Bihar Board 12th Business Studies Important Questions Short Answer Type Part 2 in English

Bihar Board 12th Business Studies Important Questions Short Answer Type Part 2 in English

BSEB 12th Business Studies Important Questions Short Answer Type Part 2 in English

Question 1. List any three consumer organisations/NGOs in Delhi.
Answer:

1. Common Causes, Delhi.
2. Consumer Coordination Council, Delhi.
3. Voluntary organisation in interest of consumer education (VOICE), Delhi.

Question 2. Explain in brief the objectives of management.
Answer: Objectives of Management:
(i) Securing maximum results with minimum efforts:The main objective of the management is to obtain maximum output with the minimum use of a vailable resources, directed towards reducing the cost of production.

(ii) To increase efficiency of the factor, of production: Through optimum utilization of its factors of production, management aims at reducing wastage of time, efforts and many, leading to increase in productivity and there by growth of an enterprise.

(iii) To achieve prosperity Management aims at securing prosperity for both the owners and the workers by generating higher profits for the owners and providing a fair remuneration to the workers.

(iv) To ensure betterment of human life and social justice Management also aims at improving the standared and quality of living of the people within and outside the orgnisation structure and seeks justice to all through its uniform policies and practices.

Question 3. Co-ordination is a ‘Continuous Process’ and the ‘Essence of Management’ in an organisation. Explain.
Answer: Essence of Management:

• Co-ordination is needed to perform all the functions of management.
• In Planning, co-ordination is required between main plan and supportive plans of different departmants.
• In Organisation, co-ordination is required between different resources of an organisation and also between authority, responsibility and accountability.
• In Staffing, co-ordination is required between skill of a person and job assigned to him, between efficiency and compensation, etc.
• In Directing co-ordination is required between superior and sub-ordinates, between orders, instructions guidelines and suggestions, etc.
• In controlling co-ordination is required between standard and actual performance.

Question 4. What are the three levels of management? State any there functions of the middle level management?
Answer: The term level of management refers to line of demarcation between various managment positions is an organisation. Breach has divided management into three levels as under:

1. Top level management.
2. Middle level management.
3. Lower level management.

Functions of middle level management:

1. To serve as a link between the upper level and lower level management.
2. To explain the objectives and policies laid down by the top level management.
3. To keep an eye on the actual results, so that work performance can be assessed.
4. To maintain a balance between different parts of the organisation.

Question 5. Define scientific management. State any three of its principles.
Answer: Scientific management implies the application of science to management. It means conducting business activities according to standardized tools method and trained personnel in order to increase the output improve its quality and reduce the cost and wastes.

Principles of management:
(i) Co-operation between labour and management: Taylor has advocated for harmonious relationship between workers and the management because he feels that if there is close relationship between employees and the employer, maximum output may be obtained at minimum cost.

(ii) Maximum prosperity of the employer and its employees: Taylor under, stand that maximum output at minimum cost leads to maximum profit. Therefore, both workers and die management should be paid handsome records for their service.

(iii) Scientific selection, training and development of workers: According to Taylor, employees should be selected according to pre-determined standards. After that, proper training should be imparted to develop the workforce.

Question 6. What is meant by ‘work study’? Briefly explain the role of ‘Time’ and ‘Motion’ studies while setting the standard task.
Answer: Work Study: In the words of Russell M. Cume, “Work study is the systematic, objective and critical study of all the factors governing the operational efficiency of any specified activity in order to effect improvement.”

Time study: Time Study is the art of observing and recording the time required to perform each detailed task of an industrial operation. It involves the following steps:

• Dividing the work into various parts or components,
• Recording the time taken by different employees in completing that sub-task.
• Selection of the average worker.
• Finally setting up the standared time.

Every worker is required to compete the work within die standard time.

Motion Study: Motion Study is the science of eliminating wastefulness resulting from using unnecessary, ill-directed and inefficient motions. The aim of motion study is to identify a scheme of least waste or best method of work.
Steps involved in moton study are:

• Selection of efficient workers.
• Analysis of movement involved.
• Recording the best motions involving minimum time and effort.
• Selection of the most efficient working system.

These work measurement techniques help in determining the best method of doing a job and the standard time allowed for Jt. It is on this basis that the standard task is, set.

Question 7. Describe, in brief, Taylor’s principles of:
(i) Co-operation, not individualism, and
(ii) Maximum, not restricted output.
Answer:
(i) Co-operation, not individulism: This principle suggests to secure cooperation of workers. It is only through co-operation with workmen that managers can ensure that work is carried out in accordance with plans and standared of performance. Work should be Carried out by individuals in cooperation with each other based on mutual confidence and sense of good will, while setting standards, employees who are supposed to perform should be involved in that process.

(ii) Maximum, not restricted output: There should be continuous increase in production and productivity. As a result surplus will increase and both the management and labour can have a larger share. This principle requires that the aim of management should be to secure maximum prosperity for the employees along with maximum welfare of employess.

Question 8. Why is it important for business enterprises to understand their environment? Explain briefly.
Answer: Importantancc of study of Business Environment: Business environment is highly dynamic and uncontrollable. It keeps the entire business active and prudent.

Business environment has following benefits:

• A study of the changing business environment is helpful in formulating future strategies.
• A study of the environment reveals various internal and external environmental factors affecting the enterprise.
• A study of the business environment helps recognize the threats, challenges, risks and dangers likely to be faced by an enterprise.

Question 9. Explain the meaning of Business Environment Explain any two dimensions of general environment of business.
Answer: Business Environment means forces (economic, social, political, technological etc.) and instututions (suppliers, customers, competitors, etc.) outside the firm with which its members must deal to achieve the organization’s purpose.

Business Environment is the aggregate of all and influences that surround and affect the business. The dimensions of general environment of business are:

1. Economic Environment.
2. Social Environment
3. Technological Environment.

(1) Economic Environment: Economic environment consists of national income, corporate profits, inflation rate, fate of interest, tax rates employment rate, government spending, etc. general economic environment influences the policies and actions of the business in a big way.

(2) Social Environment: It describes characteristics of the society in which the organisation exists, literary rate, educational level, custom beliefs, value, life style, demographic distribution are apart of social environment.

