Class XI Accounts & Business Studies

Business Studies:

1. State the role of an office as an information centre.
2.Mention the main sub-departments in a modern office.
3.Who is an office manager?
4.State the services rendered in a modern office.
5.What do you mean by centralization of office services?
6.What do you mean by decentralization of office services.
7.Discuss the merits and demerits of centralization of office services.
8.Discuss the merits and demerits of centralization of office services.

ACCOUNTS:

1. What do you mean by transaction?
2."All transactions are events, all events are not transactions".Comment.
3. Define creditors. How is it different from Debtors?
4. What do you mean by Capital?
5. Define assets and liabilities.
6. Difference between-a) Carriage inward and Carriage outward  b) Return Inward and Return Outward.   c) Trade Discount and Cash Discount.
7. Define Drawings.
8. Difference between Book keeping and Accounting.
9. Define Accountancy.
10.What are the systems of Accounting.
11. What are the branches of Accounting.


BANKING STRUCTURE:

Banking in India in the modern sense originated in the last decades of the 18th century. Among the first banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829-32; and the General Bank of India, established 1786 but failed in 1791.

The largest bank, and the oldest still in existence, is the State Bank of India. It originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank of Bengal. This was one of the three banks funded by a presidency government, the other two were the Bank of Bombay and the Bank of Madras. The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India in 1955. For many years the presidency banks had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935, under the Reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks under the State Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks. In 1969 the Indian government nationalised 14 major private banks. In 1980, 6 more private banks were nationalized.^[7] These nationalized banks are the majority of lenders in the Indian economy. They dominate the banking sector because of their large size and widespread networks.

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks. The scheduled banks are those which are included under the 2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are further classified into: nationalised banks; State Bank of India and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector banks. The term commercial banks refers to both scheduled and non-scheduled commercial banks which are regulated under the Banking Regulation Act, 1949.

Generally banking in India was fairly mature in terms of supply, product range and reach-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State Bank of India expanding its branch network and through the National Bank for Agriculture and Rural Development with things like microfinance.    

Evolution of the Indian Banking Industry:

The Indian banking industry has its foundations in the 18th century, and has had a varied evolutionary experience since then. The initial banks in India were primarily traders’ banks engaged only in financing activities. Banking industry in the pre-independence era developed with the Presidency Banks, which were transformed into the Imperial Bank of India and subsequently into the State Bank of India. The initial days of the industry saw a majority private ownership and a highly volatile work environment. Major strides towards public ownership and accountability were made with nationalisation in 1969 and 1980 which transformed the face of banking in India. The industry in recent times has recognised the importance of private and foreign players in a competitive scenario and has moved towards greater liberalisation.

In the evolution of this strategic industry spanning over two centuries, immense developments have been made in terms of the regulations governing it, the ownership structure, products and services offered and the technology deployed. The entire evolution can be classified into four distinct phases.

• Phase I- Pre-Nationalisation Phase (prior to 1955)
• Phase II- Era of Nationalisation and Consolidation (1955-1990)
• Phase III- Introduction of Indian Financial & Banking Sector Reforms and Partial Liberalisation (1990-2004)
• Phase IV- Period of Increased Liberalisation (2004 onwards)

Current Structure

Currently the Indian banking industry has a diverse structure. The present structure of the Indian banking industry has been analyzed on the basis of its organised status, business as well as product segmentation.

Organisational Structure

The entire organised banking system comprises of scheduled and non-scheduled banks. Largely, this segment comprises of the scheduled banks, with the unscheduled ones forming a very small component. Banking needs of the financially excluded population is catered to by other unorganised entities distinct from banks, such as, moneylenders, pawnbrokers and indigenous bankers.

Scheduled Banks

A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have to fulfill certain conditions such as having a paid up capital and reserves of at least 0.5 million and satisfying the Reserve Bank that its affairs are not being conducted in a manner prejudicial to the interests of its depositors. Scheduled banks are further classified into commercial and cooperative banks. The basic difference between scheduled commercial banks and scheduled cooperative banks is in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are registered under the Cooperative Societies Act. These banks work according to the cooperative principles of mutual assistance.

Scheduled Commercial Banks (SCBs):

Scheduled commercial banks (SCBs) account for a major proportion of the business of the scheduled banks. As at end-March, 2009, 80 SCBs were operational in India. SCBs in India are categorized into the five groups based on their ownership and/or their nature of operations. State Bank of India and its six associates (excluding State Bank of Saurashtra, which has been merged with the SBI with effect from August 13, 2008) are recognised as a separate category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI Subsidiary Banks Act, 1959) that govern them. Nationalised banks (10) and SBI and associates (7), together form the public sector banks group and control around 70% of the total credit and deposits businesses in India. IDBI ltd. has been included in the nationalised banks group since December 2004. Private sector banks include the old private sector banks and the new generation private sector banks- which were incorporated according to the revised guidelines issued by the RBI regarding the entry of private sector banks in 1993. As at end-March 2009, there were 15 old and 7 new generation private sector banks operating in India.

Foreign banks are present in the country either through complete branch/subsidiary route presence or through their representative offices. At end-June 2009, 32 foreign banks were operating in India with 293 branches. Besides, 43 foreign banks were also operating in India through representative offices.

Regional Rural Banks (RRBs) were set up in September 1975 in order to develop the rural economy by providing banking services in such areas by combining the cooperative specialty of local orientation and the sound resource base which is the characteristic of commercial banks. RRBs have a unique structure, in the sense that their equity holding is jointly held by the central government, the concerned state government and the sponsor bank (in the ratio 50:15:35), which is responsible for assisting the RRB by providing financial, managerial and training aid and also subscribing to its share capital.

Between 1975 and 1987, 196 RRBs were established. RRBs have grown in geographical coverage, reaching out to increasing number of rural clientele. At the end of June 2008, they covered 585 out of the 622 districts of the country. Despite growing in geographical coverage, the number of RRBs operational in the country has been declining over the past five years due to rapid consolidation among them. As a result of state wise amalgamation of RRBs sponsored by the same sponsor bank, the number of RRBs fell to 86 by end March 2009.

Scheduled Cooperative Banks:

Scheduled cooperative banks in India can be broadly classified into urban credit cooperative institutions and rural cooperative credit institutions. Rural cooperative banks undertake long term as well as short term lending. Credit cooperatives in most states have a three tier structure (primary, district and state level).

Non-Scheduled Banks:

Non-scheduled banks also function in the Indian banking space, in the form of Local Area Banks (LAB). As at end-March 2009 there were only 4 LABs operating in India. Local area banks are banks that are set up under the scheme announced by the government of India in 1996, for the establishment of new private banks of a local nature; with jurisdiction over a maximum of three contiguous districts. LABs aid in the mobilisation of funds of rural and semi urban districts. Six LABs were originally licensed, but the license of one of them was cancelled due to irregularities in operations, and the other was amalgamated with Bank of Baroda in 2004 due to its weak financial position.

Business Segmentation

The entire range of banking operations are segmented into four broad heads- retail banking businesses, wholesale banking businesses, treasury operations and other banking activities. Banks have dedicated business units and branches for retail banking, wholesale banking (divided again into large corporate, mid corporate) etc.

