Q1. Define Financial Management? Explain Its objectives?
4 marks
Ans: Financial management is concerned with management of flow of funds and involves decisions
relating to procurement of funds , investment of funds in long term and short term assets and distribution of
earnings to the owners.
Objectives of Financial management:
I.
II.
Primary objective : (a) objective of wealth maximization: The primary and most important
objective of financial management is to maximize wealth of equity shareholders which means
maximizing the price of equity shares
Secondary objectives: The objective of wealth maximization is possible only by :
(i)
Profit maximisation’
(ii)
Maintaining liquid assets
(iii)
Financial reserves for growth
(iv)
Optimum utilization of funds
Q2. Define financial decisions? Explain major financial decisions?
Ans: Financial decisions refer to the decisions concerning financial matters of a business firm.Major
financial decisions are:
(i)
(ii)
(iii)
Investment decisions: deciding investment of funds in long term and short term assets
Financing decisions: deciding sources of funds i.e. ratio of debt and equity
Devidend decision: deciding amount of profit to be paid as dividend
Q3. Explain various factors affecting investment decisions
Or
Explain various factors affecting capital budgeting decision
Or
Explain various factors that affect fixed capital decisions?
Ans:
(1) Nature of business: (a) manufacturing concern: heavy investment in fixed asset
(b) Trading concern: less investment in fixed assets
(2) scale of operation: (a) large scale : require large amount of fixed capital
(b) small scale: requires relatively less fixed capital
(3) choice of techniques: (a) labour intensive technique: require less fixed capital
(b) capital intensive technique: require more fixed capital
(4) Financing alternatives: (a) Assets purchase on cash basis: require more fixed capital
(b) Assets purchased on financing and leasing: need less fixed capital
(5) Growth Prospects:
(a) Growth plans in future: need more fixed capital
(b) less or no possibility of growth:
need less fixed capital
(6) Technology upgradation: (a) Assets become obsolete sooner: require higher fixed capital
(b) Assets less affected by technological upgradation: require less fixed
capital
Q.4 what are the factors that affect working capital requirements?
Ans: (1) Nature of business: (a) trading concern: less working capital
(b) manufacturing concern: more working capital
(2) scale of operation:
(a) large scale: more working capital
(b) small scale : less working capital
(3) Business cycle: (a) boom condition:more working capital
(b) Depression or Recession: less working capital
(4) seasonal factors : (a) peak season: more working capital
(b) slack season: less working capital
(5) production cycle: (a) long production cycle: more working capital
(b) short production cycle: less working capital
(6) credit allowed: (a) liberal credit policy: more working capital
(b) strict credit policy:
less working capital needed
Q5. What is trading on equity?
Ans: trading on equity is an arrangement in which firm makes use of borrowed funds in such a way so
that rate of return on equity shares can be increased
Q6. What are the factors that affect choice of capital structure / Financing decisions
Ans: 1. Cash flow position: a) strong cash flows : debt is preferred
b) cash shortage: equity should be used
2. Debt service coverage ratio (DSCR): a) Higher DSCR: more debt to be raised
b) lower DSCR: more of equity is preferred
3. Return on investment (ROI) : a) ROI greater than rate of interest: more of debt is used
b) ROI is lower than rate of interest: more of equity is preferred
4. Tax rate: a) higher tax rate:: more equity is used
b) lower tax rate : more of debt is used
5. stock market conditions: a) Boom period: more of equity is preferred
b) Depressed market condition: more of debt is preferred
6. Business risk: a) higher business risk: more of equity is used
b) lower business risk: more of debt is used
Q7. What is financial planning? What are its objectives? What are its importance?
Ans: Financial planning is the process of estimating the fund requirements , specifying the sources of
funds and utilizing them in an optimum manner
Importance of financial planning:
1.prepares for future challenges
2.helps in avoiding business shocks and surprises
3. helps in coordination
4. helps in eliminating wasteful efforts
5. helps to link present with future
6. facilitates financial control
Objectives of financial planning:
1. to ensure availability of funds whenever required
2. to ensure that unnecessary finance is not raised
Q8. What are the factors that affect dividend decisions?
Ans: 1) earnings : a) more earnings: greeater dividend
b) less earning: less rate of dividend
2. stability of earnings: a) stable and regular earnings: declare higher dividends
b) unstable or irregular earnings: low rate of dividends
3. Growth prospects: a) growth prospects in near future: firm pays less dividend
b) Do not have any growth plans: declare high rate of dividends
4. cash flow position: a) surplus cash: firm can pay more dividends
b) cash shortage: declare no or very low dividends
5. Access to capital market : a) Easy access : liberal dividend policy
b) limited access: declare low dividends
6. Taxation policy: a) higher dividend distribution tax rate: less dividend is paid
b) lower dividend distribution tax rate: higher rate of dividend is paid
Q9. What is financial market and what are its functions?
Ans: A financial market is a market for the creation and exchange of financial assets.
Functions of financial market
1. Mobilize savings and channelize them into most productive uses.
2. Facilitate price is discovery: Price of various financial assets and securities in determined through their
demand and supply.
3. Provide liquidity to financial assets: As they can be early converted into cash as and when required.
4. Reduce the cost of transactions: As investors are not required to spend much on getting information
relating to price, cost and availability of securities.
Q10. Define money market? Who are the major participants of money market?
Ans: Money market: refers to market for short term funds, which deals in monetary assets whose period of
maturity is up to one year.
Major participants of money market
Reserve bank of India (RBI), commercial banks, NBFC`s, state govt., large corporate houses and mutual
funds.
Q11.give features of money market instruments?
Ans: Feature/characteristic/nature of money market instruments:
1. Highly liquid: because discount finance house of india(DFHI) provides a ready market for them.
2. Less risky: Due to shorter duration of investment and soundness of the issuers.
Q12. Explain various instruments of money market?
Ans: Instruments of money market:
1. Treasury bill (T-bill)is an instrument of short term borrowings issued by RBI an behalf of Indian govt.
(i) There are negligible instruments.(ii) Issued at price less than face value and redeemed at par as maturity.
(iii) There are known as zero coupon bonds.(iv) Issued for a period of 14 days to 364 days.(v) Available for a
minimum amount of RS 25000 and multiples thereof.
2. Commercial paper: is an unsecured instrument issued in the form of a promissory note.
(i) Issued only by large and credit worthy companies.(ii) It is negotiable instrument.(iii) It is sold at discount
and redeem at par.(iv) Issued in denominators of RS 5 lakhs or multiple thereof.(v) Maturity period is 15 days
to 1 year.(vi) Issued to meet short term requirements of funds like seasonal and working capital needs.
(vii) It is used for bridge financier also.
3. Call money: is a short term finance whose maturity period varies from 1 day to 15 days.
(i) Call money is used by banks to maintain the CRR (call reserve ratio).(ii) Also known as `Inter-bank call
money` as banks with shortage of cash borrow from banks having excess of cash.(iii) Interest rate paid on call
money is known as `call rate`.
4. Certificate of deposits: it is a bearer document issued by commercial banks and development financial
institutions against the deposits kept by companies and institutions.
(i) Time period ranges from 91 days to 1 year.(ii) It is negotiable instrument i e freely transferable.
(iii) It is unsecured instrument and help in raising a large amount of money for short period.
5.Commercial bill: It is a short term instrument used by business firms to finance their working capital
requirements.
(i)
(ii)
(iii)
It is commonly used in credit purchase and sales.
There are bills are negotiable instruments.
They can be discounted with the bank even before the due date.
Q12. Define capital market? What are its main features
Ans: Capital markets: refers to whole network of all organisations, institutions and instruments that provide
medium and long term funds.
Features: 1. Investment outlag: requires less investment as value of securities is generally low.
2. Participants: Individual investors and institutional investors.
3. Duration: Deals in medium and long term securities.
4. Liquidity: due to presence of stock exchange.
5. Safety: risky as issuing companies may fail to perform as per projection.
6. Expected return: Generally yield higher return as both capital gains and dividend or interest.
Q13. Give components of capital market? Define primary market? Explain various methods of floatation ?
define secondary market?
Ans:
Component of capital market
(I) Primary market: refers to the market where is securities are sold for the first time. Also known as new issue
market.
(i)
(ii)
(iii)
Common securities are equity shares, preference shares, debentures etc.
Directly contributes to capital formation as it facilitates transfer of surplus funds from savers to
entrepreneurs for setting up new projects, expansion etc.
Investors are banks, financial institutions, insurance companies’ mutual funds and individuals.
Method of floatation:
1. Offer through prospectus: Under this method, company invites public to apply for its securities through
issue of prospectus.
(i) Prospectus contains terms and conditions for sale of securities, details about purpose of issue, historical
background and future prospects of company.
(ii) The contents of prospectus should be in accordance with provisions of companies act and SEBI guidelines.
2. Offer for sale: Securities are first issued to intermediaries like issue houses and stock brokers at a fixed
price. There intermediaries, in turn, resell the securities to the investing public at higher price.
