KVS RAIPUR REGION

Study Materials (MODULE) for Low Scorer Students

Subject: Business Studies – XII

Subject Co-ordinator: Sh. V. Kalyanraman, Principal KV Mahasamund S.N. Name of the Teacher’s Designation Topics KV

01 Sh. G. Shrivastava

PGT

Marketing Management, Consumer Protection Dongargarh

02 Sh. R. K. Thakur Financial Management and Financial Market Raipur No. 02

03 Smt. Anita Darfade Directing and Controlling Raipur No. 01

04 Ms. Sarita Devi Organizing and Staffing Raipur No. 01

05 Sh. V Jaisawal Management & Business Environment, Planning Durg

06 Sh. Deepak GuptaNature & Significance of Management, Principles of Management

Mahasamund

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Points to be remembered

DO IT

1. Do the work neat and clean.2. Don’t draw the margin line, just fold the answer sheet from both the edges (left and right).3. Put the answer number clearly on the middle of the page and highlight it by underlining.4. Solve all the parts of the question together.5. Make strategy/plan to solve the question, to avoid vesting of time for making wrong answer.

DON’T DO IT

1. Spending time on a particular question more than its requisite time2. Cramming to learn journal entries, posting to ledger etc.3. Ignoring about writing of heading, conclusion etc.4. Solving some part of one question at the another place5. Request to examiner for giving pass mark

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NATURE&SIGNIFICANCEOFMANAGEMENT and

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PRINCIPLESOFMANAGEMENT

1. Mohan, a manager, does not distribute the work amongst his subordinates, eitheraccording to capability or proportionately. Which principle of management is beingoverlooked and why ? (2007---5—2)2. Write a short note on ‘Management as a Discipline’. (2007---6---3)3. Explain in brief the objective of management. (2007---11---4)4. Briefly explain the techniques of Taylor’s Scientific Management. (2007---16---5)5. List any two personal objective of management. (2009---1----1)6. Give any one reason why principles of management are not rigid prescriptions. (2009—2---1)7. Hero Ltd. target is to produce 10,000 shirts per month at a cost of Rs. 150 per shirt.The Production Manager could achieve this target at a cost of Rs.160 per shirt.Do you think the Production Manager is ‘effective’? Give reason in support of your answer. (2009---3---1)8. State the objective of ‘Motion Study’. (2009---4---1)9. ‘Art is concerned with personal application of knowledge.’In the light of this statement compare all the features of art with management and prove that it is an art. (2009---21---5)10. (i) Name and explain the principal of management in which workers should be encouraged to develop and carry out their plans for improvement in the organization. (ii) Name and explain the technique of scientific management which helps in enimilating the unnecessary diversity of product s and thus results in saving cost. (2009---22---5)11. Your grandfather has retired from an organization in which he is responsible for implementing the plans developed by the top management. At which level of management was he working? State one more function performed at this level. (2011---1---1)12. List any two social objective of management. (2011---2---1)13. State any one reason why ‘Principal of Management’ are important. (2011---3---1)14. Give the meaning of ‘Mental Revolution’ as suggested by F.W.Taylor. (2011---4---1)15. ’Management is a Profession like medical or legal Profession .‘ Do you agree with this statement ? Give any five reasons in support of your answer. (2011---21---5)16. Expain Fayol’s principles of ‘Equity’ and ‘Order’ with examples. (2011---22---5)17. Identify the nature of management when it is practiced as personal application of existing knowledge to achieve desired results. (2012---3---1)18. Name the level of management at which the management are responsible for implementing and controlling the plans and strategies of the organization. (2012---4---1)19. Explain how principles of management : (i)help in optimum utilization of resources and effective administration, and (ii) help the managers in meeting changing environment requirements. (2012---11---3)20. Explain the technique of scientific management which is the strongest motivator for a worker to reach standard performance. (2012---16---4)21. Explain how management ‘increase efficiency’ and ‘helps in the development of society’.

(2012---21---5)22. Identify the nature of management when it is said to be a systematized body of knowledge that explain certain general truths. (2012---3---1)23. At which level of management the managers are responsible for the welfare and survival of the organization. (2012---4---1)24. Explain how principles of management: (i) provide useful insight into reality and (ii) helpful in thoughtful decision making. (2012---11---3)25. Explain the technique of scientific management that is the extension of ‘Principal of division of work and specialisation’. (2012---16---4)

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26. What is meant by ‘Co-Ordination’? How it ‘integrates group efforts’ and ‘ensures unity of action’ ? Explain. (2012---21---5)27. Identify the nature of management when a manager applies the existing theortical knowledge in his own unique manner. (2012---3---1)28. At which level of management are the managers responsible for maintaining the quality of output and safety standards ? (2012---4---1)29. Explain the technique of scientific management which separates the planning and execution work.(2012---16---4)30. What is meant by ‘Co-Ordination’ ? Explain any two points of its importance in management.(2012---21---5)Solution:1.Work Division,Because the work should be divided into small tasks to the competent persons which leads to specialization.Specialisation is the most efficient way to use human effort.2.’Management as a Discipline’ means it is based on systematic body of knowledge .It has well defined principles based on variety of business situation.3. (i)Organisational Objective: (a)Survival (b)Profit (c)Growth (ii)Social Objective : To follow the obligation towards various stakeholders of society. To use environment friendly method. (iii) Personal Objective: To satisfy the diverse needs of various employees To provide good remuneration

To provide good working condition4.Techniques of Scientific Management (Any five)(i)Functional Foremanship To absorb the benefit of specialization, work should be divided into small jobs. Firstly there should be two departments Planning Departments and Production Department and there should be four clerks under each department for efficiency.(ii)Standardisation : Standard should be fixed for each of the activity performed in the organization.Standard should be fixed for process,raw material,time taken,product,equipment used,methods or working conditions.These standard are the benchmarks which should be adopted during production.It will result in cost reduction and better quality.(iii)Simplification of Work: Simplification aims at eliminating unnecessary varieties,sizes and dimensions. It will result in saving of cost,labour,machine,stock and tools.(iv)Method Study : To find the best way to do a job ,right from procurement of raw material and till the final product is delivered to customer.It will result in minimizing the cost and improvement in quality.(v)Time Study : Time study determines the standard time for a particular job.After several readings a standard time is fixed for each activity.It will reduce the idle time.(vi) Fatigue Study : It determines that a worker feels tired physically and mentally after continue working.The rest intervals and work rotation will help one to regain energy and it will result in increased productivity.(vi) Differential Piece Wage System : According to this system Wages should be given on production basis. A high rate should be used to pay efficient worker and low rate should be used to pay inefficient worker.A worker is considered efficient when it achieve the target in standard time.5. Any two(i) Providing adequate remuneration (ii)Good working condition (iii)Retirement benefits (iv)Stability in service (v)Education and health facility6. Because the subject matter of management is human behavior which does not constant in all circumstances.

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7. Yes, the production manage is effective because he has completed the work in given time.8. The main objective of motion study is to eliminate the unnecessary activities from a particular process. Then completion of process will take less time and it will result in increased productivity.9. ‘Art is concerned with personal application of knowledge.’The above statement is true because knowledge can be acquired through study,observation and experience and on the basis of such knowledge a person settles the various problems by his own intelligence.Management is an art because of the following reasons :(i) Existence of theoretical knowledge: Art requires the existence of certain theoretical knowledge on the basis of which experts in various areas have derived some principles. In the same way there is a lot of literature in the field of management thus there is existence of theortical knowledge.(ii)Personalised application : Art is a personalized concept. Because the use of basic knowledge to achieve targets varies from person to person. The various experts will always differ in demonstrating and using their skill. In the same way in field of management a manager applies various principles and scientific techniques to solve the problem in his unique manner.(iii) Based on practice and creativity: Art requires the creativity and practice. On the basis of practice an expert improves his performance. In the same way practice makes a manager to perform well. If he is involved in critical situations he will develop his own theory to settle the problem. So we can say that management is an art.10.(i) Initiative : It is the principle of management in which workers are encouraged to develop and carry out their plans for improvement in the organization. According to this principle the manager should create such an environment in the organization that the employees get motivated to take first step to execute the plan. Their ideas and suggestions should be welcomed and suitably rewarded if they result in reduction of cost and improve the performance of organization.(ii) Simplification : According to this technique of scientific management the unnecessary design,sizes and varieties of product are eliminated . Because it will result in cost reduction due to less equipments,less inventory, less labour. The management can concentrate on the remaining activities.11. He is working at middle level of management. He has to interpret the policy of top management to lower level. He has to look after of his respective department. He has to assign duties and responsibilities to his subordinates.12.The two social objective of management are :(i) To fulfill the obligation towards various stakeholders.(ii) To use environment friendly methods and techniques.(iii) To provide good quality product and appropriate price.13. Principles of management are important to train the manager and to guide them to take decision. 14. The word ‘Mental Revolution’ means to chage the attitude of employer and employees both. Both should realize that each one is important. Management and workers should transform their thinkings. They should know that their interest is favourable to each other. The management should share the gains of organization. At the same time the workers should also try to work hard for the good of the organization.15. ’Management is a Profession like medical or legal Profession .‘ To answer it we should examine the salient features of a profession and see whether the management satisfies them.(i)Well defined body of knowledge : All profession are based on a well-defined body of knowledge. In the same way management also has a well defined body of knowledge. It has various principles for different business situations.

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(ii) Restricted Entry: The entry to a profession is restricted because a person has to acquire a special knowledge and degree in a particular field. But unlike professions such as medicine and law which requires a special degree there is no requirement of such special education for becoming a manager. But knowledge and training is desirable qualification for a manager.(iii)Professional Association : All profession are affiliated to a professional association which regulates entry, grants certificate of practice and enforce a code of conduct. To become a lawyer, a chartered accountant, a doctor they have to become a member of a professional association. There are several association of practicing manager in India, like AIMA. But there is no compulsion for manager to be a member of such professional association.(iv)Ethical code of conduct : All professional are bound by a code of conduct imposed by their profession association. This code of conduct guides the behavior of its members. But in field of management there is no requirement to be a member of a professional association so there is less code of conduct.(v)ServiceMotive : The basic motive of a profession is to service their client’s interest by rendering valuable personal service.In the same way the basic purpose of management is to help the organization to achieve the goal.16. Equity: According to this principle there should be equality in the behavior of manager towards all employees. Manager should send a message that everyone is equal in the eyes of management. There should be no difference because of religion, sex, caste, language etc. There should be equal opportunities for everyone in the organization. It will result in improved loyalty and devotion among workers towards organization. For example same salary should be provided to both of employees whether male or female who are doing same type of work.Order : According to this principle there should be a definite place for each person and material in the organization. And each person and material should be available at its own place. It will result in increased efficiency. For example if loose tools are placed at their proper place they can be used whenever required without spending time to search them. So all activities will be executed without any hindrance. 17. When management is practiced as personal application of existing knowledge to achieve desired results it is considered as Art.18. Middle Level19. (i)Optimum Utilisation of Resources :Principles of management equips the manager to foresee the cause and effect relationship of their decision. So the wastage associated with trial and error can be overcome. In this way the human and physical resources can be put to optimum use. This will result in higher output in minimum cost. Effective administration is also possible because of work division, unity of command, scalar chain etc.(ii) Meeting changing environment requirements : The principles of management are not rigid they can be modified and used according to changed circumstances. They can adapt the dynamic business environment. For example the principle of division of work can be applied to entire business also. Because of which in modern time organization needs outsourcing of services. The core activities they do themselves and look for outsourcing for non core activities. 20. The strongest motivator for a worker to reach standard performance is Differential Piece Wage System. According to this technique the workers are devided in two categories efficient and inefficient. That worker will be considered efficient who completes the given work in standard time. To reward the efficient worker a different rate of wages is adopted to pay them. For example if a worker produce 10 units in 8 hrs.then he will be paid by Rs.50 per unit and if he produce less than 10 units he will be paid by Rs.30 per unit. Then if a worker produces standard output he will get 10*50= Rs.500 and if he produces 9 units he will get 9*30= Rs. 270 This difference (500-270) of Rs.230 will highly motivate him to be efficient.

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21. Management plays an important role to achieve the goal of organization effectively and efficiently. The aim of a manager is to reduce costs and increased productivity through better planning ,organizing, directing, staffing and controlling the activities of the organization. Manager uses various principles and techniques which result in efficiency.

Management helps in development of the organization by fulfilling the obligation towards different stakeholders of business.Through this process it helps in development of society also. It makes an effort to provide good quality products and services at cheaper rates, creates employment opportunities and uses new technology for the betterment of society.22. Management is as a science.23. Top Level24. Importance of principles of management :(i) Provide useful insight into reality: The principles of management improves knowledge, ability and understanding of various managerial situations and circumstances. So the principle of management increase the efficiency of management. They can solve the problems quickly.(ii) Helpful in thoughtful decision making : The principle of management helps manager in taking scientific decision based on facts and logic.They are based on the objective assessment of the situation. Thus management principles helps in thoughtful decision making.25. The technique of scientific management that is the extension of ‘Principal of division of work and specialisation’ is functional foremanship. According to this technique to improve the efficiency of foreman work is divided in small parts and each work is assigned to a particular foreman . In this way he will become an expert in his field . In this technique the entire work is divided in two parts i.e. planning function and execution fuction. There are four personnel in each part who will do a specific work.

Factory Manager Planning Incharge Production inchargeInstruction Route Time and Cost Disciplinarian Speed Gang Repair Inspector Card Clerk Clerk Clerk Boss Boss Boss 26. ‘Co-Ordination ‘integrates group efforts’ : Coordination integrates the individual efforts for the attainment of the goal of organization. It provides a common direction to group efforts and ensures that the organization goal will achieve according to plan. ‘Co-Ordination’ ensures unity of action : Coordination ensures unity of action in the realization of a common purpose. It binds the action of different departments to achieve the common goal. It ensures that individual contribution is helpful to attain the goal of organization.27. Management is an Art.28. At supervisory or Operational level of management.29. . Functional foremanship is the technique of scientific management which separates theplanning and execution work. In this technique the entire work is divided in two parts i.e. planning function and execution fuction. There are four personnel in each part who will do a specific work.

Factory Manager Planning Incharge Production inchargeInstruction Route Time and Cost Disciplinarian Speed Gang Repair Inspector Card Clerk Clerk Clerk Boss Boss Boss According to this technique to improve the efficiency of foreman work is divided in small parts and each work is assigned to a particular foreman . In this way he will become an expert in his field.

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30. Co-ordination : Coordination is the force that binds all the other functions of management. It is the function of management which runs through all the activities of management, such as purchase, sales and finance etc. to achieve the goal of organization. It is exist in all function of management such as planning, organizing, staffing, directing and controlling. Importance of coordination: ‘Co-Ordination ‘integrates group efforts’ : Coordination integrates the individual efforts for the attainment of the goal of organization. It provides a common direction to group efforts and ensures that the organization goal will achieve according to plan. ‘Co-Ordination’ ensures unity of action : Coordination ensures unity of action in the realization of a common purpose. It binds the action of different departments to achieve the common goal. It ensures that individual contribution is helpful to attain the goal of organization.Suggested Questions :1. Why management is said a multifaceted concept ?2. ‘co ordination is essence of management.’ Explain.3. Explain ‘Unity of Command’ and ‘Unity of Direction’.4. Explain the principle of ‘Scalar Chain’ and ‘Gang Plank’ .

MANAGEMENT&BUSINESSENVIRONMENTBusiness Environment is a sum total of external factors that surround and influence an

organisation. Features of Business Environment: The salient features of business environment are:1. Totality of External Forces: The business environment is the sum total of all individuals, institutions and other forces that are outside the control of a business enterprises.2. Dynamic Nature: Business environment is dynamic in nature as it keeps on changing. 3. Specific and General Forces: Business environment includes both specific (like customers, investors, competitors etc) and general (such as legal, political, economic ect.) forces.4. Interrelatedness: Elements of business environment are closely interrelated.5. Complexity: Business environment consists of a large number of factors. Hence, complex in nature.6. Relativity: Business environment is a relative concept as it differs from firm to firm and from one region to the other.7. Uncertainty: It is very difficult to predict future accurately, especially when the environment a business firm faces, is changing at a very fast pace.Importance of Business Environment:1. First mover advantage2. Warning Signals3. Helps in tapping (converting input to outputs) useful resources4. Helps in planning and Policy Formulating5. Helps in Improving performance6. Helps in coping with Rapid Changes.Elements of business environment: Business environment consists of five important dimensions including economic, social, technological, political and legal. Economic environment includes such factors as interest rates, inflation rates, changes in disposable income of people, stock market indexes and the value of rupee. Social environment includes social forces like traditions, values, social trends, society’s expectations of business, and so on. Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business. Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold toward business.

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Legal environment includes various legislations passed by the government, administrative orders issued by government authorities, court judgments as well as decisions rendered by various commissions and agencies at every level of the government—center, state or local.Economic environment in India: The economic environment in India consists of various macro-level factors related to the means of production and distribution of wealth which have an impact on business and industry. The economic environment of business in India has been steadily changing since Independence mainly due to government policies. In order to solve economic problems of our country at the time of Independence, the government took several steps including control by the state of key industries, central planning and reduced importance of the private sector. These steps delivered mixed results until 1991 when Indian economy happened to face serious foreign exchange crisis, high government deficit and a rising trend of prices despite bumper crops.Liberalisation, privatisation and globalisation: As a part of economic reforms, the Government of India announced a new industrial policy in July 1991 which sought to liberate the industry from the shackles of the licensing system (liberalisation), drastically reduce the role of the public sector (privatisation) and encourage foreign private participation in industrial development (globalisation).Impact of Government policy changes on business and industry: The government policy of liberalisation, privatization.and globalisation has made a definite impact on the working of enterprises in business and industry in terms of (a) increasing competition (b) more demanding customers (c) rapidly changing technological environment (d) necessity for change (e) need for developing human resource (f) market orientation (g) loss of budgetary support to the public sector. In the new economic environment, the Indian enterprises have developed various strategies to meet the challenge of competitionGlobalization: A truly global economy implies a boundaryless world where there is:(i) Free flow of goods and services across nations; (ii) Free flow of capital across nations;

(iii) Free flow of information and technology;(iv) Free movement of people across borders; (v) A common acceptable mechanism for the settlement of disputes;(vi) A global governance perspective.Major Elements of Political Environment1. The Constitution of the country 2. Prevailing political system3. The degree of politization of business and economic issues4. Dominant ideologies and values of major political parties5. The nature and profile of political leadership and thinking of political personalities6. The level of political morality7. Political institutions like the government and allied agencies8. Political ideology and practices of the ruling party9. The extent and nature of government intervention in business 10. The nature of relationship of our country with foreign countries

Previous Year Questions:2010-Delhi-Set-123. Explain by giving any five reasons why understanding of business environment is

important for managers.Suggested Answer:

Understanding of business environment is important for managers because:

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1. It helps to identify opportunities and getting the first mover advantage. 2. It helps to identify threats and early warning signals.3. It helps in tapping useful resources.4. It helps in coping with rapid changes.5. It helps in assisting in planning and policy formulations.6. It helps in improving performance.(If an examinee has not given the headings as above but has given the correct explanation, full credit should be given)

2010-Out side Delhi-Set-224. Explain any five impacts of government policy changes on business and industry in India.Suggested Answer: See the basic theory

2010-Foreign-Set-223. Explain by giving any five reasons why understanding of business is important for

managers.Suggested Answer: As above

2011-Delhi-Set-15. “The understanding of Business Environment enables the firm to identify opportunities.”

What is meant by ‘opportunities’ here.1

Suggested Answer:Opportunities refer to the positive external trends or changes that will help a firm to improve its performance.

6. Business Environment includes both ‘specific and general forces’. List any four general forces. 2

Suggested Answer:General forces (any four): 1. Social 2. Political 3. Economic 4. legal 5. Technological.