Retail banking

It includes exposures to individuals or small businesses. Retail banking activities are identified based on four criteria of orientation, granularity, product criterion and low value of individual exposures. In essence, these qualifiers imply that retail exposures should be to individuals or small businesses (whose annual turnover is limited to Rs. 0.50 billion) and could take any form of credit like cash credit, overdrafts etc. Retail banking exposures to one entity is limited to the extent of 0.2% of the total retail portfolio of the bank or the absolute limit of Rs. 50 million. Retail banking products on the liability side includes all types of deposit accounts and mortgages and loans (personal, housing, educational etc) on the assets side of banks. It also includes other ancillary products and services like credit cards, demat accounts etc.

The retail portfolio of banks accounted for around 21.3% of the total loans and advances of SCBs as at end-March 2009. The major component of the retail portfolio of banks is housing loans, followed by auto loans. Retail banking segment is a well diversified business segment. Most banks have a significant portion of their business contributed by retail banking activities. The largest players in retail banking in India are ICICI Bank, SBI, PNB, BOI, HDFC and Canara Bank.

Among the large banks, ICICI bank is a major player in the retail banking space which has had definitive strategies in place to boost its retail portfolio. It has a strong focus on movement towards cheaper channels of distribution, which is vital for the transaction intensive retail business. SBI’s retail business is also fast growing and a strategic business unit for the bank. Among the smaller banks, many have a visible presence especially in the auto loans business. Among these banks the reliance on their respective retail portfolio is high, as many of these banks have advance portfolios that are concentrated in certain usages, such as auto or consumer durables. Foreign banks have had a somewhat restricted retail portfolio till recently. However, they are fast expanding in this business segment. The retail banking industry is likely to see a high competition scenario in the near future.

Wholesale banking

Wholesale banking includes high ticket exposures primarily to corporates. Internal processes of most banks classify wholesale banking into mid corporates and large corporates according to the size of exposure to the clients. A large portion of wholesale banking clients also account for off balance sheet businesses. Hedging solutions form a significant portion of exposures coming from corporates. Hence, wholesale banking clients are strategic for the banks with the view to gain other business from them. Various forms of financing, like project finance, leasing finance, finance for working capital, term finance etc form part of wholesale banking transactions. Syndication services and merchant banking services are also provided to wholesale clients in addition to the variety of products and services offered.

Wholesale banking is also a well diversified banking vertical. Most banks have a presence in wholesale banking. But this vertical is largely dominated by large Indian banks. While a large portion of the business of foreign banks comes from wholesale banking, their market share is still smaller than that of the larger Indian banks. A number of large private players among Indian banks are also very active in this segment. Among the players with the largest footprint in the wholesale banking space are SBI, ICICI Bank, IDBI Bank, Canara Bank, Bank of India, Punjab National Bank and Central Bank of India. Bank of Baroda has also been exhibiting quite robust results from its wholesale banking operations.

Treasury Operations

Treasury operations include investments in debt market (sovereign and corporate), equity market, mutual funds, derivatives, and trading and forex operations. These functions can be proprietary activities, or can be undertaken on customer’s account. Treasury operations are important for managing the funding of the bank. Apart from core banking activities, which comprises primarily of lending, deposit taking functions and services; treasury income is a significant component of the earnings of banks. Treasury deals with the entire investment portfolio of banks (categories of HTM, AFS and HFT) and provides a range of products and services that deal primarily with foreign exchange, derivatives and securities. Treasury involves the front office (dealing room), mid office (risk management including independent reporting to the asset liability committee) and back office (settlement of deals executed, statutory funds management etc).

Other Banking Businesses

This is considered as a residual category which includes all those businesses of banks that do not fall under any of the aforesaid categories. This category includes para banking activities like hire purchase activities, leasing business, merchant banking, factoring activities etc.

Products of the Banking Industry

The products of the banking industry broadly include deposit products, credit products and customized banking services. Most banks offer the same kind of products with minor variations. The basic differentiation is attained through quality of service and the delivery channels that are adopted. Apart from the generic products like deposits (demand deposits – current, savings and term deposits), loans and advances (short term and long term loans) and services, there have been innovations in terms and products such as the flexible term deposit, convertible savings deposit (wherein idle cash in savings account can be transferred to a fixed deposit), etc. Innovations have been increasingly directed towards the delivery channels used, with the focus shifting towards ATM transactions, phone and internet banking. Product differentiating services have been attached to most products, such as debit/ATM cards, credit cards, nomination and demat services.

Other banking products include fee-based services that provide non-interest income to the banks. Corporate fee-based services offered by banks include treasury products; cash management services; letter of credit and bank guarantee; bill discounting; factoring and forfeiting services; foreign exchange services; merchant banking; leasing; credit rating; underwriting and custodial services. Retail fee-based services include remittances and payment facilities, wealth management, trading facilities and other value added services.

                       

Class XII Commerce

FINANCING:

1. What is meant by Trade Credit?

Ans.. Trade credit is the credit extended by one business firm to another as incident to sale or purchase of goods or services. It is also known as “mercantile credit’. Trade credit may be defined as credit extended by sellers to buyers at all levels of production and distribution. It does not include consumer credit or installment credit. Trade credit is usually granted for a period ranging from 15 days to three months. The buying firm receives supplies without paying immediately. Trade credit reflects the buyers’ power to purchase now and pay later. It also indicates seller’s faith in buyers. Trade credit is available in the ordinary course of business and no security is required for getting it. The amount and terms of the trade credit depends upon the financial strength and goodwill of the buyer, the custom of trade, financial resources of the supplier, the amount and frequency of purchases, degree of competition, location of the customer, the nature of products, etc. Trade credit is very convenient method of raising short term finance as no formalities are involved and the credit is readily available to reputed firms. It is flexible source of finance and no charges on assets are created. However, the prices charged for credit sales are usually higher than the cash price.

2.Why are participating preference shares so called?

Ans. Preference shares are those shares which carry certain preferential right both regarding the dividend and the return of capital. Dividend at a fixed rate must be paid on preference shares before it is paid on equity shares and in the event of winding up of company, preference shareholders must be paid back their capital before equity shareholders.

Participating preference shares are those preference shares which entitle their holders a share in the residual profits of the company in addition to the fixed rate of dividend.

3. 3. Write Short notes on Cash Credit.

Ans:  It is a formal agreement under which a borrower is allowed to borrow up to a certain limit. It is running account from which the amounts can be withdrawn and paid back from time to time subject to a certain amount. Cash credit is of two types. When the cash credit is not backed by any security, it is known as clean cash credit. When the cash credit is backed by tangible assets or guarantees it is known as secured cash credit.

The bank can refuse credit when the creditworthiness of the borrower is unsatisfactory or when there is shortage of funds. The maximum amount known as limit is determined according to the financial position of the borrower. Cash credit is available to firms of high credit standing.

3. Write Short notes on Cash Credit.

Ans:  It is a formal agreement under which a borrower is allowed to borrow up to a certain limit. It is running account from which the amounts can be withdrawn and paid back from time to time subject to a certain amount. Cash credit is of two types. When the cash credit is not backed by any security, it is known as clean cash credit. When the cash credit is backed by tangible assets or guarantees it is known as secured cash credit.

The bank can refuse credit when the creditworthiness of the borrower is unsatisfactory or when there is shortage of funds. The maximum amount known as limit is determined according to the financial position of the borrower. Cash credit is available to firms of high credit standing.

4. What is an ESOP?

Ans: ESOP(Employee Stock Ownership Plan) is a scheme under which an employee of the company is given a right to purchase a specified number of its shares at a stipulated price(usually below the market price) during a given period of time. An employee must complete a minimum period of service in the company in order to fulfil the specified eligibility conditions. The employee can either pay in instalments or by way of deduction from his/her monthly salary.