Question 10. Why is planning regarded as a pervasive function of management?
Answer: Planning is needed for all activities at all levels although the nature and extent of planning varies with the delegated authority or position a persons holding in the organizational hierarchy and with the broad guidelines outlined by his superiors, Thus planning is a pervasive function of management

Question 11. “Planning is the basic function of management.” Explain.
Answer: Among various functions of management planning occupies the foremost position. Planning proceeds the executer of all other managerial functions because it provides the frame of reference for future decisions reduces overall impact of changes and allows managers to organize, staff, direct and control the activities necessary to achieve the organizational goals.

Question 12. How can political climax and policies of competitors obstruct Planning?
Answer: Political climax: Political climax affects the planning in a negative way. Planning is adversely affected by the policies of Government. If the Government, introduces new laws, changes in trade policy, taxation policy or industrial policy, the planning of many enterprises is disturbed.

Policies of competitors: The planning of competitors affects the planning. While planning, the planner must keep the policies of the competitors convinces the consumer and surpassed them in marketing. This will distribute the planning.

Question 13. “Planning restricts creativity”. Explain.
Answer: Planning involves deciding in advance what is to be done, how is to be done and by whom. Thus all organizational activities arc pre-conceived and predetermined at the stage of planning itself and there is very little or no scope for deviating from the plans due to factors like capital investments, government policies and so on. This blind conformity with pre-determined guidelines discourages individual initiative and freedom.

Question 14. Define organizing.
Or, What is meant by organizing process?
Answer: Organizing is a process of bringing together physical, financial and human resources establishing productive relations among them for the achievemnt of goals. According to Harold Koontz O’ Donnell “Organizing involves the grouping of activities necessary to accomplish goals and plans, the assignment of these activities to appropriate departments and the provision for authority delegation and co-ordination.”

Thus, organizing is concerned with building up a stable framework or structure of various interrelated parts of an enterprise, each part having its own function and being centrally regulated.

Question 15. Distinguish between formal and informal communications.
Answer: Difference between formal organisation and informal organisation:

Basis	Informal communication	Formal communication
1. Authenticity	It is authoritative.	It is not authoritative.
2. Sender	Manager sends it.	Leader sends it.
3. Channel	It is sent through established channel.	It is sent through unestablished channels.
4. Identification	Its source can be identified.	Its source cannot be identified.
5. Responsibility	Responsibility for action can be fixed.	Responsibility for action cannot be fixed.
6. Flexibility or rigidity	It is rigid as it passes through established channel.	It is flexible as it has not to pass through established channels.
7. Reliability	It is reliable.	It is not reliable as it carries rumors.
8. Speed	It is slow.	It is speedier.
9. Direction of flow	It follows a set pattern i.e., from top to lower level or vice-versa.	It does not follow any set pattern.
10. Scope	Its scope is limited as it serves organisation interests or needs.	Its scope is wide. It not only serves the employees but also the organisation.

Question 16. Discuss the four function of management.
Answer: The four functions of management are as follow:
1. Planning: planning is the function of determining in advance what is to be done and who is to do it. This implies setting goals in advance and developing a way of achieve them efficiently and effectively. Planning cannot prevent problems but it can predict them and prepare contingency plans to deal with them if and when they occur.

2. Organising: Organising is the management function of assigning duties, grouping tasks, establishing authority and allocating resources required to carry out a specific plan. It determines what activities and resources are required. It decides who will do a particular task, what it will be done, and when it will be done. Organising involves the grouping of the required tasks into manageable departments or work units the establishment of authority and reporting relationships.

3. Staffing: Staffing is finding the right people for the right job. A very important aspect of management is to make sure that the right people with the right qualifications are available at the right places and times to accomplish the goals of the organisation. This is also known as the human resource function and it involves activities such as recruitment, selection, placement and training of personnel.

4. Directing: directing involves leading, influencing and motivation employees to perform the tasks assigned to them. This requires establishing an atmosphere that encourages employees to do their best motivation and leadership are two key components of direction. Directing also involves communicating effectively as well as supervising employees at work. Motivating workers means simply creating an environmentthat makes them want to work.

5. Controlling: Controlling is the management function of monitoring organisational performance towards the attainment of organisational goals. The task of controlling involves establishing standards of performance measuring current performance comparing this with establishment standards and taking corrective action where any deviation is found.

Question 17. What are the steps in the process of organizing?
Answer: following are the steps in the process of organizing:

1. Division of Labour: On the basis of principles of division, every group is handed over some specified work. This leads to increase in the efficiency of efforts of such groups. Division of labour leads to increase in work efficiency.
2. Sources of Authority: As authority gives rise to responsibility, fixing of responsibility is essential while delegating authority to people working at different levels of the organization.
3. Departmentation: At this stage, the activities of the same nature are grouped and assigned to a particular department.

Question 18. Discuss the elements of delegation.
Or, Explain the elements of delegation of authority.
Answer: following are the elements of delegation:

• Responsibility: It is the obligation of a subordinate to properly perform the assigned duty. When a superior assigns a job to his subordinate, it becomes the responsibility of the subordinate to complete the job. This means that the word responsibility comes into play only after the job has been assigned.
• Authority: Authority means the power to take decisions. Decision can be related to the use of resources and to do or not to do something.
• Accountability: It means the accountability of the subordinate to his superior for his work performance.

Question 19. Distinguish ‘Formal’ and ‘Informal’ organization.
Answer: Difference between ‘Formal’ and ‘Informal’ organization:

Basis of Difference	Formal organization.	Informal organization
1. Formation	It is deliberately established to achieve the pre-determined objectives.	This is an outcome of the inter-relationship of different people.
2. Rules	It is based on strict rules which are written. The violation of rules may lead to penalties.	It has its own group norms which are not written and clear the violation of group norms invity social disapproval.
3. Organization Structure chart	In a formal organization an organization chart showing different departments is prepared which show them clearly.	An informal organization has no place in an organization chart.
4. Purpose	Its purpose is to achieve the objectives of the organization economically.	Its purpose is to fulfill individual needs and protect mutual interest.

Question 20. What does the term ‘Span of Management’ refer to?
Answer: Span of management refers to the number of subordinates that can be effectively managed by a superior. The span of management determines the level of management in structure. In general, the span of management is wider at higher levels of management.