3. Private placement: company sell the securities to some selected institutional investors and individuals.
(i) No prospectus is issued as securities are issued privately to investors like UTI, LIC etc.
(iii) This method saves the costs of public issue and helps to raise capital more quickly.
4. Right issue: company offers the new shares to its existing share holders in proportion of shares already held
by them.
(i) This method gives pre- expective right existing sharer holder over such securities.
(ii) A right issue is compulsory requirement under companies act 1956.
5.E-IPOs: Company issues capital to public through online system of stock exchange.
(i) Under E-IPO, the issuing company enters into as agreement with stock exchange and as to a point SEBI
registered brokers to accept application and place orders with company.
(ii) A registrar having electronic connectivity with stock exchange is also appointed.
II Secondary market: refers to market for sale and purchase of previously issued securities.
(i)
No involvement of issusing company as investor, who wishes to sell the security, may choose to sell it
to the investor, who wishes to buy it, at the prevailing price.
Contributes indirectly to capital formation: by providing liquidity and marketability to existing securities
Q14. Differentiates between primary market and secondary market?
Ans: Difference between primary and secondary market
Basis
Nature of securities
Primary market
It deals with issue of new securities
Process of transactions
Determination of prices
The company sells securities either
directly to the investors or through
as intermediary
It promotes capital formation as
funds flows directly from savers to
investors.
Only buying of securities takes
place.
By management of the company.
Location
No fixed geographical location.
Capital formation
Buying and selling
Secondary market
It deals with sale and purchase of
existing securities only.
The ownership of existing securities
is exchanged between investors
without involvement of company.
It promotes capital formation
indirectly.
Both buying and selling of securities
takes place.
By demand and supply of the
securities.
Located at a specified place.
Q15.define stock exchange and explain its functions?
Ans: Stock exchange: refers to an institution or body of individuals which is constituted for the purpose of assisting,
regulating or controlling the business of buying and selling or dealing in securities.
Functions: 1. Providing liquidity and marketability to existing securities: Presence of ready market provides liquidity
and easy marketability as investments can be converted into cash as and when required.
2. Pricing of securities: By comparing their demand and supply conditions. It enables the investors to know
present worth of their investment.
3. Safety of transaction: For listing, companies have to fulfill arigid set of requirements. After listing,
companies have to operate with in the frame work of stock exchange.
4. Constitutes to economic growth: It not only mobilize the existing savings of investors but also encourage
them to invest in securities in which higher returns are expected. This leads to capital formation and economic
growth.
5. Providing scope for speculations: Stock exchange provides oppurtunities to speculate and generate profits
from fluctuations in security prices.
6. Economic barometer: Price trends on stock exchange reflect the economic conditions of the country.
Q16. Explain trading procedure on a stock exchange?
Ans: Trading procedure on a stock exchange:
1.
Selection of broker: This is necessary because trading of securities is possible only through SEBI registered
brokers, who are member of stock exchange.
2.
3.
Opening demat account: The securities are held in electronic form by a depository.
(ii)
Placing the order: (i) Order can be communicated to 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 in to he encuted.
4.
Executing the order: According to instructions of client, the broker executives the order i.e buys or sells
the security so closer.
5.
Settlement: (i) Equity spot market follows T + 2 rolling settlement i.e if a trade has taken place on
Monday then it must be settled by wednesday.
Q17. Define Demutualization?
Ans: Demutualization: refers to separation of ownership and control of stock exchanges from trading rights of
members.
It is useful as: (i) It reduced conflict of interest between the stock exchange and the brokers.
(ii)It reduced chances of brokers using stock exchanges for their personal gains.
Q18. Define depository?
Ans: Depository: is an organisation which holds securities (like shares, debentures etc) of investors in
electronic form at the request of the investors through a registered depository participant.
Q19.define depository participant?
Ans: Depository participant(DP) is an agent of the depository services [Two depositories are NSDL and CDSL]
]minimum network for depository is RS 100 crores]
Q20.who is a beneficial owner?
Ans: beneficial owner is the real owner of the securities who has lodged them with the depository in the form
of entry
Q21.what is dematerialization of securities?
Ans: Dematerialisation of securities is process by which physical shares certificates are converted to an
equivalent number of securities in electronic form.
Q22.what are regulatory, development and protective functions of SEBI?
Ans: Regulatory functions of SEBI: 1. Registration of brokers and sub-brokers in the market.
2. Registration of collective investment schemes and mutual funds.
3. Regulation of stock bankers portfolio exchanges, underwriters merchant bankers.
4. Regulation of take over by companies.
5. Levying foe or other charges for carrying out the purpose of the act.
Development function of SEBI: Training of inter mediaries of securities market.
2. Conducting research and publishing information useful to all market participants.
3. Undertaking measures to develop the capital markets by adopting a flexible approach.
Protective function of SEBI:
1.
2.
3.
4.
Prohibition of fundamental and unfair trade practices like making mis- leading statements, manipulation
etc.
Controlling insider trading and imposing penalties for such practices.
Undertaking steps for investor protection.
Promotion of fair practices and code of conduct in securities market.
Objectives of NSE
1. To establish a nationwide trading facility for all types of securities
2. to ensure shorter settlement cycles and book entry settlement
3. to meet international benchmarks and standards
4. to provide fair ,efficient and transparent securities market using electronic trading system
Q23.give objectives of SEBI?
Ans: 1. To regulate stock exchanges to promote their orderly functioning
2. to protect rights and interest of investors and to guide and educate them
3. to prevent trading malpractices
4. to regulate and develop a code of conduct for intermediaries to make them competitive
Q24.differentiates between marketing management philosophies?
Ans:
BASIS
SELLING
CONCEPT
PRODUCT
CONCEPT
PRODUCTION
CONCEPT
MARKETING
CONCEPT
Starting
point
Factory
Factory
Factory
Market
SOCIETAL
MARKETING
CONCEPT
Market and
society
Main focus
Selling existing
product
Quality of
product
Quality of product
Customer
satisfaction
Means
Through selling
and promotional
efforts
Profit through
sales value
Through
better quality
Through availability
and affordability of
product
Profit through mass
product
Through
marketing
techniques
Profit through
customer
satisfaction
Ends
Profit through
product
quality
customer
satisfaction and
social welfare
Through
marketing
techniques
Profit through
customer
satisfaction and
social wellfare
Q25.explain various functions of marketing?
Ans: FUNCTIONS OF MARKETING:
1.Gathering and analysing market information.2.Marketing planning.3.Product,Designing and Development.
4.Standardisation and Grading :Standardisation refers to producing of goods of predetermined specification to
achieve uniformity and consistency in the output.
Grading refers to classfying products into different groups with some characteristics.
5.Packaging and labelling.6.Branding.7.Customer support services.8.Pricing of products.9.Promotion10.Physical
distribution.
11.Transportation.12.Storage or warehousing.
Q26.Define marketing mix and explain various elements of marketing mix?
Ans: Marketing Mix: refers to set of marketing tools that a firms uses to pursue its marketing objectives in a target
market.
Q27.Define branding? Explain various advantages of branding to marketers and customers?
Ans: Branding: the process of giving a name,sign or symbol to a product is called branding.Important terms relating
to banding are:
1.Brand:refers to name ,sign,design or combinaton of them,which nis used to identifying a product.
2.Brand name: refers to that part of a brand,which can be spoken.
3.Brand mark: refers to that part of a brand,which can berecognised in the form of sign,symbol or design.
4.Trade mark: refers to that part of a brand,which is given legal protection.
Advantage of branding to marketers;
1.Helps in product differentation.
2.Helps in advertising and display programme.
3.Differential pricing.
4.Ease in introduction of our new products.
Advantages of branding to customer:
1.Helps in product identification.
2.Ensures quality.
3.Status symbol.
Q28. What are the characteristics of good brand name?
Ans: Characteristics of good brand name;
1.Simple and easy pronounceable.2.Suggestive.3.Distinctive.4.Adaptable.5.Versatile.6.Legal protection.7. Staging
power.
Q29.define packaging? What are the various levels of packaging?
Ans: Packaging:refers to the act of designing and producing the container or wrapper of a product.
Levels of packaging:
1.Primary packaging:it refers to immediate packaging of the product.
2.Secondary packaging:it provides additional layer of protection.
3.Transportation packaging:it provides protection and ease in transportation and storage.
Q30 what are the importance of packaging ?
Ans: Importance of packaging;
1.Rising standard of health and sanitation.2.Self-service outlets.3.Innovational opportunity
Q31.what are the functions of p[ackaging?
Ans: Functions of packaging;
1.Product differentiation.2.Product protection.3.Facilitate use of products.4.Product promotion.
Q32 define labeling? What are t he functions performed by the labels?
Ans: Labelling:it is the process of attaching or putting labels on the product.
Functions performed by the labels;
1.Describe the products and specify its contents.2.Identifying the product or brand.3.To help in grading the
product.4. Promote the product.5.Provide information required by law.
Q33.what are factors that affect price determination?