5. What is hybrid security?

Ans: Hybrid security means any security which has the features of more than one type of securities.It is referred as "hybrids" and combines the feature of both debt and equity. Hybrid securities pays divided at fixed or floating rate until a certain date, at the end of which the holder of such security has a number of options like converting the securities into the underlying share. Holder of such security has a known cash flow in the form of dividend and there is an option of converting the security into underlying shares.

6. Write short notes on Underwriting of shares.

Ans: Underwriting may be defined as an agreement between the company and an underwriter under which the underwriter agrees to sell the shares of the company to the general public for an agreed commission. However, if the underwriter is unable to sell the shares the company, the underwriter agrees to take up the agreed number of securities in his own name.

Underwriting helps in the financing of new companies and in the modernisation and expansion of existing companies. It also improves public confidence in securities and facilitates geographical dispersal of securities.

The underwriter is entitled to the commission at the agreed rate on the amount underwritten even if all the securities are taken up by the public.

7. What is the difference between right shares, bonus shares and sweat equity shares?

Ans: Rights Share or Right issue: Section 81 of the Companies Act, 1956 provides that a public company may increase its subscribed capital through a further issue of shares to its existing shareholders provided such issue is made (a) at any time after the expiry of two years from the formation of the company, or (b) at any time after the expiry of one year from the first allotment of shares, whichever is earlier. The shares which are offered to the existing members are called Rights Share. The shares can also be offered to new members when the existing members do not accept the offer within the prescribed period.

Bonus Share: A company instead of distributing profits as dividend can issue fully paid up shares to its shareholders free of cost in proportion to their existing shareholdings. These shares are called Bonus Shares. Issue of bonus share is also known as Bonus Issue or Capitalisation of the undistributed profits of the company. In such cases, the company pays dividend by issue of equity shares to its existing shareholders in proportion to their shareholdings.

Bonus shares can be issued from the following funds:

(i)                  Credit balance of Profit & Loss A/C.

(ii)                General Reserve or Reserve Fund

(iii)               Capital Reserve & Profit

(iv)              Share Premium A/C

(v)                Capital Redemption Reserve A/C

Sweat Equity Share: Sweat equity share can be issued by a company to its employees and directors for their loyalty and efficient participation. It helps to retain the best talent. It is open for public subscription but offered to the employees and directors for their contribution to the company. The shares can be offered free of cost or at a discount. Sweat equity share is offered to a valued employee as a part of his remuneration. Sweat equity share can only be issued after one year of the commencement of business of the public company.

8. What is instalment credit?

Ans: Instalment credit refers to the facility of buying machinery equipment and other durable goods on credit. The buyer has to pay a part of the price of the asset at the time of delivery known as “Down Payment” and the balance is payable in a number of instalments. The supplier charges interest on the balance due and the interest is included in the amount of instalments. A business firm may also buy fixed assets on hire purchase basis, under which the ownership of the asset remains with the supplier until the final instalment is paid by the buyer.

Purchase of fixed assets on instalments and hire purchase enables a business firm to utilise the asset and make payments out of the earnings made by using the assets.

9. What is factoring?

Ans: Factoring also known as “accounts receivable financing” implies raising finance through the mortgage of book debts (debtors). Finance companies or factors provide finance to business concerns through the purchase of accounts receivable or book debts or against the security of accounts receivable.  Outright sale of accounts receivable is known as “factoring”. The business concern is relieved of the cost and effort of collecting debts and bad debts losses. But is an expensive method of financing since the banks make advance up to 60% of the accounts receivable mortgaged with them.

10. What is collateral security for a bank loan?

Ans: Commercial banks generally want some collateral security against the loans granted by them. This means that the borrower must leave something in possession of the bank which the bank can dispose off easily in case the borrower default to make payment. Shares, life insurance policies, fixed deposit receipts, precious metals are generally accepted by bank as collateral securities.

11. What do you mean by discounting of bills of exchange?

Ans:  Discounting of bills of exchange implies procuring cash from a bank in exchange for instruments like bills of exchange. Banks buy the instruments at a price lower than its face value, the difference being the discount. Business concerns find it useful to raise short-term finance from the banks as banks maintain utmost secrecy of its client’s affairs. They do not interfere in the management of the borrowing concerns. Banks provide financial assistance in different forms so that the borrowing firm can choose the type of assistance to suit its own requirements.

12. What do you mean by inventory loans?

Ans: Inventory loans are short-term loans which are provided against the security of inventories. Inventories like raw materials, finished goods are fairly liquid and considered to be desirable form of collateral. Loans provided against the security of such inventories are known as “inventory loans”.

13. Distinguish between Bank Overdraft and Bank Loan.

Ans:  Overdraft is different from loan in the following ways:

(i)                  Overdraft is available only on a current account but for a loan current account is  not necessary.

(ii)                Overdraft is allowed for a very short period(a few days) while loan can be for a long period(several years)

14. Difference between E-banking and Core Banking Solution (CBS).

Ans: E-banking or electronic banking means banking transactions carried out with the help of computer systems. Any user having a PC (Personal Computer) and a browser can access the bank website and avail banking services. Electronic banking is banking over the internet. Customers get 24 hours and 365 days services and can make transactions from residence or office and even while travelling.  E-banking helps in transferring funds electronically from one account to another account. It facilitates timely payment of telephone bills, electricity bills, insurance premium, credit card dues, etc. It also facilitates receiving of funds instantly such as receipt of salary, pension, commission, dividend on shares, interest on debentures, etc.

Core Banking Solution- Under this system, by opening a bank account in one branch (which has CBS facility), the customer can operate the same account in all the branches of the same bank anywhere across the country. The CBS enables the customer to deposit and withdraw funds from any of the bank branch across the country. Transfer of funds and updating of pass book can be done in any of the bank branches.

15. Difference between NEFT (National Electronic Fund Transfer) and RTGS (Real Time Gross Settlement)

Ans:

	Basis of Distinction	NEFT	RTGS
1.	Processing	NEFT transactions are settled in batches	RTGS transactions are processed individually and continuously.
2.	Minimum transaction value	No minimum value	Minimum value is Rs. 2 lacs
3.	Number of transfers during the day	Six times on a week day and three times on Saturday	No limit on the number of transfers during the day.

16. Define ATM.

Ans: ATM(Automatic Teller Machine) is an automatic machine. A customer can withdraw or deposit money with the help of this machine by inserting his/her ATM card and typing his/her personal identity number (PIN). The ATM operates for 24 hours. Cash withdrawal, balance enquiry, cheque book request, fund transfer etc and be done by using ATM channels.

17. Discuss the different types of SMS Alerts.

Ans:  Under this service a customer gives his/her mobile number which is recorded by bank in its computer system in the customer’s account. Whenever there is a transaction (debit/credit) there is automatically a SMS on the customer’s mobile. The SMS states the nature and amount of transaction, date of transaction and the balance in the account on that date. Thus, the customer receives all the information about his/her account without having to visit the bank. The following types of SMS alerts are given to the customer by the bank-

(a)    Transaction alerts-

(b)   Cheque deposit alert

(c)    Cheque clearing alert-

(d)   Cheques bounce alert-

(e)   Standing Instruction-

(f)     Maturing term deposit alert

(g)    Low Balance alert-

(h)   High Balance alert

18. Difference between Debit Card and Credit Card.

Ans: Debit Card- A person can get a debit card by depositing money in the bank. The card holder can make immediate payment for the goods purchased or services availed by using debit card. When the customer presents his/her debit card the terminal automatically transfers money from the buyers account to the sellers account. Debit card can also used to withdraw money from the ATM.

