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Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 12 Consumer Protection. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 12 Important Extra Questions Consumer Protection

Consumer Protection Important Extra Questions Short Answer Type

Question 1.
What is the provision regarding enforcement of the orders of District Forum, State Commission, or National Commission?
Answer:
Following are the provision regarding enforcement of orders of redressal agencies
1. Every order of (Redressal Forum, the Agency Commission, or National Commission) shall be a bind if no appeal has been preferred against such order under the provision of this Act.

2. No redressal agency shall admit a complaint unless it is filed within 2 years from the date on which the cause of action has arisen (sec. 24 A (1)).

3. A complaint may be entertained for the period specified above If the complaint satisfies that he had sufficient cause for not filing the complaint within such period [Sec. 24 A (2)].

It is worth mentioning that such delay can be condoned only when the reasons are recorded.

4. Every order made by such agency will be executed in the same way as the court, to which it is sent, shall execute as if it were decree or order sent to it for execution. (Sec. 25).

5. If the redressal agency fails to get its order executed, then it will send the order to the court in whose jurisdiction the dispute falls for its execution. Then the said court shall execute the order as if it were a decree or order sent to it for execution.

Jurisdiction is decided as under:

• If the order is against a company, the jurisdiction will be divided on the basis of the place of the registered office of the company.
• If the order is against any person, the jurisdiction will be decided according to the place where the person concerned voluntary resides or carries on business, or personally works for gain (Sec. 25)

6. When a complaint is put up before these agencies it is found to be frivolous or vexatious, it shall, for a reason to be recorded in writing, dismiss the complaint.

It can also be made an order that the complaint shall pay to the opposite party such cost, not exceeding ten thousand rupees, as may be specified in the order.

Question 2.
What are the Penal Provision under Consumer Protection Act?
Answer:
According to Sec. 27, where a trader or a person against whom a complaint is made, or the complainant, fails to comply with any order made by the District Forum, the State Commission, or National Commission, as the case may be, such traders or person or complainant shall be punishable

• with imprisonment for not less than one month but which may extend to 3 yrs; or
• with fine which shall be not less than Rs. 2000 but which may extend to Rs. 10,000; or
• with both.

In case, the redressal agency is satisfied with the circumstances of the case, it can reduce the minimum limits of both imprisonment or fine, mentioned above.

Consumer Protection Important Extra Questions Long Answer Type

Question 1.
What are various prescribed authorities under the consumer protection Act, 1986? Describe their composition, object, and procedure for the meeting.
Answer:
Authorities under the Act as follows:
1. The Central Consumer Protecting Council (Sec. 4 (1)): This section provides provision for the establishment of the Central Consumer Protection Council (now Central Council) by the Central Government. The Central Government may issue a notification in this regard and may specify the date of establishment of such council in the notification.

Composition (Sec. 4(2)): The Central Council shall consist of the following members

1. The Minister-in-Charge of consumer affairs in Central Government, who shall be its chairman, and
2. Such member of other official or non-official members as may be prescribed.
3. The Minister of State of Consumer Affairs in Central Government as Vice-Chairman of Council;
4. The Minister of Food and Civil Supplies or Minister-in-Charge of Consumer Affairs in State;
5. 5 members from Lok Sabha and 3 members from Rajya Sabha.
6. The Secretary of National Commission for Scheduled Castes and Scheduled Tribes;
7. Up to 20 representatives of the Central Government Department and autonomous organization concerned with consumer interest;
8. At least 35 representatives of the Consumer Organisation concerned with consumer interest.
9. not less than 10 representatives of women.
10. Up to 20 representatives of farmers, trade, and industries.
11. The Secretary in Department of Civil Supplies shall be the Member Secretary of Central Council.

The object of Central Council (Sec. 6)The Central Council shall work with the objective to promote and protect the rights of consumers.

Terms of CouncilTerm of Council shall be 3 years. A member may resign by submitting his written resignation to the chairman, the vacancies shall be filled from the same category by the Central govt, and such person shall hold office so long as the original member would have been entitled to hold office. The Central govt may constitute a standing working group from amongst the member of the council to monitor the implementation of the recommendation of the council.