Ans: Price:refers to amount of money,which a customer has to pay,to buy a product.
Factors affecting price determination: 1 product cost includes total cost of producing , distribution and
selling the product .
2Utility and demand of the product : i) lot of utility – higher price charged
ii) less utility – low price fixed .
3 extent of competition in the market : i) no competition – enjoy complete freedom in fixing price
ii) severe competition – has to consider the price, quality
and features of competitors’ product.
4: government and legal regulations
5:pricing objectives:
(i)maximize profits: fix maximum price for its product
(ii)obtaining market share leaderships: fix low price to attract large number of people
(iii) surviving in competitive market: offer discount on its product
(iv) attain product quality leadership: charges higher prices to cover higher quality.
6:marketing method used:
(i)
(ii)
More distribution channel used: charges higher price
Less distribution channel used: charges less price
Q34.what are the factors that determine choice of channels of distribution?
Ans: I) Product related factors:
i) a) industrial product: direct or short channel
b) consumer product: long channels are preferred
ii)a) perishable product: short channel
b) non perishable: long channels
iii) unit value product: a) expensive product: direct or short channel
b) low unit value product: long channels are preferred
iv) a) complex product: direct channels is preferred
b) simple or non complex products: longer channels are preferred
II) Company characteristics:
i) financial strength: a) financially strong: direct channel
b) financially weak: longer or indirect channel
ii) degree of control desired: a)firm wants to exercise control over distribution: short channel
b) firm not desirous to control over distribution:longer channels
III) Market factors:
i) size of market: a) large market size: more intermediaries are used
b) small number of consumers: direct or short channels
ii) Geographical concentration: a) buyers concentrated in small geographical location: direct channel
b) buyers dispersed over wide area: indirect channels
iii) Quantity purchased: a) order size is small: longer channels
b) order size is large: direct channels
IV) COMPETITIVE FACTORS
V) ENVIRONMENTAL FACTORS
Q35.What are decisions involved in the process of physical movements of goods? Or
Explain components of physical distribution og goods?
Ans: 1. Order processing: refers to time and steps involved between receipt of order from customer and
delivery of goods
2. Transportation: implies physical movement of goods from one place to another
3. Warehousing: refers to holding and preserving goods till they are delivered to the buyers
4. Inventory control: means maintenance of stock held for distribution
Q36. What are the major factors that determine level of inventory ?
Ans:i) policy on level of customer
ii) accuracy of sales forecast
iii) Responsiveness of distribution system
iv) cost of inventory
Q37.Define advertising and give its features?
Ans:
.Advertising refers to any paid forms of non-personal presentations and promotion of goods and services by an
identified sponsors.
Features:
1.Paid form.2.Impersonality.3.Identified sponsors.
Q38. Give merits of advertising?
Ans: Merits:
1.Mass reach.2.Enhancing customers satisfaction3.Expressiveness.4.Economy
Q39. —“ advertising misleads customers and increases the cost of products”. Do you agree
with the ?give reasons.
Ans:` no , I don’t agree with this statement.
Objections to advertising :
I)
Add to cost :firms spend lot of money on advertising which increases
the cost of production .
Against this objection :
This fact cannot be denied that advertising help to increase the
demand of a product . it leads to mass production , which bring
economics of scale and reduce per unit cost of production .
II)
Undermines social values ;
As advertising leads to discontent among people , it is often said that
its undermines social values.
Against this objection :
In fact , by providing information about modern and better products ,
advertising gives wide choice to the customer. moreover, final choice
to buy or not depends on them .
III)
Confuses the buyer : each brand claims to be better than others
Against this objection :
Advertising only offers alternatives and provides wide choice .
IV)
Encourages sale of inferior products:
Against this objection : inferiority or superiority of a product depends
on the economic status and preferences of the target customers.
V)
Some advertisements are in bad taste : some advertisements make
use of indecent language , photograph or convey bad message in
order to attract customers .
Against this objection : good or bad taste is a matter of personal
opinion . with change in time, what was not accepted ten years ago
may be acceptable today.
Conclusion : most of the criticism against advertising are not entirely
true. In present competitive world , advertising help in effectively
communicating with target market , increasing the sale and reducing
per unit cost of production.
Q40. Define personal selling? What are its features?
Ans: Personal selling:is a process of informing customers and persuading them to purchase products through
personal communication.
Features:
1.Personal forms.2.Development of relationship.3.Oval conversation.4.Narrow coverage.5.Flexibility.
Q41.what are the qualities of good saleman?
Ans:1. Physical qualities 2. Knowledge 3. Mental attributes 4. Vocational attributes 5. Courtesy 6.
Tactfulness
Q41.what is sales promotion and explain various sales promotion techniques or activities?
Ans: Sales promotion:refers to short term incentives , which are offered toencourage the buyers to make
immediate purchase of a product or service.
various sales promotion activities:
1.rebate: offers the product at a price less than original price
to clear off the excess inventory.
2. discount: refers to reduction of certain percentage from the
price for a limited period.
3.refunds: a part of the product price is refunded to the
customer on showing proof of purchase
4. product combination: giving one product as a gift along with
the purchase of main product
5. quantity gift: offering some extra quantity of the main
product as gift to customers.
6. instant draws and assigned gifts: customers is given a coupon
on purchase.
7. lucky draws: customers is given a coupon on purchase of a
product and the lucky winners are decided by draw of lots.
8. usable benefit: coupon or discount voucher is given to
consumer on purchase of a product to avail any special benefit
or discount.
9. full finance@ :product is sold on installment basics at zero
percent rate of interest.
(i)sampling: distribution of free samples of a product through
sales representation
Q42. Differentiate between advertising and personal selling?
Ans:
Basis
Kind of communication
Advertising
Impersonal form of
communication
Transmits uniform
messages to all
customers
Inflexible
It reaches large
number of people
Cost per persons is
very low
It covers market in
short time
Uniformity of message
:
Flexibility
Reach
Cost
Time
Personal
Personal form of
communication
Message is not
uniform
Highly flexible
reaches limited
people
Cost per person is
quite high
Needs lot of time
to cover entire
market
Q43 Difference between advertising and sales promotion:
Basis
Objective
Regularity
Usefulness
Time
Media
Advertising
It aims to attract the customer
towards a particular brand
It is recunning in nature
It is useful in creating and demand
and goodwill
It has long term perspective
T.v,newspapers,etc.
Sales promotion
It aims to convince customers to
actually purchase the product
It is not recunning
It is useful in immediately sales
It has short term perspective
Rebates,free samples.etc.
Q44. what are various tools of public relation
Ans. 1:press
2:conferences and seminar
3: speeches
4:meetings
5:events
6:publc service activities
7:written materials
Q45.define consumer protection and give its importance from consumer point of view and businessman
point of view?
Ans: Consumer protection refers to the act of providing adequate protection to consumers against the
unscrupulous, exploitative and unfair trade practices of manufacturers and service providers.
I) Importance of consumer protection from consumers point of view:
1.
2.
3.
Consumer ignorance: Due to wide spread ignorance of consumers, it becomes necessary to educate them
so that they can protect their interest.
Unorganised consumers: In India, consumers have not yet organized themselves to have powerful
consumer movement.
Widespread exploitation of consumers: through various unfair trade practices such as defective and
unsafe products, adulteration etc.
II) Importance from businessman`s point of view:
1.
2.
3.
4.
5.
Long term interest of business: business firms can exist only when they satisfy the consumers.
Business uses society resources: Business men are not the owners but merely the trustees of society`s
resources.
Social responsibility: It is responsibility of the business to protect the interest of consumer by supplying
good quality goods at reasonable prices.
Moral justification: It is moral responsibility of business to take care of consumer`s interest and avoid any
exploitative and unfair trade practices.
Government Intervention: Any unfair trade practice would invite govt. intervention, which may hamper
the image of business.
Q46.define controlling? Give its features?
Ans: Controlling refers to comparison
of actual performance with planned performance
and taking corrective action, in care of deviation between actual and planned
performance.
Nature/Features/Characteristics
1. Controlling is a goal oriented process as it aims to ensure that resources are used
effectively and efficiently to achieve pre-determined goals.
2. Controlling is a pervasive functions as it is required in all organisations, all levels
in all departments.
3. Controlling is both a backward looking and a forward looking:
 It is backward looking functions as it measures and compares actual
performance with standard fixed in the past.
 It is forward looking functions as it aims to improve future performance,
based on experience gained in the past.
4. Controlling is a continious function as it involves continious s review of
performance and review of standard.
Q47.give importance and limitation of controlling?
Ans: Importance
1. Accomplishing organizational goals: Though controlling, every attempt is
made to keep the activities on the right track, so that organizational goals
could be achieved efficiently and effectively.
2. Judging accuracy of standard: A good control system keeps a careful check on
the changes taking place in the business environment and helps in recising
standards as and when required.
3. Making efficient use of resources: Its aims to ensure that each activity
performed according to the predetermined standards.
4. Improving employee’s motivation: Employees knows the standards against
which the performance will be appraised. It motivates them to give better
performance.