Question 21. Describe the importance of an informal organization.
Or, Why is an informal organization considered necessary? Give any three reasons?
Or, What is the importance of an informal organization in a formal set-up?
Answer: The importance of an informal organization in a formal set-up may be explained as under:

• Sense of belongingness: In case of an informal organization, there is a feeling of belongingness and personal satisfaction among employees.
• Flexibility: Informal Organization is more flexible because it is based on social relationships and not on formal relationship.

Question 22. Briefly enumerate the important sources of recruitment.
Answer: The sources of recruitment can be conveniently classified into internal and external sources.
(i) Internal sources: it is recruitment of employers from within the existing employees, of the organization whenever new vacancy arises people from within the organisation will be upgraded, promoted, transferred or demoted, this process or filling job is called internal sources.

(ii) External sources: External sources of recruitment means the recruitments from outside the organization. when an organization has exhausted internal sources to be unsuitable, then external sources are used. The methods of recruitment are many walk-ins. public employment agencies, labour unions, educational institutions, professional associations, military services, etc.

Question 23. Distinguish between Time Study and Motion Study.
Answer: Difference between Time Study and Motion Study:
Time Study:

1. Time study covers only stop watch procedures.
2. Time study is done before motion study.
3. Time study provides the evolution of work measurement devices by establishing time standards.
4. Time study considers the time taken by the worker in the performance of a job.

Motion Study:

1. Motion study mainly covers photographic procedures
2. Motion study is done after time study.
3. Motion study provides for the evolution of ideal methods of doing the work.
4. Motion study is mainly concerned with the physical effect made by him for completing the work.

Question 24. What is the importance of staffing function in today’s environment?
Or, ‘Staffing is an important function of management in all organizations.’ Why? Explain any four reasons.
Or, State the importance of staffing function in management.
Answer: Importance of staffing function:

• Investment costs: Procurement of human resources involves investment in terms of selection, training and development cost.
• Long term effect: The investment in human resources is of long term effect.
• Potential contribution: While selecting a person more particularly for the managerial position, the enterprise has not only to think of the current tasks but also his potential contribution in future.
• Cost may surpass investment: The return of investment of personnel more particularly managerial personnel may be positive or negative.
• Multiple effect: The total effect of the functioning of die individual members of a team of managers may not be equal to the effect of the team as a whole.

Question 25. Explain the internal sources of recruitment.
Answer:
(i) Transfer: it involves the shifting of an employee from one job to another, one department to another or from one shift to another without a substantive change in the responsibilities and status of the employees. Shortage of suitable personnel in one branch may be filled through transfer from other branch or department. Job transfers are helpful in avoiding termination and in removing individual problems and grievances.

(ii) Promotions generally, enterprises fill the higher jobs by promoting employees from lower jobs. Promotion leads to shifting an employees to a higher position, carrying higher responsibilities, facilities, status and pay. Promotion is a vertically shifting of employees. It helps in improving the motivation, loyalty and satisfaction level of employees. It has a great psychological impact over the employees.

Question 26. Why does entrepreneurship consider as a creative function?
Answer: The nature of entrepreneurship is creative work culture and qualitative improvement is development only through creative thinking by promoter, organization and management. Basically entrepreneurship is a creative activity creative thinking always motivates to execute positive fundamental and practical thinking.

Question 27. Distinguish between ‘external’ and ‘internal’ source of recruitment.
Answer: The difference between ‘External’ and ‘internal’ source of recruitment are as follows:

Basis	Internal source of Recruitment	External source of Recruitment
1. Meaning	It is recruitment of employees from within the existing empioyees of the organisation.	It is recruitment of employess from outside the organisation.
2. Basis	Generally, seniority is the basis of recruitment.	Generally, requirement is based on merit.
3. Choice	It gives limited choice in the requirement of employees.	It provided wider choice in the requirement of employees.
4. Effect on staff	The existing staff is motivated to improve their performance.	The existing staff feels dissatisfied if external sources are used.

Question 28. Who is a supervisor?
Answer: The supervisor occupies an intermediate position between management and operative employees. As the connecting link between management and workers, the supervisor bridges the gap between what the management expects and what the workers wants. He acts as the medium of communication between higher level managers and the operatives.

The supervisor holds a key position in the organization. He turns plans and policies of the organization into actual results through the efforts of operatives. As the leader of his group or section he is responsible for both the quality and quantity of production. Supervisors are online executives with command authority. They perform all the basic functions of management. Their main task is to secure desired results from rank and file in accordance with predetermined standards of performance.

Question 29. Explain the process of motivation.
Answer: Process of motivation: Motivation is the result of interaction between human needs and incentives offered to satisfy them. The main steps in motivation process are given below:

• Awareness of need: The process of motivation begins with awareness of a need. Feeling of a need creates anxiety of tension in the person.
• Stimulus for action: In order to satisfy the need and remove tension, a person takes some action. When a person feels hungry, for example, he takes steps to satisfy his hunger. He workes to earn money with which he can buy food. If the gets no work he may beg for food or may even try to steal food.
• Fulfillment of need: In case the person is successful in satisfying his need he feels motivated. If the attempt is unsuccessful die need remains unsatisfied. In such a case the person may search for a different action.
• Discovery of new need: when one need is satisfies a new need arises and the process is repeated.

Question 30. What are the various objectives of Consumer Protection Act?
Answer: There are many objectives of Consumer Protection Act, main of them are as follows:

• To protect and promote the rights of consumer.
• To establish consumer council in order to protect consumer’s interests and rights.
• To provide for disposal of consumer disputes and allied matters.
• To dispose as early as possible and through easy process, the consumer disputes.
• To set up quasi-judicial machinery to solve disputes.

Question 31. State any three factors that influence the effectiveness of a leader.
Or, State any three qualities of a good leader.
Answer: Following are the qualities of a good leader:

1. Physical energy and stamina: A leader should have a good personality, charming manners and ability to work hard. A leader will be successful only when he acts with the group as a member and works hard.
2. Intelligence: Leaders should have somewhat higher intelligence than the average of their subordinates. They should possess the ability to think scientifically analyse accurately and interpret clearly and concisely the problems faced by the group.
3. Vision and foresight: A leader, should exhibit his trait of looking forward. He must have foresight to see and feel the future. He should take into account the happenings which are about to occur in future.