Procedure for Meeting of Central Council (Sec. 5) The council shall meet as and when necessary, but at least one meeting of the council shall be held every year. The meeting shall be held at such place and at such time as the chairman may think fit.

2. The State Consumer Protection Council (Sec 7(1))This section authorizes the State Government to establish a Consumer Protection council by issuing a notification in this regard and with effect from such date as it may specify in the notification.

Composition Sec 7 (2): The State Council shall consist of the following members

1. The Minister-in-Charge of Consumer Affairs in State Government as its chairman.
2. Such member of other official or non-official members, representing various interest, as may be prescribed by State Government; and
3. Up to 10 other official or non-official member nominated Objects of Council (Sec. 8) The objective of every state council shall be to promote and protect the rights of consumers as laid down in clauses (i) to (v) of section 6 within the state.

The procedure of Meeting (Sec 7 (4)): The State Council shall meet as and when necessary, but at least 2 meetings should be held every year. It shall meet at such time and place as the Chairman may think fit and observe such procedure which is prescribed by State Government for the transaction of its business.

3. The District Consumer Protection Council (Sec 8 A): This section was inserted in 2002 in Act by making amendment in it. ACU to the Section, the State Govt, shall establish District Consumer Protection Council for every district with effect from such date as is specified in the notification.

Composition: The District Council shall consist of the following members:

• the Collector or Deputy Commissioner as its chairman; and
• such member of other official or non-official members representing such interest as may be prescribed by State Government.

The object of Council (Sec. 8B): The District Council shall work with the objective of promoting and protecting the rights as specified in clauses (i) to (vi) of sec. 6 with the jurisdiction of the district.

Procedure for MeetingThe District Council shall meet as and when necessary, but at least 2 meetings should be held every yr. It shall meet at such time and place as the Chairman may think fit and observe such procedure which is prescribed by State Govt, for the transaction of its business.

Question 2.
Define the following terms
Answer:
(a) Consumer: Acc. to Consumer Protection Act, 1986, ‘Consumer’ means a person who:
1. Buys any goods for the consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys goods for consideration paid or promised or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose or, (Sec 2(l) d 0).

2. Hires of avails of any services for a consideration which has been paid or promised or partly paid or promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of services for consideration paid or promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person.

Explanation Please note that the consumer also includes the user of goods or beneficiary of services when such goods or services are used or availed with the permission of the main buyer.

Also, the consumer does not include a person who uses the goods or services for the purpose of resale or any other commercial purpose.

But note that, ‘commercial purpose’ doesn’t include used by him exclusively for the purpose of earning his livelihood, by means of self-employment.

(b) Complaint ‘Complaint’ means any allegation in writing made by a complainant that:

1. an unfair trade practice or a restrictive trade practice has been adopted by any trader;
2. the goods, brought by him or agreed to be brought by him, suffer from one or more defects;
3. the services, hired or availed of or agreed to be hired or availed of by him, suffer from a deficiency in any respect;
4. A trader has charged for the goods, mentioned in the complaint, a price in excess of the price fixed by or under any law for time being in forces or displayed on the goods or any package containing such goods.
5. Goods, which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of permission of any law for time; being in forces requiring traders to display information in regards to contents, manner, and effect of the use of such goods (sec 2 (1) (c)).

(c) ComplainantAny person or institute mentioned below who files a complaint is called the complainant

1. A consumer or
2. Any voluntary consumer association registered under the Indian Companies Act, 1956 or any Voluntary Consumer Association registered under other Act in force in the country.
3. The Central or State govt., who or which makes a complaint.
4. In the case of numerous consumers having the same interest, one or more than one consumer.
5. In case of death of a consumer, his legal heir or representative, who or which makes a complaint (Sec 2(1) (b)).

(d) ManufacturerIt means the person who:

1. makes or manufacture any goods or parts thereof,
2. does not makes or manufacture any goods but assemble parts thereof made or manufactured by others and claims the end-product to the goods manufactured by himself, or
3. puts or causes to be put his own mark on any goods to be made or manufactured by, any other manufacturer and claims such goods to be made or manufactured by himself (sec 2(i)).

Explanation Where a manufacturer dispatches any goods or part thereof no any branch office maintained by him, such branch shall not be deemed* to be manufactured even though the parts so dispatched to it as assembled at such office and are sold or distributed from such branch office.