2011-Outside Delhi-Set-15. “The understanding of Business Environment enables the firm to identify threats.” What

is meant by ‘threats’ here. 1Suggested Answer:

Threats refer to the external environment trends and changes that will hinder a firm’s performance.

6. Business Environment includes both ‘specific and general forces’. List any four specific forces. 2

Suggested Answer:Specific forces (any four): 1. Suppliers 2. Investors 3. Customers 4. Competitors .

2012-Delhi-Set-122. State any five points which clarify how understanding of Business Environment helps the

managers.5

Suggested Answer: Give the answer by explaining any 5 importance given above of business environment.

2012-Outside Delhi-Set-122. State any five impacts of Government Policy changes on Business and Industry.

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Suggested Answer: In the following manner the economic changes initiated by the Government of India are influencing the working of Indian Businesses: (give proper explanation of each point)1. Increased Competition2. Market orientation (Buyer’s Market)3. Rapidly changing Technological Environment:4. Loss of Budgetary Support to Public Sector5. Need for Developing Human Resource.

2012-Foreign-Set-122. Describe any five features of Business Environment.

5Suggested Answer: Give the answer by explaining any 5 features given above of business

environment.

Other Question:1. Give the meaning of the term ‘Business Environment’. OR What is business

environment. 1Suggested Answer: See the detail given above. 2. “Management of every enterprise can be benefited from being aware of different

dimensions of business environment.” Explain any four such dimensions. 4

Suggested Answer: Explain any four dimensions given above.3. Give any two examples of gain and loss each of the impact on business organisations due

to changes in economic environment. 2Ans: The examples of the impact on business organisation due to changes in economic

environment are:Gain: Insurance sector has been opened for private investment. Earlier there were only governmental agencies like LIC, New India Assurance, etc. Now with the policy change a number of private companies have entered the field like Max India Insurance, Royal Sundaram, ICICI Prudential etc.Loss: Gradual reduction in the subsidy on kerosene and Petroleum products has increased the cost for the industries using it as inputs to production.

4. Which Indian Policy has opened the doors of Indian economy for MNCs?1

Ans: Industrial Policy 1991.5. Write two political factors influencing business environment.

1Ans: 1. Political conditions such as general stability and peace in the country.

2. Specific attitudes of elected government.6. Write two legal factors influencing business environment. 1Ans: 1. Legislation passed by the government

2. Administrative orders issued by government authorities.7. The Finance Minister reduces the repo rate to face the situation of recession. This is

related to which dimension of business environment?1

Ans: Economic Environment.8. Name the term/process which indicates the induction of private ownership in state owned

enterprises. 1Ans: Privatization.

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9. How can environmental awareness help a manager? 1Ans: Environmental awareness can help managers to identify various threats on time and serve

as an early warning signals.10. Do you think that business environment is a relative concept? 1Ans: Yes, business environment is a relative concept since it differs from country to country

and even region to region.

Value Based Questions:1. Gamma is a chemical producing company. It has not set-up its waste disposal unit. All

the chemical waste is thrown in rive. What kind of organizational values are ignored could fit affect the people living in that area.

Ans: The industrial is ignoring its social responsibility and the kinds of values ignored are:1. Value for health and safety of the people.2. Respect for the environment. The entire ecological system will collapse.

2. A manager of a firm always takes into account the business environment while determining the plan for the business. What values are reflected in the manager’s behaviour?

Ans: The values reflected in the manager’s behaviour are:1. Awareness 2. Alertness3. Adaptability 4. Ready to act in the interest of the society.

3. One of the micro-blogging website decided to remove pages containing inflammatory content with false information on Assam violence. Name the values that are considered by the company.

Ans: the values that are considered by the company are”1. Unity and integrity of the country2. Peace3. Empathy.

PLANNINGPlanning is deciding in advance what to do and how to do. It is one of the basic managerial functions.Planning therefore involves setting objectives and developing an appropriate course of action to achieve these objectives.A plan is a specific action proposed to help the organization achieve its objectives. It is a document that outlines how goals are going to be met. The importance of developing Plans is evident from the fact that there may be more than one means of reaching a particular goal. So with the help of logical plans, objectives of an organization could be achieved easily.Single Use PlanSingle use plans apply to activities that do not recur or repeat. Single use plan is one time plan specifically designed to achieve particular goal that, once achieved will not recur in the future. Such Plan is developed to meet the needs of a unique situation. The length of a single use plan differs greatly depending on the project in question, as a single event plan may only last one day while a single project may last weeks or months. Eg. Programme, Budget.Standing Plan – Known As Repeat Use PlansStanding plans are used over and over again because they focus on organizational situations that occur repeatedly. They are usually made once and retain their value over a period of years while undergoing revisions and updates. That is why they are also called repeated use plans. Eg. Objective, Strategy, Policy, Procedure, Method, RuleImportance/benefits of Planning

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Planning provides directions, reduces risks of uncertainty, reduces overlapping and wasteful activities, promotes innovative ideas, facilitates decision making, establishes standards for controlling. Features of PlanningPlanning focuses on achieving objectives; It is a primary function of management; Planning is pervasive, continuous, futuristic and involves decision making, it establishes standards for controlling, it is a mental exercise.Limitations of PlanningPlanning leads to rigidity; reduces creativity; involves huge costs; It is a time consuming process; Planning does not work in a dynamic environment; and does not guarantee success.Planning ProcessSetting objectives: Objectives may be set for the entire organisation and each department or unit within the organisation.Developing premises: Planning is concerned with the future which is uncertain and every planner is using conjucture about what might happen in future.Identifying alternative courses of action: Once objectives are set, assumptions are made. Then the next step would be to act upon them.Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative.Selecting an alternative: This is the real point of decision making. The best plan has to be adopted and implemented.Implement the plan: This is concerned with putting the plan into action.Follow-up action: Monitoring the plans are equally important to ensure that objectives are achieved.Types of PlansObjectives: Objectives therefore can be said to be the desired future position that the management would like to reach.Strategy: A strategy provides the broad contours of an organisation’s business. It will also refer to future decisions defining the organisations direction and scope in the long run.Policy: Policies are general statements that guide thinking or channelise energies towards a particular direction.Procedure: Procedures are routine steps on how to carry out activities.Rule: Rules are specific statements that tell what is to be done.Programme: Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action. Budget: A budget is a statement of expected results expressed in numerical terms. It is a plan which quantifies future facts and figures.

Previous Year Questions:2009-Delhi-Set-15. State the first two steps in the process of Planning. 1Suggested Answer:

(i) Setting Objective (ii) Developing premises6. Give one difference between policy and procedure. 1Suggested Answer:

Policy: Policy is a general guideline which brings uniformity in decision making for achievement of predetermined objectives. A manager may use his discretion to interpret and apply a policy.Procedure: It consists of routine steps on how to carry out activities. It details the exact manner in which any work is to be performed. It specifies the steps in a chronological order.

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23. Explain five limitations of Planning. 5Suggested Answer: Explain any 5 limitations given above.

2009-Outside Delhi-Set-15. What is meant by ‘selecting an alternative’ as a step in planning process 1Suggested Answer: See above summary6. What is meant by ‘Policy’ as a type of plan. 1Suggested Answer: See above summary23. Explain any five point of importance of planning for a large business enterprise. 5Suggested Answer: Explain any 5 points of importance given above.

2009-Foreign-Set-15. What is meant by ‘follow-up-action’ as the step involved in planning process. 1Suggested Answer: See above summary6. Define the ‘Objective’ as a type of plan. 1Suggested Answer: See above summary23. Explain any five features of planning. 5Suggested Answer: Explain any 5 features given above.

2010-Delhi-Set-111. Define Planning. List any two limitations of Planning.

2Suggested Answer:

Planning means setting objectives for a given time period, formulating various courses of action to achieve them and then selecting the best possible alternative from among the various courses of action available. ORPlanning is deciding in advance what to do, how to do when to do and by whom it is to be done.

(or any other correct definition)The limitations of Planning are (Any two):1. Leads to rigidity 2. May not work in a dynamic environment3. Reduces creativity 4. Involves huge costs5. Time consuming process 6. Does not guarantee success.

16. Explain ‘Objective’ and ‘Strategy’ as types of plans.4.

Suggested Answer:Objective: An objective is the end which the management seeks to achieve. An objective needs to be expressed in specific terms and is to be achieved within a given time period.Strategy: A strategy is a comprehensive plan for accomplishing an organization’s objectives. It is a term used in defence parlance which means to prepare plans considering the plan of adversary. Whenever a strategy is formulated, the business environment needs to be taken into consideration.

2010-Outside Delhi-Set-111 Define Planning. List any two limitations of Planning.

2Suggested Answer: As above16. Explain policy and procedure as types of plans.Suggested Answer: As above

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2010-Foreign-Set-313 Define Planning. List any two limitations of Planning.

2Suggested Answer: As above19. Explain ‘Method’ and ‘Rule’ as types of plans.Suggested Answer:

Method: Method is the prescribed way or manner in which a task has to be performed. It deals with a task comprising one step of procedure.Rules: A rule is a statement that specifies what is to be done or not to be done. A rule does not allow for any flexibility or discretion. A rule prescribed penalty for violation.

2011-Delhi-Set-112. Differentiate between ‘Objective’ and ‘Strategy’ as types of plans. 3Suggested Answer:

Objective: An objective is the end towards which all activities of the organisation are directed. An objective needs to be expressed in measurable terms and is to be achieved within a given time period.Strategy: A strategy is a comprehensive plan for accomplishing an organisation’s objectives. Whenever a strategy is formulated, the business environment needs to be taken into consideration.(Due credit be given for differentiation in any form)

16. ‘Planning is important function of management’. State any four reason. 4Suggested Answer:

Importance of planning (any four):1. Planning provides direction by stating in advance how the work is to be done.2. Planning reduces risk of uncertainty by looking ahead and anticipating changes.3. Planning reduces overlapping and wasteful activities by co-ordinating the activities of different divisions.4. Planning promotes innovative ideas requiring application of mind and foresight.5. Planning facilitates decision making by making a choice from among the alternative courses of action.6. Planning establishes standards against which actual performance is measured.(or any other correct statement of importance)

2011-Outside Delhi-Set-112. Differentiate between ‘Policy’ and ‘Rule’ as a types of Plans. 3Suggested Answer:

Differentiation between Policy and RulePolicy: Policy is a general guideline which brings uniformity in decision making for achievement of predetermined objectives. A manager may use his discretion to interpret and apply a policy within its framework.Rule: A rule is a statement that specifies what is to be done or not to be done. It is a guide to behaviour. A rule does not allow for any flexibility or discretion and prescribes penalty for violation.

16. State any four features of planning. 4Suggested Answer:

Features of planning are : (Any four)1. Planning focuses on achieving organisational objectives.2. Planning is the primary function of management as it lays down the basis for all other functions of management.

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3. Planning is pervasive as it is required in all organisations, at all levels and in all departments.4. Planning is continuous because a plan is framed, implemented and is followed by another plan.5. Planning is futuristic as it involves looking ahead and preparing for the future.6. Planning involves decision making as it involves a choice from among the various alternative courses of action.7. Planning is a mental exercise as it is intellectual activity of thinking rather than doing.8. Planning provides the basis for controlling by providing standards.

2012-Delhi-Set-11. Name the type of plan which provides the broad contours of an organization’s business.

1Suggested Answer: Strategy2. ‘Planning always leads to success.’ Do you agree? Give reason in support of your answer.

1Suggested Answer: No, planning may not always lead to success because planning is based on

certain assumptions about the future. These assumptions may or may not be correct.23. State any five limitations of ‘Planning’.

5Suggested Answer: Explain any five limitations given above.

2012-Outside Delhi-Set-11. Name the type of plan which is time bound and linked with measurable outcome.

1Suggested Answer: Objective2. ‘Planning is done for achieving the organizational goals.’ Do you agree? Give one reason

in support of your answer.1

Suggested Answer: Yes, because it ensures that goals are clearly defined so that they act as a guide for what actions are to be taken and in which direction.

23. State any five features of ‘Planning’5

Suggested Answer: Explain any five features given above.

2012-Foreign-Set-11. Name the type of plan which provides the prescribed ways in which a task has to be

performed considering the objective.1

Suggested Answer: Procedure2. How is planning a pervasive function? State.

1Suggested Answer: Planning is required at all levels of management as well as in all departments

of the organisation.23. Explain any three advantages and two limitations of ‘Planning’.

5Suggested Answer: Explain any three advantages and any two limitations given above.

Other Questions:Q.1 What are the key elements in the concept of planning?

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Ans: There are three key elements in the concept of planning. These are:(a) Establishing clear, precise and realistic objectives for a given time period.(b) Determining and evaluating the various available alternatives of doing the task.(c) Selecting the most suitable alternative.

Q.2 “Failing to plan is planning to fail.” Give two reasons and explain with suitable example.4

Suggested Ans: The given statement highlights the importance of planning. Explain any two importance.

Q.3 Why is it said that planning is pre-requisite for controlling?1

Suggested Ans: Planning is said to be pre-requisite for controlling because planning provides performance standards for which control is exercised.

Q.4 Explain how ‘Planning’ provides direction to action.3

Ans: Planning provides direction to action by:(a) Stating in advance how work is to be done.(b) Clearly defining goals and objectives so that actions can be taken accordingly.(c) Determining the policies, programmes, procedures and strategies which provides guidelines to the employees to achieve these objectives.

Q.5 Explain how ‘Planning’ reduces risk of uncertainty.3

Ans: Planning reduces risk of uncertainty by:(a) Making use of effective forecasting techniques, it enables the managers to look ahead and anticipate changes.(b) It shows the ways to deal with changes and uncertain events(c) It helps in developing managerial responses for the unforeseen and unanticipated circumstances by stimulating ‘what if’ situations.

Q.6 “Planning facilitates decision making” and “establishes standards for controlling” Explain how?5

Suggested Ans: Explain the two statements in the light of features of planning.Q.7 ‘Planning is necessary for the effective management”. Comment

5Suggested Ans: Explain the importance / benefits of planning.Q.8 Briefly explain how planning helps in co-ordination.Ans: Planning is regarded as the parent exercise as at covers all other functions of

management. It involves deciding in advance: what to do- i.e. planning objectives, how to do- i.e. planning the organisation, when to do- i.e. planning the time schedule, who is to do- i.e., planning the staffing and what ought to be done has been achieved- i.e. planning the control system. Activities are planned in such a manner that there is complete harmony. Planning is a step by step approach and through this systematic approach it helps in co-ordination.

Q.9 “Planning restricts creativity”. Explain (OR) State how planning leads to rigidity.3

Ans: Planning restricts creativity because:1. Planning is usually done by the top level management and rest of the organisation just implements it.2. All organizational activities are preconceived and predetermined at the stage of planning itself.3. There is no or very little scope for middle and lower levels to deviate from the plan.

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Q.10 “Planning does not guarantee success”. Explain3

Ans: Planning does not guarantee success because:1. Future is full of uncertainty, hence accurate prediction about future is not always possible.2. Managers have a tendency to apply previously tried and tastes successful plans, which may not hold valid or appropriate in current environment.3. Even if plans are well laid down, the extent to which these plans can be transformed into action determines the level of success.

Q.11 Explain the process of Planning. OR‘Defining organizational objective’ is the first step in the process of planning. Explain the other steps of this process.

Suggested Ans: Explain the steps involved in the process of planning as given above.Q.12 What are the planning premises required in the process of planning?

3Ans: Planning premises are the anticipated environments in which plans are expected to

operate. They include assumptions or forecasts of the future and known conditions that will affect an organisation. Planning premises are foundations upon which the entire structures of planning is built and it is the correctness of these assumptions that determines the success of plans.

Q.13 What are the standing plans and Single-use-plans?1+1

Suggested Ans: Explain the terms as given above.Q.14 Distinguish between the the standing plans and Single-use-plans.

3Ans:

Sl. No.

Basis Standing Plan Single Use Plan

1 Meaning Standing plan is formulated to deal with recurring problems.

Single-use plan is formulated for a specific period or situation.

2 Repetition These are made to be used time and again.

These can not be used again

3 Examples It includes objectives, strategy, policy, procedure, method and rule.

In includes programme and budget.

Q. 15 “No enterprise can achieve its objectives without systematic planning”. Do you agree with this statement. Give any five reason in support of your answer.

1+5Suggested Ans: Yes, I agree with this statement. The planning is the primary function of every

organisation. The management process starts with the planning and all other functions follow. The objectives to be achieved by a business enterprise are clearly laid down at the time of planning. Thus planning is a purposeful activity. Explain any five benefits or importance for reason in support of your answer.

Q.16 “Planning is done by human beings yet they can cause the failure of entire system”. Explain. 4

Suggested Ans: The entire planning exercise may turn out to be futile / spoiled due to human element involved in it. The various ways in which it can influence planning are: (Explain the following limitations)1. Unwarranted Elaboration:2. Delay in Action:3. Lack of Accuracy:

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4. Psychological Barriers:Q.17 “Some times planning fails inspite of the best efforts of management”. Do you agree?

Give any five reason in support of your answer.4

Ans: The above mentioned statement is true because:1. Planning is concerned with future and futures is uncertain.2. Planning may cause delay in action as it is time consuming action3. Due to psychological barriers, planning may be raised by some of the managers and employees.4. As planning is done according to pre-determined manner, no alteration is made after.5. It is an expensive process.

Value based Question:1. Name the values, which a business organisation follows when it plans.Ans: The values, which are observed by a business organisation, are:

1. Minimising wastage of resources2. Saving time and energy3. Ensuring survival of business.

2. An insurance company dealing with public has clearly specified and put signboards at all the place in the organisation indicating “No Smoking”. Despite that some of the workers continued smoking in the office premises. Name any two values, which are ignored by the workers.

Ans: Values ignored by the workers are:1. Obedience for the organizational rule.2. Self-discipline3. Work culture4. Concern for the health of other people5. Ignoring the ban imposed by government for smoking at public place

3. Which important value is talked about when the staff is complying with the rules and regulation/Code of Conduct?

Ans: Discipline.

Solve yourself:1. How can political climate and policies of competitors obstruct planning?2. Give an example each of any three limitations of planning which are beyond the control

of an organisation.3. An auto company C Ltd. is facing a problem of declining market share due to increase

competition from other new and existing players in the market. Its competitors are introducing lower-priced modes for mass consumers who are price sensitive. For quality conscious consumers, the company is introducing new model with added features and new technological advancements.(i) Prepare a model business plan for C Ltd. to meet the existing challenge. You may specify what types of plans you are preparing.(ii) Identify the limitations of such plan.