Question 32. “All managers are leaders, but all leaders are not managers.” Do you agree with this statement? Give any three reasons in support of your answer.
Answer: Yes, we agree with the statement that all managers are leaders but all leaders are not managers following points may be given in support of our views:

1. Leaders perform only one function i.e. leadership function which is one of the elements of directing function of management, Managers perform all the managerial functions i. e., planning, organizing, staffing, directing and controlling.
2. Managers possess formal authority and hold managerial position in the organization whereas a leader may not hold any managerial position, because his authority is informal.
3. The focus of managers is on achieving the organizational goals only while leaders have to achieve the expectations of followers.

Question 33. Distinguish between ‘upward’ and ‘downward’ communication.
Answer: Following table shows the distinction between downward communication and upward communication:

Basis of Distinction	Downward Communication	Upward Communication
1. Flow	Its flow is from higher to lower authority.	Its flow is from lower to higher authority.
2. Nature of compliance	It is essentially directive in nature and demands action by superiors.	It is essentially non-directive because its purpose is to provide the manager with the information the sub-ordinates posses.
3. Speed	It travels very fast.	It travel slowly.
4. Purpose	Its purpose is to issue orders and instructions to the sub-ordinates.	Its purpose is to put the suggestions or grievances by the subordinates to the superiors.

Question 34. Explain the meaning of controlling.
Answer: Control is a basic management function which implies measurement of actual performance comparing it with the standards and take corrective measures to ensure attainment of objectives according to plans.

According to Henry Fayol, “Control consists in verifying whether everything, occurs conformity with the plans adopted, the instructions issued. principles established, It has for its object to point out weakness and errors in order to rectify them and prevent recurrence.”

Question 35. “Planning is looking ahead and controlling is looking back.” Comment.
Answer: Planning and controlling are closely interrelated, controlling is impossible without planning and planning cannot be successful without a proper system of controlling. Planning sets standards to achieve business objectives, controlling measures and assesses the actual performance and compares it with planned standards and suggest corrective measures to be taken to prevent recurrence of the deviations. Planning is the beginning and controlling is the final stage of business activity. Both are interrelated and complementary to each other.

Question 36. “Controlling implies taking action”. Explain.
Answer: Controlling means taking action to correct a condition which is different from one that is planned. A manager sitting in the side lines and watching the organization in action does not control. To controlling has to initiate action which will guide the operations within the spheres of plans. Remedial action is the essence of controlling. This will also include actions to modify and improve on the existing plans to recurrence of the deviations noticed by manager.

Question 37. What are the advantages of Management Audit?
Answer: The main advantages of Management Audit are as follows:

• It helps to locate present and potential deficiencies in the performance of management functions.
• It helps to improve the control system of an organization by continuously monitoring the performance of the management.
• It improves co-ordination in the functioning of various departments so that they work together effectively towards the achievement of organizational objectives.
• It ensures updating of existing managerial policies and strategies in the light of environmental changes.

Conducting management audit may sometimes pose a problem as there are no standard techniques of management audit. Also, management audit is not compulsory under any low. Enlightened managers, however, understand its usefulness in improving overall performance of the organization.

Question 38. Distinguish between ‘formal’ and ‘informal’ communication.
Or, How does informal communication differ from formal communication in respect of:
(i) Mutual relationships,
(ii) Speed of communication, and
(iii) Needs.
Answer: Following table shows difference between formal communication and informal communication:

S.No.	Basis of Difference	Formal Communication	Informal Communication
1.	1. Mutual relationships	Its channel laid down in the organisation structure. It follows the chain of command.	Its channel is based on social relationships. It is independent of the chain of command and free from all formalities.
2.	2. Speed of communication	It is slow moving process because it takes the routes prescribed by the scalar chain.	It is a fast moving process because it does not have any prescribed route.
3.	3. Needs	It serves organization needs.	It serves not only organizational needs but also social needs of the members of the organization.

Question 39. Explain the process of control as a function of management.
Answer: Steps in Control process: The main objective of controlling function is to ensure that the actual performance of work is in accordance with the established norms and standard of work. For this objective following steps are taken in mind in the control process:

(i) Establishing Standards: The first step is to establish standards which should be in verifiable terms i.e., quantity of producton units of service, man hour, speed, volume, etc, These standards should be fixed separately for individual, groups, department etc.

(ii) Measuring actual performance: A comprehensive report regarding the actual performance of individual groups, departments and the whole enterprise should be prepared at regular intervals so that they can be studied, analyzed and discussed.

(iii) Comparing actual performance with the desired performance: Actual performance of the individuals, groups, departments and the whole enterprise should be compared with the desired performance.

Question 40. Describe in brief five features of a good control system.
Answer: Features of a good control system:

1. Simplicity: A good control system must be simple and easy to understand, Every employee should understand the control system.
2. Motivating: It should motivate both controller and controlled.
3. Economy: The system of control must be worth its cost. It is justified only if the economies anticipated from it are more than the expected costs in its working.
4. Quick reporting: Information relating to target and actual performance should be speedily available.

Question 41. Give the meaning of finance.
Answer: Money required for carrying business activities is called business finance. Almost all business activities require some finance. Finance is needed to establish a business, to run it, to modernise it, to expand to diversity it. It is thus, needed at every stage in the life of a business entity. Availability of adequate finance is thus very crucial for the survival and growth of a business.

Question 42. Give the meaning of Financial Management.
Answer: All finance comes at some cost. It is quite imperative that it needs to be carefully managed. Financial management is concerned with optimal procurement well as usage of finance. For optimal procurement different available sources of finance are compared with associated risks. Similarly, the finance; so procured needs to be invested in a manner that the returns for the investment exceed the cost at which procurement has taken place.

Financial managment aims at reducing the cost of funds procured. Keeping the risk under control, and achieving effective deployment of such funds is covered under financial management. It also aims at ensuring availability of enough funds whenever required as well as avoiding idle finance.