5. Ensuring order and discipline: controlling keeps a continuous check on
employees to minimize undesirable activities like theft, fraud, dishonesty,
corruption, etc.
6. Facilitating coordination in actions: Its integrates diverse activities of different
departments towards common goals and avoids duplication of efforts.
Limitations
1. Difficulties in setting quantitative standards: It is very difficult to measure
human behavior and employee morale.
2. Little control on external factors: Changes in government policies, etc cannot
be checked by control system.
3. Resistance from employees: As it interferes with their action and thinking and
creates restrictions on their freedom.
4. Costly affairs: Performance of each and every person has to be measured and
reported to higher authorities. It requires lots of time, efforts and cost.
Q48. Explain controlling process?
Ans: Controlling process
1. Setting performance standards: Standards provides the yardstick against
which actual performance is measured.
2. Measurement of actual performance: Performance should be measured in
an objectives and reliable manner and in same units in which standards
are fixed.
3. Comparison of actual performance with standards: Such comparison will
reveal the deviations between the planned and actual performance.
4. Analyzing deviations: Significant deviations must be paid more attentions
as compared to minor deviations.
5. Taking corrective actions: If deviations goes beyond the acceptable range,
espically in important areas, it demands managerial attention.
Q49. Give relationship between planning and controlling?
Ans: Relationship between Planning and Controlling :
1. “Planning and Controlling are mutually interrelated and interdependent
activities”. They are inseparable twins of mgt:
 Without Planning, there is no basis for controlling as we have to
compare actual performance with certain standard. Controlling is blind
without planning. If the standards are not set in advance, managers
have nothing to control. When there is no plan, there is no basis of
controlling. Hence, Controlling is always based on planning.
 Similarly “Planning without Controlling is meaningless” because once a
plan becomes fractional, Controlling is necessary to monitor the
progress, measure it, discover deviations and initiate corrective
measures to ensure that events conforms to plans.
2. Planning in Perspective:Process as it prescribes the most appropriate course
of action to achieve the objectives.
Controlling is Evaluative: Process as it evaluates whether planned decision
have been translated into desired action.
-: Control process starts where Planning leaves off.
3. Both are backward lacking as well as forward looking: Plans are preferred for
future and are based on forecasts about future conditions. -: It is forward
looking.
Planning is backward looking function as plans are guided by part experiences.
Q50.Give meaning and features of business environment?
Ans: Business Environment may be defined as all those conditions and forces external to a business unit under
which it operates.
Features / Nature / Characteristics
1.
2.
3.
4.
5.
6.
7.
Totality of External Forces: That directly or indirectly influences the working of a business system.
Specific and General Forces : Specific Forces such as investors, customers directly affects and general
forces such as social, political, legal and technological conditions indirectly affects the business
enterprises,
Inter-relatedness:Different elements of business environment are closely inter-related.
Dynamic Nature: Business environment keeps on changing.
Uncertainty: It is very difficult to predict the trend of business environment with full accuracy.
Complexity: Business Environment is complex as it is a combination of many factors which are interrelated and inter-dependent.
Relativity: Business Environment is a relative concept since it differs from country to country and even
region to region.
Q51.give importance of business environment?
Ans: Importance of Business Environment:
1.
2.
3.
4.
5.
6.
Help the firm to identify opportunity and getting the first mover advantage: By keeping in touch with the
charges in the internal environment and enterprise can identify opportunities and find strategies to
capitalize on the opportunities at the earliest.
Helps to identify threats and warming signals: Environmental awareness helps an organization to identify
threats to its business interest and act as a warning signal.
Helps in tapping useful resources: The analysis of business environment helps in determining
requirements of the environment as a result, business is able to arrange useful resources at the night time
from the environment at economical prices.
Helps in coping with rapid changes: IT enables the business to copy up with the charges in the internal
environment by making relevant changes in their internal.
Helps in assisting in planning and policy formulation: Scanning, understanding and analysis of business
environment provide the bare for planning and policy formulation.
Helps in improving performances: Analysis and understanding of trends of the business environment
helps the business to improve its performances.
Q52. Explain different components of business environment?
Ans: Elements of Business Environment:
1.
Economic Environment: Refers to all those farmers that have economic facts on business activities.
i.
Key economic influences include factors such as inflation, interest rate, disposable income,
money supply and so on.
ii.
Each of the economic factor can serve either an opportunity or as a threat to a business
enterprise.
Components and aspects of economics environment:
a) Relative role of private and public sector.
b) Growth rate of GNP and per capita income at current and constant price.
c) Rate of saving and investment.
d) Volume of export and import.
e) Money supply in economy.
2.
Social environment: represents the custom and traditions, values, culture, social trends, believe, norms
and ethics of a society in which business enterprise operates.
Component and aspects of social environment:
a) Attitude towards product innovation, life style, occupations, distribution and customer preference.
b) Concern with quality of life.
c) Life expectancy, birth and death rate.
d) Expectation from workforce.
e) Shift in the presence women in workforce.
f) Consumption habits.
 Analysis and understanding of social environment is important as it determines the product
standards and services of conduct that are acceptable to the society.
3. Technological environment: it includes forces related to scientific improvement and innovations which
provide new ways of producing goods and services and new methods and techniques of operating a
business.
Components and aspects of technological environment
a) Research and development activities
b) Innovations in product and process
c) Import and export of technology
d) New equipment
4.
Political environment: includes political conditions such as political leadership, political stability,
practices of riling party extent and nature of government intervention in business and so on.
Components:
5.
(a) Constitution of the country.
(b) Prevailing political system.
(c) Political ideology and practices of the rating party.
(d) Extents and nature of government intervention in business.
(e) Nature of relationship of our country with foreign country.
Legal Environment: Refers to frame work of law and various legislations within which business
transaction are to take place.
Components: (a) Legislation that have been passed by the state assembly.
(b) Some laws are: Companies Act, Factory Act, Trade Union Act.
(c) LPG Policy is being adopted.
Q53.Explain impact of economic reforms on business?
Ans: IMPACTS ON ECONOMIC REFORMS ON BUSINESS
1.
2.
3.
4.
5.
Increasing Competition: Prior to economic reforms, Indian firms enjoyed protection because of licensing
and other restrictions. But after the reforms, delicensing and liberalized entry of foreign firms increase the
competition for Indian firms.
Example: Banking reforms increased competition for nationalised bank like SBI from domestic bank ICICI
and MNCs bank like HSBC.
More Demanding Costumers: Reforms have increased the choice of costumers. As they are well informed
and manufacturers take pain in satisfying their expectations.
Rapidly Changing Technological Environment: use of advance technology provides a competitive edge and
helps in producing better quality goods at lower cost. As a result, now a day’s most of the big companies
spend huge amount of technological upgradation.
Necessity for Changes: Before reforms, business environment was quite stable and business plans and
policies use to continue over a long period of time. But after reforms, LPG policy made business
environment unstable.
Example: Nokia, Samsung keeps on making changes in their products so that their products can face
competition.
Need for Developing Human Resources: In the dynamic environment it is not possible to achieve success
with unskilled employs. Firm need people with higher competency and greater commitment for example;
firm regularly arrange on the job and of the job training for their employs so that their knowledge is
updated.
6.Loss of Budgetary Support to Public Sector: Government has reduced the financial support to public sector
undertaking after reforms, PSUs have realised that in order to survive and grow they have to generate their own
resources and improve their performances.
Q54.Define liberalization, globalization and privatization?
Ans: Libralisation: refers to removal of entry and growth and restrictions on private sector enterprises.
Privatetisation: means transfer of ownership, management and control of public sector enterprises to the
entrepreneur in private sector.
Goobalisation: means integrating the national economy with the world economy through removal of barriers
on international trade and capital movement
Q55.Define management? Explain its features?
Ans: Managementis the process of designing and neatening on environment in which individuals work
together with the aim of achieving goods effectively and efficiently.
Characteristics Of management :
1. Management is a goal oriented process: Management integrates the efforts of all members
towards achieving the objectives.
2. Management is all pervasive: Management is essential to all oraganisation whether big or small
economic social or political.
3. Management ofMultidimensional: Its three main dimensions are:
(a) Management of work: Every organization emits to perform some work
(b) Management of People: managing people has two dimension
(c)
4.
5.
6.
7.
(i)
It implies dealing with diverse needs of employees as individuals.
(ii)
It also implies dealing with individuals as a group of people.
Management of Operations: Combines management of work as well as people ti produce the
goods itsinvolves deciding what is to be done and who is to do it.
Management is a continuous Process: All the functions of management are performed bt the
managers on continuous bans.
Management is a Dynamic Functions: Which has to adopt itself to the changing environment.
Management of group activity: Management helps people to realize their individuals as well as
organizational goals through group efforts.
Management is an Intangible force: Its presence can be felt when targets are met, employees
are happy and there is orderliness and coordination’s in the work environment.
of management?