ORGANIZINGVery short Ans.wer type questions :-(1 mark)Q.1 Define organisation.Ans.. Organisation is a structure may be organisation of system of job positions, the roles assigned tothem and the authoring relationship among various positions.Q.2 What is meant by organizing?Ans.. Organising can be defined as a process that initiates implementation of plans by

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Clarifying jobs and working relationships and effectively deploying resources for attainment ofidentified and desired results (goals).Q.3 Which level of managers are responsible for determining formal organisation?Ans.. Top level managementQ.4 Name the type of organisation which does not have any predetermined objectivesInformal organisationQ.5 Give the meaning of organisation as structure.Ans.. Organisation structure can be defined as a framework within which managerial and operatingtasks are performed It specifies the relationship between people, work, and resources.Q.6 Define authority.Ans.. Authority refers to the right of an individual to command his subordinate and to take actionwithin the scope of his position.Q.7 Mention the essential elements of delegation of authorityAns. Authority, Responsibility and AccountabilityQ.8 Can responsibility be delegated?Ans. According to the principle of absolute responsibility. authority can be delegated but responsibilitycan’t be delegated by a manager. The manager remains responsible our accountable to his ownsuperior for the tasks which he may assign to his subordinateQ.9 What do you mean by centralization?Ans..Centralization means concentration of all decision making functions at the apex of themanagement hierarchy decision making authority hies with the help of top level of management.Managers have less freedom action. It is suitable for small organisation.Q.10 What is decentralization?Ans.. Decentralization means the delegation of all decision making functions to the lower level of thehierarchy. Decision making authority is shared with lower levels of Management Mangers havemore freedom of action. It is suitable for large organisation.Q.11 Which organizational structure is suitable for a multi-product manufacturing company?Ans. Divisional organization structureQ.12 Which organizational structure is suitable for a uni-product manufacturing company?Ans. Functional organization structureQ.13 Out of formal and informal organisation which is dependant upon which?Ans. Informal organization depends on formal organization.Q.14 How is informal organisation created?Ans. Informal organisation is created spontaneously by the employees working together andinteracting with each other.Q.15 Name the organisation in which employees are allowed to communicate freely and there are norules and regulations.Ans.. Informal organisationQ.16 Distinguish between formal and informal on the basis of purpose.Ans. Formal Organisation is formed with the purpose of achieving organizational goal whereasInformal organization is formed to satisfy social, personal and psychological needs.Q.17 Name the concept which reduces the workload of a manager.Ans. Delegation of authorityQ.18 Define span of control.Ans. It refers to the number of subordinates coming under direct control and supervisionof the superior.Q.19 In ABC Ltd. all the decisions are taken by top level management only. Which policy is followedby organisation?Ans. Centralization

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Short Ans.wer Type Question (3/4 marks)Q.1 How does informal system work in a formal organization?Ans. An informal system works in an informal organisation without any formalities.a. An informal organisation originates from within the formal organisation as a result ofpersonal interaction among employees.b. The standards of behaviour evolve from group norms rather than officially laid downrules and regulations.c. Independent channels of communication without specified direction of flow ofinformation are developed by group members.Q2 Discuss the steps of Organising.a) Identification and Division of WorkThe first step in the process of organizing involves identifying and dividing the total work to bedone into specific activities (called jobs) in accordance with previously determined plAns..Such division of work into jobs is necessary because of the following reasons :One individual cannot perform the entire work. By dividing the work, the burden ofwork can be shared among the employees.b) Grouping jobs and DepartmentalisationThe second step in organizing is to combine or group similar/related jobs into largerunits called departments, divisions or sections. This grouping process is called“Departmentalisation”. Departments can be created using several criteria as a basis suchas products territory etc.c)Assignment of Duties:It is necessary to allocate work to various employees. Once departments have been formed, eachof them is placed under the charge of an individual, called departmental head (e.g., production,manager, finance manager, marketing manager, etc.) Jobs are then allocated to the members ofeach department according to their skills and competencies.d)Establishing Reporting Relationships :Merely allocating work is not enough. Each individual should also know from whom he has totake orders and to whom he is accountable. The establishment of such reporting relationshipshelps in coordination amongst various departments.Q.3 Give any three demerits of divisional organisation.Ans. Demerits of Divisional structure(i) Departmental conflicts : Conflict may arise among differentdivisions with reference to allocation of funds and further a particular division myseek to maximize its profits at the cost of other divisions.(ii) Costly : It may lead to increase in costs since there may be aduplication of activities across products. Providing each division with separateset of similar functions increases expenditure.(iii) Ignoring of organizational interests : It provides managers withthe authority to supervise all activities related to a particular division. In courseof time, such a manager may gain power and then he may ignore organizationalinterests.Q4 .State four advantages of Delegation of Authority.Ans. Delegation of authority is necessary in all types of organizations. Reasons can be seen through theimportance.The importance of delegation of authority may be outlined as follows :1. Reduced workload of managers : Delegation of authority permits a manager to share hisworkload with his subordinates. By passing on the routine work to the subordinates, themanager is able to concentrate on more important aspects of his subordinates and is able toconcentrate on policy matters and decision-making. This would increase his effectiveness.2. Effective management : The manager who delegates authority can perform much more thanthe one who does not. This is because the manager can get some work done by his

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subordinates and is able to concentrate on policy matters and decision-making. This wouldincrease his effectiveness.3. Motivation of employees : Delegation implies grant of authority to the subordinates along withresponsibility for work. A result, subordinates have a sense of recognition. They aremotivated to work for higher performance. They do their job to the best of their abilities andskills.4. Employee development : As a result of delegation, employees get more opportunities to utilizetheir talent. It allows developing those skills which will improve their career prospects. Itmakes them better leaders and decision makers. Thus, delegation helps by preparing betterfuture managers.Q.5 State any two circumstances in which Divisional organization structure is moresuitable.Suitability(i) Divisional structure is suitable for those business enterprises where a large variety ofproducts are manufactured using different productive resources.(ii) When an organisation grows and needs to add more employees, create moredepartments and introduce new levels of management, it will decide to adopt adivisional structure.Q.6 Delegation of authority is based on the elementary principle of division of work. Explain.Ans. In division of work, the work is divided into small tasks. Same way in delegation, themanagerdivides some of his work & authority among his subordinates. No manager can perform all thefunctions himself. To get the work done efficiently and in a specialized manner, the managerdivides the work among his subordinates according to their qualification & capability.Q.7 Authority can be delegated but responsibility cannot. Explain.Ans.. Authority can be delegated but responsibility cannot. Delegation does not mean abdication.The manager shall still be accountable for the performance of assigned tasks. The manager cannotescape from the responsibility for any default or mistake on the part of his subordinates.Thus irrespective of the extent of delegated authority, the manager shall still be accountable to thesame extent as before delegation.LONG ANSWER TYPE QUESTIONS (5 / 6 mks)Q3. What is meant. by functional structure? Give its merits & demeritsAns. Functional organization structure is a structure whereby the departments are created on thebasis of functions of the organization such as Production, marketing, finance etc.Advantages/Merits1. Specialisation : A functional structure leads to occupational specialization sinceemphasis is placed on specific functions. this promotes efficiency in utilization ofmanpower as employee perform similar tasks within a department and are able toimprove performance.2. Efficiency : It helps in increasing managerial and operational efficiency and thisresults in increased profit.3. Minimises costs : It leads to minimum duplication of efforst which results ineconomies of scale and thus lowers cost.4. Better control and coordination : It promotes control and coordination within adepartment because of similarity in the tasks being performed.Proper attention : It ensures that different functions get due attention.5. Ease in training employees : In makes training of employees easier as the focus isonly on a limited range of skills.Disadvantages/Demerits1. Functional empires : A functional structure places less emphasis on overallorganizational objectives than the departmental objectives. Such practices may leadto functional empires wherin the importance of a particular function (or department)may be over-emphasised.

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2. Problems in coordination : Pursuing departmental interests at the cost oforganizational interests can also hinder the interaction between two or moredepartments. It may lead to problems in coordination among different departments.3. Conflict of interests : A conflict of interests may arise among departments whenthe interests of two or more departments are not compatible.4. Inflexibility : It may lead to inflexibility as people with same skills and knowledgebase may develop a narrow perspective and thus have difficultyQ4. Why is organising considered an important function of management? Give any six reasons?Ans. The importance of organizing may be summaries as follows :-(a) Benefits of specialization : The activities are grouped very carefully into specialized jobs on thebasis of similarity. repetitive performance of a particular task leads to specialization.(b) Clarity in working relationships : The jobs of managers and non managers are clearly defined &differentiated.(c) Effective administration : Organising provides a clear description of a jobs and related duties.This helps to avoid confusion and duplication. Clarity in working relationship enables properexecution of work. This brings effectiveness in administration.(d) Source of support and security improves job satisfaction: Organising is a source of support,security and satisfaction to managers and employees in performing their assigned tasks. Itrecognizes the status levels of members; each one of the members enjoys a definite status andposition in the organisation.In a sound organisation every individual is assigned the job for which he is best suited. Theassignment of right jobs to right persons improves job satisfaction among the employees.(e) Optimum utilization of resources : A sound organisation helps In the optimum utilization oftechnological and human resources by avoiding duplication of work and overlapping of efforts.(f) Adaptation of change : The process of organizing allows a business enterprise to adapt itselfaccording to changes in the business environment. It allows the organisation structure to besuitably modified and the revision of inter-relationships amongst managerial levels to pave theway for a smooth running of the business.Q5. “Delegation is the entrustment of responsibility and authority to another and the creation ofaccountability for performance.” Explain the elements of delegation in the light of this statement.a)ResponsibilityResponsibility is the obligation of a subordinate to carry out assigned activities to thebest of his abilities.It arises from a superior-subordinate relationship because the subordinate is bound toperform the duty assigned to him by his superior.Thus, responsibility flows upwards, i.e., as subordinate will always be responsible to hissuperior.b) AuthorityAuthority is the sum of powers and rights of an individual to command his subordinates,to use financial, material and human resources as well as the right to take action withinthe scope of his position.Authority is needed to discharge a given responsibility.Authority flows from top to bottom, i.e., the superior has authority over the subordinate.An important consideration to be kept in view with respect to both authority andresponsibility is that when an employee is given responsibility for a job he must also begiven the degree of authority necessary to carry it out. Thus, for effective delegation, theauthority granted must be equal to the assigned responsibility.If authority granted is more than responsibility, it may lead to misuse ofauthority.

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On the other hand, if responsibility assigned is more than authority, it maymake a person ineffective.c) AccountabilityAccountability implies being Ans.werable for the final outcome. Once authority has beendelegated and responsibility accepted, one cannot deny accountability.It cannot be delegated and flows upwards, i.e., a subordinate will be accountable to asuperior for satisfactory performance of work.It indicates that the manager has to ensure the proper discharge of duties by hissubordinates.Conclusion:· While authority is delegated, responsibility is assumed, accountability isimposed. Responsibility is derived from authority and accountability is derivedfrom responsibility.

1) What is organising?Ans- organising refers to the process of identifying and grouping various activities and bringing together physical, finanacial and human resources and establishing product relations among them for achievment of specific goals.2) What is functional structure?Ans- When activities are grouped together under one department according to nature of function they are involve in then it is known as functional structure.3) What is divisional structure?Ans- When activities are grouped together on the basis of different product produced by company then it is known as divisional structure.4) What is formal organisation?Ans- The formal organisation is designed and established by management to achieve certain goals. It is a system of clearly defined activities and relationship.5) What is informal organisation?Ans – Informal organisation exists within the formal organisation, the employees develop friendly relationship and form small social group. The network of these social groups based on friendship is called informal organisation.6) What is delegation?Ans- Delegation is the process of sharing of responsibilities between superior and subordinates.7) What are the elements of delegation?Ans – Responsibility,authority, accountability8) Which orgafnisatonal structure is suitable for a multi-product manufacturing company?Ans- Divisional structure.9) Name the concept which reduces the work load of a manager.Ans- Delegation of authority reduces the work load of a manager.10) What is the objective of decentralisation?Ans- To disperse authority to the lowest level.

Business studies3 marks questions

1. Define ‘organising’ as function of management?Ans. Organising refers to the process of identifying and grouping various activities and bringing together physical, financial and human resources and establishing productive relations among them for achievement of specific goals.2. State three steps of the process of organising.Ans. The three steps of the process of organising are:

(a) Division of work(b) Grouping of jobs and departments

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(c) Assignments of duties.3. Explain any three reasons why organising is considered as an important function of

management.Ans. Three reasons for why organising is an important function of management:

(a) Benefits in specialisation- In organising every individual are assigning a part of total work and not the whole task.

(b) Role of clarity- In the organising function the employees are assigned different jobs and the managers clearly define the jobs.

(c) Development of personnel- delegation of authority is an important part of organising.

4. State any three advantages of ‘formal organisations’.

Ans. The three advantages of formal organisations are-(a) Systematic working(b) Achievement of organisational objectives(c) No overlapping of work.

5. What is functional organisation structure? Give two advantages of this structure.Ans. When activities are grouped together under one department according to nature of function they are involved in then it is called functional structure.Two advantages of functional structure are-(a) Specialisation(b) Easy supervision(c) Easy co-ordination6. Discuss the disadvantages of divisional structure of organising.Ans. The three disadvantages of divisional structure are-

(a) Each department will require all the resources as every division will be working as an independent unit.

(b) Each department focuses on their product only and they fail to keep themselves as a part of one common organisation.

(c) Conflict on allocation of resources. 7. Explain delegation of authority.Ans. A process of entrusting responsibilities and authorities to the subordinates and creating accountability on those employees who are entrusted responsibilities and authorities is called delegation of authority.8. Why it is necessary to delegate authority? Give three reasons.Ans. Three reasons for the necessity of delegation of authority are-

(a) Effective management(b) Employees development(c) Motivation of employees.

9. Explain any three importance of decentralisation.Ans. The three importance of decentralisation are-

(a) Develop managerial talent for future- In the decentralisation process managers working at lower and middle level also learn the art of making decision.

(b) Facilitates growth- Decentralisation grants more autonomy or freedom to lower level.

(c) Promotes initiative and creativity- The initiative directly depends on the authority.

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10. Give any three considerations must kept in mind while building an organisational structure-

(a) Job design(b) Departmentation(c) Span of control

Q.1 Name the function of management which co-ordinate the Physical, Financial, and Human resources and establishes productive relations among them for achievement of specific goals.

Ans.1 OrganizingQ.2 Name and explain the two steps in the process of organizing which comes after identification and division of work and departmentation.

Ans. 2 Assignment of duties and establishing reporting relation ships.Q.3 Aman Ltd. is manufacturing Toys and has Production Sales, Purchase and finance Department, which type of organization structure would you suggest to them? State any three advantage of this organization structure?

Ans. 3 I would suggest functional structure for Aman ltd.

Avantages:-1. Functional structure leads to functional specialization.

2.Coordination within the department is easier.

3.It ensures effective utilization of personnel.Q.4 Hindustan Ltd. is manufacturing computers, soaps and textile . Which type of

organizational structure would suit the requirement of such organization? State any three advantages of this organization structure?

Ans. 4 Divisional Structure would suit the requirement of Hindustan ltd.

Advantages of Divisional structure are as follows:

1. It leads to product specialization.2. Decision-making is faster and effective.3. It helps to concentrate on each product.

Q.5 It is a System of consciously coordinated activities of two or more person towards a

common objectives. Mention this system of organization and explain its two features.

Ans. 5 Formal organization.

Feature of formal organization are as follows:

1. It is deliberately created by management.2. It is established to achieve organizational goals.3. It has well defined structure of task and relationship.

Q. 6 It is a network of personal and social relations not established or required by the formal organization but arising spontaneously as people associate with one another. Name this organization and give its three advantages.

Ans. 6 Informal organization

Advantages:

1. It brings a feeling of belongingness, self respect and satisfaction.2. It satisfies social and cultural needs of the members.

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3. It makes organizational structure flexible and workable.Q.7 The directors of Narmada Ltd. An organization manufacturing computer has asked their

marketing manager to achieve a target rate of 100 computers per day. The marketing manager has delegates the task to his deputy sales manager working under him. The deputy sales managers could not achieve he target. Is the marketing manager responsible for the failure of his deputy sales manager? Explain in brief , the relevant principle in support of your answer?

Ans. 7 Yes, marketing manager is responsible for non- achievement of target sales. He is accountable to the deputy sales manager because authority can be delegated but responsibility can’t. Accountability and responsibility are always upward.Q.8 The Director of Kamal Ltd, an organization manufacturing computer want to double the

sales and given this responsibility to their sales manager. The Sales Manager has noauthority either to increase sales expense or appoint new salesman. Hence, he could not achieve this target. Is the sales manager responsible for not achieving the target? Explain in brief , the relevant principal in support of your answer.?

Ans. 8 No, sales manager is not responsible for not achieving the target. The principle involved is purity of authority and responsibility.

Q.9 It refer to the systematic delegation of authority from top management to the lower level managers. Mention the name of it.

Ans. Decentralization.

Q.10 “If we delegate the authority, we multiply it by two if we decentralize it, we multiply it

by many “ how?

Ans.. Scope of delegation of authority is limited as it is confined to a

manager and his immediate subordinate in work unit.

Scope of decentralization. It involves systematic delegation of authority at all levels and in all functions of the organization. It is an extension of delegation to the lowest levels in the organization.

Q.11 The employee of ABC Ltd. Take part in volleyball matches on Sunday. Name the types of organization formed.

Ans. 11. Informal organization.Q.12 “The first Step in the process of organizing is identification and division of work” Why is he work divided into manageable activities?

Ans 12. The work is divided into manageable activities so that duplication of efforts and resources can be avoided and the burden of work can be shared among the employees.Q.13 While allocating work to various employees how the work must be assigned?

Ans. . The work must be assigned to those who are best fitted to perform it well.Q. 14 which Function of management is concerned with building a stable frame work or

structure of various parts of an enterprise?

Ans. . Organizing.Q.15 How can department or division be created?

Ans. . It can be created on the basis of-

a) territory and b) products

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Q.16 How does an informal organization emerge?

Ans. . Informal organization emerges from within the formal organization

when people interact beyond their officially defined roles.Q.17 Name the organization which has the benefit of Easy to fix responsibility?

Ans. . Formal organization.Q.18 Name the type of organization which does not have predetermined objectives?

Ans. Informal organization.Q.19 A Fashion design house has the following main job:-

(1) Manufacturing (2) Finance (3)Marketing (4) Personal (5) Research and Development Which organizational structure will you prefer for this type of a company and why?

Ans. Functional organizational structure will be suitable.Q.20 Rina runs a shoe manufacturing factory. She wants to expand her business. For expansion

she contemplated to enter into the manufacturing of leather bags and western formal wear apart from the running business of shoes. By doing this her company will be able to provide many products to working women under one roof. Which organization structure will you suggest her and why?

Ans.. In this situation, Divisional Structure will be suitable as it provides equal importance to

all products. Also describe the advantages of divisional organization structure.Q.21 Name the activity which increase the importance of the role of subordinates?

Ans. Decentralization.Q.22 For which kind of enterprises functional structure is more suitable?

Ans. When the size of the organization is large, has a diversified activities and operations require a high degree of specialization.

STAFFINGVERY SHORT QUESTIONS (1 Mark)1. Which function of management helps in obtaining right people and putting them on the rightjobs.Ans.. Staffing.2. Name the process concerned with searching for prospective candidates for vacant job position.Ans.. Recruitment3. What is job description ?Ans.. It is the document describing task, responsibilities and relation of one job with other job.4. What is job specification ?Ans.. It refers to the process of streamlining the attributes of a person required to do a job.5. What is pre-requisite to selection?Ans.. The pre-requisite to selection is recruitment.6. What is case study method of imparting training?Ans.. Under this method, a real or hypothetical problem is provided to the trainees.7. State one limitation of incorrect placement.Ans.. Wastage of material, time, effort and energy, resulting in lower productivity and poor quality ofproduct, unsatisfaction among the employees.8. Any two duties of Human resource management.Ans.. (i) Recruitment i.e., search for qualified people .(ii)Training & Development of employees.10. Who was looked down by both the workers and the owners?