Question 43. What are the main objectives of financial management?
Answer: The main objectives of financial management are as follow:
1. Profit maximization: It is the chief aim of every investor, while purchasing the share of company, the investor see the profitability of that company. When a company earns maximum profit, chances are that the rate of dividend will be high. Thus the main objectives of financial management is to safeguard the interest of shareholders, creditors, the company, employees and the government at large.

The arguments behind the concept of maximization of profit are:

• Profit is the indicator of economic efficiency of the company.
• Profit leads to efficient allocation of resources and the distribution to the users.

However, it suffers from certain limitations:

• It assumes perfect competition in the economy which may always be not so. Thus it may not lead to optimisation of owner’s interest and society.
• It ignores the impact of dividend policy on market price of the share.
• It is a vague concept and is subject to varied interpretation.

2. Wealth maximisation: It is also known as value maximisation or net present worth maximisation. It is universally accepted as the objective for financial decision. As per this concept the value of an asset should be viewed in terms of benefits it can produce.

Question 44. What are the characteristics of sound financial plan?
Answer: The following are the main characteristics which should be kept in mind while making a sound plan:

• Simplicity: The financial plan should be simple so that every one can understand it easily.
• Based on organizational objectives: The financial plans are prepared with a view to cover the main objectives of that organization. Hence, it is suggested that funds should be procured at the lowest cost otherwise the profitability of the organisation will suffer.
• Best utilisation of resources: The best financial plan is the one which utilises its own resources for the benefit of the company. Ploughing back of profit is the best way of financing the business enterprises.
• Flexibility: The financial plan should be flexible, which means due scope for adjustment as and when needed may be incorporated in it.
• Utility: The proper use of capital should be for the development of the organisation.

Question 45. Define the capital structure.
Answer: Debt and equity differ significantly in their cost and riskiness for the firm. Cost of debt is lower than cost of equity for a firm because lender’s risk is lower than equity shareholder’s risk, and therefore, they should acquire a lower rate of return. Additionally, interest paid on debt is deductible expense for computation of tax liability whereas dividends are paid out of after tax profits.

Increased use of debt, therefore, is likely to lower the overall cost of capital of the firm provided that cost of equity remains unaffected cost. Hence, capital structure refers to the mix between owner and borrowed funds.

Question 46. Distinguish between owner’s capital and borrowed capital.
Answer: Distinction between owner’s capitals and borrowed capital:

Basis of difference	Owner’s capital	Borrowed capital
1. Meaning	It consists of the amounts contributed by the owner and their profits reinvested in the business.	It includes funds available in the form of loans or credit.
2. Redemption	It remains permanently invested in the business.	It is not permanent source of business finance. The borrowed funds have to be paid back after the stipulated period.
3. Risk	It carries the risk of business. It is also called risk capital.	The debts or the company are generally secured. in case of winding up, the creditors are paid first before anything is paid to the shareholders.

Question 47. What is “Financial Risk”? Why does it arises?
Answer: Financial risk is the chance that a firm would fail to meet its payment obligations. Increased use of debt increases the financial risk of a business. It arises on account of use of debt in Capital Stricture, any default in meeting these commitments may force the business to go into liquidation. Higher use of debt increases the fixed financial charges of a business.

Question 48. Define a current asset and gave four examples.
Answer: Current assets are those assets which are the normal routing of the business, get converted into cash or cash equivalents within one year. Current assets facilitate smoothing day-to-day operations of the business. Current assets are usually more liquid but contribute less to the profits than fixed assets e.g., 1. Cash in hand/Cash at bank, 2. Marketable securities, 3. Bills receivables, 4. Debtors, 5. Finished goods inventory, 6. Work in progress, 7. Raw materials, 8. Prepaid expenses.

These assets are expected to get converted into cash or cash equivalents within a period of one year. There provide liquidity to the business. An asset is more liquid if it can be converted into cash quicker and without reduction in value. Insufficient investment in current assets may make it more difficult for an organization to meet its payment obligations. However, these assets provide little or low returns. Hence a balance needs to be struck between liquidity and profitability.

Question 49. Give the functions of financial market.
Answer: Financial market is a merket for the creation and exchange of financial assets. Its functions are as follows:

1. Mobilization of savings and channelising them into the most productive uses.
2. Facilitate price discovery.
3. Provide liquidity to financial assets.
4. Reduce the cost of transactions.

Question 50. What do you mean by money market?
Or, “Money market is essentially a market for short-term funds.” Discuss.
Answer: The money market is a market in which short-term money loan or financial assets that are close or near substitute of money are traded. The ‘short term’ means generally for the period upto one year. The term ‘close substitutes for money’ is used to denote financial assets which can be turned into cash quickly. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded everyday. It has no physical location, but is an activity conducted over the telephone and through the internet.

It enables the raising of short term funds for meeting the temporary shortage of cash and obligations of the temporary deployment of excess funds for earning returns. The major participants in the market are the Reserve Bank of India (RBI), commercial banks, non-banking finance companies, state governments, large corporate houses and mutual funds.

Question 51. Discuss the objectives for evolution of money market.
Answer: There are mainly four objectives of money market:

• It provides an equilibrating mechanism for earning out short term surpluses and deficits.
• The money market provides a focal point for Central Bank intervention for influencing liquidity in the economy.
• It provides reasonable access to users of short-term money to meet their requirements at realistic, price.
• From the point of view of an efficient banking system, the money market should genuinely equilibrate in the short term to provide a viable alternative to default in the maintenance of reserve requirement by banks.

Question 52. Discuss the functions of money market.
Answer: There are various functions performed by money market for overall economic development of country, main are as follows:

• It provides outlets to commercial banks, non-banks financial concerns, business corporations and other investors for short-term.
• It also provides short term funds to business man, industrialists, traders, etc. to meet their day-to-day requirement of working capital.
• It enables businessmen with temporary surplus funds to invest them for a short periods.
• By discounting the bills and commercial papers the money market bridges the time limit between the sale and actual payment of money.

Question 53. What is Capital market?
Answer: Capital market is concerned with long term finance for industry and government, just as money market is concerned with supply of short-term finance to trade and industry. Capital market consists of series of channels through which the saving of community are made available for industry and government.