Credit Card- A person having good reputation can obtain a credit card from a bank. A person need not have money in his bank to get a credit card. Credit is an overdraft facility provided by the bank. Credit card is issued by the bank to selected customers to enable them to make payments of credit limits up to a specified limit known as “credit limit”.  Credit card bears bank’s name, name of the customer, validity period, identity number or card number and signature.  Customer can withdraw cash from ATM counters without having any deposit in the bank and a transaction fee is charged on the amount withdrawn. The customer can also use the credit card at any outlet to purchase goods or services. Interest is charged if payment is not made during the specified period.

19. Enumerate the various types of E-banking services.

Ans: The various types of E-banking services are as follow-

(a)    Electronic Fund Transfer (EFT)    (b) Automatic Teller Machine    (c) Debit card   (d) Credit card   (e) Tele- banking    (f) Core Banking Solution (CBS)    (g) SMS Alerts.

20. Difference between bank draft and banker’s cheque.

Ans: Bank Draft: A bank draft is a cheque drawn by a bank on its own branches or some other banks. It is payable to the person named in it or to his order. It is payable on demand hence it is also known as “Demand Draft”. It is an instrument issued by a bank instructing another branch of the same bank or other banks to pay the sum specified to the payee.  The customers have to pay certain commission to the bank in order to avail such facility. The payee can present the draft on the bank and collect the cash.

Banker’s Cheque- A banker’s cheque also known as pay order is a local bank draft which is payable within the city or town. Banker’s cheque is bank draft serving local purpose. The issuing bank charges some commission for rendering this service.

Bank Draft is payable across the country while banker’s cheque is payable locally. In both Bank draft and banker’s cheque there is no risk of dishonour.

MANAGEMENT:

Q1.       Define the term management.

Ans: Management consists in guiding human and physical resources into a dynamic, hard hitting organisation unit that attains its objectives to the satisfaction of those served and with a high degree of morale and sense of attainment on the part of those rendering the service.

It is a distinct process consisting of planning, organising, activating and controlling performance to determine and accomplish objectives with the use of human beings and other resources.

Q2.       Explain management as an activity.

Ans: As an activity, management means the art of getting things done through the efforts of other people. Management is a human activity which directs and controls the organisation and operations of business enterprise. As an activity management guides, directs, regulates and integrates human effort towards the achievement of certain common goals. It integrates the inputs of men, money, material, machinery and methods and makes a productive enterprise out of them.

Q3.       Explain management as a process.

Ans: As a process, management is what managers do. Management is considered a process because it consists of series of interrelated elements. Management is process of planning, organising, staffing, directing and controlling functions. Management is an integrated process of bringing together human and non-human resources and integrates them. Management is a continuous process.

Q4.       “Management is all pervading”. Explain.

Ans: Management is required in all types of organisation-business, family, club, school, temple, army, government, cricket team, etc. Management is necessary in both small and large organisations. The basic functions of management of planning, organising, staffing, directing and controlling are performed at every level of authority- top, middle and lower levels.

Q5.       “Management is both a science and an art”. Comment.

Ans: Management as a science: Science is a systematized body of knowledge pertaining to a specific field of study. The knowledge is based on observation and experiments which establishes cause effect relationship. The principles are developed through the scientific methods of observation of events and verification through testing. These principles are universal truths.

Management has a systematized body of knowledge. It makes use of observation and experience. Principles of management are based on research and experience. Management can be considered a science because it contains all the characteristic of science. However, it is a social science. It directs the behavior of human beings.

Management as an art: Art is the bringing of desired results through the application of skills. It is concerned with the application of knowledge and skills.

Management is an art as it requires a vast knowledge and requires skills of innovation, initiation, implementation and integration. Management is an art because the process of management involves the use of knowledge and skill which is directed towards achievement of specific goals. Like any art management is creative as it creates new situations and provides for further improvement. The success of managerial task is related with the personality, character and knowledge of the people involved.

Hence, we can conclude that management is both a science and an art.

Q6.       “Management is getting things done through people”. Discuss.

Ans: Management is an art of getting things done through the efforts of other people. It reveals that a manager accomplishes the objectives by guiding the efforts of the people. Management is guiding human and physical resources into dynamic organisations which help to achieve the organisational goals. It aims to make work suitable for human beings and to organize people so as to make them work effectively. It is concerned with the efforts of group of people. It aims at achieving the organisational goals through group efforts.

Q7.       Difference between administration and management.

Basis of Distinction	Administration	Management
1.Meaning	It means determination of objectives and policies of an organisation.	It means creating an internal environment which helps to achieve organisational goals.
2.Nature of work	Decision making process	Executive function
3.Level of Authority	Top-level of authority	Middle and lower levels
4. Scope	It is a wider term	It is a narrower term
5.Factors influencing decision making	External factors	Internal factors
6. Limits	It determines the limits within which management has to function	Its functions within the limit of administration.

Q8.       Define management as a profession.

Ans: Profession means a vocation requiring specialized knowledge, practical training, service motive and code of conduct.

The essential features of a profession are as follows:

(i)                  Specialized body of knowledge which is transferable.

(ii)                Formal education and training.

(iii)               Service motive

(iv)              Statutory body

(v)                Code of conduct.

Management fulfills certain attributes of profession as it can regarded as a specialized body of knowledge which is transferable. Like profession management also requires formal education and training. Like professional, managers are expected to serve the society. However management associations are not recognized as statutory bodies unlike the professional bodies like Institute of Chartered Accountants. Like professionals, manager too have code of conduct, however this code of conduct is not legally binding on the managers.

Hence we can conclude that management does not possess all the essential attributes of a profession, but is emerging as a profession. Management today is a creative job. Management is moving in the direction of a profession.

Q9.       Discuss the importance of management.

Ans: Management is the dynamic life giving element in every business. Management integrates the human and non human resources, without it the resources of production remain resources and never become production.

The importance of management can be discussed as follows.

1.       Achievement of group objectives: Management creates coordination and team spirit in the group. Managers inspire the members of the group to make contributions towards the achievement of common goal of the organisation.

2.       Optimum utilization of resources: Management brings together human and non-human resources in the right proportion. Men, material, machine and money may become ineffective without sound management.

3.       Minimization of cost:  Management improves efficiency and reduces cost through planning, sound organisation and effective control. By eliminating wastage and minimum cost, management enables an enterprise to face cut throat competition.

4.       Survival and growth:  Managers continuously monitor environmental changes and take necessary steps to ensure that the enterprise is successfully facing the uncertainties of the future. Environmental changes create both threats and opportunities. An effective managements help to meet the threats and take advantage of the opportunities.

5.       Higher standard of living: Management raises the standard of living of the people by providing good quality goods and services at the lowest possible cost.

6.       Generation of employment: Expanding business enterprises and setting up new business enterprise, managers create jobs for the people. People earn their livelihood by working in these enterprises. Management helps in developing the human resources through training and guidance.

7.       Development of the nation: Efficient management is equally important at the national level. Management helps in the economic and social development. The development of a country depends on the quality of the management of its scarce resources.

Q10.   Why is management considered to be a dynamic function?

Ans:  Management is considered to be a dynamic function as management is performed continuously so as to mould the policies and practices of the organisation according to the changes in the organisation. Management is a never-ending process and performed continuously, the principles and practices of management have to be continuously changed with the change in the business environment.

Q11.   Explain contingency approach of management?

Ans: The contingency approach of management states that the management principles and practices must be changed as per the situation in which the organisation operates. In other words, the management techniques which are effective in one situation may prove to be ineffective in another situation. Hence policies and strategies must be in accordance with the situation or prevailing business condition.