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Ans.. Labour welfare officer.11. What is an inherent part of human resource management?Ans.. Staffing.12. What is both a line as-well as a staff activity?Ans.. Staffing.13. State are the internal sources of Recruitment?Ans.. (i) TrAns.fer (ii) Promotion14. Why recruitment is regarded as a Positive Process and selection is a negative process?Ans.. Recruitment is Positive Process because it is concerned with attracting qualified and competentindividuals to apply for a job while selection is choosing the best among them and rejecting theunsuitable candidates.15. If you wish to plan for a lifetime what is requiredAns. Develop people.16. Why the importance of employee training has increased?Ans.. When jobs have become more complex.17. State the step in the process of staffing related with the remuneration given to the employees for theservices rendered by them?Ans. Compensation.18.Which sources of recruitment is suitable for newly established business Internal or external?Ans. External sources.19.What is called the vertical shifting of employees (upward)?Ans. Promotion20.Give any one benefit of promotion as sources of recruitment?Ans. It improves loyalty and satisfaction level of employees.21.Give one reason why transfer is done?Ans. To balance the deficit and surplus of manpower in different branches.Short questions (3 or 4 Marks)Q1. What do you mean by Staffing? Enumerate any two features of staffing function of management?Ans. Staffing is a managerial function of placing the right job. Staffing is concerned with determiningthe man power requirement of enterprise and includes function like recruitment selection, training,growth, development and performance appraisal of employees.Features1 It deals with human resources2 It is concerned with helping employees to develop their abilities.Q2. Explain Vestibule Training?Ans.:- Under those methods separate Training centre to setup to give Training to the New Employs.Actual work Environment are created in that centre and employs used the same material Equipment etcwhich they use while doing the actual Job. This method is generally use critical equipment machineryare required to handle by worker.Q3 Discuss any two advantages of training and development to the organization and to theemployees?Ans.. Advantages to the Organization:-(1) Helps in increasing productivity of workers and thus leads to increase in profit.

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(2) Makes effective response to dynamic environment.Advantages to the employees:-(1) Employs become more efficient in handling machine and thus chances of accidents areminimized.(2) Training increases skills and knowledge of an employs and thus provides batter carrierprospects to the employs.Q4 “Selection is a negative process” explain.Ans.. Selection is the process of selecting the most potential candidate from among those who hadapplied for the Job, by going through the process of rejection of relatively unsuitable candidates. Henceit is referred to negative process.Q5 Explain the concept of “Job Rotation”?Ans.:- Under this method of training, an individual is transferred from one Job to another or from onedepartment to another in a planned manner. It is suitable for new entrants. So that they can interact withother employees. Trainees cultivate specialized knowledge and skills of the entire department.Q6 What do you mean by off the job method of training? Enumerate various method of off the jobtraining?Ans.: Off the job methods of training refers to those methods under which an individual is providedtraining away from the work place or in the other words it means learning before doing.Methods1 Class room lectures2 Films3 Case study4 Computer modeling.Q7 State three advantages of External sources of recreuitment.Ans. 1.Fresh Talent : The entry of fresh talent into the organisation.2.Wider choice : The external sources provide a wider choice of personnel to choose from.3.Qualified personnel : Required qualifications are available for the external sources.4.Competitive Spirit : Competitive spirits is available by external source.Q8 State the limitations of External sources of recruitment.Ans.. LimitationsDissatisfaction among existing Employees.Costly process: It is costly process. Expenses an advertising, conducting test.Lengthy Process: It is very long process.Q. 9 Discuss “Apprenticeship” as a method of training.Ans. Apprenticeship programme training : The workers seeking to enter skilled job (e.g.,plumbers, electricians or iron workers, etc.) are sent for apprenticeship trainingprogramme which is an on-the-job method of training.In the Apprenticeship Programme, a master worker or a trainer is appointed who guides theworker or learner regarding the skill of job. The master worker performs the job and the trainee(learner) observes him performing. When the learner learns all the skills, then slowly he startstaking up the job step by step and master worker becomes the observer.When the trainee becomes perfect in doing the job, the master worker goes and the trainee getsfull charge of job, the master worker goes and the trainee gets full charge of job position.· Generally, the time period, for apprenticeship programmed may very from 2 to 5 years.· During the apprenticeship period, the trainee is paid less than a fully qualified worker.Q10 What is meant by ‘Orientation’?

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Ans.. Orientation/Induction : Orientation is a planned introduction of employees to their jobs, their coworkersand the organisation. And initial training programme is provided to all the selected persons soas to induct them to the job. It is important to make the new persons comfortable to carry out theassigned jobs smoothly.LONG QUESTIONS (5/ 6 marks)Q1 Some learning opportunities are designed and delivered to improve skill and abilities of employeeswhere as some other are designed to help in the growth of individual in all aspects . Identified theconcept and make comparative study?

ORDifferentiate between training and development on the bases of purpose and focus?MEANINGTraining: it is a process of imparting knowledge for doing specific job.Development: it is a process of learning opportunities designed to help employees grow.NATURETraining: it is a job oriented process.Development: It is a carrier process.FOCUSTraining: It focuses on technical skills.Development: It focuses on conceptual and human ideas.PURPOSETraining: The basic purpose of training is to enable the employees to do job or home intended job.Development: The basic purpose of development is to enable the growth of the employees.DURATIONTraining: I t is imparted for a fixed period.Development: It is a continuous and never ending process.Q2 Differentiate between internal source of recruitment and external source of recruitment?Internal sources External sourcesMEANING It is a recruitment of employees fromwithin the existing employees of theorg.It is a recruitment of employees fromoutside the org.BASIS Generally seniority is the bases ofrecruitment.Generally recruitment is based on merit.It provides wider choice in therecruitment of employees.CHOICE I t gives limited choice in therecruitment of employees.It provides wider choice in theRecruitment ofEmployees.ECONOMY It is less expensive and less timeconsuming.I t is a more expensive and more timeconsuming.QUALITY Choice is restricted to available pool oftalent only.Best and talented employees can beselected.TIMEINVOLVEComparatively less time is required forfilling the vacanciesIt requires more time to fill thevacancies.Q3 Differentiate between Recruitment and SelectionRECRUITMENT SELECTIONMEANING It is the process of searching andmotivating candidates to apply forjobIt is that process of staffing whichrejects the unsuitable candidates andchoose the suitable candidates.PURPOSE The basic purpose is to create a largepool of applicants for the jobs.

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The basic purpose is to eliminate asmany candidates as possible until themost suitable candidates get finalized.Scope Recruitment is restricted to the extentof receipt of application.Selection includes sorting of thecandidates.Positive /negativeprocessRecruitment is a positive process. Asmore and more applicant are soughtto be attracted.Selection is a negative process as moreapplicants are rejected than selected.Criteria It gives freedom to applicants. Anyone is free to apply.It gives very little freedom toapplicants. Applicants must meet theselection criteria.Q4 What are the steps involved in the staffing process? Explain briefly?Ans.: 1) Enumerating man power requirement: Staffing process begins with the estimation of manpower requirement which means finding out number and type of employees need by the org. in future.2) Recruitment: After man power planning, the manager tries that more and more people shouldapply for the job so that the org. can get more choice and select better candidates.3) Placement and Orientation: Placement refers to placing the right person on the right job forwhich he is selected.Orientation refers to introducing the new employees with the existing employees.4) Selection refers to choosing the most suitable candidate to fill the vacant job position. It is anegative process because a number of candidates are rejected under it.5) Training and Development: The process of training helps to improve the job knowledge andskill of the employees. Training and Development not only motivate the employees but these improveefficiency of work also.6) Performance Appraisal: At this step the capability of the employees is judged and for that hisactual work performance is compared with the work assigned to him.Performance and career planning: It is a process through which employees get better salary, status,position and also get promotion to higher post.7) Compensation: For deciding the compensation the works are evaluated. Compensation mustbe reasonable and related with the work.Q5 Briefly describes the steps in the selection process?Ans. The selection starts after candidates for jobs have submitted their application –the selectionprocess usually includes a number of steps1. Preliminary screening: In this step the candidates who do not fulfill the required basic qualificationare eliminated.2. Selection test: Though these tests, ability and skill of the candidates are measured. Common type oftests conducted by org are-1. Intelligence test2. Aptitude test3. Personality test4. Trade test5. Interest test3. Employment interviewThe candidates who qualify the test are called for interview.4. References & background checks

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After the candidate declared successful in the interview then information related to back ground, socialrelation, and character are indentified.5. Selection decisionThe candidate who past the test, interview, reference check are included in selection list & themanager’s select most suitable candidate from the list.6. Medical examination:-Before giving appointment letter the selated the candidate are selected for medical fitness.7 job offer:-For job offer the appointment letter in hand over & a date in the appointment letter is mentioned onwhich one has to report for the duty.8. Contract of employment:-After the acceptance of job offer by a selected candidate required to sign various documents.Q6 What is Staffing ? Discuss the importance of staffing.Ans.. Meaning : It is the process of management which is concerned with obtaining andmaintaining a satisfactory and satisfied work forceImportance of Staffing1. Obtaining competent personnel : Proper staffing helps in discovering and obtainingcompetent personnel for various jobs.2. Higher performance ; Proper staffing ensures higher performance by putting rightperson on the right job.3. Continuous survival and growth : Proper staffing ensures continuous survivaland growth of the enterprise, research & development, innovation.4. Optimum utilization of human resources : Proper staffing helps to ensure optimumutilization of human resources. By avoiding over manning, it prevents underutilizationof personnel and high labour costs. At the same time, it avoids disruption of work byindicating in advance the shortages of personnel.5. Improve job satisfaction : Proper staffing improves job satisfaction and morale ofemployee through objective assessment and fair rewarding of their contribution.6. Helps in achieving organisaional goals : The efficiency and effectiveness of anorganisation in achieving its goals is determined to a great extent on the competence,motivation and general effectiveness of its human resources.Human resources are the foundation of any business. The right people can help abusiness to take it to the top where the wrong people can break the business. Withefficient and competent personnel, the firm can maintain quality products and sell themprofitably.Conclusion : Staffing function must be performed efficiently by all organizations. Ifright kind of employee are not available, it will lead to wastages of materials, time,efforts and energy, resulting in lower productivity.It is, therefore, essential that right kind of people must be available in right number atthe right time. Q1. Name the concept related for prospective candidate .

Ans.Recruitment. Q2 Why selection is called negative process.

Ans. Selection is called negative process because number of rejected candidate is more than the selected candidates.

Q3 Out of training and development which is wider inn scope.Ans. Development is wider in scope.

Q 4.Is expense on training a waste

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Ans. Noexpense on a waste. Q5 Which source of recruitment has the disadvantages of increase in labour turnover.

Ans.External source of recruitment. Q6 Which function of management helps in obtaining right people and putting them of right jobs? Explain any five points of importance of this function

Ans . Staffing.Importance of staffing:-1. Filling Jobs with competent personnel: - Staffing helps in discovering and obtaining

competent personnel for various jobs.2. Performance:-Since performance of an organization depends on the quality of the persons

employed, the function of staffing is very significant.3. Survival:- Competent and efficient workers not only bring an organisation into

existence, but also ensure its survival and growth.4. Proper utilization of manpower:- The staffing process facilitates optimum use of human

resources by avoiding overstaffing and prevents disruption of Work due to shortage of personnel.

5. Improve job satisfaction and morale:- The process of staffing provide right kind of work atmosphere and culture, it improve their job satisfaction and morale.

Q. 7. Explain the steps involved in the in the process of staffing.Ans .

1. Estimating manpower requirement:- Staffing process begin with the estimation of manpower requirement which means finding out number and type of employees needed by the organization in near future.

2. Recruitment: It refers to the process of including the people to apply for the job in the organization. After assessing the number and type of employee required, the manager tries that more and more people should apply for the job so that the organization can get more choice and select better candidate.

3. Selection:- It refer to choosing the most suitable candidate to fill the vacant job position. Selection is done through a process, which involve test, Interview etc.

4. Placement and orientation: - Placement refers to occupying of post by the candidate for which he is selected. After selection employee is given appointment letter and is asked to occupy the vacant job position.

5. Training and Development:- Training and development not only motivate employees but these improve efficiency of work also.

Q.8 . Explain the process of selection of employees in an organization. Ans.

Preliminary screening Selection Test

Employment Interview Checking the references

Selection Decision Medical examination

Job offer Contract ofemployment.

Q. 9. Explain following methods of training the workers

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Apprenticeship programme. Vestibule training. Job rotation. Internship training

Ans Apprenticeship programme:- Under This method ,trainees work Under the direct

supervision of expert, who guide and help them in learning the job. A uniform period of training is offered to trainees ranging from two to five year.

Vestibule training:- under this method, training is given in a classroom, where actual work environment is created. In other words employees are trained of the dummy model.

Job rotation:-Job rotation refers to shifting the trainee from one department to another or from one job position to another. It helps the employees to gain knowledge by doing various job.

Internship training:- In this method vocational or professional institutes enter into arrangement with big business enterprises, wherin their studeents are sent to big industrial enterprises to gain practical experience.

Q. 10. Why are the employees training necessary in an organization? Explain.Ans. Importance of training for organization-

Reduction learning time: - A trained employees takes Less time in learning the job as compared to untrained employees.

Better performance:- the performance of trained employee is always better than the performance of untrained employees as in the training programmes their qualities and capabilities are improved.

Attitude formation:- the training and development aim at mouldithe employees so develop positive attitude for the organization, and to motivate them to be ready to take the initiative and result in better support And co-operation among the employees.

Help to adapt changes:- Training help employees to adopt environmental changes.Importance for employees :-

Career option:- Improved skill and knowledge due to training bring better career option for employees.

Earning more:- improvement in efficient performance of employees help the employees earning more.

Boost up the morale:- Training increase the satisfaction and morale of employees. Less chances of Accident:- training makes employees more efficient so there are less

chances of accidents.Q. 11. What is meant by recruitment? Explain any five external sources of recruitment of employees.Ans. Recruitment means including of attracting more and more candidates to apply for the vacant job positions in the organization. Methods External sources of recruitment

Direct Recruitment:- some time the organization paste notice at the gate of their office or factory or workshop stating the vacant job positions.

Casual Caller :-- Generally the large organization maintain an application file in which They keep all the pending applications which the job seekers leave with the reception.

advertisement on television- the new trend Of the external recruitment is telecast

on various channels regarding various job positions. They telecast the requirement of job along with the qualification necessary to apply.

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Employment Exchange- act as the middle man between the job seekers and the organization who have vacant job position.Q.12 Write a short note on human resource management.Ans. Human resource management is the part of management process which develop and manage the human elements of the enterprise considering their knowledge, skill, creativity , talents and potentials for the contribution towards organizational objectives.

1) What is staffing?Ans- Staffing is the process of determining the manpower needed to meet the company’s objective and recruiting, selecting, training and developing the new and existing staff.2) Name the concept related to searching for prospective candidates.Ans- Recruitment.3) Why selection is called negative process?Ans- Selection is considered as negative process because number of rejected candidates is more than the number of selected candidates.4) Name first two stages of evolution of HRM.Ans- (i) Industrial Revolution (ii) Emergence of Trade union.5) Out of training and development which one is wider in scope?Ans- Development is wider.6) Under which source of recruitment employees get motivated?Ans- Internal source.7) Is expenses of training a waste?Ans- No.8) Define training.Ans- training refers to equipping the employee with the skill necessary to perform the job.9) State one objective of preliminary screening/interviews.Ans- To eliminate unqualified and unfit candidates.10) Which function of management fill the jobs created by organizing function.Ans- Staffing.

1. Explain the term ‘staffing’.Ans. Staffing is the process of determining the manpower needed to meet the company’s objective and recruitment, selection, training and developing the new and existing staff.

2. State any three importance of staffing.Ans. The three importance of staffing are-(a) Filling the role by obtaining competent persons(b) Placing right person at the right job(c) Growth of enterprise.

3. Explain HRM.Ans. When staffing function is carried on at a large scale, it becomes human resource management.

4. What the various stages of the evolution of HRM.Ans.1. Industrial revolution 2. Emergence of trade union 3. Labour welfare officer 4. Factory system 5. Personnel officer

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6. Dynamic environment 7. Importance of H.R. approach 8. HRM5. Give three steps of staffing process.Ans. The three steps of staffing process are-

(a) Estimating the manpower requirement(b) Recruitment(c) Selection

6. What are the main components of staffing?Ans. The main components of staffing are-

(a) recruitment(b) selection(c) training

7. What is recruitment?Ans. It is a process of including suitable candidates to apply for the job in your organisation.

8. What do you mean by placement?Ans. Placement refers to occupying of post by the candidate for which he is selected.

9. What do you mean by campus recruitment?Ans. It refers to recruitment from educational institutes. Some big organisations remain in touch with the educational institutions with the purpose of recruiting young talented people.

10. What is internal source of recruitment?Ans. Under internal source of recruitment the vacant job positions are filled by inducing the existing employees of the organisation.

GENERAL TIPS1. The students should be advised to start with the meaning and purpose of

delegation ,showing that there are two parties i.e superior and the subordinate by giving an example then to start with decentralization where managers of all the levels are involved.

2. The students should be directed to write all the steps of staffing or selection and not only 5 or 6 as per the marks of the questions unless not specified .

3. The students should always be directed that when a question of distinguish comes for 5 or 6 marks it should always be started with a brief introduction.

4. A long answer on functional or divisional structure should be supported with a diagram.

5.ORGANISING1. A type of organisation where post job is more significant than the persons –

FORMAL ORGAINSATION2. Roopesh ltd. Is a firm dealing in four products i.e clothes ,jewellary ,cosmetics and

designer shoes . What type of organisation structure should it adopt- Divisional ORGANISATION STRUCTURE.

3. A TYPE OF ORGANISATION EXISTING IN A FIRM THAT IS FORMED BY MUTUAL INTERACTION- Informal Organisation

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4. Mahesh ltd. Had various functions to be performed such as production sales finance HRD in an organisation . What type of Organisation structure is suitable for it –FUNCTIONAL ORGANISATION STRUCTURE.

5. Granting authority within a prescribed limit for the sharing the task with the subordinates . It is related to which term-DELEGATION OF AUTHORITY

STAFFING1) Name the source of recruitment where fresh talent blood is invited-

EXTERNAL SOURCE OF RECRUITMENT .2) Name the external source of recruitment where the candidates of colleges and

universities are interviewed and selected- CAMPUS VISIT3) The purpose of the step of selecting is to remove and eliminate all the unfit

candidates for a job in the beginning .Name the step- SCREENING OF THE APPLICATIONS.

4) Which skills are promoted in the DEVELOPMENT OF THE MANAGERS- Conceptual skills .

DIRECTINGVERY SHORT QUESTIONS ( 1 mark)1.Define the term ‘Directing’.Ans. Directing is telling the people what to do and seeing that they do it in best of their ability.2. State the elements of Directing.Ans. Supervision, leadership, Motivation and communication.3.State two features of Directing.Ans. a) It initiates actionb) It is a continuous function.4.Define Motivation.Ans. Motivation is a process of stimulating people to action to achieve desired goal.5.What is a motive ?Ans. Motive is an inner state or desire which energises an individual to move or behave towardsachievement of goal.6.The common needs are food, shelter, education etc. state the type of need as per Maslow.Ans. Physiological need.7.State two monetary incentives.Ans. a) Pay and allowances b) Bonus8 State two non monetary incentivesAns. a)Recognition b) Granting authority.9.State two features of Leadership.Ans. a) Leadership indicates the ability of an individual to influence others.b) Leadership tries to bring a change in the behaviour.10.Define the term ‘Communication’.Ans. Communication is transmission or exchange of ideas, views, messages, information orinstructions between two or more than two persons with a common understanding.11. State the form of communication where official talks take place.Ans. Formal communication.12.What is Diagonal communication ?Abs It is the flow of communication between the persons working in different departments andholding different levels of authority.13.What is grapevine ?Ans. The network of informal communication is called grapevine.14.State one advantage of written communication.

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Ans. It can be verified from written records, it can be expressed in precise terms.15. State the common means and ways of transmission of ideas.Ans. Spoken words, written words, diagrams, pictures, gestures etc.SHORT ANSWER QUESTIONS (3 / 4 MKS)1) State three advantages of Motivation.Ans. a) Motivation sets in motion the action of people: Motivation bridges the gap between theability to work and willingness to work. It enables the management to secure the best utilization ofphysical and financial resources.b) Motivation improves the efficiency of work performance.As motivation builds the willingness to work among the employees, the persons work withinitiativeness thereby increasing their work performance.c) Motivation leads to stability in the employees.Motivation helps in reducing the labor turnover and absenteeism. It creates confidence among theemployees and secure their loyalty to the organization.2. Distinguish between Leadership and ManagementBasis Leadership ManagementOrigin Leadership originates out of Management originates out of individuals influence official powers and rights.Functions A leader is to motivate and A manager has to planguide his followers organize, direct and control his employees.