It refers to all the facilities and industrial arrangement for the borrowing and lending term funds. It directs savings into most productive uses leading to growth and development of the economy. An ideal capital market is one where finance is available at reasonable cost.

Question 54. How capital market function?
Answer: The term capital market refers to facilities and industrial arrangement through which long term funds, both debt and equity are raised and invested. The capital market consists of development banks, commercial banks and stock exchanges.

An ideal capital market is one where finance is available at reasonable cost. The process of economic development is facilitated by the existence of a well-functioning capital market. Infact, development of the financial system is seen as a necessary conditions for economic growth. It is essential that financial institutions are sufficiently developed and that market operations are free, fair, competitive and transparent. The capital market should also be efficient in respect of the information that it delivers, minimize transaction cost, allocate capital most productively.

Question 55. Explain the two parts of Capital market.
Answer: The capital market can be divided into two parts:

1. Primary market
2. Secondary market

1. Primary market: The primary market is known as the new issues market. It deals with flow securities being issued for the first time. The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seek to establish new entereprise or to expand existing ones.

2. Secondary Market: The secondary market is also know, as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity arid marketability to existing securities.

Question 56. What are the features of Indian capital market?
Answer: The capital market in India has exhibited following special features in the recent years:

• Greater reliance on debt instruments as against equity and in particular borrowing from financial, institutions.
• Issue of debentures, particularly convertible debentures with automatic and compulsory conversion into equity without the normal option given to investors.
• Floation of equity issues for the purpose of takeover, amalgamation, etc. and avoidance of borrowing from financial institutions for fear of their discipline and conversion clause by bigger companies.
• Avoidance of underwriting by some companies to reduce the costs and avoid scrutiny by financial institutions.

Question 57. Discuss the functions of stock exchange.
Answer: The functions of a Stock Exchange are as follow:
1. A ready and continuous market for trading: Stock exchange provides a ready market for those who wish to buy and sell securities. Buyers and sellers do not have to search for each other. They come in contact with each other through brokers who provide a quick intermediation between them.

2. Liquidity: It provides quick liquidity to investors who are motivated by liquidity factors. People with surplus cash can invest in securities which provide them a return higher than the bank rate and people with deficit it cash can sell their securities to convert them into cash.

3. Time efficiency: It enables the security holder to dispose off his securities at the best price in the shortest possible time period. So it true for buyers.

4. Source of finance: Government local bodies, financial corporations and corporate enterprises have been able to raise crores of rupees by channelising individuals funds in securities. It thus, provides an effective source of finance to them where by they connect their financial requirements for their day-to-day working, setting up to new ventures, expansion, diversifications and modernisation of their existing units.

5. Pricing of securities: It, prices the securities as close as possible to their net worth. The prices are based on their present and future income earning capacity. Though some degree of speculation is always present, buyers and sellers deals in securities which almost reflect their true “work. Prices are quoted and published daily in the forms of stock market quotations.

6. Equity and safety in dealings: A stock exchange operates in accordance with rules and regulations framed by the government. The government is empowered under the Securities Contracts (Regulations) Act, 1956 to grant and withdraw approval or change bye-laws, demand enquiries on the members of stock exchange, supersede and suspend the governing body of the stock exchange, suspend its business etc.

7. Mobilisation of savings: It provides an outlet for investment of surplus funds of corporates and non-corporates in corporate securities that would fetch them a ratio of return generally higher than the rate offered by banks.

8. Capital formation: By channelising savings in the most productive investment outlets, stock exchanges provides for capital formation and economic growth of an economy.

Question 58. What is meant by National Stock Exchange of India (NSE)?
Answer: The National Stock Exchange is the latest, most modem technology driven exchange. It was incorporated in 1992 and was recognised as a Stock Exchange in April 1993. It started operations in 1994, with trading on the wholesale debt market segment. Subsequently, it lanched the capital market segment in November 1994 as a trading platform for equities and the futures and option segment in June 2000 for various derivate instruments. NSE has set f up a nation-wide fully automated screen based trading system.

The NSE was set up by leading financial institutions, banks, insurance companies and other financial intermediaries. It is managed by professional, who do not directly or indirectly trade as on the exchange. The trading rights are with the trading members who offer their services to the investors. The board of NSE comprises of senior executives.

Question 59. Authority can be delegated but not responsibility. Explain.
Answer: The power of taking decision in order to guide the activities of others is called authority. Authority can be delegated where the obligation of a subordinate to perform assigned duties. The manager divides some of work and authority among his subordinates. No manager can perform all the function himself. Responsibility can not be delegated in any circumstances.

Question 60. What are the reasons for the establishment of SEBI?
Answer: The capital market has witnessed a tremendous growth during 1980’s charactered particularly by the increasing participation of the public. This ever expanding investors population and market capitalization led to a variety of malpractices on the part of companies and others involved in the securities market. The glaring examples of these malpractices include existence of self-styled merchant bankers, unofficial private placements rigging off prices, unofficial premium on new issues, non-adherence of provision of the Companies Act, violation of rules and regulations of stock exchanges and listing requirements, delay in delivery of shares etc. These malpractices and unfair trading of shares etc. These malpractices and unfair trading practices have eroded investors’ confidence and multiplied investors’ grievances.

The government and the Stock Exchange authorities were helpless in redressing the investors problems because of lack of proper penal provision in the existing legislation. This gave rise reasons to establish Securities Exchange Board of India.

Question 61. Define the Securities and Exchange board of India (SEBI).
Answer: The Securities and Exchange Board of India was established by the Government of India on 12th April for the orderly and healthy growth of securities market and for investors protections. It was to function under the administrative control of the ministry of finance of the Government of India. The SEBI was given all powers through the ordinance passed in Parliament to redress the investors and to control the malpractices prevailing in stock exchanges, the government of India took initiative to set up a separate regulatory body known as Securities and Exchange Board of India.

Question 62. What is ‘Treasury Bills’?
Answer: Treasury Bills: Treasury bills are issued by the Reserve Bank of India on behalf of the Government of India as a short term liability, and sold to banks and to the public, The issue period ranges from 14 to 364 days. Treasury bills are negotiable instrument, i.e,. there are freely transferable. They do not pay any interest but are issued at a discount. Their marketability makes them popular and they are considered a safe investment.