Q12.   Explain management as hierarchy of authority?

Ans: Management is bound together by the effective relationship between superiors and sub-ordinates. The level of authority ranges from the top level to the lower level. The top level is responsible for decision making and supervising the work of the lower level. There should be effective delegation of authority from the top level to the lower level. The lower level should take the responsibility and should be accountable to their superiors.

Date: 10-June-2015

1. Why is management considered as a discipline?

Ans: Management as a discipline implies obedience, respect of authority and observance of the established rules and regulations. Discipline is essential for the smooth running of every organization. According to Fayol, good supervision at all levels, clear and fair rules and built in system of penalties will help to maintain discipline. Management as a discipline is based on scientific approach and adheres to a code of ethics.

2. Explain the integration concept of management?

Ans: Management integrates the human efforts with the use of other resources(physical and financial resources). Integration between the resources is essential to achieve the desired objectives of the organisation. Management brings together men, materials, machines and money together. Management is essential to harmonise the individual goals with the organisation goals to minimise conflicts in the organisation.

3. Discuss the principles of scientific management as formulated by F.W.Taylor.

Ans: Scientific management is based on the following principles:

1. Scientific study and planning of work: As per this principle the manager should adopt scientific attitude and use scientific methods for solving problems. Old method of doing work should be substituted by decisions based on facts.

2. Harmony in group action: Dissatisfaction among any worker should be avoided. Any kind of disagreement should not be allowed to crop in and if it arises should be reduced to minimum.

3. Scientific selection, training and development of employees: Employees should be selected and trained as per the requirements of the job.

4. Co-operation between employees and management: the objectives of management can be achieved through co-operation and commitment of all employees.

5. Maximum prosperity for both employees and management: Maximum prosperity can be possible when efficiency of employees and output are maximised.

6. Division of work and fixing responsibility: The total task of the organisation should be divided among the employees. Management should fix responsibility for planning and supervision of the work.

7. Standardisation of tools and equipments: Standardisation in respect of tools, equipments, working hours, working conditions etc to improve the efficiency of employees.

8. Mental revolution: This means change in the thinking on the part of both the employees and the management. This is essential to get the maximum benefit of scientific management.

4. "Government without good management is like a house built on sand".In the light of the above statement explain the importance of management in modern times.

Ans: Refer to the importance of management.

5. Define management principles. Briefly discuss any five features of management principles.

Ans: Management principles can be defined as general statements of fundamental truth which establishes cause and effect relationship and are derived through observations and experiments. Management principles provide guidelines for managerial decision-making and action. Management principles are twofold concept. Firstly, it provides the guidelines for managerial performance(decision making and action) and secondly, it helps in predicting and understanding the results of managerial action.(i.e. outcome of the managerial decisions.

The features of management can be discussed as follows:

i) Universality: Principles of management are fundamental truth. These principles can be applied in different types of organisations e.g. business, governments, hospital, army, university etc. The basic task of the manager remains the same i.e. to get the desired results through effective coordination of human and non-human resources. Principles of management can be used by managers in different organisations and at different levels of authority.

ii) Dynamic in nature: Principles of management are not rigid but flexible and dynamic in nature. These principles can be modified to suit different situations and all kinds of changes in business environment.

iv) Influencing human behaviour: Management is a social science and it deals with human behaviour. Management principles are directed towards influencing human behaviour for getting the best possible results.

v) Cause and effect relationships: Principles of management indicate cause and effect relationship between two or more variables. These principles are used to solve different managerial problems with the help of observations, analysis and experience.

6. Discuss the need for the principles of management.

Principles of management are required for the following reasons:

i) To increase efficiency: Principles of management have been developed from experiences of various experts. These principles provide necessary guidelines to managers as to how they should function in different situations to obtain the best results. Principles of management help to improve managerial efficiency.

ii) Improving art of management: Principles of management helps in improving the art of management by suggesting how things can be done to get good results in an efficient manner.

iii) To improve research: Principles of management serves as a basis for further research and growth in management. Management provide new ideas, vision and imagination for conducting research studies in management.

iv) To evaluate managerial behaviour: Principles of management prescribe what one should do to manage things in a given situation. These principles attempt to prescribe and evaluate the behaviour of managers.

v) Developing the spirit of cooperation: Co-operation is the willingness to help each other. Management principles are aimed at achieving co-operation to achieve organisational goals.

vi) To train managers: Principles of management provide a conceptual framework for scientific and systematic training and development of managers.

vii) Attaining social goals: Principles of management enable managers to make optimum use of human and material resources. The supply of quality goods at reasonable prices improves social welfare.

viii) Reducing waste: The principles of management help in optimum utilisation of available resources. Efficiency of management can be easily increased by reducing waste.

7. What is the principle of 'unity of command'?

Ans: According to this principle an employee should receive orders from one superior only and be accountable to him. No person can serve several masters at the same time. If a subordinate has more than one boss dual command will undermine authority, weaken discipline, divide loyalty and create confusion, delays, etc. Principle of unity of command is very relevant in large and modern organisations as it helps in smooth working of people.

8. What is the principle of 'Equity' in management?

Ans: Management should treat the employees with justice and kindness. There should be equity of treatment in dealing with subordinates and no discrimination should be made between them. Nepotism and favouritism should not exist as these are injurious to the motivation and morale of employees.

9. Explain the principle of 'Authority and Responsibility'.

Ans: Authority is the right to get work done from others and responsibility is the obligation to perform the assigned task. Anyone who exercises authority must accept responsibility for his work. One who is held responsible should be given the necessary authority. Authority and responsibility are coexistent and they must go hand in hand. Authority and responsibility are co-existent and must go hand in hand. Authority without responsibility leads to irresponsible behaviour while responsibility without authority will make a person ineffective.

10. How is the principle of 'stability of tenure' important to an organisation?

Ans: According to these principle a reasonable security of service should be provided to all employees. Stability of tenure helps to develop loyalty and attachment on the part of employees. Unnecessary labour turnover or change of personnel increases cost of selection and training and spoils the image of the firm.

11. What is 'scalar chain' in management?

Ans: Scalar chain means the chain of superiors ranging from the ultimate authority to the lowest level. It is necessary to ensure unity of command and effective communications in the organisations.

12. What is 'Espirit De Crops" or Gang Plank?

Ans: Espirit De Crops means the spirit of loyalty and devotion to the group to which one belongs. According to this principle a manage should always try to ensure harmony and team work among his subordinates. He should avoid divide and rule policy, and abuse of written communication to ensure unity and cohesiveness among employees.

13. What is meant by universality of management principles?

Ans: Universality of management principles means the basic principles are applicable in all types of organisations. Therefore, managerial knowledge and skills can be transferred from organisation or country to another.

All organisations require effective coordination of human and physical resources. Therefore, all must observe the same general principles. The fundamental principles of management are applicable to all kinds of human activities from simplest work to Great Corporation. The application of management principles however differs from one organisations to another depending upon the culture and needs of the particular organisation.