Question 3.
What is the need and importance of the consumer protection Act in India?
Answer:
Need and Importance of Consumer Protection Act can be explained as follows:
1. Unfair and Deceptive Trade Practices: In case of unfair and deceptive trade practices, such as selling of defective or sub-standard goods, ignoring safety standards, charging exorbitant prices, misrepresenting the efficiency or usefulness of goods, etc. Consumer Protection Act makes producers/traders more accountable to consumers. It also becomes inevitable for consumers to unite at a common platform to deal with issues concerning consumer protection.

2. Lengthy Legal Process: The violation of various Acts by traders/producers means an ordinary consumer has no other remedy but to initiate action by way of a civil suit which involves a lengthy legal process proving to be too expensive and time-consuming. In fact, very often the time, cost, and mental tension involved in the legal process is disproportionate to compensation claimed and actually granted to individual consumers. Therefore, it becomes necessary to involve laws directed at protecting the consumers providing for remedies that are simpler, more accessible, quicker, and less expensive.

3. Impact of other countries: the USA, European Union, Australia, etc. have taken effective and strict measures to protect the interest of consumers. Following these countries, India has also felt the necessity of consumer’s protection.

4. Welfare State India is a welfare state: One of the Directive Principles enshrined in the Indian Constitution is that state shall direct its policy towards securing that operation of economic system does not result in the concentration of wealth and means of production to determinantal to common man-keeping in view the consumer interest, Govt, passed Monopolies and Restrictive Trade, Practices Act, 1969. Later on, in 1984, provisions relating to unfair trade practices were also incorporated in Act. wide powers have been granted to the HRTP commission under the Act to control and prohibit monopolistic, restrictive, and unfair trade practices.

5. Economic DevelopmentDuring 55 years of planning in India, there is a spectacular change in the standards of living. The structural and institutional changes in the economy consequent upon Economic Reforms 1991 clearly indicate that there has been modernization and globalization of the economy wants of the consumers have increased manifold. Hence, the need for safeguarding consumer’s interests has also grown and has become more important.

6. Means of transport and communication: The rapid growth of means of transport and communication has brought the world consumers together. There is a strong ‘demonstration effect’ through Mass media of TV/ cable network that has made the consumers aware that they can no longer be exploited by the business community and kept isolated from other countries as far as their right to safety and health are concerned.

7. Role of Judicial System: Consumer Protection Act, 1986 has vested vast powers to t Supreme Court for the protection of consumer rights, their safety, and health. As a breakthrough, the remedies for consumer protection are now simpler, more accessible, quicker, and less; expensive.

8. LokAdalats: The concept of Lok Adalat in India is catching up fast. They have become part of a speedy, effective, and economical redressal system. Interesting to note, lakhs of cases relating to motor accidents, complaints diagrams Ltd. Delhi Electric Supply Undertaking have been settled involving crores of rupees. The concept of Lok Adalats has now been extended to other areas.

9. Concept of Public Interest Litigation (PIL): For consumer protection, a large number of petitions by way of PIL have been filed before High Courts and Supreme Court. The concept of PIL is catching fast. Under PIL, it is not only the aggrieved person, but any person can move to court in the interest of the weak or a group who or which may not be in a position to seek legal remedy on his own. ” Secondly, a complaint sent to Supreme Court even on postcard may be treated as a writ petition. PIL is virtually consumer interest litigation which has helped a lot in the cause of consumer protection.

10. Consumer Awareness: The spread of education especially higher education has made people aware of their rights as consumers. The relief granted to consumers and important judicial decisions regarding consumer protection or relief is often covered by, newspaper. Rising income has increased the purchasing power of people to spend more. The rise in prices of products has created in consumer an attitude to expect better quality or. at least to expect the product to be worth their money. Consumers expect better services for their durables. Legislation leading to consumer protection has created an awareness among consumers about their rights and remedies available to them.

11. Consumer organizations: There are more than 500 consumer organizations in India. These consumer organizations are performing a number of functions such as bringing out vouchers, journals, monographs, collecting data of different talks, seminars, workshops, and conferences for the purpose of focusing on the problems of consumers and finding solutions thereof.