Question 63. What is marketing? What functions does it play in process of exchange of goods and services? Explain.
Answer: According to Candiff and Still marketing is the business process by which products are matched with the markets and through which transfers of ownership are affected. If a business organization produces the products after assessing the requirements of prospective customers, it is more likely to be successful to achieve its objective. The process of marketing works through the exchange mechanism.

The individual buyers and sellers obtain what they need and want through the process of exchange i.e. the process of marketing involves exchanges of products and services for money or something considered valuable by the people. Exchange mechanism refers to the process through which two or more parties come together to obtain the desired products or service from someone.

Question 64. Give the important features of marketing.
Answer: Features of Marketing:
1. Need and wants: The process of marketing helps individuals and groups in obtaining what they heed and want. Thus, the primary reason for people to engage in the process of marketing is to satisfy some of their needs or wants. Needs are basic to human beings and do hot pertain to a particular product. Wants are culturally defined objects that are potential satisfiers of needs.

2. Creating a market offering: Marketing offering refers to a complete offer for a produce for service, having given features, like size, quality, taste, etc. at a certain price, available at a given outlet or location and soon. A good ‘market-offer’ is the one which is developed after analysing the needs and preference of potential buyers.

3. Customer value: The process of marketing facilitates exchange of products and services between the buyers and sellers. The buyers make buying decision on their perception of the value of the product or service in satisfying their need, in relations to its cost. A product will be purchased only if it is perceived to be giving greatest benefit or value for the money.

4. Exchange mechanism: The process of marketing works through the exchange mechanism. The individuals (buyers and sellers) obtain what they need and want through the process of exchange. In the modem world, goods are produced at different places and are distributed over a wide geographical area through various middlemen, involving exchanges at different levels of distribution.

In short marketing is not merely a business phenomenon or confined only to business organiations but marketing activities are equally relevant to nonprofit organisations such as hospitals, schools, sports-clubs and social and religious organizations.

Question 65. What are the main objectives of marketing?
Answer: The main objectives of marketing are:

• Consumer Satisfaction: A business organisation can survive only if its products and services are demanded by customers. Effective marketing makes an effort to supply goods and services to the consumer.
• Identification of consumers’ demand: Marketing is concerned with assessment of consumers’ demand so that the producer can know what goods be produced and in what quantity.
• Co-ordination with other business activities: Marketing makes an effective effort of Co-operation with other aspect’s of business.
• Sales promotion: The aim of marketing is to boost sales through advertisement of mass contact technique. The new and old customers should be kept well informed about the quality and price of product.
• Control on sales areas: Marketing is useful in controlling the sales areas of any business organisation. Every organisation plans its sales according to an area or region, if any variation in sales then it sounds be corrected as soon as possible.

Question 66. What are the differences between marketing and selling.
Answer: The differences between marketing and selling are:
Marketing

1. Focuses on customer heeds.
2. Customer enjoys supreme importance.
3. Product planning and development to match products with markets,
4. Inregrated approach to achieve long term goals.
5. Converting customers needs.
6. Caveat vender (let the sellers beware)
7. Profit through customer satisfaction.

Selling:

1. Focuses on seller needs.
2. Product enjoys supreme importance.
3. High pressure selling to sell goods already produced.
4. Fragmented approach to achieve immediate gains.
5. Converting products into cash.
6. Caveat emptor (let the buyers beware).
7. Profit through sales volume.

Question 67. Define the marketing management.
Answer: Marketing management involves planning, organising, directing and controlling all marketing activities. It is responsible for developing and executing an appropriate marketing mix so as to achieve the organisational objectives. According to Philip Kotler, marketing management is the analysis, planning, implementation and control of programmes designed to create, build and maintain mutually beneficially exchanges and relationships with target market for the purpose of achieving organisational objectives.

Marketing management is thus marketing concept in action. It is an important functional are a of business. In most of the large concerns it is organised as a separate marketing department under the control of a marketing manager.

Question 68. Explain the significance of marketing mix.
Answer: Marketing mix represents a blending off our elements, product, price, promotion and physical distribution. Determination of marketing mix is an important decision which the market manager has to take. If proper marketing mix is determined the following benefits will accure to the organisation:

• Marketing mix serves as the link between the business firm and its customers. It focuses attention on the satisfaction of customers. Thus, it helps in pursuing consumer oriented marketing.
• Since marketing mix takes care of the needs of the customers it helps in increasing.sales and earning higher profits.
• Marketing mix gives consideration to the various elements of marketing system. There is a balanced relation between these elements.
• Marketing mix signifies that its four dements are closely inter-related. Decisions or changes in one element usually affect decisions or changes in the other.
• Marketing mix facilitates melting the requirements of different types of customers, product design, pricing, promotion and distribution will depend upon the needs and purchasing power of the customers.

Question 69. Define advertising. What arc its main features? Explain.
Answer: Advertising: Advertising is the dissemination of information, concerning an idea, product or service to induce action in accordance with the intent of the advertiser. According to William J. Stanton, “Advertising consists of all the activities involved in presenting to a group a non-personal oral or visual, openly sponsored message regarding a product, service or idea, this message called an advertisement, is disseminated through one or more media and is paid for by the identified sponsor.”

Features of advertising:

• The purpose of advertising is to promote ideas about the products and services of a business firm. It is directed towards increasing the sales of a business.
• Advertising is a non-personal form of presentation and promotion of ideas, goods or services, There is no face to face direct contact with the customers,
• It is also described as non-personal sales-manship. It is complementary to personal selling because it simplifies the task of sales force by creating awareness about the message in the minds of potential customers.
• Advertising is a paid form of communication. The advertisements are communicated through various advertising media and the advertiser has to pay for the space or time hired by him to communicate the message to the present and prospective customers.
• Advertising is done by an identified sponsor.