14. Discuss the fourteen principles of management as per Henry Fayol.

Ans: Henry Fayol, who started his career as an engineer and rose to the position of managing director, formulated 14 principles of management through his long practical experience and developed a general theory of management. The fourteen principles of management as suggested by Henry Fayol are as follows.

i) Division of work (specialisation): Division of work means division of total task and allocation of the total task among the different persons so that an employee can concentrate on only one type of work. It helps to improve efficiency by avoiding wastage of time and effort. If an individual perform the same job repeatedly he acquires speed and accuracy in performance.

ii) Authority and responsibility:  Authority is the right to get work done from others and responsibility is the obligation to perform the assigned task. Anyone, who exercises authority, must accept responsibility for his work. Authority and responsibility are co-existent and must go hand in hand. Authority without responsibility leads to irresponsible behaviour while responsibility without authority will make a person ineffective.

iii) Discipline: Discipline implies obedience, respect of authority and observance of the established rules and regulations. Discipline is essential for the smooth running of every organization. According to Fayol, good supervision at all levels, clear and fair rules and built in system of penalties will help to maintain discipline. Management as a discipline is based on scientific approach and adheres to a code of ethics.

iv) Unity of command: An employee should receive orders from one superior only and should be accountable to one superior only. If an employee receives orders from more than one superior it undermines authority, weaken discipline, divide loyalty and create confusion, delays etc.

v) Unity of Direction: There should be one head and one plan for a group of activities having the same objective. Each group of activities with the same objective should have one plan of action and must be under the control of one superior. Unity of direction is essential for co-ordination.

vi) Sub-ordination of individual interest to general interest: The general interest of an organisation must prevail over the individual interest. In other words individual interest must be discarded and general interest must be maintained.

vii) Fair remuneration to workers: The remuneration payable to the workers must be fair, reasonable and satisfactory. The rewards must motivate the employees to improve their productivity.

viii) Effective centralisation: There should be proper balance between centralisation and decentralisation. In other words, there should not be too much concentration of authority for decision making. The management should decide the extent of authority to be concentrated at the top and the effective delegation of authority.

ix) Scalar Chain: Scalar chain refers to the chain of authority ranging from the top authority to the lowest rank. The flow of communication should ne through the established chain of command.

x) Order: Order refers to systematic arrangement of human and the non-human resources. The right man in the right job is very important for the successful functioning of an organisation.

xi) Equity: Management should treat all the employees with justice and kindness. There should be equity of treatment in dealing with the subordinates and no discrimination should be made between them.

xii) Stability of tenure of workers: A reasonable sense of security of service should be provided to all employees. Stability of tenure helps to develop loyalty and attachment on the part of the employees.

xiii) Initiative: Employees across all levels should be encouraged to think out and execute the assigned tasks in a better way. Initiative is a source of strength for an organisation. Workers must be encouraged to make suggestions or improvement in the original plans.

xiv) Espirit De Crops: There must be team spirit and cooperation among the employees of an organisation. It is based on two principles: i) union is strength and ii) team work is essential. There should be cooperation and team work among the employees of an organisation. Management should not follow the policy of divide and rule.

MID TERM EXAMINATION ANSWERS:

1. What is technological environment?

Ans: Technological environment includes new approaches of producing goods and services, new procedures as well as new equipments. It refers to the state of science and technology in the country and related aspects as the rate of technological change, institutional arrangements for the development and applications of new technology. Technological environment is mainly dependent on research and development, invention and innovation, development of new technology. It exerts a significant influence on the industry , trade and commerce.

2. State two rights of consumer.

Ans: The two rights of consumer are as follows.

i)                    Right to be Heard: Consumer grievances against any product or services  should be listened and appropriate action should be taken to solve them.

ii)                   Right to Safety: Consumer should be protected against marketing of goods which are hazardous to health and life.

3. What is the difference between Authorized Capital and Reserve Capital?

 Ans: Authorized Capital: The capital which is mentioned in the capital clause of the Memorandum of Association and with which the company is registered is known as Authorized capital. It is the maximum amount of capital which a company is authorized to raise by issue of shares.

Reserve Capital:  The uncalled portion of subscribed capital which is collected only on the liquidation of the company is known as Reserve capital.

4.       Give main forms in which financial assistance from a commercial bank may be available?

Ans:  The financial assistance from a commercial bank may be available in the form of i) Overdraft   ii) Cash Credit  iii) Discounting of Bills and iv) Loans and advances.

5.       Mention any four indirect channels of distribution.

Ans: The four indirect channels of distribution are i) Factor  ii) Del Credere agent  iii) Forwarding and Clearing agent and  iv) underwriter.

6.       What is Hybrid Security?

Ans: Refer previous blog answer.

7.       Enumerate the importance of Espirit De Corps.

Ans:  Espirit De Corps is one of the important principle of management  as suggested by Henry Fayol which states that i) Union is strength and ii) team spirit is essential. It implies that there must be cooperation and team spirit between the employees of any organisation. The manager must infuse a spirit of teamwork among the employees.

8.       What is meant by order as a principle in Fayol’s management?

Ans: Order as a principle of management refers to the systematic arrangement of human and non-human resources in the organisation. There must be optimum utilisation of human and non-human resources. It implies right men in the right job and right material in the right place.

9.       Explain the two fold concept of principles of management as per Henry Fayol.

Ans: The principles of management as per Henry Fayol   i) provide guidelines for managerial decision-making and action ii) it also helps in predicting and understanding the results of managerial action.

10.   What is SWOT analysis?

Ans: Refer class notes.

11.   Difference between Marketing and Selling.

     Ans:

Marketing	Selling
i)                    Marketing is wider term which includes selling. ii)                   It is consumer oriented. iii)                 It starts before the product is produced. iv)                 It aims at maximising consumer satisfaction. v)                  It continuous even after sales.(after sale service)	i)                    Selling is one of the functions performed in marketing. ii)                   It is product oriented. iii)                 It starts after the product has been produced. iv)                 It aims at maximising the volumes of sales. v)                  It ends with the sale of goods.

12.   Mention three remedies available to the consumers under the Consumer Protection Act, 1986.

Ans: The three remedies available to the consumers under the Consumer Protection Act, 1986 are as follows:

i)                    To remove the defect in goods or deficiency in service.

ii)                   To replace the defective product with a new one free from any defect.

iii)                 To refund the price paid for the product or the charges paid for the service.

13.   Write short notes on Retained Earnings.

  Ans:The balance of profits post payment of income tax, payment of dividends to shareholders and transfer to specific reserve) set side is known as retained earnings. The undistributed profits is reinvested in the business as long term-capital. Retained earnings is also known as "Ploughing back of profits. It strengthens the financial position of the business and brings flexibility in the capital structure. Their is no cost attached to retained earnings as a source of capital.

14.   What do you mean by trade credit?

Ans:  Trade credit is the credit extended by one business firm to another during the purchase of goods or services. It is also known as mercantile credit. In other words, it means the credit extended by the sellers to the buyers for a period ranging from 15 days to three months. The buying receives the product or the service without having to pay immediately. No security is required for trade credit as it is provided during the ordinary course of business.

15.   State any six differences between a share and a debenture.

Ans:

Shares

Debentures

i)                    Shares are part of the owned capital ii)                   Shareholders are the owners of the company. iii)                 Equity shareholders can participate in the management of the company. iv)                 Equity shareholders have voting rights. v)                  Dividends are payable only if the company earns profit. vi)                 Not redeemable except redeemable preference shares.

i)                    Debentures are loan to a company. ii)                   Debentures holders are the creditors of the company. iii)                 Debenture holders cannot participate in the management of the company. iv)                 Debenture holders have no voting rights. v)                  Interest must be paid to the debenture holders irrespective of profit. vi)                 Usually redeemable.

16.   What are preference shares? Why is it so called? Explain the advantages of issuing these shares from company’s view point.