Question 4.
Explain the problems of consumers under the Consumer Protection Act.
Answer:
Due to illiteracy, poverty, lack of information, etc. consumers has to face many problems every day. They tolerate silently all these because their outlook being traditional, They remain ignorant of their rights. Following are the problems under the Consumers Protection Act
1. Unfair Trade Practices Trade communities are engaged in various activities to increase their sale and change their economic use or to provide some services. They may devise any unfair method viz. false and misleading advertisement, free gifts, lucky draws. They falsely represent that the services are of particular quality or grade. Following are the unfair trade practice.

(a) False and misleading Advertisement: Trade community spends a lot of money on the advertisement of their goods and services but most of these are false and misleading. These are exaggerated and based on unprovable claims. They make advertisement of products of poor quality’s special standard product.

(b) Free gifts and Prizes: The offering of gifts, prizes, or other items with the intention of the net providing there as offered or creating an impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole is treated as unfair trade practice.

2. Spiralling price: The prices of the product are unduly hiked by the {froducers. The rising prices are the result of anti-social activities viz hoarding, black marketing, and creating of artificial scarcity of the product. It leads to consumer exploitation and victimization.

3. Adulteration It is a big consumer problem. Sometimes, it is very hazardous to health. The traders resort to many sources to earn high profits. Mixing animal fat with ghee, harmful seeds with grains and pulses, mustard oil with mineral oil are some of the adulterations.

4. Poor quality products Sale of poor quality products and sub-standard products is also a part of consumer exploitation. The manufacturer makes the declaration that the product is ‘Agmark’ is not sufficient. There is no matter missing to verify that the goods sold to consumers conform with a specification of safety. It results in a large number of the death by using sub-standard products and unsafe domestic products like a pressure-cooker, kerosene stoves, etc.

5. Deceptive packing Many times traders resort to practicing to deceive consumers. They put the smaller quantity of products in a packet or change the spelling of reputed product slightly like Tata Teas, the name ‘Tata Tea’ etc.

6. Underweight supplies Underweighfgoods by the trader to the consumer, For example, each LPG cylinder must contain 14.2 kgs. of gas but many times under-weight cylinders are supplied to customers.

7. Deficiency in Services Deficiency in Services is also a form of customer problem for instance

• Under delay in courier service
• wrong billing by electricity and telephone departments
• under delay in setting insurance accident claims.

8. Negligence in services It is another cause of consumer exploitation, For instance, wrong operations by a surgeon. Many of these incidents are published in newspapers very often.

9. Monpoloistic trade practices Monopolistic is that market condition in which there is a single seller of a certain product in the market so he is in the position to exploit the consumer by charging high prices and low quality of product etc.

Question 5.
What is the redressal machinery for consumer disputes given in Consumer Protection Act, 1986? %
Answer:
The Act provides for three-tier Quasi-Judicial redressal machinery at District, State, and National Levels for redressal of consumer disputes and grievances. The District Forum has jurisdiction to entertain complaints where the value of goods and services complained against is less than Rs. 20 lakhs; the States Commission for claims between Rs. 20 Lakhs and Rs.100 Lakhs; and the National Commission for claims exceeding Rs. 100 Lakhs.

1. District Commission: Section 9 (a) of the Act provides for the establishment of a District Forum by the State Government for each district of the state by notification. The State Government may establish more than one District Forum if it deems fit to do so.

• Composition (sec. 10(1)): (a) The Collector of the District will be its president.
• Two or more members including at least one woman member, are the persons of ability, integrity, and standing.
• They are appointed by the State Government on the recommendations of the selection committee, on the terms and conditions, salary, or honorarium, and allowances whatsoever.

The selection committee shall consist of the following, namely:

1. The President of the State Commission – Chairman
2. Secretary, Law Department of the State – Member
3. Secretary-in-Charge of the department dealing with consumer affairs in the State member.

Every member of the District Forum will hold office for 5 years or till the completion of 65 years of age, whichever is earlier and shall be eligible for re-appointment. The members should have adequate knowledge and experience to solve the problems relating to economic, law, commerce, accountancy, industry, public affairs, and administration.

Jurisdiction (Sec. 11 ): District forum has:
(a) Pecuniary Limits Under the pecuniary limits of the district, the forum can entertain complaints up to the dispute of Rs. 20 Lakhs only.

