actions with respect to the situation he/she is in. The planner also takes alternative measures in case the main plan doesn’t work.
And finally, planning is absolutely not a guess. It involves setting objectives, making premises, plotting alternative courses of action, comparing all alternative plans and finally implementing the best one. All these require a lot of thinking process.
Hence, the correct answer is option (D).
Note: Based on its content, planning can be of two types.
1. Strategic planning: It decides on long term objectives of the organization and encompasses all aspects of the business.
2. Tactical planning: It converts theoretical plans to action plans and acts as a dynamic support to the strategic plan.
22. Write notes on the following:
(a) Significance of Fiscal Policy.
Ans: Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply. These two policies are used in various combinations to direct a country’s economic goals. Here’s a look at how fiscal policy works, how it must be monitored, and how its implementation may affect different people in an economy.
fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals.
The usual goals of both fiscal and monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages. The establishment of these ends as proper goals of governmental economic policy and the development of tools with which to achieve them are products of the 20th century.
Fiscal policy relates to decisions that determine whether a government will spend more or less than it receives. Until Great Britain’s unemployment crisis of the 1920s and the Great Depression of the 1930s, it was generally held that the appropriate fiscal policy for the government was to maintain a balanced budget.
Or
Non-Financial incentives.
Ans: Non-financial incentives inspire and engage employees in ways that money is incapable of doing.
Non-financial incentives are the types of rewards that are not a part of an employee’s pay. Typically, they cost the company little or no money, yet carry significant weight.
Some of the common non-financial incentives are:
1. Status: Status refers to reducing the position and prestige associated with a job in the organization. Higher status helps to satisfy safety and social need, esteem needs, and self-actualization needs. Management provides status symbol facilities to its employees to motivate them. For example, costly furniture, well-furnished AC cabins, a car, etc.
2. Organizational climate: It refers to the characteristics which describe an organization and distinguish one organization from the other. Characteristics include individual autonomy, reward orientation, open communication, etc., which directly influence individual behaviour in a positive direction. Management helps to create an organizational climate and tries to motivate employees in this healthy working organizational climate.
3. Career advancement opportunity: Every individual wants growth and development in his life. When employees are provided opportunities to grow, then they feel more satisfied and become more committed to organizational goals. For example, the opportunity for promotion works as a tonic in encouraging employees to improve their performance.
4. Job Enrichment: It is concerned with designing jobs that include a great variety of work. Varieties of work make the work more challenging and interesting. Instead of doing routine jobs, enriched jobs offer opportunities for recognition and growth. It also improves job satisfaction and motivates employees.
(b) Rights of a consumer under Consumer Protection Act.
Ans: Although businessman is aware of his social responsibilities even then we come across many cases of consumer exploitation.
That is why government of India provided following rights to all the consumers under the Consumer Protection Act:
1. Right to Safety: According to this right the consumers have the right to be protected against the marketing of goods and services which are hazardous to life and property, this right is important for safe and secure life. This right includes concern for consumer’s long term interest as well as for their present requirement.
Sometimes the manufacturing defects in pressure cookers, gas cylinders and other electrical appliances may cause loss to life, health and property of customers. This right to safety protects the consumer from sale of such hazardous goods or services.
2. Right to Information: According to this right the consumer has the right to get information about the quality, quantity, purity, standard and price of goods or service so as to protect himself against the abusive and unfair practices. The producer must supply all the relevant information at a suitable place.
3. Right to Choice: According to this right every consumer has the right to choose the goods or services of his or her likings. The right to choose means an assurance of availability, ability and access to a variety of products and services at competitive price and competitive price means just or fair price.
The producer or supplier or retailer should not force the customer to buy a particular brand only. Consumer should be free to choose the most suitable product from his point of view.
4. Right to be Heard or Right to Representation:
According to this right the consumer has the right to represent him or to be heard or right to advocate his interest. In case a consumer has been exploited or has any complaint against the product or service then he has the right to be heard and be assured that his/her interest would receive due consideration.
This right includes the right to representation in the government and in other policy making bodies. Under this right the companies must have complaint cells to attend the complaints of customers.
Or
Functions of entrepreneurs in relation to economic development.
Ans: Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like land, labour and capital into national income and wealth in the form of goods and services. They help increase Net National Product and Per Capita Income in the country.
Functions Of Entrepreneurs In Economic Development:
1. Capital formation: Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities. Investment of public savings in industry results in productive utilization of national resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth.
2. Improvement in per capita income: Entrepreneurs explore opportunities and exploit them. They convert talent and idle resources like land, labor, and capital into national income and wealth as goods and services. They help increase the net national product and per capita income in the country, which are important indicators for measuring economic growth.
3. Improvement in living standards: Entrepreneurs set up industries that overcome the scarcity of essential commodities and introduce new products. The production of goods on a large scale and the manufacture of handicrafts, etc., help in improving the standard of living of a common man in the small scale sector. Offer goods at these low costs and increase consumption diversity.
4. Economic independence: Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries. Businessmen also export goods and services on a large scale and thereby earn scarce foreign exchange for the country. Such import substitution and export promotion help to ensure the economic independence of the country without which political independence has little meaning.
5. Backward and forward links: An entrepreneur initiates change in which there is a chain reaction. There are many backward and forward linkages in establishing an enterprise. For example, the setting up of a steel plant creates many ancillary units, and the demand for iron ore, coal, etc. expands. There are backward relationships. By increasing the supply of steel, the plant facilitates machine manufacturing, tube making, vessel manufacturing, and the development of other such units.