Ans: Preference shares are the shares which carry preferential rights regarding the payment of dividend and return of capital. Dividend at a fixed rate must be paid to the preference shareholders before it is paid to the equity shareholders. In the event of winding up of company preference shareholders must be paid back their capital before equity shareholder. Hence, preference shares is known as preference shares because of the preferential rights.

The advantages of issuing these shares from company‘s viewpoint:

1.       No charge on assets:  Issue of preference shares does not involve any mortgage or charge on assets of the company.

2.       No interference in management: Preference shareholders do not carry any voting rights. There is no dilution of control.

3.       Appeal to cautious investors: Preference shares appeal to those investors who look for reasonable safety.

4.       No burden on profits: Preference shares do not put a fixed burden on finances are only paid out of profits.         

17.   Distinguish between Fixed Capital and Working Capital.

Ans:

Fixed Capital	Working Capital
i)                    It is required for investment in fixed assets. ii)                   It is meant for long term. iii)                 It does not change its form iv)                 It is generally raised through shares, debentures and long term loans.	i)                    It is required for investment in current assets. ii)                   It is meant for short term. iii)                 Its keep on changing its form. iv)                 It is generally raised through short term sources like trade credit, cash credit, inventory loans, discounting of bills, etc.

18.   Define Capital Gearing. What is the difference between Low Capital Gearing and High Capital Gearing?

Ans: Capital Gearing- The ratio between equity (owned funds) and debt (borrowed funds) is called capital gearing. In other words, capital gearing may be defined as the fixation of proper ratio between two or more type of securities and the ratio which each type of security will bear to total capitalisation.

Low Capital Gearing: Capital gearing will be low if the equity share capital predominates the capital structure. In other words, when the proportionate amount of equity shares capital is larger than that of preference shares and debentures it is called low geared. It is also known as “Trading on thick equity”.

High Capital Gearing: Capital gearing will be high if the proportion of non-equity capital is high. In other words, the amount of preference share capital and debentures taken together becomes higher than that of the equity capital. It is also known as trading on thick equity.

19.   Explain any four sources of working capital

Ans: The four sources of working capital are as follows:

1.       Borrowings from Commercial Banks: Commercial banks generally provide short term credit to the business. The short term finances can be provided in the following ways:

a)      Loans and advances b) Cash Credit c) Bank Overdraft d) Discounting of bills.

2.       Trade Credit: It refers to an arrangement where the suppliers allow the customer to pay their dues within the credit period allowed by them.

3.       Instalment credit: It is usually allowed by the retailers for selling durable goods like television sets, refrigerators, washing machines, personal computers, etc.  Instalment credit is usually granted by the commercial banks or financial companies who have special arrangements with the suppliers.

4.       Factoring: It refers to an arrangement whereby the book debts are assigned to a bank and a short term loan is received against the debtor balance. Specified charges have to be paid in order to avail this facility.

20.   “Management is both a science and an art. Comment.

Ans: Refer previous blog.

21.   Compare and contrast the Henry Fayol’s principles of management with F.W.Taylor’s principles of scientific management.

Ans: Henry Fayol is regarded as the pioneer of administrative theory and father of principles of management. Henry Fayol’s principles are concerned with the entire range of management performance. The administration of all organisation requires the same rational process. In other words, the principles of management are universal in nature.

Federick Winslow Taylor is regarded as the father of scientific managements. His principles are based on careful observations, objective analysis and innovative outlook. It is knowing exactly what is to be done and the best way of doing it. It is regarded as scientific techniques which increases the efficiency of an enterprise.

Similarities:

1.       Both realised the universality of principles of management. In other words, the principles of management are universal in nature.

2.       Both Fayol and Taylor aimed at improving the prevailing condition of management.

3.       Both realised the importance of human factor in management.

4.       Both applied scientific methods to the problems of management.

5.       Both developed their ideas through practical experience.

6.       Both emphasised importance of mutual co-operation between the employees and the employers.

7.       Both wanted to improve management practice.

Dissimilarities:

Points of difference	Taylor	Fayol
1.       Perspective	Operative or shop floor level	Top level of management
2.       Purpose	Increasing productivity of workers.	Developing general theory of administration.
3.       Beginning 4.       Name of work done	Began  from the operating level Scientific management.	Began from top level. General theory of administration.
5.       Rigidity	Relatively rigid	Flexible in nature.
6.       Evaluation	Analyzed the way of doing work technically.	Improved managerial activities technically.
7.       Contribution	Analyzed scientific management on the basis of scientific techniques.	Explained fourteen principles and five functions of management.

22.   Discuss the fourteen principles of management as per Henry Fayol.

Ans: Refer previous blog for the answer.

23.   Differentiate between Branding and Labelling

Ans:  Branding:Branding is the process of assigning a distinctive brand name or symbol to a product in order to differentiate it from competitive products. Branding helps to give a separate identity to the product. Branding helps to create loyalty of the product and builds reputation of the producers.

Labelling: Labelling implies putting labels or identification marks on the package in order to give information about the product, i.e. its weight, size, price, date of manufacturer and expiry date. Label may be part of the package or it may be attached as a tag. It may also provide instructions as to the opening and handling of the product.

24.   Discuss any six factors influencing the choice of channel of distribution.

Ans: The six factors influencing the choice of channel of distribution are as follows:

1.       Nature of the product: The physical properties have a strong influence on the selection of a channel of distribution. In case of perishable goods fewer middlemen are required for their sale. In case of products of technical nature the same is distributed directly to consumers or users.

2.       Nature of the market: The nature of the market is probably the most important factor influencing the choice of channel of distribution. If the number of consumers is less, the manufacturer can directly sell its products, whereas a large potential market is likely to necessitate the use of middlemen.

3.       Nature and types of middlemen:  Middlemen bridge the gap between producer and consumer. The role of middlemen is indispensable and the degree of their importance depends on a) service provided by the middlemen b) availability of desired middlemen c) attitude of middlemen towards manufacturers’ policies.

4.       Competition: The nature and degree of competition have an important bearing on the selection of a suitable channel. Where several manufacturers are engaged in producing and marketing similar products, a keen competition among them is generally found. Each of them seeks to employ the same channels.

5.       After sale service to customers: The channel of distribution will be short for such products which require after sales service.

6.       Price of the product: A low priced product with a large number of buyers will require more channels of middlemen to reach the customers. A high priced product with comparatively less number of buyers requires middlemen.   

25.   Write short notes on underwriting of shares.

Ans: Refer previous blog for the answer.

26.   Explain three factors that affect the economic environment of the business enterprise.

Ans: The three factors that affect the economic environment of the business enterprise are as follows: 

i)                    Economic Policies: The economic policies of the Government such as monetary policy, fiscal policy, foreign trade policy, taxation policy, industrial policy, licensing policy have great effect on the functioning of the business enterprise. A particular economic policy can either create an opportunity or a threat to the business enterprise.

ii)                   Economic conditions: The economic condition such as per capita income, present economic cycle, rate of capital formation, condition of capital and stock market, distribution pattern of income, etc have an important effect on the business enterprise.

iii)                 Economic systems: Capitalistic, Socialistic and Mixed economic system determines the extent of the control by the Government over the activities of business enterprise.

27.   Explain the first four components of marketing mix.

Ans: Refer class notes for the answer.