Q56.Explain objectives
Ans:
Objectives Of management:
1. Organizational Objectives: They are needed to achieve economic goals of the organizations.
Three main organizational objectives are.
(i)
Survival: possible only when organizations is able to earn enough revenue to cover its
costs.
(ii)
Profits: An organization aims to earn adequate profits in order to survive and grow.
(iii)
Growth: organizations must grow and expand to survive in the long run.
2. Social Objectives: They are needed to achieve benefits of the society.
(i)
Supply of quality products at fair prices.
(ii)
Conducting business in lawful manner
3. Personal Objectives: They relate to individuals needs of the employees.
1. Financial needs like competitive salary and perks.
2. Social needs like peer reorganization.
Q57.explain importance of management?
Ans: Importance of management:
1. Management helps in achieving group goals: It brings the human and non-humans resources
together and gives common directions to efforts of all individuals towards achieving the
organizational goals.
2. Management Increases efficiency: Management helps in creating and maintaining an
environment, which encourages better performances and higher land o efficiency.
3. Management creates dynamic personal objectives: Management helps to employment changes
by convincing the employees that changes will benefits their future prospects.
4. Management helps in achieving personal objectives: Through motivation and leadership,
management helps the individuals to achieve their personal goals while working towards
organizations objectives.
5. Management helps development of society: While achieving the development of organization
mgt also aims to develop society by giving due importance to social obligations.
6.Management creates sound organizations structures: It develop Spirit of cooperative and mutual
understanding and provides friendly environment in the organizations
Q58.expalin management as an science, art and profession?
Ans: Management as science:
1. Systematized body of knowledge: Management satisfy their features as also an organized body
of knowledge built up by mgt practitioners over a considerable period of time.
2. Principle based on Experimentations: This feature is not lent percent applicable in mgt as it deals
with humans beings and their behaviors cannot be accurately predicted.
3. Universal validity: Mgt principal have to be modified according to a given situation.
4. Cause and effect Relationship: Outcomes of principal of mgt may vary in different situations.
If we conclude from above that mgt is not exact science rather it is inexact science.
MGT as an Art:
1. Existence of theoretical knowledge: this features is present as it involves use of theoretical
knowledge like principal and techniques
2. Personalized application: Every manager has his own unique way of managing things and
peoples, although all managers learn same mgt theories and principals.
3. Based on practice and creativity: Managers also improve their managerial skills and efficiency
with regular applications of mgt principals .
if we conclude that mgt is an art as it satisfies all the characteristics.
III Mgt as a profession
1. Well defined body of knowledge: Mgt consists of systematic knowledge of concepts, theories and principles.
2. Restricted entry:Mgt is open to all individuals is want to learn skills of mgt.
3. Professional association association: It is not compulsory for a m,anager to be member of any mgt
association.
4. Ethitical code of conduct: There is no uniform code of conduct for the managers.
5. Service motive: Mgt aims to accomplish organizational goals which is generally profit maximization.
-We conclude that mgt does not possess all the necessary feature of a profession.
Q59.what are various levels of management and give their functions?
Ans: Levels of management
1.
Top level Mgt: Board of directors, chairman, president etc.
Functions: 1. Determine the objectives of organisation
2.
3.
4.
5.
Farming of plans and policies.
Analyse the business environment.
Setting up an organizational frame work.
Assemble the resources
2.Middle level Mgt: Purchase manager, production manager, finance manager, plant superident etc.
Functions 1. Interpret the policies framed by top Mgt.
2. Selecting suitable cooperative and supervisory personnel.
3. Assign duties and responsibilities to lower Mgt
4. Motivate personnel to achieve desired objectives.
3. Operational or supervisory level: Supervisory, super dent foreman, section officier etc.
Functions: 1.Issues orders and instructions.
2. Prepare plan for activities.
3. Assign and assist in work.
4. Represent`s workers grievances.
Q60.Define coordination? Explain why coordination is an essence of management?
Ans: Co-ordination: refers to orderly arrangement of group efforts to provide unity of action in order to achieve
common purpose.
Co-ordination is an Essence of Mgt because of the following two reasons:
1. Co-ordination is needed in all mgt functions:
(a) Planning: (i) Between overall plan organisation and departmental plans.
(b) Organizing: Between resources and activities to be performed.
(c) Staffing: Between efficiency of workers and compensation.
(d) Directing: Between superiors and subordinates.
(e) Controlling: Between standards and actual performance.
Co-ordination is needed at all levels:
(a) Top level to integrate activities of organisation for accomplishment of goals.
(b) Middle level: to integrate efforts of different sections and sub-sections.
(c) Lower level: in the activities of worker to ensure that work proceeds as per plans.
Q61.Explain characteristic of coordination and also give its importance?
Ans: Characteristics of co-ordination
1.
2.
Co-ordination integrates group efforts: coordination is an orderly arrangement of group efforts and
not an individual effort.
Co-ordination ensures unity of action: it acts as an binding force between departments and ensures
that all efforts are focused towards achieving organizational goals.
3. Co-ordination is a continuous process:coordination is a never ending process as its nees is
felt at each and every step in the organization.
4. Co-ordination is all pervasive functions : coordination is needed in all departments and at all
levels because of interdependence of various activities.
5. Co-ordination is a deliberate function:every manager has to take deliberate actions to
achieve coordination
Importance of coordination
1. Unity of action: – an enterprise has diverse resources; technique, activities etc and they all must be
coordinates to bring unity through unity in action.
2. Increase in efficiency and economy: – coordination brings efficiency because it is an effort of all
organizational members. It also helps to maintain good relation among all levels of management.
3. Development of personnel: – coordination helps to obtain information about job, qualities of a job
holder which helps to analyze about the potentialities of the job holder and improve coordination
system
4. Differential perception: – different people have different perception. When all people are
coordinated effectively their effort and power are concentrated to achieve organizational goals.
5. Survival of the organization: – coordination helps o harmonize the work resources and physical
facilities. When there activities are not harmonized the organization can’t achieve the goal and it can’t
survive in the society
6. Accomplishment of objectives: – when the employees , their task and available resources are
coordinated, their production will be increased and it helps to accomplish the objectives of the
organization
7. Basis of managerial function: – all managerial functions such as planning, organizing, directing,
controlling etc can’t be conducted effectively without communication.
8. Specialization: – in the absence of coordination in the organization the activities can’t be moved in
specialized areas. Therefore, it helps in speci
Q62.Define planning and give its features?
Ans: Planning refers to the process of the 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 cources of action available.
Features/Nature/Characteristics of planning:
1. It focuses on achieving organization objectives: Planning is goal oriented i.e. purpose of
planning is to develop and facilitate accomplishment of organization.
2. It is primary function of management as it lays down the basis for all other functions of
management.
3. It is pervasive as it required in all organization at all levels and all departments.
4. It is continues because a plan is formed, implemented and is followed by another plan.
5. It is futuristic as it involves looking ahead and preparing for the future.
6. It involves decisions making as it involves a choice from among the various alternative
courses of action.
7. It is mental exercise as it is an intellectual activity of thinking rather than doing.
Q63.Give importance and limitation of planning?
Ans: Importance Of Planning:
1. Planning provides direction: By starting the objectives in advance, planning facilities
unity of directions.
2. Planning reduces the risk of uncertainty: It helps the mgt. to anticipate the future and
prepare for the risks by making necessary provisions.
3. Planning redu8ces overlapping and wasteful activities: Planning ensures clarity in
thought and actions and helps in avoiding and duplication of efforts.
4. Planning promotes innovative ideas: While planning many new ideas arise and it results
into creative, innovative and farsighted attitude among the managers.
5. Planning facilities decisions making: Planning helps the manager to look into the future
and make a choice from amongst various alternatives courses of action.
6. Planning establishes standards for controlling: Planning provides the standards against
which the actual performance is evaluated.
Limitation of planning:
1. Planning leads to rigidity: As employees are required to strictly follows the predetermined policies.
2. Planning may not work is an dynamics environment: Plans have to operate in an internal
environment which is beyond the control of organization.
3. Planning reduces creativity: Employees have to strictly follow plan and deviations are
considered to be highly undesirable.
4. Planning involves huge cost: Lot of money is spent on gathering and analyzing
information and evaluation of various alternatives.
5. Planning is a time consuming process: Lot of time is needed for collection, analysis and
interpretation of data.
6. Planning does not guarantee Success: It is not necessary that a plan which was worked
before will work again in the charged and competitive environment.
7. Reluctance to charges: Employees become accustomed to set methods of doing works
and resists the charges.
Q64.Explain steps involved in planning process?
Ans: Steps in Plannings Process:
1. Setting Objectives: objectives may be set for the entire organization and each
department or unit within the organisation.
2. Developing processes: planning is concerned with the future which is uncertain and
every planner is using assumption about what might happen in future.
3. Identifying alternative courses of action: For every plan there are numbers of options.
4. Evaluating alternative courses: The positive and negative points of each alternatives are
thoroughly examined.
5. Selecting an alternative:this is an real point of decision making. Alternative to be
selected should be the most feasible, profitable and with least negative consequences.