Mutual relationship All the leaders are not the managers All the Managers are leaders.1. Discuss three qualities of a leader.Ans. a) Listening skill: A good leader is a good listener. Leaders have to create a culture wherepeople can be frank and share the information. Receiving feedback about oneself is important.b) Self confidence: A leader must have confidence in his own ability to accomplish tasks and meet the needs of every situation.c) Intelligence: A Leader should examine every problem in a right perspective. He should have alogical mind and objective outlook free of bias.2. State two advantages and two limitations of Formal communication.Ans. Advantages a) It is systematic and ensures orderly flow of information.

b) The source of communication can be known andb) The source of communication can be known and so the responsibility can be fixed.Limitations

a) It is a slow moving process.b) It is conveyed in an impersonal manner.

3. What is ‘Noise’ in the process of communication?Ans. ‘Noise’ is the disruption interference in the process of communication. It can occur at any point in the process of communication i.e at the point of transmission or decoding.For e.g if you are chatting and disruption in the network connection, if you are talking on aphone, disconnection of the telephone line etc.Noise can also arise due to bad communication skill of the sender, inattentive listener,use oftechnical and difficult words etc. Thus Noise can be anything that hampers Understanding in the

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process of Communication.4. State three Financial incentives.Financial Incentives — Incentives which are directly or indirectly associated withmonetary benefits.Non Financial Incentives — Incentives which are not measurable in terms of money.Examples for financial Incentives — Pay, allowances productivity linked wageincentives, Bonus, Retirement benefits, Copartnership.Example. Non Financial Incentives — Status, organizational climate, career advancementopportunity, job security etc.Ans.. 7. State three non monetary incentives..(a) Job Enrichment — is a method of motivating employee by making the task to beperformed by him more interesting and challenging. The job in itself serves as asource of motivation to the employee and brings out the best in him.(b) Suggestion System — Is a system where suggestions regarding the workprocedure, environment are solicited from employees. This increase theirparticipation & importance in the working of the enterprise and hence motivatesthem.(c) Job Security refers to making the employee feel safe in his job positions. He isnot threatened by transfers or removal from service and hence performs to the bestof his abilities.8 State three psychological barriers to effective communicationAns. a) Premature evaluation: If a person has a pre-conceived notion against the communicationthen he will evaluate the meaning of the communication before he listens to it..b) Lack of attention : The listener may be physically present and not mentally. He may be preoccupiedwith some other thoughts.c) Loss of transmission and poor retention.Many people cannot retain the information for a long period due to poor retention power9. Discuss Three Principles of DirectingAns. a) Maximum Individual contribution:According to this principle, directing must help every individual employee to contribute hisBest towards the achievement of organizational goal.b) Harmony of objectives : Directing must ensure that the individual goals of employees andthat of organization do not conflict with each other. Directing must aim at bringing harmonyamong them.c) Follow through : Managers must continuously review whether the instructions are beingunderstood and followed by the employees or not.10.State any three types of needs that govern human motivation.Ans. Understanding and influencing the human behaviour requires understanding their needs. It can be :

a)Physiological needs (Need for food, clothing shelter, education etc)b) Security needs (need of safety and freedom from fear or threat)c) Social needs ( need for love, affection, belongingness)d) Esteem needs ( need for recognition, need for self respect)e) Self actualization (need to grow, sense of fulfillment)

LONG QUESTIONSQ1 . Distinguish between Formal communication and InformalQ1 . Distinguish between Formal communication and Informal communication

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Ans.. 1 Formal Communication Informal Communication1. Channel 1. It follows formal or established line of command. 1. It is a based on informal relationship and arises as a p result of personal social or group relations between people.

2. Nature 2. Rigid 2. Flexible3. Speed 3. The speed of communication 3. It transmits information is usually slow swiftly.4. Need 4. It serves organizational 4. It serves organizational as needs. well as individual needs tosocialize with others.5. Records 5. Its record is kept for future 5. No record can be kept.reference..2. State the measures that can be taken to reduce the barriers to effective communicationAns... The barriers to an effective communication can be reduced by followingmeasures :—(i) Clarify the Idea : Clarify in the thoughts of the sender is must for effective‘communication’.(ii) Use of proper people language : Sender should try to make the messagemeaningful and understandable by using appropriate words.(iii) Message should be precise : Lengthy and unwarranted elaboration makesmessage less meaningful this should be avoided.(iv) Ensure proper feedback : The sender of the message should take thefeedback from the receiver. Feedback of the conveyed message is an essentialtool to the check that the message is duly understood.(v) Effective use of organisation Facilities : Effective use of organizationalfacilities like suggestion box complaint box secret box helps in making thecommunication effective.Q3. Discuss in brief the functions of a SupervisorAns. Supervision means overseeing the subordinates at work. Supervision performs the followingimportant functions which help the organisation to achieve objectives function of thesupervisor:a) Planning the work: The supervisor has to determine work schedule for even and steady flow ofwork.b) Issuing orders: The supervisor issues orders and instructions to the workers for achievingcoordination.c) Providing guidance and leadership : The supervisors leads the workers of his department. He fixesproduction targets for them & provides them the necessary guidance for doming the work assignedto them.d) Motivation : The supervisor motivates his subordinates by providing financial and non financialincentives. He inspires them for higher quality & productivity.

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e) Controlling output — The supervisor controls the performance of the workers by comparing theirperformance with the standards. He also takes necessary action to ensure that production is doneaccording to the predetermined standards.Q4 Discuss six monetary Incentives.Ans. The incentives that have a monetary and financial benefit are called financial incentives. TheyAre:-a)Profit sharing : It has been accepted that the profit earned by the firmis also due to the effortput by the workers. So they have a full right to receive a share in it. It is an effective incentivewhich satisfies the workers.b) Co-partnership: Under this system, employees share the capital as well as the profits. Underemployees stock option plan the workers are given shares. They are also given Bonus sharesand they share the ownership of the firm. It motivates them as they share the profits too.c) Productivity linked wages: Under this system, a sales person is guaranteed a minimum wage aswell as commission on sales. A commission plan motivates him to work better.d) Suggestion system: Valuable suggestions are accepted and the most valuable ones are alsorewarded with cash money.e) Retirement benefits: Every employee wants his future to be secured. The firm providesretirement benefits, pension, provident fund, gratuity etc.f) Perks: various perks such as housing, car allowance foreign trips etc can be given to themanagers to boost up his morale.Q5 Discuss the Importance of Communication .Ans. Communication is a process of understanding between the persons through exchange of ideas,messages, suggestions etc. It is important due to the following reasons –a) It facilitates Planning : Participation of all the executives in planning is a pre requisite forgetting the task done. This participation is possible only when the managers and employeesinteract with each other. There should be no communication gap.b) It helps in decision making. Most of the decisions are taken up by the top level management.But for decision making, right type of information is required from different persons.It isthrough communication that people come together in a firm, managers can identify theproblems faced by the employees, so that he can take the decisions effectively.c) It helps in the process of motivation :Sharing of the information with the subordinate gains their confidence and willing cooperation.Discussion on common interest of the management and workers is a source of satisfaction forthe employees as it gives them recognition. It increases their morale of doing work.d) It is a basis of effective leadership.A goodcommunicator is a good leader. Through good communication skill, the manager comescloser to his subordinates and removes the misunderstanding. Thus it is the basis of leadership.1.A function of management is concerned with instructing, guiding, counselling, motivation sub-ordinates in an organisation to achieve pre-stated goals. Name the function.

2 State the direction of flow of directing function of management.

3.Yash an employee in sales department is easily motivated by monetary incentives. Harsh an employee in the same department can be motivated only by promotions and career advancement opportunities. Which technique of motivation must a manager use for both. State the principal of directing to be applied in the mentioned case(1).

4. Give reasons why functions and performance of supervisor’s are vital to any organisation.

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5.With a help of a flow chart explain the various elements in the communication process.

6.State briefly giving reasons how a supervisor-

7.Acts as a link between workers and management.

8.Plays a key role in maintaining group unity among workers placed under his control.

9.Give 2 example s each of positive and negative motivation.

10. Explain briefly why motivation is considered a complex process.

11. Explain co-partnership and perquisite as measures of motivation. Also state whether they are monetary or non- monetary incentives.

12. Mohit Sales manager of a company dealing in fast moving consumer goods has a problem in communicating with his sales offices spread all over the country primarily because of problems in encoding and decoding of messages into words and impressions.

(a) Which type of communication barriers does the firm suffer from.(b) Give 3 examples of such barriers.

IMPORTANT QUESTION:-

1 Give two examples of non financial incentive.Ans Status , Employee participation.

Q 2 Which function of management is concerned with instructing , guiding and inspiring people in the organisation to achieve its objectives?

Ans Directing.

Q 3 Name the element of directing which stimulates people to take up work voluntarily and with full potential?Ans Motivation.

Q 4 Which level of organization performs the function of Directing?Ans All levels of the organization perform Directing function as it is pervasive.

Q 5 An organization suffers from higher rate of employee turnover .Which element of directing is lacking in the organization?

Ans Motivation. Q 6 Why is feedback important in the organisation?

Ans Feedback is important to ensure that receiver has received & understood the messsage.

Q 7 Is it necessary in communication that the sender & receiver of information should be face to face with each other?Ans No,it is not necessary .Sender & receiver may communicate either through direct or indirect contact.

Q 8 Give one example of noise in the process of communication.Ans Poor telephone connection .

Q 9 Why does formal communication get delayed? Ans Formal communication get delayed as it has to follow scalar chain of authority.

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Q10 One day at lunch time Mikki informed Amit who were working in the same organisation but in different departments that due to computerization many people are going to be retrenched soon from the organisation. Name the type of communication.

Ans Informal communication.Q11 'A good leader does not wait for the opportunities but creates them' . Which quality of a good leader is highlighted?

Ans Initiative.

Q12 Name the incentive scheme in which company offers shares to the employees at a price less than the market price.

Ans Co-partnership / Stock option.

Q13 'Motivation can either be positive or negative.’ Comment .Ans Motivation can be positive in the form of rewards like increase in pay , promotion or negative in the form of punishment, threat of demotion.

Q14 'Leadership is required only for less efficient subordinates.' Comment.Ans The statement is incorrect .Leadership is required for all employees as it influences behavior of all employees to contribute positively to achieve organizational goals.Q15 A Supervisor always expects that his subordinates should obey him and is not prepared to listen to any suggestion made by workers . Do you think supervisor is a good leader.

Ans No, supervisor is not a good leader because he is not a good listener.

Q16 Informal communication supplements the formal communication in many ways ? How?Ans Advantages of informal communication-

1) It provides social satisfaction 2) It links those people who do not fall in the official chain of command. 3) It fills gaps of formal communication by discussing those matters ,which cannot be discussed through official channels .

Q18 Rajat a sales manager , achieved his sales target one month in advance . This achievement was displayed on the noticeboard & a certificate for best performance was awarded to him by CEO of the company.

* Name the incentive provided to Rajat.* Identify the type of incentive .* List two other incentives of the same type identified. Ans 1) Recognition. 2) Non financial incentive. 3) Job enrichment & Job security.

Q19 There are some barriers which are concerned with encoding & decoding of message .State any three such barriers.

Ans Semantic barriers are- 1) Badly expressed message (Explain) 2) Unclarified assumptions (Explain) 3) Faulty translations (Explain)

Q20 'Directing is the process around which all performance of an organisation revolves'. Do you agree?Give any four reasons in support of your answer.

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Ans Importance of Directing are- 1) Initiates direction (Explain) 2) Helps to implement changes(Explain) 3) Leads to integrated group activity (Explain) 4) Provides stability in organisation (Explain)

Q21 Good & effective directing should be based upon certain principles. Explain any three principles of directing.

Ans Principles of Directing are- 1) Maximum individual contribution (Explain) 2) Unity of command (Explain) 3) Harmony of objectives (Explain)

Q22 In an organisation there are many leaders . But a good leader must be distinguished one.Suggest any four qualities that a good leader must possess.

Ans Qualities of a good leader are- 1) Physical features (Explain) 2) Integrity (Explain) 3) Communication skills (Explain) 4) Initiative (Explain)

Q23 Effectiveness of manager depends on his ability to communicate effectively. Explain how?Ans Importance of communication are - 1) Acts as basis of coordination (Explain) 2) Acts as basis of decision making (Explain) 3) Increases managerial efficiency (Explain)

24 It is only motivation through which the managers can inspire their subordinates to give their best to the organisation. In the light of this statement Explain four points of importance of motivation.

Ans Importance of motivation are- 1) Improves performance level (Explain) 2) Introduce changes smoothly (Explain) 3) Reduces employee turnover (Explain) 4) Changes negative attitude into positive (Explain)

Q25 Some communication barriers are concerned with the state of mind of both the reader & receiver. Discuss any three such barriers.

Ans Psychological barriers are - 1) Premature evaluation (Explain) 2) Lack of attention (Explain) 3) Loss by transmission & poor retention (Explain) 4) Distrust (Explain)

CONTROLLINGVERY SHORT QUESTIONS (1 mark question)1. What is meant by controlling?Ans.. - Under controlling deviations are sought to be noticed in the actual work progress and thestandards already determined, the causes of deviations are found out and corrective action is taken sothat in future the mistakes are not repeated.

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2. Which function of management ensures that actual activities confirm to planned activities?Ans.. It is controlling.3. Name the function which reviews the operations in a business unit.Ans.. Controlling function.4. Why it is said that ‘planning is meaningless without controlling’?Ans.. Because in the absence of controlling no will take it seriously to work according to the plans.and hence, the plan will fail.5. Why it is said that ‘controlling is looking back’?Ans.. Because under it, a manager tries to find out whether the work has been done according to thestandards or not.6. Give meaning of the term’ Deviation’ as used in the control function of management.Ans.. Deviation refers to the difference between actual performance and standard work.7. Name the two situations in which corrective action is not required.Ans.. (i) Zero Deviation (ii) Positive Deviation.8. State any one advantage of ‘Critical-point Control’ and ‘Management by Exception.’Ans.. By taking care of important deviations both time and efforts are saved.9. Why it is said that ‘planning is looking back’?Ans.. Because the planning is done on the basis of the happening of the past.10. What is meant by ‘Budget’?Ans.. A budget is a quantitative expression of the plan of action.11. What do you mean by Quantitative Standards?Ans.. They are the standards which are shown with the help of figures, e.g., production of 10 units by alabour in a day.Short questions (3/4 marks questions)

1. “Controlling is a pervasive function.” Explain.Ans.. The controlling is a pervasive function of the management as it is performed in allorganizations (business and non-business) and at all managerial levels. It is that function ofmanagement under which every manager at every level assures that the actual progress is inconformity with the plans..2. “An effort to control every thing may end up controlling nothing”. Comment.Ans. This statement is absolutely right. Here the ‘principle of critical point control’ is applicable.According to this principle, those points or activities should be determined in the very outset whichhave an important role to play in ensuring the actual work progress in accordance with the plans.

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These are known as Key Result Areas- KRAs. It means that the managers should not be involved insmall insignificant activities but should pay more attention to those activities where unfavourableresults can cause heavy loss to the enterprise.3. Differentiate between the ‘Principle of Critical – point control’ and Principle ofManagement by exception’.Ans. Under the principle of critical point, it is sought to be understood on which points or activitiescontrol will be profitable, while in the principle of exception deviation is taken care of in respect ofthe pre-determined critical points and in case of especially good or especially good or especiallybad deviation in respect of some particular critical point corrective action is taken.4. Explain any three types of Budgets.Ans. (i) Sales Budget: Sales budget is a detailed plan of sales which gives the details about theestimated sales within a definite period of time. It shows as four things in connection with the sales:Goods, Quantity, Price and Period of time.(ii) Production Budget: this budget is based on the sales budget. This budget determines thequantity of different products to be produced and their time of production.(iii) Cash Budget: When all the expenditure budgets have been prepared, the cash budget isprepared last of all. This budget gives an estimate of the cash receipts and payments.5. What are the Limitations of controlling?Ans.(i) Difficulty in setting quantitative standards: Control system loses some of its effectivenesswhen standards cannot be defined in quantitative terms. Employee morale, job satisfactionand human behaviors are such areas where this problem might arise.(ii) Little control on external factors: Generally an enterprise cannot control external factorssuch as government policies, technological changes, competition etc.(iii) Resistance from employees: Control is often resisted by employees. They see it asrestriction on their freedom.(iv) Costly affairs: Control is a costly affair as it involves a lot of expenditure, time and efforts.

LONG QUESTIONS (5/6 marks questions)

Q: What is meant by ‘Controlling’? Discuss the importance of controlling.Control is an indispensable function of management. Without control the best of plans can go away.

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A good control system helps an organization in the following ways:(i) Accomplishing organizational goals: the controlling function measures progress towards theorganizational goals and brings to light the deviations, if any, and indicates correctiveaction.(ii) Judging accuracy of standards: a good control system enables management to verifywhether the standards set are accurate or not. An efficient control system keeps a carefulcheck on the changes taking place in the organization and in the environment and helps toreview and revise the standards in light of such changes.(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce wastageand spoilage of resources. This ensures that resources are used in the most effective andefficient manner.(iv) Improving employee motivation: a good control system ensures that employees know wellin advance what they are expected to do and what are the standards of performance on thebasis of which they will be appreciated.(v) Ensuring order and discipline: Controlling creates an atmosphere of order and discipline inthe organization. It helps to minimize dishonest behaviors on the part of the employees bykeeping a close check on their activities.(vi) Facilitating coordination in action: Controlling provides direction to all activities and effortsfor achieving organizational goals.Q.2 Explain the relationship between planning and controlling.Ans. The relationship between planning and controlling can be divided into the following two parts.(i) Interdependence between Planning and Controlling.(ii) Difference between Planning and Controlling.(i) Interdependence between Planning and Controlling. Planning is meaningless withoutcontrolling and controlling is blind without Planning. Both the aspects of the interdependence ofplanning and control have been discussed below:(a) Planning is meaningless without Controlling: if the process of controlling is taken away frommanagement no person working in the enterprise will take it seriously to work according to theplans and consequently, the plans will fail.(b) Controlling is blind without Planning: Under the system of controlling actual work performance

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is compared with the standards. Hence, if the standards are not determined there is no justificationleft for control and the standards are determined under planning.(ii) Difference between Planning and ControllingYes, planning and controlling are incomplete and ineffective without each other but it doesn’t meanthat both are not independent. Reasons are:(a) Planning is looking Ahead whereas Controlling is Looking Back: Plans are always formulatedfor future and determined the future course of action for the achievement of objectives laid down.On the contrary, controlling is looking back because under it a manager tries to find out, after thework is completed, whether it has been done according to the standards or not.(b) Planning is the first function and Controlling is the last function of Managerial Process: themanagerial process moves in a definite sequence- like planning, organizing, staffing, directing andcontrolling happens to be the last step.Q.3. Explain briefly the various steps in the process of control.Ans.. Following are the steps of controlling process:(i) Setting Performance Standards: the first step of controlling is to set performance standards.Standards are those criteria s on the basis of which the actual performance is measured.Thus, standards serve as benchmarks towards which an organization strives to work.Standards can be set in both quantitative as well as qualitative terms.(ii) Measurement of Actual Performance: the second step in the controlling process is themeasurement of actual performance. The measurement of actual performance is done on thebasis of pre-determined standards. The measurement of actual performance tells themanager whether the work has been done according to the plan or not.(iii) Comparison of Actual Performance with Standards: At this step, actual performance iscompared with the standards and deviations are found out.(iv) Analyzing Deviations: Deviations are examined the light of pre-determined DeviationTolerance Limits. If the deviations are within limits they can be avoided. But if they crossthe limits, they should be reported to the higher level managers without any delay. Thereare two important principles regarding this:(a) Principle of Critical Point Control: According to this principle, those activities

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should be determined in the very outset which have an important role to play inensuring the actual work progress in accordance with the plans. These areknown as Key Result Areas – KRAs. It means that the managers should not beinvolved in small insignificant activities but should pay more attention to thoseactivities where unfavourable results can cause heavy loss to the enterprise.(b) Management by Exception; Management by exception, is an important principleof management control based on the belief that an attempt to control everythingresults in controlling nothing. Thus, only significant deviations which go beyondthe permissible limit should be brought to the notice of management.(v) Taking Corrective Action: The last but the most important step in the controlling process istaking corrective action. By now the deviations and their causes become known. Now is theturn of removing the hurdles in the actual work progress. The purpose of corrective action isto bring the actual work progress to the level of expected progress.Q4. What is meant by ‘Budgetary Control’? State its any four advantages.Ans.. Budgetary control is a system which uses budgets as a means of controlling. It means thatwhen different activities of a business enterprise are sought to be controlled with the help ofbudget, it is called budgetary control.Advantages of Budgetary Control(i) Helpful in Attaining Organizational Objectives: Budgets are based on plans and all thedepartmental managers are informed about the expectations each one of them. Thedepartmental managers put in their best efforts to achieve their target and consequently ithelps in attaining the organizational objectives.(ii) Source of Motivation for Employees: this technique prescribes the objectives for theemployees. Their performance is matched with the standards. If the results are positive, theyare appreciated. This motivates them.(iii) Optimum utilization of Resources: Budgetary Control divides the resources among all thedepartments in an appropriate manner. This makes it possible the Optimum utilization ofavailable Resources in the organization.(iv) Achieving Coordination: By implementing this system, the activities of all the departments

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are directed towards a single goal. In this way, all the departments work for the attainmentof the common goal. Consequently, coordination is established among them.(v) Facilitates Management by Exception: Management by exception means bringing only theimportant deviations to the notice of the higher rank managers. Budgetary Control makesevery deviation- big or small noticeable. Small deviations remain confined to thesubordinates and a report about the big deviations is sent to higher authorities.