28.   Discuss the technological development in the banking sector.

Ans: Information technology has brought tremendous changes in the banking sector. Conventional banking services have been replaced by e-banking services. The technological development in the banking sector can be discussed as follows:

i)                    Phone banking:  Customers can address most of their grievances through phone.  Retail banking services are also offered through the use of phone banking. Various requests like request for credit card, loans, account balance enquiry can be done through phone banking.

ii)                   Internet (online banking):  Customer can operate their bank accounts anytime and anywhere in the world. Customers are provided with Login ID and password through which they can access their bank accounts. Online bill payment for shopping, fund transfer, e-bill payment, electricity bill, mobile phone bill, telephone bill payment can be done through internet banking.

iii)                 ATM channel (Kiosk banking):  Modern banks provide retail bank service through Automatic Teller Machine.  Cash withdrawal, balance enquiry, cheque book request, fund transfer etc can be done through ATM channels.

iv)                 Debit Card and Credit Card: Debit card is issued by the bank to account holders who keep deposit account with them. It is plastic card bearing the account holders’ name, validity period, customers’ name, identity number and signature. This card facilitates withdrawal of cash from any ATMs’, automatically transfer money, etc. It can also be used for online payment of electric bills, telephone bills.

Credit card is issued by the bank to selected customers to enable them to make payment on credit bills upto specified limit. Like debit card it is also a plastic card bearing bank’s name, customers’ name, identity number, validity period and signature. This card allows the card holder to withdraw cash from the ATM counters without having any deposit in the bank and a transaction fee is charged by the bank.

Electronic Fund Transfer System (EFTS): This system allows direct transfer of funds from one account to another account electronically. Salaries can be credited to the employees’ account. NEFT and RTGS are the modes of EFTS

FUNCTIONS OF MANAGEMENT:

1.     PLANNING

Q1. What are the three main points in the definition of planning?

Ans: Planning is the process of deciding in advance the objectives to be achieved during a given period of time. Thus, the three main points in the planning are

i)                   Setting objectives to be achieved for a given period of time.

ii)                Identifying alternative courses of action.

iii)              Selecting the best possible alternative course of action.

Q2. “Planning is the basic function of management”. Explain.

Ans: Planning is considered to be basic function of management since all other functions of management like organising, directing, staffing, coordinating and controlling are performed within the framework of planning. Planning lays down the base for other functions of management.

Q3. Do you think planning can work in a changing environment?

Ans: Planning means to assess the future situation and make provision for it. It involves collection of the relevant information from the past and present and developing a definite course of action for future. Planning is merely a prediction about the future. Hence, planning may not work effectively in a changing environment as it is difficult to assess the future trends in the changing business environment. In order to cope up with the changing business environment business plans, policies, methods, budgets must be modified time to time.

Q4. “Planning restricts creativity”. Explain.

Ans: Planning restricts creativity since the managers and workers are expected to perform on the predetermined course of action. They are reluctant to deviate from plans and guidelines. Planning doesn’t promote creative thinking and initiative at all levels of management since they are expected to perform as per the specific plans, policies, guidelines etc.

Q5. “Planning bridges the gap between where we are and where we want to go”. Explain.

Ans:  Planning bridges the gap between the present and the future as planning is futuristic in nature. It is considered to be forward looking process. Plans are prepared for implementing them in future and it helps to cope up with the future uncertainties. It is conscious determination of what to do, when to do, how to do and who shall do in advance.  It helps to minimise risk in future by formulating a definite course of action.

Q6.  Explain any six features of planning.

Ans: The features of planning can be discussed as follows:

i)                   Basic Function of management: Planning is the first function of management and provides a base for other functions of management. Other functions of management cannot be performed without effective planning. Planning provides a framework for other functions of management.

ii)                Planning is all pervading: Planning is required at all levels of management and in all departments of an organisation.

iii)              Goal oriented: Planning seeks to achieve the goals and objectives of the organisation. It identifies the actions that would lead to the desired objectives and goals.

iv)              Mental exercise:  Planning is a mental exercise, creative thinking and imagination. Planning involves logical and systematic thinking.

v)                 Planning is a continuous process:  Planning is an ongoing process. If there is any deviation due to changing environment, the plans have to be revised in order to cope up with the changes.

vi)              Planning is a flexible process: Planning process should flexible in order to cope with the future changes and challenges. Planning process shouldn’t be rigid, existing plans must be revised time to time in order to cope up with the changing environment.

Q7. “Planning is of vital importance in the managerial process”. Do you agree? Explain any five reasons in support for your answer.

Ans: Planning is of vital importance as it is all pervading and precedes all other functions of management. Planning is essential for the success of the business. The importance of planning can be discussed as follows.

1.     Economising operations:  Effective planning helps to reduce inefficiency and wastage. It helps to realise the objectives in the best and cheapest possible manner. The different operations become more effective with sound planning.

2.     Optimum utilisation of resources: Planning leads to optimum utilisation of resources. It helps to allocate the resources in an efficient manner to achieve the goals of the organisation.

3.     Makes activities meaningful: Management By Objectives (MBO) cannot be done unless there is sound planning. Managers and employees realise that their activities relate to the goals of the organisation.

4.     Provides basis of control: Planned performance are compared with the actual performance. A comparison of actual performance with the planned performance helps to identify the deviations and provide a basis of control since appropriate actions can be taken to achieve the desired results.

5.     Helps in coordination: Cooperation and coordination between different departments becomes easy since people at all levels are involved in the planning process. Without planning coordination between different departments becomes difficult.

 

Sample questions for ISC-2016

PART I (20 Marks)

Answer all questions.

Question 1                                                                                                                       [10´ 2]

Answer briefly each of the questions (i) to (x).

(i) Name the dimensions of business environment.

(ii) Mention the four types of short term financial assistance available from a

Commercial Bank.

(iii) Give two features of planning.

(iv) What is factoring?

(v) Give two features of e-banking.

(vi) State any two points of distinction between recruitment and selection.

(vii) Name four kinds of debentures.

(viii) Give two differences between bonus shares and right shares.

(ix) Give two objectives of Marketing.

(x) Mention any two specific differences between advertising and publicity.

PART II (60 Marks)

Answer any five questions.

Question 2

(a) Understanding the environment of business is of immense significance. Explain. [6]

(b) Write short notes on the following types of plans: [6]

(i) Rule

(ii) Method

(iii) Policy

Question 3

(a) Distinguish between fixed capital and working capital of a business concern. [3]

(b) What are equity shares? Explain any three advantages of issuing equity shares from

the point of view of a company. [4]

 (c) The directors of Manik Co. Ltd decided to reinvest and retain profits of their

company. What would be their rationale for doing so? [5]

Question 4

(a) What are sweat equity shares? [3]

(b) List any four features of NEFT. [4]

(c) Explain A.H. Maslow’s Need Hierarchy Theory of Motivation. [5]

Question 5

(a) Distinguish between delegation and decentralisation. [3]

(b) Write four methods by which the objectives of consumer protection can be achieved. [4]

(c) Describe any five qualities of a good leader. [5]

Question 6

(a) Explain any three barriers to communication. [3]

(b) Explain the features of planning as a function of management. [4]

(c) Differentiate between formal and informal organization. [5]

Question 7

(a) Coordination is considered as the essence of management. Comment. [4]

(b) Write short notes on:

(i) Functional organization; [4]

(ii) Modern concept of marketing. [4]

Question 8

(a) Explain the meaning of: [3]

(i) Debit card

(ii) Credit Card

(iii) ATM

(b) Explain four sources of external recruitment. [4]

(c) What do you understand by the term promotion? State and explain the elements of

promotion. [5]

Question 9

(a) Explain any three functions of a supervisor. [3]

(b) Explain the meaning of: [4]

(i) Inter corporate deposit;

(ii) Instalment credit.

(c) What is marketing mix? Explain the elements of marketing mix. [5]