6. Implement the plan: Transforming the plan into action by activating others managerial
functions.
7.Follow up action: monitoring the plans are equally important to ensure that objectives are
achieved
Q65.Define various standing and single use plans?
Ans: Standing Plans: Can be used again and again whenever a particular situation arises. They
Include:
1. Objectives: Refers to end points towards which all business activities are directed.
2. Strategy: Refers to unified, comprehensive and integrated action plan designed to
achieve specific objectives in the event of difficulty.
3. Polices: Refers to general statements that charretise energy towards a particular
directions.
4. Procedures: Refers to chronological sequence of various steps to be taken in order to
perform an activity in as efficient manners.
5. Methods: Refers to prescribed process in which a particular operations or activity is
performed.
6. Rules: Refers to specific statements that inform ehat is to be done.
Single Use Plans: Formulated to meet specific requirements. They Include:
1. Budget: Refers to statements of expected result expressed in numerical terms over a
specific period of time.
2. Programmers: Refers to combination of objectives, policies, procedures, rules tasks and
other elements designed to meet specific situations to achive some objectives.
Q66 Explain what are principles of management and how they are derived?
Ans: Management principles are statements of fundamental truth , which provide guidelines for
managerial decision making and action.
Derivation of management principles:
1. Observation: the management thinkers and researchers observe certain events in actual
practice and analyze them to get certain guidelines which may be used in future.
2. Experimentation: the guidelines developed through observation are repeatedly experimented to
test their validity. If they provide the same result in all conditions, then the principle is accepted
as a management principle.
Q67.Explain nature and importance of principles of management?
Ans: Natue of management principles:
1. Universal application: management principles can be applied to all kinds of organization
,irrespective of size and nature
2. General guidelines: management principles have to be adjusted as per demand of the situation
because real business situations are very complex and dynamic.
3. Formed by practice and experimentation: management principles are evolutionary in nature as
they have been developed through observations, experimentation and experience of
management thinkers.
4. Flexible: principles of management do not provide hard and fast rule and they have to modified
as per changes in business environment.
5. Mainly behavior: principles of management aim to influence unpredictable behavior of human
beings in order to achieve organizational goals.
6. Cause and effect relationships: principles of management help in predicting the outcomes of
managerial actions.
7. Contingent: the application of principles of management depends upon the prevailing
conditions at a particular point of time. They have to be suitably amended as per the situations
IMPORTANCE OF PRINCIPLES OF MANAGEMENT:
1. Providing managers with useful insight into reality: principles of management improves
knowledge, ability and understanding of managers.through principles, managers can avoid hit or
trial method.
2. Optimum utilization of resources and effective administration: by coordinating the physical,
financial and human resource. The cause and effect relationship avoids trial and error approach
and reduces inefficiency, wastage and spoilage in use of resources.
Principles also help in better administration by discouraging personal prejudices and adopting
an objective approach.
3. Scientific decisions: decisions based on management principles tend to be more realistic and
free from personal bias as they have been developed after repeated experimentation.
4. Fulfilling social responsibility: principles of management not only help in achieving
organizational goals but also guide managers in performing social responsibility.
5. Meeting changing environmental requirements: management principles provide an effective
and dynamic leadership and help the organization to implement the changes .
6. Management training , education and research: principles provide broad guidelines which help
in testing human behavior, understanding it and predicting the outcome in future.principles
help to increase knowledge and are used as a basis for management training,education and
research.
Q68.Explain various FAyol’s principles of management?
Ans: FAYOL PRINCIPLE OF MANAGEMENT:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Division of work: divide total work into compact jobs and allocate them to different individuals
Authority and responsibility: maintain a balance between authority and responsibility
Discipline: obedience to rules and regulation of the organization
Unity of command: orders from one superior only
Unity of direction: one head and one plan and efforts of all should be directed towards
objectives.
Subordination of individual interest to general interest: interest of organization must prevail
over individual interest.
Remuneration of emplyees: pay should be fair to both employees and organization
Centralization and decentralization: proper combination of centralization and decentralization
Scalar chain: chain of command and communication be followed in the organization
Order: there should be place for everything and everyone in the organization.
Equity: fair treatment with employees
Stability of personnel: make proper efforts to achieve stability and continuity of employees
Initiative: encourage workers to make and execute plans
Spirit de corps: take steps to develop sense of belongingness and feeling of team spirit among
the employees
Q69.Explain various principles and techniques of scientific management given by Taylor?
Ans: Principals of scientific MGT (Taylors):
1. Science not rule of thumb: Make scientific study and analysis of each part of job instead
of hit and trail method.
2. Humanly, Not Discord: Achieve complete harmony between management and workers
to affairs organizational goals.
3. Cooperative, Not individualism: Achieve cooperative between management and
workers instead of individualism.
4. Development of workers to their greatest efficiency and prosperity: Develop workers to
their greatest efficiency and prosperity.
Techniques Of scientific Mgt:
1. Functional Foremanship: Each worker should be sequeruised by eight specialists.
2. Standards and simplifications of work: Standardization involves setting standard for
every furriness separatism. Simplifications refer to eliminating unnecessary diversity of
products.
3. Method Study: Finding one best way of doing a job.
4. Motion Study : Analyzing various motions to performs a task in order to detect and
eliminate unnecessary movement.
5. Time Study: To determine standard time needed to perform a well defined job.
6. Fatigue Study: To determine amount and frequency of rest intervals required is
completing a task.
7. Differential piece wage system: Efficient and inefficient works are paid at different rates.
Q70.Explain meaning of staffing and give its features?
Ans: Meaning:staffing is that part of the process of management which is concerned with
obtaining,utilizing,and maintaining a satisfactory and satisfied workforce
FEATURES OF STAFFING:
(1)
(2)
(3)
(4)
(5)
(6)
Integral part of management process as organisation cannot exist without human resources
Pervasive as it is performed by all managers at all levels
Continuous process as it meets the growing needs of the organisation
Deals with people as it is concerned with people at work and their relationship
Wide scope as it includes a series of activities
Is a multiple objective activity as it has to fulfill its responsibility towards organisation employees
and society
Q71.Explain importance of staffing?
Ans: IMPORTANCE OF STAFFING
(1) Filling jobs with competent personnel:it helps in discovering and obtaining competent personnel
for various jobs
(2) Better performance:it ensures higher performance by putting the right man in the right job
(3) Survival and growth:competent and efficient workers not only bring an organisation into
existence,but also ensures its survival and growth
(4) Optimum utilization of human resources :by avoiding overstaffing and prevents disruption of
work due to shortage of personnel
(5) Improves job satisfaction and morale:the objective assessment and fair rewarding for their
contribution improves their job satisfaction and morale
Q72.Explain staffing process?
Ans: STAFFING PROCESS:
(1) Estimating the manpower requirements:it aims to determine the number and type of
employees required .the manpower requirements involve two kinds of analysis:
(i)workload analysis: it involves determining number and types of human resources required to
perform various jobs and to achieve organizational objectives
(ii) workforceanalysis:it shows the number and types of human resources available with the
organisation
(2) Recruitment :it involves identifying various sources of human force and attracting and
motivating them to apply for the jobs in the organisation
(3) Selection: it involves choosing the best person out of the pool of prospective
candidates,developed through recruitment
(4) Placement and Orientation:placement refers to assigning specific jobs to the candidates
selected for appointment.Orientation refers to the process of introducing new employees to the
organisation
(5) Training and Development: this step improves the knowledge and competence of employees
inorder to enable them to perform their jobs efficiently
Q73.Explain different aspects or component of staffing?
Ans: ASPECTS OR COMPONENTS OF STAFFING:
(1) Recruitment: is a positive step which aims at attracting number of candidates to apply for the given job
(2) Selection: is a negative process,which aims at selecting the most suitable person out of the various
candidates ,who have applied for the job
(3) Training:is concerned with upgradation of the knowledge and skills of the employees so that their ability to
perform can be enhanced
Q74.what are the various sources of internal recruitment ? give merits and demerits of internal sources of
recruitment?
Ans: Internal Sources of Recruitment:refers to making use of existing staff to fill up vacant jobs.
1 Promotion: refers to movement of employees from a lower level position to higher level position, carrying
higher responsibilities,facilities and pay.
1.
Transfer: refers to shifting of employees from one job to another , one department to another or from one
shift to another, without a substantive change in responsibilities and status of an employee.
Merits of internal sources:
1.
2.
Higher motivation level: it motivates employees to work more efficiently
Simple process: as present employees are already known to the organisation and can be evaluated more
accurately
3. Develops future managers: it provides training ground for developing middle and top level managers
4. No need for induction training: existing employees are already familiar with the work environment
5. No over or under staffing: shifts surplus workforce to departments with shortage of staff
6. Economical: as existing employees need less training
Demerits of internal sources:
1.
2.
3.
4.
5.
6.