(b) Territorial Limits Under the territorial limits, a complaint shall be constituted in the District forum within the territorial jurisdiction wherein the opposite party resides or carries business or has a branch office or any course of action arises wholly or in part.

The manner in which complaint shall be made (Sec 12): A complaint in relation to any goods sold or delivered or agreed, to be sold or delivered or any service provided or agreed to be provided may be filed with a district forum by

1. The consumer to whom such goods are sold or delivered or, agreed to be delivered or such service provided or agreed to be provided;
2. Any recognized consumer association whether the consumer to whom the goods sold or delivered.
3. One or more consumers, where there are numerous consumers having the same interest, with the permission of the District Forum, on behalf of, or for the benefit of, all consumers so interested; or
4. The Central or the State Government.

The procedure of Admission of Complaint (Sec 13):
(a) The district forum on receipt of a complaint shall refer a copy of the complaint within 21 days from the date of its admission to the opposite party mentioned in the complaint asking him to give his version within a period of 30 days which can be extended further for 15 days. If the opposite party denies the charges leveled against him, then the District Forum shall settle the consumer dispute in the mariner specified in clause (c) to (9) of .the Section 13.

(b) If the complaint received by it under section 12 relates to goods in respect of which the procedure specified in clauses (c) to (g) sub-section 1 of section 13 cannot be followed, or if the complaint relates to any services, then the district forum shall 1 proceed to settle the dispute on the basis of evidence brought to its notice by the complainant and the opposite party or on the evidence of complainant only if the opposite party omits or fails to take any action.

(c) No proceedings complying with the procedure laid down in sub-sections (1) and (2) shall be called in questions, in any court, on the ground that the principles of natural justice have not been complied with.

Power (sec 13):
(a) for the purpose of this section, the District Forum shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908.

(b) Every proceeding before the District Forum shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Code (45 to 1860), and the District Forum shall be deemed to be a Civil Court for the purpose of section 195, and chapter XXVI of the Code of Criminal Procedure, 1973, (2, 1974).

Finding of the District Forums (Sec. 14 (1)): If, after the preceding, conducted under section 13, the District Forum is satisfied that the allegations about services are true or the loss is suffered by the complainant due to goods supplied to him, the forum shall issue an order to the opposite party directing him to do one or more of the following things, namely
(a) To remove the defects in goods;
(b) To replace the goods with new goods.
(c) To return the price to the complainant;
(d) To pay such amount as may be awarded by it as compensation;
(e) To remove the defects or deficiencies in the services;
(f) To discontinue the unfair trade or restrictive trade practice;
(g) Not to offer hazardous goods for sale;
(h) To withdraw the hazardous goods from being offered Or sale;
(i) To cease manufacture of hazardous goods and to desist from services.
(j) To pay such sum (minimum 5% of the value of goods sold) as may be determined by it, if it is of the opinion that loss or injury/ has been suffered by a large number of consumers who are not identifiable conveniently.
(k) To issue corrective advertisement to neutralize the effect of misleading advertisement at the cost of the opposite party;
(l) To Pay for adequate costs to parties,

Appeal (Sec. 15): The aggrieved party may appeal against the orders of District Forum to the State Commission within 30 days of the passing of the order. The State Commission has the power to entertain an appeal after the expiry of 30 days if it is satisfied that there was sufficient cause for delay. But for making an appeal to State Commission, the aggrieved party has to deposit 50% of that amount of Rs. 25,000, whichever is less, in a prescribed manner.

2. State Commission: The Act provides for the establishment of the State Consumer disputes Redressal Commission by the State Government in the State by notification:

Composition (Sec 16):
(a) A person who is or has been or has the qualification of a High Court Judge is appointed by the State Government in consultation with the Chief Justice of the High Court of the State, as its President [ (Sec. 16(a)).

(b) There will be two and other two members*including at least a woman member who are the persons of ability, integrity, and standing. Members should not be less than 35 years of age have a bachelor’s degree from a recognized university and should have at least 10 years of experience in dealing with problems relating to economics, law, commerce, accountancy, industry, public affairs as administration.