HOTS:-1. Identify the function of management which enables the management to verify whether

objectives set by it are being achieved or not.2. Name another function of management which sets standards for performing the above

mentioned function.3. State the meaning of the term deviation and state any one factor which would cause

deviation.4. What is the main aim of break even analysis.5. While drawing out the network diagram for execution of Metro Rail in Delhi the engineers

concerned identified the CPM.(a) What is CPM?(b) Which technique of controlling does it form a part.(c) What is the major advantages of such identification.

6. State names of any 3 modern techniques of controlling.7. What is the Basic aim of PERT and CPM techniques.8. Controlling should not be misunderstand as the last functions of management? Why?

Questions for 1 Mark

1. Name the function of management which reviews the operations in a business unit?

Ans: Controlling

2. Give an example of external factor which is beyond the controlling process?

Ans: Government policy

3. What do you mean by the term “Deviation”?

Ans: Moving away from the standards laid down.

4. How controlling makes efficient use of resources?

Ans: When each activity is performed as per standards than wastage is minimized.

5. Give an example of quantitative standards?

Ans: Number of units.

6. What is critical point control?

Ans: Key areas which are important for the success of an organization only should be focused.

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7. Which technique of controlling is based on the belief that an attempt to control everything results in controlling nothing?

Ans: Management by exception.

8. Mittal Group used the technique in which it planned its operations in terms of sales volume, cash inflow and outflow. Which technique of controlling is used in this case?

Ans: Budgetary control

9. Give an example of traditional technique of controlling.

Ans: Any one out of the following:

-Personal observation

-Statistical reports

-Break-even-analysis

-Budgetary control

10. Name the technique through which the performance of a company can be measured?

Ans: Ratio Analysis

11. What do you mean by Break-even-point?

Ans: Point where Total Cost and Total Revenue both are equal.

Questions for 3-4 marks

1. “Controlling does not provide ready made solution to check all activities in an organization.” Do you agree with this statement? Justify your opinion.

Ans: Yes, for the justification any three out of following limitations could be used:

- Difficulty in setting quantitative standards

-Less control on external factors

-Resistance from employees

-Costly affair

2. “Planning and controlling are two sides of a same coin”. Comment.

Ans: Planning and controlling are inseparable twins of management. Planning initiates the process of management and controlling Completes the process. Plans are the basis of control and without Control the best laid plans may go lost.

3. “Controlling is backward looking as well as forward looking function of management”. Justify.

Ans: controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backward-looking function. However, it should be understood that planning is guided by past experiences and the corrective action initiated by control function aims to improve future performance. Thus, controlling is both backward-looking as well as a forward-looking function.

Questions for 5-6 Marks

1. “Controlling is a systematic process involving a series of steps”. Explain.

Ans: Steps in the process of controlling-

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Setting performance standards

Measurement of actual performance

Comparing actual performance with standards

Analysing deviations

Taking corrective action.

FINANCIALMANAGEMENT&FINANCIALMARKET2012

Q.1 State any one ‘Developmental function’ of SEBI. 1Q.2 State any one advantage provided by OTCEI 1Q.3 What is meant by ‘Financial Planning’? Give any two points of its importance. 3Q.4Investment decision can be long-term or short-term. Explain long-term investment decision

and state any two factors affecting this decision. 4Q.5 Explain any four function of ‘Stock Exchange’. ORExplain any four methods of floatation of new issue in the ‘Primary Market’ 6Q.6State any one ‘Protective function’ of SEBI. 1Q.7 Stage any one objective of setting up of SEBI. 1

Q.8 What is the duration of the instruments being traded in money market? 1Q.9.What is meant by ‘Financial Planning’? 1Q.10 What is meant by ‘Capital Structure’ of a company? State any two factors which affect the

capital structure of a company. 3Q.11 Identify the financial decision which determines the amount of profit earned to be

distributed and to be retained in the business. Explain any four factors affecting this decision. 5

Q.12 Differentiate between ‘Capital Market’ and ‘Money Market’ on any four bases.OR Differentiate between ‘Primary Market’ and ‘Secondary Market’ on any four points.

6Q.13 State any one function of ‘Financial Market’. 1Q.14 What is meant by ‘Financial Planning’? State any two points of its importance.

3Q.15 What is meant by ‘Financial Management’? State the primary objective of ‘Financial

Management. 3

2011Q.16 What is meant by ‘Money Market’? Explain any two instructions used in Money Market.

4Q.17 Your are a Finance Manager of a newly established company. The Directors have asked

you to determine the amount of working capital requirement for the company. Explain any four factors that you will consider while determining the working capital requirement for the company. 6

Q.18 “Sound Financial Planning” is essential for the success of any business enterprise. “Explain this statement by giving any six reasons.

Q.19 Define Financial Management. 1

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Q.20 “To promote orderly and healthy growth of securities market and protection of investors SEBI was set up.” With reference to this statement explain the objective of SEBI. 4

Q.21. What is meant by ‘Primary Market’? Explain any two methods of floating new issues in the Primary Market.4

Q.22 “Financial market plays an important role in the allocation of scarce resources in an economy by performing many important functions.” Explain any four such functions. 4

Q.23 You are a Finance Manager of a newly established company. The directors have asked you to determine the amount of Fixed Capital requirement. Explain any four factors that you will consider while determining the fixed Capital requirement for the company. 6

Q.24 What is meant by ‘Financial Market” Explain any two functions of Financial Market.4Q.25. How are the shareholders likely to gain with loan components in capital employed?

Explain with suitable example.52010

Q26. Explain the following money market instruments: (a) Certificate of deposit(b) call money 3Q.27 Explain the meaning of Financial Planning. Why is it important? Give any two reasons.

4Q.28 State any five methods floating new issues in the primary market.

5Q.29 What is meant by ‘Financial Decision’? State any four factors affecting the financial

decision. Q.30What is meant by Capital Structure’? State any 4 factors affecting the choice of capital

structu6Q.31 State any FOUR functions of ‘Stock Exchange’. 4MARKING SCHEME;ANS.1 i. SEBI promotes training of intermediaries of the securities market such as brokers, sub – brokers etc.,ii. SEBI has permitted internet trading in a limited way through registered stock brokers. iii. In order to reduce the cost of issue, SEBI has made under – writing optional. (ANY ONE)ANS.2 IT PROVIDES LIQUIDITY TO SMALL COMPANIES.

ANS.3 Financial planning is essentially preparation of a financial blueprint of an organisation’s future operations.

IMPORTANCE; Optimum utilization of funds

-coordination among different functional areas

-Avoids confusion and wastage

-Reduces financial uncertainties

-Base for financial control

-Detailed plans for futureANS.4 It relates to how the firm’s funds are invested in different Long term (fixed) assets . A long-term investment decision is also called a Capital Budgeting decision. factors affecting;(2marks)

Cash flows of the project

-Rate of return of the project

-Investment criteria involved (2marks)ANS.5 Functions of stock exchange

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1. Providing Liquidity and Marketability to Existing Securities: It gives investors the chance to disinvest and re-invest. This provides both liquidity and easy marketability to already existing securities in the market. 2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. 3. Safety of Transactions: The membership of a stock exchange is well regulated and its dealings are well defined according to the existing legal frame work. This ensures that the investing public gets a safe and fair deal on the market. 4. Contributes to Economic Growth: A stock exchange is a market in which existing securities are re-sold or traded. Through this process of disinvestment and re-investment

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savings get channelized into their most productive investment avenues. This leads to capital formation and economic growth. 5. Spreading of Equity Cult: The exchange can play a vital role in ensuring wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments. 6. Providing Scope for Speculation: The stock exchange provides sufficient scope within in the provisions of law for speculative activity in a restricted and controlled manner. (1/2 MARKS FOR CORRECT POINT &1MARKS FOR CORRECT EXPLAINATION ANY FOUR)ORFollowing are the methods of raising capital from the primary market :• 1. Public issue through prospectus: under this method the company wanting to raise capital issues a prospectus to inform and attract the investing public. It invites prospective investors to apply for the securities. • 2.Offer for sale: under this method the sale of securities takes place in two steps. In the first step the company sells the entire lot of shares to the intermediary firms of stock brokers at an agreed price .In the second step, the intermediary resells these shares to investors at a higher price. • 3. Private placement: In private placement the entire lot of new securities is purchased by an intermediary at a fixed price and sold not to the public but to selected clients at a higher price. • 4 .Rights issue (for existing companies: This is the offer of new shares (additional shares) by an existing company to the existing shareholders. The shareholder may either accept the offer for himself or assign to another. A rights issue to the existing shareholders is a mandatory requirement.• 5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange. (1/2 MARKS FOR CORRECT POINT &1MARKS FOR CORRECT EXPLAINATION ANY FOUR)ANS.6 (i) SEBI prohibits fraudulent and unfair trade practices in the securities market .ANS.7 • 1. To regulate stock exchanges and the securities industry to promote their orderly functioning. • 2. To protect the rights and interests of investors, particularly individual investors and to guide and educate them. (ANY ONE)

ANS.8 Up to 1 year or 365 days

ANS.9 Financial planning is essentially preparation of a financial blueprint of an organisation’s future operations. ANS.10 CAPITAL STRUCTURE: Capital structure refers to the mix between owners and borrowed funds. (1 MARKS)FACTORS AFFECTING THE CHOICE OF CAPITAL STRUCTURE 1. Cash Flow Position: Size of projected cash flows must be considered before issuing debt. 2. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. 3. Debt Service Coverage Ratio(DSCR): Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR). ANY TWO 1MARKS EACH).

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ANS.11 DIVIDEND DECISION:-The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business for meeting the investment requirements. (1 MARKS)

FACTORS AFFECTING DIVIDEND DECISION:- a) Earnings: Dividends are paid out of current and past earning. Therefore, earnings is a major determinant of the decision about dividend. (b) Stability of Earnings: Other things remaining the same, a company having stable earning is in a position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend. c) Stability of Dividends: It has been found that the companies generally follow a policy of stabilising dividend per share. (d) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. (e) Cash Flow Position: Dividends involve an outflow of cash. A company may be profitable but short on cash. Availability of enough cash in the company is necessary for declaration of dividend by it. (f) Shareholder Preference: While declaring dividends, managements usually keep in mind the preferences of the shareholders in this regard. (g) Taxation Policy: The choice between payment of dividends and retaining the earnings is, to some extent, affected by difference in the tax treatment of dividends and capital gains. ANY FOUR 1MARKS EACH).

ANS.12 Difference between Capital market and Money Market

Basis Capital Market Money Market

Duration More than one year Upto 365days or 1 year

Instruments Share, Debenture, Bonds Commercial Bill, Commercial paper, Treasury bill, Call Money, Certificate of Deposit

Participants Financial Institutions, Bank, Corporate bodies, Foreign investors, Individual investors, etc

RBI, Financial Institutions, Bank

Safety More risk-Less safety Less risk More safety

Return Higher Lesser

Liquidity Lesser HigherDifference between Primary Market and Secondary Market Primary Market Secondary Market 1. It is the market for new securities. 2. Securities are exchanged between company and the investors. 3. It promotes capital formation directly. 4. Only buying of securities takes place. Securities cannot be sold here.

1. It is the market for existing securities. 2. Securities are exchanged between investors. 3. It promotes capital formation indirectly. 4. Both buying and selling of securities can take place in the stock exchange / stock market. 5. There is a specified location.

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5. There is no fixed geographical location. 6. Prices are determined and decided by the management of the company. 7. Securities are issued to investors for the first time.

6. Prices are determined by demand and supply for the security in the stock exchange. 7. Securities may be bought and sold many times but not the first time.

ANS.14 1. Mobilization of savings and channeling them into the most productive uses: A financial market facilitates the transfer of savings from savers to investors (industries) 2.Facilitates price discovery: In the financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset which is being traded in that particular market. (ANY ONE 1 MARKS)ANS.14 FINANCIAL PLANNING Financial Planning is essentially preparation of financial blueprint of an organisations’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. 1 MARKSIMPORTANCE OFFINANCIAL PLANNING (i) It tries to forecast what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. In other words, it makes the firm better prepared to face the future. (ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future. (iii) If helps in co-ordinating various business functions e.g., sales and production functions, by providing clear policies and procedures. (ANY TWO 1 MARKS EACH)ANS.15 Financial Management: It is concerned with optimal procurement as well as usage of finance. 1 MARKSObjectives of Financial Management: Maximisation of owners’ wealth is sole objective of financial management. It means maximization of the market value of equity shares. Market price of equity share increases if the benefits from a decision exceed the cost involved. 2 MARKS.ANS16. MONEY MARKET IS A MARKET WHICH DEALS IN SHORT TERM FUND , NORMALLY FOR A PERIOD LESS THAN ONE YEAR.1 MARKS 1. Treasury Bill (T-bills): It is basically an instrument of short-term borrowing by the Government of India maturing in less than one year. They are also known as Zero Coupon Bonds.

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2. Commercial Paper: It is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise sort-term funds at lower rates of interest than market rates. It usually has a maturity period of 15 days to one year. 3. Call Money: It is a short-term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. It is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. ANY TWO.ANS17 FACTORS AFFECTING WORKING CAPITAL REQUIREMENTS 1. Nature of Business: Trading Organisations – Less working capital Manufacturing Organisations – more working capital 2. Scale of Operations: Large scale organizations – more working capital Small scale organizations – less working capital 3. Business Cycle: Boom period - more working capita Depression period - less working capital 4. Seasonal factors: Peak season – more working capital Lean season – less working capital 5. Production cycle: Longer production cycle – more working capital Shorter production cycle – less working capital 6. Credit allowed: Conservative/strict credit policy – less working capital Liberal credit policy – more working capital 7. Credit availed: If credit is available easily from suppliers - less working capital If credit is not available easily from suppliers – more working capital 8. Operating efficiency: If current assets are managed efficiently – less working capital If current assets are not managed efficiently – more working capital 9. Availability of Raw Material: Easy and timely availability of raw material – less working capital (ANY FOUR)ANS.18 IMPORTANCE OFFINANCIAL PLANNING (i) It tries to forecast what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. In other words, it makes the firm better prepared to face the future. (ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future. (iii) If helps in co-ordinating various business functions e.g., sales and production functions, by providing clear policies and procedures. (iv) Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning. (v) It tries to link the present with the future. (vi) It provides a link between investment and financing decisions on a continuous basis. (vii) By spelling out detailed objectives for various business segments, it makes the evaluation of actual performance easier.ANY SIX.ANS.19 Financial Management: It is concerned with optimal procurement as well as usage of finance. ANS.20 • 1. To regulate stock exchanges and the securities industry to promote their orderly functioning.

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• 2. To protect the rights and interests of investors, particularly individual investors and to guide and educate them. • 3. To prevent trading malpractices and achieve a balance between self regulation by the securities industry and its statutory regulation. • 4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc., with a view to making them competitive and professional.

ANS.21 Primary Market: It is also known as the new issues market. It deals with new securities being issued for the first time. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. 2 MARKS

Methods of Floatation: Following are the methods of raising capital from the primary market :• 1. Public issue through prospectus: under this method the company wanting to raise capital issues a prospectus to inform and attract the investing public. It invites prospective investors to apply for the securities. • 2.Offer for sale: under this method the sale of securities takes place in two steps. In the first step the company sells the entire lot of shares to the intermediary firms of stock brokers at an agreed price .In the second step, the intermediary resells these shares to investors at a higher price. • 3. Private placement: In private placement the entire lot of new securities is purchased by an intermediary at a fixed price and sold not to the public but to selected clients at a higher price. 2MARKS ANY TWO.ANS.22 FUNCTIONS OF FINANICIAL MARKET 1. Mobilization of savings and channeling them into the most productive uses: A financial market facilitates the transfer of savings from savers to investors (industries) 2.Facilitates price discovery: In the financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset which is being traded in that particular market. 3. Provide liquidity to financial assets: Financial markets facilitate easy purchase and sale of financial assets. In doing so they provide liquidity to financial assets, so that they can be easily converted into cash whenever required.4. Reduce the cost of transactions: Financial markets provide valuable information about securities being traded in the market. It helps to save time, effort and money.1MARKS EACH

ANS.231. Nature of Business: The type of business has a bearing upon the fixed capital requirements. For example, a trading concern needs lower investment in fixed assets compared with a manufacturing organisation. 2. Scale of Operations: A larger organisation operating at a higher scale needs bigger plant, more space etc. and therefore, requires higher investment in fixed assets when compared with the small organisation. 3. Choice of Technique: Some organisations are capital intensive whereas others are labour intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour.

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4. Technology Up gradation: In certain industries, assets become obsolete sooner. Consequently, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases. 5. Growth Prospects: Higher growth of an organisation generally requires higher investment in fixed assets. 6 .Diversification: A firm may choose to diversify its operations for various reasons, With diversification, fixed capital requirements increases. 7. Financing Alternatives: A developed financial market may provide leasing facilities as an alternative to outright purchase. Availability of leasing facilities, thus, may reduce the funds required to be invested in fixed assets, thereby reducing the fixed capital requirements. Such a strategy is specially suitable in high risk lines of business. 8. Level of Collaboration: At times, certain business organisations share each other’s facilities. For example, a bank may use another’s ATM or some of them may jointly establish a particular facility. Such collaboration reduces the level of investment in fixed assets for each one of the participating organization.

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FUNCTIONS OF FINANICIAL MARKET 1. Mobilization of savings and channeling them into the most productive uses: A financial market facilitates the transfer of savings from savers to investors (industries) 2.Facilitates price discovery: In the financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset which is being traded in that particular market.1 ½ MARKS EACH.