Limited choice: selection is to be made from few candidates available within the enterprise
Lack of fresh talent: it prevents infusion of new blood and reduces the scope for fresh talent
Not suitable for a new enterprise:
Decrease in enthusiasm level: if employees know that they will automatically get time bound promotions
Lack of competition: as there is no competition from outside world
Low productivity: due to frequent transfers
Q75. what are the various sources of externall recruitment ? give merits and demerits of external sources of
recruitment?
Ans: External sources of recruitment : refers to searching for the employees from the sources outside the
organisation
1.
Direct recruitment: under this method , a notice is placed on the notice board of the enterprise specifying
the details of the jobs available
2. Casual callers: unsolicited applications from job seekers formed a database that company can use
3. Advertisement : the advertisement is given in newspaper, trade journals and magazines along with full
description about the job and its requirements
4. Employment exchange: are used for filing unskilled and semi skilled jobs
5. Placement agencies and management consultants: undertake total functions of recruiting and selecting
personnel on behalf of various organisations
6. Campus recruitment: organisations conduct interview in campuses of various institutes, universities and
colleges to search prospective candidates
7. Recommendation of employees: existing employees are encouraged to recommend suitable candidates
among their friends and relative for employment
8. Labour contractors: intermediaries known as agents or labour contractors are used for hiring unskilled and
semi skilled workers
9. Advertisement on television: the detailed requirements of the job are publicised along with the profile of the
organisation
10. Web publishing: certain websites are designed to provide information about the job seekers and job
opening
Merits of external sources:
1.
Qualified personnel: External sources help the management to attract qualified and trained people to
apply for the vacant jobs.
2. Wider choice : External sources provide wide choice and helps the enterprise to make right choice of
candidates
3. Fresh talent : this means infusion of new blood and new ideas into the enterprise
4. Competitive spirit : As internal candidates have to compete with them, it induces the existing employees
to show better performance
Demerits of external sources
1 . Dissatisfaction among existing staff: who aspire for promotion
2. Lengthy process: as vacancies are published and enterprise has to wait for the response of prospective
candidates
3. Costly process: as lot of money is spent on advertising and processing the applications
Q76.Explain selection process?
Ans: Selection process:
1. Preliminary screening: on the basis of preliminary screening of application form, unqualified candidates are
eliminated
2. Selection tests: those candidates who pass the preliminary interview are asked to appear for the selection test.
Important selection test are as follows:
(a) Intelligence test : measures the level of intelligence or the intellectual quotient of the candidate including the
mental ability , such as reasoning, memory etc
(b) Aptitude test: is conducted to determine ability and capacity of the candidate to learn the skills required to perform
the specific jobs
(c) Personality test : This test is conducted to determine whether prospective employee has the ability to adjust in the
organisation.
(d) Trade test: is conducted to determine the actual skills and abilities possessed by the candidate.
(e) Interest test: is conducted to determine person’s area of interest and the kind of jobs that will satisfy him
3. Employment interview: all those applicants who qualify the tests are called for an interview . interview is a formal ,
face to face oral conversation between employer and the applicant.
4. Reference and background checks: A candidate is required to give name and address of some references in the
application form. The candidates successful in the interview are generally investigated on the basis of references
supplied by them
5. selection decision: The candidates who cross all the hurdles are included in the final list of selection .
6. medical examination: candidates are required to undergo a medical test in order to determine his physical health,
illness and physical stamina.
7. Job offer: the candidate who clears the medical examination is issued job through a letter of appointment.
8. contract of employment: after the candidate accepts the job offer , a written contract of employment is made
between employer and the candidate
Q77.differentiate between training and development?
Ans: Training vs Development
• While training is an event, development is a process
• Training focuses on short term goals of the company while development focuses on the employee as a
person
• While training results can be measured in terms of benefits to the organization, the advantages of
development are much more subtle
Q78.Explain various methods of training?
Ans: Methods of training:
On the job training methods: refers to methods that are bapplied to the workplace, while the employee is actually
working.
1.
Induction training( orientation training): refers to the process of introducing the selected employees to other
employees and familiarising them with the rules and policies of the organisation
2. Apprenticeship training: under this method trainees (apprentice) work under the direct supervision of experts
who guide and help them in learning the job
3. Coaching: a superior plays the role of a coach , guide and instructor to monitor and develop managerial
qualities in the subordinate
4. Internship training: vocational or professional institutes enter into arrangement with big business enterprise
wherein their students are sent to big industrial enterprise to gain practical work experience
5. Job rotation: refers to shifting the training from one department to another or from one job to another
Off the job training method: refers to methods in which training is provided to the employee away from his job
1.
2.
3.
4.
5.
6.
Class room lectures/conferences: are conducted to convey specific information, rules , procedures or
methods
Films: this method of training provides information and explicitly demonstrate skills which are not easily
presented by other techniques
Case study: refers to a method in which real life problem is given to the trainees and they are required to
find out the optimum solution by studying it
Computer modelling: a computer is programmed to show some of the realities of the job
Vestibule training: training is given in a classroom vwhere actual work environment is created
Programmed instruction: information is broken into meaningful units and these units are arranged in a
proper way to form a logical and sequential learning package
Q79.Explain importance of training?
Ans: Importance of training and development for the organisation:
1. Reduces cost of production: it prevents inefficiency, spoilage and wastage in use of the resources which reduces
cost of production
2. increased productivity: well trained employees give better performance on the job which increases the productivity
both in terms of quantity and quality
3. prepare future managers: training enables the emplyees to take more challenging jobs and prepare them to take
positions of future managers in case of emergency
4. Boost employee morale: training improves the overall attitude of the employees towards job , working condition
and organisation. It helps to reduce absenteeism, labour turnover and grievances among the employees.
5. Better response to fast changing environment: Training helps to keep pace with the rapid changes taking place in
the dynamic environment.
Importance of training and development to the employees:
1.
2.
3.
4.
Career growth: training helps employees to advance in their careers as it provides new, improved
and advance knowledge and skills
Increased earnings: as it helps to improve the performance and productivity of the employees
Safety of employees : The trained employees are less prone to accidents as they are more
efficient to handle machines and materials.
High morale: as employees know their job
Q80. Differentiate between recruitment and selection?
Ans:
Difference Between Recruitment And Selection
Both recruitment and selection are the two phases of
the employment process. The differences between the
two
are:
1. Recruitment is the process of searching the
candidates for employment and stimulating them to
apply for jobs in the organisation WHEREAS selection
involves the series of steps by which the candidates are
screened for choosing the most suitable persons for
vacant posts.
2. The basic purpose of recruitments is to create a talent pool of candidates to enable the
selection of best candidates for the organisation, by attracting more and more employees to apply
in the organisation WHEREAS the basic purpose of selection process is to choose the right
candidate
to
fill
the
various
positions
in
the
organisation.
3. Recruitment is a positive process i.e. encouraging more and more employees to apply
WHEREAS selection is a negative process as it involves rejection of the unsuitable candidates.
4. Recruitment is concerned with tapping the sources of human resources WHEREAS selection is
concerned with selecting the most suitable candidate through various interviews and tests.
5. There is no contract of recruitment established in recruitment WHEREAS selection results in a
contract of service between the employer and the selected employee.
Q81 Define organizing and explain various steps in process of organizing?
Ans: Organizing refers to identifying
and grouping different activities in the organization and
bringing together human and non – humans resources to achieve organizational goals.
Steps in the process of organizing:
1. Identifying and division of works: The works is dividing in a systematic way so that each
person get a separate and distinct task
2. Departmentation: Group related and similar jobs under one department Grouping may
be done on the basis of functions products.
3. Assignment of duties: all café works to different employees on the basis of knowledge
experience and qualification.
4.Establishing reporting relationship: Clearly define the authority and responsibility associated
with each job. There is need to create superior subordinate relationship
Q82 Explain importance of organizing?
Ans: Importance of Organization:
1. Benefits of Specialization: Process of organization divides the total works into compact
and convenient jobs. Such division of works reduces the workload and increases the
productivity.
2. Clarity and in working relationship: Organization classifies the authority and
responsibility of individuals of different departments.
3. Optimum stylizations of resources: With clarity in jobs, individuals know in advance
what they are supposed to do.
4. Adaptation to change: Organizing helps the organization to adjust itself as per changing
circumstances by suitably modifying the organization structure.
5. Effective Administrative: By avoiding confusion, overlapping of works and duplication of
efforts.
6. Development of personnel: In the process of organizing, managerial personnel are
trained to acquire wide experience in diverse activities through delegation of authority.
7. Expansion and growth: Organizing allows a business enterprise to add more job
positions, departments or products lines.
Q83.Explain organization structure? How it is created and why it is needed?
Ans: Organizing Structure: Refers to network of job positions, responsibilities and authority at
different levels of organization.
How in organization structure created?
The structure of an organization is deliberately designed and planned. It is greatly influenced by
span of management.
Need for organization Structure: Arise when business grows beyond a certain minimum limits
as it becomes difficult to coordinate the functions and activities of different members.