Question 70. Give the functions of labeling in the marketing of products.
Answer: The functions of labeling are as follows:
1. It suggests the product’s usage, cautions in use, etc. and specify its components.
2. It helps in identifying the product or brand. For example, the name Parle, Monaco imprinted on the pack helps us to identify from number of packs which one is Parle’s Monaco Biscuit.
3. It helps in grading the products into different categories. For example, Gamier. Hair conditioner comes in different categories for different hair say for ‘normal hair’ and for other categories.
4. It helps in promotion of the products. A carefully designed level can attract attention and give reason to purchase it. For example, the pack of Dabur Amla hair oil states, “Baalon mein dum, life main fun”. The label for Surf Excelmatic says, “Keep cloth, good look and your machine in top condition.”
5. Labelling performs the functions of providing information required by law. For example, the statutory warning on the package of cigarette or Pan masala is, “Smoking is injurious to health” or “Chewing tobacco is injurious to health”. Such information is required on processed goods, drugs and tobacco products also.

Question 71. Give the distinction between Advertisement and Personal Selling.
Answer: Distinction between advertisement and personal selling:

Basis	Advertisement	Personal Selling
1. Nature of contract	Advertisement is a non-personal form of communication. There is no contact between the advertiser and the buyer.	Salesmanship means personal selling, i.e the salesperson has face-to-face contact with the buyer.
2. Scope of contract	The scope of advertising is very wide. In another words it is addressed to a large number of people.	Salesmanship is a personalised communication and so its scope is very limited. The impact of salesmanship is visible on the buyer who comes into contact with Salesman.
3. Purpose	Advertisement aims at popularising a product and enhancing the reputation of its advertiser in the long run Its basic purpose is to create customers.	Personal selling aims at effecting sales in the short run.
4. Feedback	Immediate feedback from the public is not feasible.	Personal selling gets immediate feedback from the buyers.
5. Flexibility	Advertisement is not flexible	Personal selling buyers.
6. Payment	Direct payment has to be made for each piece of advertisement.	There is no need of direct payment in case of each contact between the salesmen and the prospective buyers.

Question 72. Product is a bundle of utilities. Do you agree?
Or, Product is a mixture of tangible and intangible attributes. Discuss.
Answer: A product may be defined as a bundle of utilies consisting of various product features and accompanying services. The bundle of utilities or the bundle of psychological satisfaction that the buyer receives is provided by the seller when he sells a particular product. Anything that can be of value to the buyers termed as products.

It can be tangible i.e. which can be felt seen and touched physically such as pencil, a cycle or an intangible such as services rendered by a doctor, hair dresser or a lawyer. Thus, anything that has value to the other can be marketed. It can be a product or a service or a person or a place, an idea or an event or an organisation or experience or properties.

Question 73. What are your responsibilities as a customer?
Or, State any two points of responsibility of a consumer.
Answer: As a customer our responsibilities are as follows:

• Do not make hurry in buying.
• Do not make forget to get receipt and Guarantee/Warranty card.
• Do not make compromise with quality.
• Beware from false and misleading advertisement.
• Contact immediately to the concerned officer against grievance/complaint.

Question 74. What is Recruitment? How it is differ from selection?
Answer: Recruitment function is concerned with discovering the sources of manpower required and tapping these sources, i.e. attracting the potential employees to offer their services to the working organisation.

Difference between recruitment and Selection:

Basis	Recruitment	Selection
1. Meaning	It is process of searching suitable candidates to fill up vacant job position.	It is a process of screening and selecting the most eligible candidates and offering them jobs.
2. Stage	Recruitment proceeds the staffing function.	Staffing always start where recruitment ends.
3. Nature	It is a positive process as more and more candidates are induced to apply for the job.	It is a negative process and more candidates are rejected than the number of selected candidates.
4. Contract of Service	There is no contracted relation created.	Selection involves contract of service between employees and the employer.

Question 75. What is meant by ‘Leadership’?
Answer: Leadership may be defined as the process of influencing the behaviour of people at work, towards the realisation of specified goals. It involves ability to use non-coercive influence on the activities, goals and motivation of others achieving organisational objectives.

Question 76. State any two differences between Advertising and Personal Selling.
Answer:
Advertising

1. Advertising is a means of indirect and impersonal communication.
2. It is a means of mass communication.
3. Usually there is no personal contact in case of advertising.
4. Message reaches the customers quickly.

Personal Selling:

1. Personal selling is a means of direct face-to-face communication.
2. Only limited number of people can be contacted.
3. There is personal contact.
4. Message reaches at a very slow speed.

Question 77. What is meant by on the job training?
Answer: On the job method: The trainees are asked to do a particular job on a machine or in a workshop or laboratory. They are taught the technique of operating a machine or using tools are equipment by an experienced employee or a special supervisor. In this way, the trainees learn a job and also produce goods. Supervisor examines the work done by them from time to time and in case of any defect suggests the way tomend it.

Question 78. State two points of importance of Supervision.
Answer: The term supervision is normally used m management to mean overseeing the employees at work. It implies, instructing, observing, monitoring and guiding the subordinates at work place to ensure that plans and procedure are implemented as intended, (i) It is a universal activity performed at all levels of management, (ii) It is an important part of the directing function of management.

Question 79. What is Budgetary control?
Answer: Budgetary control is a technique of controlling based on budgets. A budget is a quantitative statement for a definite future period of time for the purpose of obtaining a given period. Actual results are compared with budgetary standard. An organisation may have a budget for any activity or function.

Question 80. State any two features of Scientific Management.
Answer: Two features of scientific management:

1. Systematic approach: Scientific management is a systematic approach to management and its use ensure that all activities are completed in a systematic and scientific manner.
2. Improves the efficiency of workers: The main aim of scientific management is to increase the efficiency of workers. This is done through conducting various kind of studies such as time study, motion study and fatigue study.

Question 81. How scale of operation affect the requirement of fixed capital?
Answer: Fixed capital requirements depend on the size of business. If the size is big, it will need more fixed capital. For smaller organisation the need will be less.

Question 82. How “scale of oprations” affect the requirement of fixed Capital?
Answer: Fixed capital requirements depend on the size of business. If the size is big, it will need more fixed capital. For smaller organisation the need will be less.

Question 83. “Sales promotion makes advertising effective.” How?
Answer: Once the samples of a particular product reach the consumers through sales promotion the advertisement of the same product gets more effective.

Question 84. Give two advantages of functional Organisation.
Answer: The advantages of functional structure are:

1. It is easier to organise department based on functions and sub-functions
2. It gives balanced weightage to the basic functions on which the survival of a firm depends.