ANS.25 It is an assumption that by using fixed charge bearing securities in the capital structure of a company, return to the equity shareholders can be increased. But this is possible only when the rate of return of the company is higher than the rate interest which a company pays on its debt capital. For example a company has Rs.10 crores capital. Option 1 the company uses only equity capital Option 2 the company uses 50% equity and 50% debt capital in its capital structure. Rate of interest on debt is 15%. Rate of Income-tax is 30% . Profit before interest and tax is Rs.2 crores. Particulars Option 1 Option 2 Profit bebore interest and taxes (PBIT) 2,00,00,000 2,00,00,000

Less: Interest on debt ------------- 15,00,000 Profit after tax 2,00,00,000 1,85,00,000 Less: Income – tax @30% 60,00,000 55,50,000 Profit after tax and interest 1,40,00,000 1,29,50,000 No. of equity shares ( FV Rs.10 each) 20,00,000 10,00,000

Return to shareholders(EPS) Rs. 7 Rs.12.95

ANS.26 1. . Call Money: It is a short-term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions. It is a method by which banks borrow from each other to be able to maintain the cash reserve ratio. . Certificate of Deposit (CD): It is a unsecured, negotiable short-term instruments in bearer form, issued by commercial banks and development financial institutions. It can be issued to individuals, corporations and companies. 1 ½ EACH.ANS.27 FINANCIAL PLANNING Financial Planning is essentially preparation of financial blueprint of an organisations’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. 2MARKSIMPORTANCE OFFINANCIAL PLANNING (i) It tries to forecast what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. In other words, it makes the firm better prepared to face the future. (ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future. (iii) If helps in co-ordinating various business functions e.g., sales and production functions, by providing clear policies and procedures. (iv) Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning. ANY TWO 1MARKS EACHANS.28 Following are the methods of raising capital from the primary market :• 1. Public issue through prospectus: under this method the company wanting to raise capital issues a prospectus to inform and attract the investing public. It invites prospective investors to apply for the securities. • 2.Offer for sale: under this method the sale of securities takes place in two steps. In the first step the company sells the entire lot of shares to the intermediary firms of stock brokers at an agreed price .In the second step, the intermediary resells these shares to investors at a higher price.

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• 3. Private placement: In private placement the entire lot of new securities is purchased by an intermediary at a fixed price and sold not to the public but to selected clients at a higher price. • 4 .Rights issue (for existing companies: This is the offer of new shares (additional shares) by an existing company to the existing shareholders. The shareholder may either accept the offer for himself or assign to another. A rights issue to the existing shareholders is a mandatory requirement. • 5. e-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange.

ANS.29 Financing Decision: - It refers to the quantum of finance to be raised from various sources of long-term of finance. It involves identification of various available sources. The main sources of funds for a firm are shareholders funds and borrowed funds. Shareholders funds refer to equity capital and retained earnings. Borrowed funds refer to finance raised as debentures or other forms of debt. Factors Affecting Financing Decision:- a) Cost: The cost of raising funds through different sources is different. A prudent financial manager would normally opt for a source which is the cheapest. (b) Risk: The risk associated with different sources is different. (c) Floatation Costs: Higher the floatation cost, less attractive the source. (d) Cash Flow Position of the Business: A stronger cash flow position may make debt financing more viable than funding through equity. (e) Level of Fixed Operating Costs: If a business has high level of fixed operating costs (e.g., building rent, Insurance premium, Salaries etc.), It must opt for lower fixed financing costs. Hence, lower debt financing is better. Similarly, if fixed operating cost is less, more f) Control Considerations: Issues of more equity may lead to dilution of management’s control over the business. Debt financing has no such implication. Companies afraid of a takeover bid may consequently prefer debt to equity. g) State of Capital Markets: Health of the capital market may also affect the choice of source of fund. During the period when stock market is rising, more people are ready to invest in equity. However, depressed capital market may make issue of equity shares difficult for any company.

ANS.30 CAPITAL STRUCTURE: Capital structure refers to the mix between owners and borrowed funds. FACTORS AFFECTING THE CHOICE OF CAPITAL STRUCTURE 1. Cash Flow Position: Size of projected cash flows must be considered before issuing debt. 2. Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. 3. Debt Service Coverage Ratio(DSCR): Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR). 4. Return on Investment (RoI): If the RoI of the company is higher, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater. 5. Cost of debt: A firm’s ability to borrow at a lower rate increases its capacity to employ higher debt. Thus, more debt can be used if debt can be raised at a lower rate. 6. Tax Rate: Since interest is a deductible expense, cost of debt is affected by the tax rate. 7. Cost of Equity: Stock owners expect a rate of return from the equity which is commensurate with the risk they are assuming. When a company increases debt, the financial risk faced by the equity holders, increases. 8. Floatation Costs: Process of raising resources also involves some cost. Public issue of shares and debentures requires considerable expenditure. Getting a loan from a financial institution may not cost so much.

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9. Risk Consideration: As discussed earlier, use of debt increases the financial risk of a business. 10. Flexibility: If a firm uses its debt potential to the full, it loses flexibility to issue further debt. 11. Control: Debt normally does not cause a dilution of control. ANS.31 Functions of stock exchange 1. Providing Liquidity and Marketability to Existing Securities: It gives investors the chance to disinvest and re-invest. This provides both liquidity and easy marketability to already existing securities in the market. 2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. 3. Safety of Transactions: The membership of a stock exchange is well regulated and its dealings are well defined according to the existing legal frame work. This ensures that the investing public gets a safe and fair deal on the market. 4. Contributes to Economic Growth: A stock exchange is a market in which existing securities are re-sold or traded. Through this process of disinvestment and re-investment

OTHER IMPORTANT QUESTIONS;

1. Mention the main purpose of financial market.

Ans: Linking the savers and investors.

2. Name any two segments of financial market.

Ans: Capital market and Money market

3. Which method of short term finance do the bank adopt to maintain their cash reserve ratio(CRR)?

Ans: Call money

4. Differentiate between NSEI and OTCEI.

Basic NSEI OTCEI

Size of Company Paid up capital Rs.3crores and above More than Rs.30lakhs and less than 25crores

Securities Both capital and money market instruments

Only capital market instruments

Settlement time Payment within 2 days from Trade date

Payment within 7days of settlement

Scope For medium and large companies For small companies

Established 1992 1990

5.Explain the functions of SEBI (Securities and Exchange Board of India).

Ans: Regulatory Function-

-Registration of Intermediaries

-Notification about rules and regulations

-levying of fees

-Regulation of investment schemes

-Inspections and enquiries

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Development functions-

-Training to intermediaries

-Promotion of fair trade

-Research

Protective functions-

-Prevents insider trading

-Prohibits unfair trade practices

-Promotes fair trade practices

-Educates investors

6 Why finance is required in a business organization?

Ans: Any one out of the following:

-To start a business

-Modernisation

-Diversification

-Acquisition of assets

7. Give any two objectives of financial management.

Ans: Any one out of the following:

-Wealth maximisation

-Profit maximisation

-Efficient use of resources

-Safety of resources

8. What is the primary objective of financial management?

Ans: Primary aim of financial management is to maximize shareholder’s wealth.

9. List any two decisions which are taken by a financial manager?

Ans: Any two out of the following:

-Investment decision

-Financing decision

-Dividend decision

10 . What is financial Leverage?

Ans: Technique of using fixed charge securities to increase the earning of equity share holders.

11. What do you mean by capital structure of a company?

Ans: Capital structure is the proportion of debt and equity in total capital of a company.

12. Discuss the TRADING PROCEDURE of stock exchange. TRADING PROCEDURE:- The procedure for purchase and sale of securities in a stock exchange involves the following steps: 4. Selection of broker

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The first step is to select a broker who will buy/sell securities on behalf of the investor. This is necessary because trading of securities can only be done through SEBI registered brokers who are the members of a stock exchange. Brokers may be individual, partnership firms or corporate books. The broker charges brokerage / commission for his services. 5. Opening demat account The next step is to open a demat account. Demat (Dematerialised) account refers to an account which an Indian citizen must open with the depository participant (banks, stock, brokers) to trade in listed securities in electronic form. The securities are held in the electronic form by a depository. At present, there are two depositories in India NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services Ltd.) Depository interacts with the investors through depository participants. Your Depository Participant will maintain your securities account balances and intimate to you the status of your holding from time to time. 6. Placing the order The next step is to place the order with the broker. The order can be communicated to the broker either personally or through telephone, cell phone, e-mail etc. The instructions should specify the securities to be bought or sold and the price range within which the order is to be executed. Only the securities of listed companies can be traded on the stock exchange. 6. Executing the order According to the instructions of the investor, the broker buys or sells securities. The broker then issues a contract note. A copy of the contract note is sent to the client.The contract note contains the name and the price of the securities, names of the parties, brokerage charged. It is signed by the broker. 7. Settlement This is the last stage in the trading of securities done by the brokers on behalf of their clients. The mode of settlement depends upon the nature of the contract. Equity spot market follows a T+2 rolling settlement. This means that any trade taking place on Monday gets settled by Wednesday. All trading on stock exchanges takes place between 9:55 am and 3:30 pm. Indian Standard Time, Monday to Friday. Delivery of shares must be made in dematerialized form, and each exchange has its own clearing house, which assumes all settlement risk.13.What is Investment Decision ?Discuss factors affecting it.Ans.s: It relates to how the firm’s funds are invested in different assets . Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital Budgeting decision. Factors affecting Capital Budgeting Decision/Investment Decision: 1. Cash flows of the project: If anticipated cash flows are more than the cost involved then such projects are considered. 2. The rate of return: The investment proposal which ensures highest rate of return is finally selected.

3. The investment criteria involved: Through capital budgeting techniques, investment proposals are selected.

MARKETINGMANAGEMENT(2007)

(1) What is meant by Sales Promotion? (1)Ans.: Sales promotion refers to short-term incentives, which are designed to encourage the buyers to make immediate purchase of a product or service.

(2) Define Product Mix. (1)Ans.: Product mix refers to the activities relating to the product services or idea to be offered. It involves decisions regarding – quality, weight, size, shape, design, packaging, labeling, brand name & features.

(3) What is meant by term ‘selling’? (1)

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Ans.: Selling is mere exchange of goods for money between sellers and buyers. It means finding the customers and transferring the goods to them for value or money. It focuses on the needs of the seller. It begins with product to be sold and ends with sale.

(4) Briefly explain any three objectives of marketing management. (3)Ans.: Following are the objectives of marketing management:(a) Creation of demand: The producers first ascertain what the customers want and then produce goods

according to the needs of customers.(b) Capturing market share: Various promotional methods and another activities enable a firm to

capture a reasonable share in the market. (c) Creation of goodwill: Marketing basically aims at building the reputation of the firm through

various image-building activities.(d) Profitable sales volume through customers’ satisfaction(e) To survive in a competitive market

(5) Explain any six functions of marketing. (6) ORAns.:

1. Gathering and Analyzing Market Information: This is necessary to identify the needs of the customers and to take various decisions for the successful marketing of the products and services. This is important for making an analysis of the available opportunities and weaknesses of the organization and help in deciding that what opportunities can best be pursued by it.

2. Marketing Planning: Business has to develop a complete marketing plan covering various important aspects including the plan for increasing the level of production, promotion of the products, etc. and specify the action programmes to achieve these objectives.

3. Product Designing and Development: The design of the product contributes to the target customers and also gives a competitive advantage in the market. It requires decision regarding the size, design, colour, weight, quality, and other features of product to meet the expectations of the customers.

4. Standardization and Grading: Standardization refers to producing goods of predetermined specifications so that buyers conform to the quality, price, and packaging and reduces the need for inspection, testing and evaluation of the products. Grading is the process of classification of products into different groups according to similar characteristics.

5. Packaging and Labelling: Packaging is the act of designing and producing the package for a product. A package is a wrapper or container in which product is enclosed, encased or sealed. Packaging reduces the risks of spoilage, breakage, leakage, etc. in the process of storage and transportation of goods. Packaging is important not only for protection of the products but also serves as a promotional tool.

Labelling refers to designing the label to be put on the package, which indicates ingredients including name of product & manufacturer, quality, quantity, price, date of manufacturing & expiry, process of use and precautions etc.

6. Branding: Branding means giving a specific name, symbol or design to a product by which it will be known. By branding, a manufacturer distinguishes his product from the competitors’ product so that consumers may identify it easily and become loyal to it.

7. Customer Support services: Customer support services such as after sale services, handling customer complaints, procuring credit services, maintenance services, technical services and consumer information are provides maximum satisfaction to the customers, which is the key to marketing success in modern days.

8. Pricing of Product: Pricing means the process of fixing the price of a product or services. Pricing is an important function because the prices of a firm’s products determine the volume of sales and the amount of profit.

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Promotion: Promotion is the process of informing customers about the availability and uses of products and services and persuading them to buy. It includes all the activities such as advertising, personal selling, sales promotion and publicity which are intended to influence buyer’s behaviour.

9. Physical Distribution: The two major decision areas under the managing physical distribution include – a) Decision regarding channels (intermediaries) of distribution b) Physical movement of the product from where it is produced to a place where it is required.

10. Transportation: 11. Storage or Warehousing:

“Advertising misleads customers and increases the cost of products.”Do you agree with this statement? Give reasons in support of your answer.Ans.: Advertising has been subjected to a lot of criticism and public disapproval. The critics of advertising raise the following objections against advertising:1. Burden on consumer or Adds to Cost:The amount spent by advertiser on his product is passed on to the consumer in the form of higher

prices. The customers have to pay more the advertised product. No manufacture pays for the advertising costs out of his own pocket.

Advertising, however, increase demand and leads to large scale of production. Large scale of production reduces costs and results in lower prices. Therefore, advertising does not put burden of higher prices on consumers in the long run.

2. Encourages Sale of Inferior and dubious products:Advertising persuades innocent people to buy inferior and undesirable products such as liquor,

cigarettes, etc. Manufactures and traders make false and exaggerated claims in their advertisements about the utility of their products. Ignorant consumers are misled to buy dubious products. Some businessmen misuse advertising to sell duplicate and dubious products. But this is not a fault

of advertising. People and government can check misuse of advertising by keeping a watch on advertisers.

3. Confuse the Buyers:Public is exposed to so many advertisements in different media. For example, five advertisements on

TV may be for toothpaste or detergent. Each brand claims it is better than others. Consumers get confused and find it difficult to make a choice. Intelligent consumers can however make judgment on the basis of reputation of the manufacturer,

price of the brand and their needs.4. Multiplies the needsAdvertising multiplies the needs of people and encourages un-healthy consumption. It induces people

to buy even those things which are not necessary. This leads to waste of society’s resources. Advertising distorts family budgets and encourages wasteful expenditure. Advertising no doubt multiplies the needs. But it also inspires to work hard and earn more to

satisfy the increased needs. Moreover, some products are innovative and more useful to people.(2008)

(1) Explain the functions of marketing. (3)Ans.: Refer the answer of question no. 5 of 2007

(2) Explain in brief any three functions of labeling. (3)Ans.: Labels perform the following functions: (any of three)(a) Describe the product and specify its contents: The manufacturer cannot communicate to each and

every customer personally so if he wants to communicate and share some information about the product with customer it is done through labels.

(b) Identify the product: The label helps the customers to identify the product from the various types available for example; we can easily identify a Cadbury chocolate from other brand of chocolate with the label of both products.

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(c) Help in grading: Label helps to grade the product into different categories for example; Brook Bond Tea – Red Label, Green Label etc.

(d) Promote sale: Attractive & clourful labels excite customer and induce him to buy the product. Specially in customer goods attractive labels increase sales volume.

(e) Providing information required by Law/Legal point of view: The label is also used to fulfil the legal requirement as it is legal compulsion to print Batch no., Contents, Maximum retail price, Weight or Volume on all the products. On some products giving statutory warning is also legal compulsion and these are also fulfilled through label.

(3) Explain in brief any three qualities of good brand name. (3)Ans.: Following are some of the considerations, which should be kept in mind while choosing a brand name: (any of three)(a) Brand should be short, easy to pronounce, spell, recognize and remember: For example – Lux,

Dettol, Surf, VIP, Vim, Ponds, Rin etc. As if brand name is difficult to pronounce than customer will hesitate to demand for it and failed to remembered.

(b) Brand name should be suggestive: Brand name must be suggests the utility, benefits and quality of the product. For example – Hajmola suggests digestive property, Ujjala suggests brightness, Hair & Care suggests care of hairs, Fair & Lovely, Promise, Genteel, Boost etc.

(c) Brand name should be unique & distinctive: The brand name should be very different and should not lose its identity for example; Airtel, Tide, Liril, Safari, Sprit etc.

(d) Brand name should be adaptable to packing or labeling requirements, to different advertising media and to different languages.

(e) Brand should be sufficiently versatile to accommodate new products, which are added to the product line for example; Maggie, Colgate etc.

(f) It should be capable of being registered and protected legally.(g) Chosen name should have staying power i.e., it should not get out of date.

(4) Give two distinctions between marketing & selling. (C3)Ans.: (any of two)

Basis of difference Marketing Selling1. Focus It focuses on the need of the customer. It focuses on need of the sellers, i.e.

convert goods in to cash.2. approach/means The marketers use integrated approach

to identify & satisfy customers’ needs.The seller uses fragmented approach for selling products.

3. objective/aim Its aims at profits through customersSatisfaction.

Its aims at profits through transfer of title (sales).

4. Scope Its wider in scope and includes varioustypes of activities

It’s narrower in scope, only exchanges of goods & services for consideration.

5. importance/ predominance

Customer is treated as the king & is given supreme importance

Selling gives priority and supreme importance to product.

6. starting and ending point

Its starts much before production with the customers’ needs & continues even after sale

Its starts after production & ends with the sale of product

7. Perspective It has a long term as it lays emphasis on growth & stability of business.

It has a short term as it focuses on profit maximization.

(5) Distinguish between Advertising and personal selling. (5)Ans.: (any of five)

S.N. Advertising Personal Selling01 Impersonal form of communication Personal form of communication02 Less flexible as standardized messages are Flexible. Messages can be changed as the type of

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used customers03 Mass reaches Limited number of customers can be contacted04 Cost per person is less Cost per person is high05 Covers market in short time Takes long time to cover market06 No direct feedback can be obtained Direct feedback can be collected07 More useful for standardized and consumer

productsMore useful for industrial & customized products

(6) Differentiate between marketing & selling by giving any six differences. (6) Ans.: Refer the answer of the question No. 04.

(2009)(1) What is meant by Channels of distribution? Explain the types of channels of distribution. (3)

Ans.: Channels of Distribution are set of firms and individuals that take title, or assist in transferring title, to particular goods or services as it moves from the producers to the consumers. In other words, channel refers to a team of merchants, agents, and business institutions that combine physical movement and title movement of products to reach specific destinations.

Types of Channel of Distribution

1. Direct Channel: Manufacture Customer (Zero Level)2. Indirect Channel:

Manufacture Retailer Customer (One Level)Manufacture Wholesaler Retailer Customer (Two Level)Manufacture Agent Wholesaler Retailer Customer (Three Level)

(2) What is meant by ‘Indirect channels of distribution’? Explain any two methods of indirect channels of distribution. (3)Ans.: When a manufacturer employs one or more intermediary to move goods from the point of production to the point of consumption, the distribution network is called indirect.

Manufacture Retailer Customer (One Level)Manufacture Wholesaler Retailer Customer (Two Levels)Manufacture Agent Wholesaler Retailer Customer (Three Levels)

(3) What is meant by ‘Direct channels of distribution’? List any four methods of direct channels of distribution. (3)Ans.: The most simple and the shortest mode of distribution is direct distribution, where in the goods are made directly available by the manufacturers to customers, without involving any intermediary. This is also called zero level channel. A straight and direct relationship is established between the manufacturer and the customer. For example, when a manufacturer sells his goods through his own retail outlets (e.g., Mc Donald, Bata); it is referred to as direct channel.Similarly, mail order selling, internet selling and selling through own sales force, (e.g., Eureka Forbes) are example of direct selling or zero level channel.