Organization structures are needed for the purpose of:
1. Determining jobs to be performed in an organization.
2. Degree of authority delegated to various job holdings.
3. Extent of responsibilities created among the employees.
Q84. What is functional structure? Give advantages and disadvantages of it?
Ans: Functional Structure: refers to grouping of jobs of similar nature under ane department.
Suitability of functional Structure:
1. When the organization has a single product or small numbers of related products.
2. When organization has to carry out diversified activities.
3. When the task require a high degree of specializations knowledge and skills.
Advantage of functional structure:
1. Specialization: Since each department has to perform specific functions.
2. Effective control and coordination: Due to similarity of tasks performed.
3. Improves Efficiency: of workers as they get suggestions and instructions forms
specialists
4. Avoid Duplication: of functions efforts and resources as one single functional
department cater to the needs of entire organizations.
5. Supervises: Over departmental activities as mangers have to supervise a narrow set of
functional skills.
Disadvantages of functional structure
1. Functional Empire: i.e. departmental functions are given more importance over the
organizational goals.
2. Difficulty in coordination: As departmental managers don’t look beyond their
departments.
3. Difficult to hold accountable: difficult to hold a particular department accountable if the
organizational goal is not achieved.
4. Conflicts of interest: between two or more departments if their interest is not
compatible.
5. Inflexibility: Employees get training of one function only. As a result they cannot be
shifted to other departments or positions.
Q85. What is divisional structure ? give merits and demerits?
Ans: Divisional Structure: When jobs related to one products are grouped under one
department, it is termed as divisional structure.
Suitability of Divisional structure:
1. When large verities of products are manufactured using different productive resources.
2. When it is important to determine profit and loss made by each products line so that
decision can be taken to expand, continue or close a particular products line
Advantages of Divisional Structure:
1. Product Specialization: as all activities related to one product are grouped in one
department.
2. Greater Accountability: Each products department is related as profits centre and is
accountable for its profits or loss.
3. Flexibility: As each division’s functions as an ambones fact.
4. Expansion and growth: as new directions can be added without interpreting the
emitting operations.
Disadvantages of Divisional structure:
1. Departmental Conflicts: With respect to allocating of funds.
2. Costly as each products division has to maintain its own facilities equipments and
personnel.
3. Ignore Organizational Interest: As manager focus in their own products without thinking
of the rest of the organization.
Q86.what is formal organisation? Give its features,merits and demerits?
Ans: Formal Organization: Refers to the structure of jobs and positions with clearly defined
functions and relationships which’s designed by the management to accumulation a particulars
task.
Features:
1. Formations: Is intentionally created by the top management to facilitate smooth
functioning of organization
2. Purpose: Created to achieve the organizational objectives.
3. Reposting Relationship: Position, responsibility and accountability of each level; are
clearly defined. This clarifies who has to report to whom.
4. Stability: Very stable done to its well defined structure.
5. Chains of command and communications: It follows the official’s chairs of command and
communication at every step.
6. Flexibility: Rigid as members are required to behave in a prescribed manner.
7. Coordination: Coordinates and integrates the efforts of various departments.
Advantages:
1. Fixation of Responsibility: is easy as mutual relationships are clearly defined.
2. Clarity of duties: Therefore there are no confusions and it help in avoiding duplications
of efforts.
3. Unity of command: as formal organization makes more use of official channels of
command and communications.
4. Helpful in achieving objectives: by providing frameworks for operations to be performed
and clarity of roles in the minds of employees.
5. Provides Stability: because of well defined structure and policies procedure and rules.
Disadvantages:
1. Delay in action: Official’s chains of commands have to be followed.
2. Lack of initiative: as it does not allow any deviations forms rigidly laid down policies and
strict rules.
3. Ignores human’s element: As it ignores the importance of interpersonal relationship and
humans needs.
Q87. what is informal organisation? Give its features,merits and demerits?
Ans: Informant Organization: Refers to networks of socials relations. This emerges on its own
due to formal roles and relationship among people.
How do informal organizations arise??
Informal organization emerges from within the formal organization when people interact
beyond their officially defined roles.
Features:
1.
2.
3.
4.
Formations: as a result of social interactions among people.
Purpose: To Satisfy social and cultural needs.
Reporting relationships: No definite patters of authority responsibility relationships.
Structure: No definite Structure because it is a complex networks of social relationships
among members.
5. Stability: Less stable done to lack of definite structure.
6. Chairs of command and communications: No specific directions of flows of Information.
7. Flexibility: as standards of behavior evolve from group norms rather than officially laid
down rules and regulations.
Advantages of informal organization:
1. Faster communication: as there is no prescribed official channel
2. Fulfill social needs: it gives emplyees a sense of belongingness , recognition etc. which is
not satisfied by formal organisation
3. Helps in achieving organizational goals: it provides employees feedback about work
experiences as they can discuss their views and ideas with superiors without any nfear
of hesitation. Such feedback contributes towards fulfillment of organizational
objectives.
Disadvantages of informal organization:
1. Resistance to change: it resists those changes which affect the culture opr relationship
among members which may delay or restrict growth
2. Spread of rumors: which not only spoil the tream spirit and morale but also advewrsely
affect the smooth working of the organization
3. Pressure of group norms: people are under pressure to observe group norms even if
such norms are against the interest of formal organization
Q88. why do members need informal organization?
1. informal organization provides great personal and social satisfaction to its members.
2.it protects the individual identity and interest
Q. why do formal organization oppose informal organization?
Managers consider informal organization as a threat to their authority and obstacles in
organizational goals.they consider it as a source of conflict and a means of restricting
output.
Q how does informal organization helps formal organization?
1. Informal organization contributes to efficient functioning of formal organization and
also compensates the inadequacies of formal organization.
2. Informal communication is often used by management to transmit information which is
not possible through official channels
3. it provides employees feedback about work experiences as they can discuss their views
and ideas with superiors without any nfear of hesitation. Such feedback contributes
towards fulfillment of organizational
DELEGATION OF AUTHORITY: refers to a process of sharing of tasks or responsibility and
authority between a amanager and his subordinate
Elements or Process of delegation:
1. responsibility: is the obligation of an individual to carry out the assigned duties.it
originates from superior subordinate relationship as subordinate is bound top perform
the duty assigned to him by his superior. It flows upwards as every subordinate is
responsible to his superior
2. authority: is the right or power granted to an individual to facilitate the performance of
the assigned task. It must be clearly stated. It flows downward as superior has authority
over his subordinates
3. accountability: is the obligation to carry out responsibility that is being answerable to
final outcome. It arises by virtue of delegation of authority but it cannot be delegated. It
flows upwards as subordinate is accountable to superior
importance of delegation of authority:
1. effective management: it enables the managers to assign the routine work to his
subordinates and concentrate on broad challenges and opportunities.
2. Employee development: delegation causes subordinates to accept accountability and
exercise judgement for solving problems.it provides them more opportunities to utilize
their talent and skills and improves their career prospects
3. Motivation of employees: delegation shows the trust and confidence of superior on his
subordinates . it provides them satisfaction in terms of recognition, opportunity to use
authority and interaction with superiors
4. Facilitation of growth: delegation gives an opportunity to lower level to exihibit their
capabilities and enables the higher level to identify opportunities.
5. Basis of managerial hierarchy:delegation establish superior subordinate relationship
which is the basis of formal organization structure
6. Better coordination: the three elements of delegation help to define powers, duties and
answerability related to various job position
Centralization – refers to concentration of decision – making power at the top level on management.
Decentralization - refers to evenly and systematic managerial authority from top level management
middle and lower levels
 Complete centralization is not possible as manager cannot retain all authority and yet have
subordinates in the organization only possible in one-man business
 Also complete decentralization is not possible as manager cannot delegate all his authority
without surrendering his position as a manager.
So, organization can never be completely centralized or decentralized.
Inter-dependence between centralization and decentralized: Top mgt. has to retain authority for major decision planning and controlling. At the same time
authority for routine or operational matter is delegated to middle and lower level.
 Operational level manager can exercise their authority only when major organizational
objectives plans and control systems are formulated at top level. Similarly, top level depends on
operating managers for of the plan.
Delegation is more important than decentralization:-
Delegation is a compulsory act as manager cannot all the activities on their own.
Decentralization is not compulsory as many organizations operate with little or no decentralization of
authority.
Q. Why it is said that decentralization is an extent of delegation?
Ans. In delegation authority is multiplied by two as authority is shared between superior &
subordinates. In decentralization authority is multiplied by many as authority is shared between
superior and subordinates all level of management.
Importance of decentralization:
1. Develops initiative among subordinates: it leads to initiative and willingness to take
responsibility.
2. Develops managerial talent for the future: as it gives subordinates a chance to take decision,
exercise judgments and perform activities of top management.
3. Quick decision-making as decision are taken by two subordinates at the point of action.
4. Relief to top mgt.: from routine and time-consuming operation and concentrate on key areas
like strategic planning major policy formulation etc.
5. Facilities growth: as manager enjoy consideration freedom to manage the affairs of dear
department.
Better control: by evaluating performance of each and every manager