Every appointment under sub-section (1) of section 16 shall be made by the State Govt, on the recommendation of a selection committee consisting of the following members, namely:

1. President of the State Commission – Chairman
2. Secretary of the Law Department of the State – Member
3. Secretary-in-Charge of the Department dealing with Consumer Affairs in the State – Member.

Every member of the State Commission shall hold office for a term of 5 years or up to the age of 67 years, whichever is earlier. He may be reappointed for 5 years if he fulfills other conditions (Sec. 16(3)).

Jurisdiction (Sec. 17): This section of the Act provides the jurisdiction of the commission as follows:
(a) The State Commission can entertain complaints where the value of goods or services and the compensation exceeds Rs. 20 lakhs but does not exceed Rs. 1 crore (Amended in 2002);

(b) The State Commission also has the jurisdiction to ‘entertain appeals’ against the orders of any District Forum within the state;

(c) The State Commission also has the power to call the record and pass appropriate orders.

Accordingly to Amendment, 2002, if the opposite party or parties (if these are more than one) actually and voluntarily resides or carries on business or has a branch office or personally works for gain at the t time of instituting the complaint, comes under the jurisdiction of State – Commission. If the opposite party or parties do not reside or carry on business or have a branch office or personally work for gain, but acquiesce in such institution, also comes under the jurisdiction of the commission.

Procedure Applicable for State Commission (Sec. 18): The Provisions of Sections 12, 13, and 14 and the rules made thereunder for the disposal of complaints by the Districts Forum shall, with such modification as may be necessary, be applicable to the disposal of disputes by the State Commission.

Vacancy in the office of the President (Sec. 18 A): This section has been omitted from the Act as per the amendment of 2002.

Appeals (Sec. 19): Any aggrieved person by an order made by the State Commission in the exercise of its power conferred by sub-clause
1. of clause (a) of Section 17 may prefer an appeal against such order to the National Commission within a period of 30 days from the date of the passing of the order in such form and manner as may be prescribed.

The National Commission may entertain an appeal after the expiry of the said period if it is satisfied that there was sufficient cause for not filing it within that period. As per Amendment Act, 2002 the National Commission shall not entertain the ‘Appeal’ unless the appellant has deposited in the prescribed manner 50% of the amount of Rs. 25,000 whichever is less.

Sec 19A(inserted in Amended Act, 2002) provides that an appeal filed before the State Commission or National Commission shall be f heard as expeditiously as possible and an endeavor shall be made to finally dispose of the appeal within a period of 90 days from the date of its admission.

3. National Commission (Sec. 20): Clause (c) of Sec. 9 provides for the establishment of the National Consumer Dispute Redressal Commission by the Central Government by giving notification in the Official Gazette.

Composition (Sec. 20):
(a) National Commission shall consist of a person who is or has been the judge of the Supreme Court, to be appointed by the Central Government (in consultation with the Chief Justice of India) who shall be its president.

(b) Not less than four iid, not more than such number of members as may be prescribed, one of whom shall be a woman, who shall have the following qualifications, namely;

• be not less than 35 years of age;
• possess a bachelor’s degree from a recognized university; and
• be persons of ability, integrity, and standing and have adequate knowledge and experience of at least 10 years in dealing with problems relating to Economics, Law, Commerce, Accountancy, Industry, Public affairs, or Administration.

Every appointment under this clause shall be made by the Central Government on the recommendation of a selection committee consisting of the following namely;
(a) a person who is a Judge of the Supreme Court, to be nominated by the Chief Justice of India- Chairman
(b) The Secretary of the Department of legal affairs in the Government of India – Member.
(c) Secretary of the Department dealing with consumer affairs in the Government of India – Member.

Every member of the National Commission shall hold office for a term of 5 years or up to the age, of 70 years, whichever is earlier. A member shall be eligible for reappointment for another term of 5 years if he satisfies the qualifications and other conditions for the appointment mentioned above.

Jurisdiction Sec 21 provides that the National Commission shall have jurisdiction
(a) To entertain complaints about the value exceeding Rs. 1 crore (as per Amended Act 2002);
(b) To entertain appeals against the orders of any State Commission;
(c) To call for the records and pass appropriate orders.