(4) ‘Bending the customer according to the product and developing the product according to customer needs’ are the two important concepts of marketing management. Identify the concepts and differentiate between the two. (5)Ans.: ‘Selling Concept’ and ‘Marketing Concept’ are respectively two important concepts of marketing management on the given statement. (For distinction between these two, refer the answer of question no. 04)

(5) What is meant by Packaging? Give any five points explaining why packaging is important. Ans.: Packaging refers to the act of designing and producing the package for a product. A package is a wrapper or container in which product is enclosed, encased or sealed. Packaging reduces the risks of

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spoilage, breakage, leakage, etc. in the process of storage and transportation of goods. Packaging is important not only for protection of the products but also serves as a promotional tool.(a) Rising Standards of Health and Sanitation : Because of theincreasing standards of living inthe

country, more and more peoplehave started purchasing packedgoods as the chances ofadulteration in such goods areminimized.

(b) Self Service Outlets : The self service retail outlets are becoming very popular, particularly in major cities and towns. Because of this, some of the traditional role assigned to personal selling in respect of promotion has gone to packaging.

(c) Innovational Opportunity : Some of the recent developments in the area of packaging have completely changed the marketing scene in the country. For example, milk can now be stored for 4-5 days without refrigeration in the recently developed packing materials. As a result, the scope for the marketing of such products has increased.

(d) Product Differentiation : Packaging is one of the very important means of creating product differentiation. The colour, size, material etc., of package makes real difference in the perception of customers about the quality of the product. For example, by looking at the package of a product say Paint or Hair Oil, one can make some guess about quality of the product contained in it.

ORExplain the following sales promotion activities: (a) Refunds (b) Instant draw & assigned gifts (c) Full finance (d) Sampling

Ans.: Commonly used Sales Promotion Activities 1. Rebate : Sometimes, on some special occasion, a manufacture offers its products at special prices much

below the listed price. This is known as rebate. For example – offering khadi products at the time of Gandhi Jayanti on special prices.

2. Discounts : These are like price promotions in which certain percentage of the price is reduced as discount from the listed price. For example – discounts up to 50% by Janata Shoes House.

3. Refunds : In this case, the seller offers to refund a part of the price paid by the customer on the production of some proof of purchase. For example – refund of Rs. 5 on presentation of empty pack of Maggie Noodles.

4. Product Combinations : The customer is given another product as free gift alongwith the purchase of certain goods. For example – gift of Ink-jet Printer with the purchase of Compaq Desk-top Computer.

5. Quantity Gifts : Sometimes seller devise special package, which gives extra quantity, of the product to the buyer at less price or no price. For example – buy two soaps and get one free by LUX.

6. Instant Draws and Assigned Gifts : Under this scheme, some gifts are given on the basis of draws or some events. For example – Jainsons Westend, Karol Bagh, Delhi organize some events instantly and deliver some gifts on the spot.

7. Lucky Draw : Under this scheme, some coupons bearing distinct numbers are issued on the purchase of some products. At the end of a day or week or month, draws are taken and the winner is awarded some gifts. For example – gift of computer to the lucky winner declared on the basis of draw taken out of the tickets of visitors to India International Trade Fair.

8. Contests : In this scheme, competitive events are organized by the companies for promoting their products. For example – Bournvita Quiz Contest etc.

9. Usable Benefits : In this scheme, gifts are given to the users of products. For example – free servicing of cars.

10. Finance Scheme : This scheme makes finance available for customers. Sometimes, in order to capture the market, finance is provided to the customer by the marketer at 0% interest rate. This is followed usually for very costly products like Premium Cars etc.

11. Sampling : Under this scheme, some free samples are distributed to develop a taste for the product. For example – launching of new type of toothpaste.

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(1) What is meant by Product concept of marketing? (3)Ans.: As a result of ‘Production Concept’, with the increase in the supply of the products customers started looking for products which were superior in quality, performance and features. Therefore, the emphasis of the firms shifted from quantity of production to quality of products as bringing continuous improvement in the quality of products.Thus, product improvement became the key to profit maximization of a firm, under the concept of product.

(2) “An important task in the marketing of goods relates to designing the label as it provides useful and detailed information about the product.” In the light of the above statement draw a label for a packet of ‘juice’ and highlight the important information to be provided on it. (5)Ans.:

(3) Name the element of marketing mix which affects the revenue and profits of a firm. Explain any five factors which help in determining this element. (6)Ans.: Price Mix affects the revenue and profits of a firm as an element of marketing mix. Price mix

refers to the decisions relating to the price to be charged for the product, services or idea. Price stands for the exchange value of the product i.e. what the customer has to pay? It involves decisions regarding targeted customers, cost, profit margin, competitive products, discount & allowance, terms of credit. The following are the few factors which help in determining the price of a product/service/idea:

1. Product Cost: The product cost includes the cost of producing, distributing and selling the product. If these cost is lesser than the price of product may fixed at lower rate and vise-versa.

2. The Utility and Demand: The buyer may be ready to pay up to the point where the utility from the product is at least equal to the sacrifice made in terms of the price paid. On the other hand, consumers made purchase according to the law of demand as more units at a low price than at a high price. However, on inelastic demand, the firm in a position to fix at higher prices.

3. Extent of Competition in the Market: Competitors prices and their anticipated reactions must be considered before fixing the price of a product. Not only the price but the quality and the features of the competitive products must be examined carefully, before fixing the price.

4. Government and Legal Regulations: The products which are necessary to made available for all the people, government can regulate the upper price limit for products by declaring as such products are essential commodity.

5. Pricing Objectives: First of all the objectives of fixing the price of product should be kept in mind. Introduction of a new product, maximization of sales, obtaining market share leadership, maximization of profits, surviving in a competitive market, attaining product quality leadership are the main objectives of setting the price of product. Whatsoever the objective, will affect the price of product i.e. if firm decides to maximize profits in the short run, it would tend to charge maximum price for its products but if it is to maximize its total profits in the long run, it would opt for a lower per unit price so that it can capture larger share of the market and earn greater profits through increased sales.

6. Marketing Methods Used: Marketing methods which have been used by marketer is also important factor for pricing product i.e. distribution system, quality of salesmen employed, quality & amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customers services etc. For example, if a firm provides free home delivery, it has some flexibility in fixing prices.

OR71

Delhi-12 Ready to drink FPOappyFIZZa

Test Best When Chilled (sparking apple juice drink) batch no. 2439Date of Mfg April 2012

300 ml (Best before 12 months)Contents: Protein, Sugar, Energy, Potassium, Fat, Calcium. Max. Price 29/-

“Generally consumers prefer to buy goods directly from the producers but it is not always possible.” Give reasons why it is so, by explaining four different factors responsible for this. Ans.:Generally consumers prefer to buy goods directly from the producers but it is not always possible. The different reasons responsible for this are as follows:(a) Nature of buyers: If number of buyer is large then it is better to take the service of middlemen for

the distribution of goods and vice-versa.(b) Types of buyers: If more buyers of the product belong to general category then there can be more

middlemen and vice-versa.(c) Buying quantity: It is useful for the manufacturers to rely on the services of the middlemen if

goods are bought in small quantity and vice-versa.(d) Cost: A manufacturer would select such channel of distribution which has less cost and also useful

from other angles.(e) Size of market: If the market area of the firm is scattered fairly then producer must take the help of

middlemen.(2011)

(1) Explain the role of marketing in a firm. (3)Ans.: Refer the answer of the question no. 04 (2007)

(2) Differentiate between ‘Marketing’ and ‘Selling’ on any 3 basis. (3)Ans.: Refer the answer of the question no. 04 (2008)

(3) What is meant by ‘Brand Name’? State any 4 characteristics of a good Brand Name. (5)Ans.: Brand Name refers to the part of brand which can be spoken and in verbal form such as Asian Paints, Dunlop etc. (Refer the answer of the question no. 03 (2008)

(4) What is Packaging? State any four functions of Packaging. (5)Ans.: Packaging is the act of designing and producing the package for a product. A package is a wrapper or container in which product is enclosed, encased or sealed. Packaging reduces the risks of spoilage, breakage, leakage, etc. in the process of storage and transportation of goods. Packaging is important not only for protection of the products but also serves as a promotional tool.Following are the important functions of packaging: (a) Protection of goods:Packaging protects the goods from adverse weather, insects, breakage in

handling etc.(b) Identification of goods: Packaging helps to identifying the product. For example – Sanchi milk can

be easily identified from other branded milk.(c) Convenience in handling and storage: Products can be moved from one place to another with the

help of appropriate packaging even storing also become safe and convenient.(d) Utility of packaging material: Sometimes even the packing itself become useful. For example –

plastic bottles of pepsi are used for storage of some other liquid items. (e) Selling small quantity becomes easy: selling in rural India has become possible due to packaging

in small pouches. Now a day’s shampoo, toilet soap, tea and many other products are being sold in small packaging.

(5) Name the element of marketing mix in which a set of firm and individuals creates possession, place and time utility and helps in market offering. Also explain any five important functions performed by this element. OR (6)Ans.: Physical distribution mix or place mix is the element of marketing mix in which set of firms or individuals create possession, place and time utilities and help in market offerings.The important functions performed by this element are as under:(a) Order Placement: This is the most important function. It involves receipt of order form, customers,

entry of order in company’s record, procuring goods from intermediaries etc.(b) Transportation: it means physical movement of goods from one place to another. It is an important

activity because most of the markets are geographically separated.(c) Warehousing: it refers to an activity of holding the goods in perfect state to create time utility.

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(d) Inventory control: it includes decoding about the level of inventory. Following factors should be kept in mind while decoding inventory level – (i) Cost of inventory(ii) Time required meeting additional demand(iii) Degree of accuracy of sales forecast etc.

ORIdentify and explain the promotional tool of marketing mix which plays a persuasive, service and informative role and thereby links a business firm to its customers. Also explain by giving any four reasons how this tool helps in increasing the sales of businessmen. Ans.: Personal Selling plays a persuasive service and informative role and thereby link a business firm to its customers. Personal selling helps in increasing the sales of businessmen as under:(a) By highlighting the qualities of a product a salesmen persuade the customer to buy the product.(b) Salesmanship consists of writing buyer’s confidence for the seller’s house and goods, thereby

wining a regular and permanent customer which ultimately leads to increased sales.(c) Salesman works as ‘eyes’ and ‘ears’ of the manufacturer and help them in improving their product

or sales policies by bringing to their suggestions, impressions and complaints of the consumers.(d) He enables the producer to adapt himself to the particular needs of consumer. He makes exchange

of consumer; he opens new market and overcome obstacles to trade. (2012)

(1) Mansi, a shoe manufacturing for school students, decided to maximize her profit by producing and distributing at large scale and thereby reducing the average cost of production. (3)(i) Identify the marketing management philosophy adopted by Mansi.(ii) Explain this philosophy on the basis of

(a) Main Focus(b) Means and Ends

Ans.:(i) Production Concept. As per this concept the consumers favour those products which are widely available at an affordable price. This availability and affordability of the product is considered as key to success under the production concept. This belief profit can be maximized by reducing the production cost.(ii) (a) Production concept suggest to give main focus on quantity of product. (b) It means Availability and Affordability of product; and the cost ends with earning of profit through large volume of production.

(2) Differentiate between ‘Marketing’ and ‘Selling’ on any five bases. (5)Ans.: Refer the answer of the question no. 04 (2008)

(3) Explain the following functions of ‘Marketing’: (5)(a) Gathering and analyzing Marketing Information(b) Standardization and Grading.Ans.: refer the answer of the question no. 05 (2007)

(4) Differentiate between ‘Advertising’ and ‘Personal Selling’ on any five bases. (5)Ans.: Refer the answer of the question no. 05 (2008)

(5) Consumer Products are classified on different basis. ‘Durability of the Product’ is one of them. Explain any three types of products in this category. Ans.: Classification of product is not in the syllabus of 2012-13.ORPhysical distribution includes some components for physically moving the goods from manufacturers to the customers. Explain these components. Ans.:Component/Elements of physical distribution are not in the syllabus of 2012-13.

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(2007)(01) Explain any three ways or means of consumer protection available in India. (06 marks)

Ans.: This topic is not in the syllabus of 2012-13. OR Briefly explain any three rights of consumer available under the Consumer Protection Act 1986.

Ans.: The rights provided under Consumer Protection Act, 1986 for protection of consumers are as follows:1. Right to Safety:This is the right to be protected against the marketing of goods which are hazardous to health or life. Certain goods like electrical goods and pressure cookers can cause injury, if there is any manufacturing defect. Consumers have the right to be protected against any such danger.2. Right to be informed: Consumers have right to be given the facts they need to make an informed choice. Therefore, the manufacturer should give all information regarding the quality, price, date of manufacture, precaution for use, etc. either on the package or separately on a piece of paper.3. Right to choose:This is the right to be assured, wherever possible, of access to a variety of products and services at competitive prices. The manufacturers should give the consumer the chance to choose from alternative products. A consumer should not be forced to buy a particular product. 4. Right to be heard:In case a consumer has been exploited or has complaint against the product or service, he has the right to be heard and assured that his / her interest would receive due consideration.5. Right to seek redressal:This is the right to get relief against unfair trade practices and exploitation. When consumers are cheated or exploited they have a right to get their claims settled against the manufacturer. A number of consumer courts and agencies have been setup specifically for this purpose.6. Right to consumer education:A consumer can protect himself against various malpractices when he knows his rights and remedies available to him. Therefore, he has the right to be educated about the rights and remedies available to him.

ORExplain any three responsibilities of consumers to safeguard their interests.Ans.:The consumers should keep a few things in mind while purchasing product or services or any things.1. Do not buy in hurry: The consumers should make an estimate of the things they want to buy well in

time. They should think about the things they want to buy along with their quality required by them. They also take in consideration the place from where to buy their things.

2. Do not buy blindly: The consumers should make full use of their reason while buying things. They should not take the seller’s words as the final truth.

3. Beware of false advertisement: The seller’s inform the consumers about their things through the medium of advertisement. The sellers exaggerate the qualities of their goods through advertisement. Therefore it is the responsibilities of consumers to recognize the truth of the advertisement.

4. Buy only ISI and Agmark goods: It is the responsibility of consumers only buys goods with the ISI or Agmark printed on them. Both these symbols are indicative of the good quality of the goods.

5. Do not compromise on quality: Consumers should not buy inferior stuff out of greed for less prices. 6. Do not forget to get receipt & guarantee/warranty card: Consumers should always get a receipt or

bill for the things purchased. In case a guarantee/warrantee card is also offered by seller, it should also be taken. These documents will be of great help in setting all kinds of disputes with the seller.

7. Approach immediately the officer concerned in case of complaint: It is the responsibility of the consumers to approach the officer concerned in case there is some complaint about the goods purchased. A late compliant may find that the period of guarantee/warrantee has lapsed.

(2008)74

(01) Explain the rights of consumers. (4 marks)Ans.: Refer the answer of the question no. 01 (2007)

(02) Mohit filed a case against ‘Domestic Coolings Ltd.’ in the ‘District Forum’, but he was not satisfied with the order of the District Forum. Where can he appeal further against the decisions of District Forum? (01 mark Delhi)Ans.: Mohit can appeal further to the State Commission against the decisions of District Forum.

(03) Amrit field a case against ‘Volvo Ltd.’ in the State Commission. But he was not satisfied with the order of the State Commission. Name the authority to which he can appeal against the decisions of State Commission. (01 mark AI)Ans.: Amrit can appeal further to the National Commission against the decisions of State Commission.

(04) Amita field a case against ‘Mahindra Ltd.’ in the National Commission. But she was not satisfied with the order of National Commission. Name the authority where she can appeal against the decisions of National Commission. (01 mark Foreign)Ans.: Amita can appeal further to the Supreme Court against the decisions of National Commission.

(2009)(01) Which Act of Consumer Protection provides for the formation of Consumer Protection Councils in

every District and State of the country? (01 mark)Ans.: The Consumer Protection Act 1986.

(02) Why consumer protection is important for consumers? Give any one reason. (01 mark)Ans.: Consumer Protection is important to safeguard the interests of consumers through rights and reliefs.

(03) Explain the Rights of consumers. (04 marks)Ans.: Refer the answer of the question no. 01 (2007)

(2010)(01) Why consumer protection is important for a businessman? Give any one reason. (01 mark)

Ans.: Consumer protection gives consumer satisfaction which in turn increases the reputation, sales & profitability of the business.

(02) Why should a consumer look for ISI mark on electrical goods? (01 mark)Ans.: ISI mark on electrical goods assures the consumer about the good quality and safety standard of the product.

(03) Explain the Rights of consumers. (04 marks)Ans.: Refer the answer of the question no. 01 (2007)

(2011)(01) Reena purchased one litre of pure Deshi Ghee from a shopkeeper. After using it she had a doubt that it

is adulterated. She sent it for a laboratory test which confirmed that the Ghee is adulterated. State any six reliefs available to Reena, if her complaints and the consumer court are satisfied about the genuineness of the complaint. (06 marks)Ans.: Reliefs available to Reena, if she complaints and the consumer court is satisfied about the genuineness of the complaint, consumer court can issue one or more of the following directions to the opposite party to give relief to Reena:(a) To remove the defect in the one litre of pure Deshi pure Ghee.(b) To replace the defective one litre of pure Deshi pure Ghee with new one.(c) To refund the price paid for one litre of Deshi pure Ghee.(d) To pay a reasonable amount of compensation for any loss or injury suffered by the Reena.(e) To withdraw the hazardous/unhealthy Deshi pure Ghee from sale. (f) To cease manufacture of such unhealthy goods at the factory place.

ORPrakhar purchased an ISI mark electric iron form ‘Bharat Electricals’. While using he found that it was not working properly. He approached the seller and complained for the same. The seller satisfies

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Prakhar by saying that he will ask the manufacturer to replace this iron. The manufacturer refused to replace and Bharat Electricals decided to file a complaint in the consumer court.Can ‘Bharat Electricals’ do this? Why? Also explain ‘who is a consumer’ as per Consumer Protection Act, 1986.Ans.: No. Bharat Ltd cannot file a complaint in consumer court. Because, as per Consumer Protection Act, 1986; Bharat Ltd is not a consumer.Definition of Consumer: Under Consumer Protection Act, 1986 consumer means – (a) One who buys goods or hires services for consideration(b) Any user of such goods with the approval of the buyer and beneficiary of services which is availed

of with the approval of one who hires the services; and(c) Anyone who uses goods bought or services hired exclusively for earning livelihood become self

employment.Therefore, Prakhar has the right to set defective electric press repaired or he can return it and set his money back. He can claim for damages as he has incurred some loss due the defective electric press.

(2012)(01) State how ‘Self-regulation by business’ acts as a means of Consumer Protection.

Ans.: The business community itself can ensure consumer protection through self regulation. If businessmen adopt ethical and socially desirable decisions and actions there will be no exploitation of consumers. Trade associations and chambers of commerce should prescribe and enforce code of conduct among their member businessmen for this purpose.

(02) Give any one responsibility of a consumer in addition to obtaining cash receipt while purchasing a washing machine.Ans.: Refer the answer of the question no. 06 (2007)

(03) Explain the following ‘Rights to Consumers’:(a) Right to be informed (b) Right to seek redressalAns.: Refer the answer of the question no. 01 (2007)

(04) Give any one responsibility of a consumer in addition to obtaining a cash memo while purchasing edible oil.Ans.: Refer the answer of the question no. 06 (2007)

(05) Explain the following ‘Rights of Consumers’: (a) Right to be Heard (b) Right to Consumer EducationAns.: Refer the answer of the question no. 01 (2007)

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