It is important to know that each hierarchy in the Act, is empowered to entertain a complaint by the consumer for the value of the goods or services and compensation. The word ‘compensation’ in the legal sense means suffering, insult, injury, or loss.
(a) Powers and Procedure Applicable to the National Commission (Sec. 22): Sec. 22 (I) provides that the provisions of sections 12, 13, and 14 and the rules made for district forum shall be available to the National Commission for the settlement of disputes.

(b) Review of orders Passed (Sec. 22 (2)): It provides that without prejudice to the provisions of sub-section (1), prove the National Commission shall have the power to review any order made by it when there is an error apparent on the face of the record.

(c) Power to set aside Orders (Sec. 22 (A)): It provides that where an order is passed by the National Commission ex-party against the opposite party, the aggrieved party may apply to the commission to set aside the said order in the interest of justice.

(d) Transfer of Cases (Sec. 22 B): The National Commission has the power of transferring the pending case from the District Forum of one state to a district forum of another state or before one state Commission to another state commission.

(e) Circuit Benches (Sec. 22C): The National Commission shall ordinarily function at New Delhi and perform its functions at such other place as the Central Government in consultation with the National Commission may notify in the Official Gazette from time to time.

(f) Vacancy in the office of the President (Sec. 22D): If the office of a resident of a District Forum, State Commission, or National Commission is vacant or the person occupying such post is absent or is unable to perform the duties, then the senior-most member will preside over the national commission.

Appeal (Sec. 23): This section provides that any person who is aggrieved by an order of the National Commission may appeal to the Supreme Court within a period of 30 days from the date of order. The Supreme Court may entertain an appeal after the expiry of the said period if it is satisfied that there was sufficient cause for delay, No appeal will be entertained by the Supreme Court unless that person has deposited 50% of that amount of Rs. 50000 whichever is less.

District Forum, the state commission, or the National Commission shall entertain the complaint if it is made within 2 years from the date on which the cause of. action arises. The District Forum, the State Commission, or the National Commission may entertain such complaints. if they are satisfied with the cause of the delay.

Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 6 Staffing. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 6 Important Extra Questions Staffing

Staffing Important Extra Questions Short Answer Type

Question 1.
State whether the following statements are true or false.
(i) “Personal Manager is both a line manager as well as a staff manager.”
Answer:
True.

(ii) Staffing and employing refer to the same activity.
Answer:
True.

(iii) Personnel problems exist only in a large organisation.
Answer:
False.

(iv) Recruitment and selection are one and the same thing.
Answer:
False.

(v) Training and development are synonymous.
Answer:
False.

Question 2.
What is meant by staffing? How staffing is a line as well as staff function?
Answer:
In simple words, staffing is the processing of obtaining and maintaining capable and competent people to fill all positions from top management to the operative level. This includes securing, recruiting, selecting, training, appraising and maintaining the individuals in organizations. Let us pull the views of management scholars on the definition of staffing.

• Staffing is the function by which managers build an organization through the recruitment, selection, development of individuals as capable employees.
• Staffing is the executive function which involves the recruitment, selection, compensating, training, promotion and retirement of subordinate managers.
• Staffing is concerned with the placement, growth development of all those members of the organization whose function is to get things done through the efforts of another individual.
• Staffing is the whole personnel function of bringing in and training the staff and maintaining favourable conditions of work.

Almost all the scholars unanimously agree that –
1. Staffing is a function involving the recruitment, selection and training and development of people.

2. Staffing is broad enough to cover both rank and file employees and managers. Staffing provides the managers with tremendous opportunity to surround themselves with subordinates of their own choosing. More often than not, staffing is equated to hiring the employees in work organization. Actually, staffing is more than hiring, for managers cannot build excellent, effective and efficient organization solely by hiring. The concept -of staffing is so broad to include several activities frequently assigned to the personnel departments such as transfers, discharge, retirements, training, development and orientation.

Truly, staffing concept widens and magnifies the decision zone of managers but at the same time, staffing entails a balanced sharing of the staffing function with the personnel department.

Question 3.
Define personnel Management. How is it different from Human Resource Management?
Answer:
Personnel management is a set of activities and personnel management focusses on the effective use of human resource in an organization. Hence it is also Labelled as Human Resource Management or Human Engineering. The other names for the term Personnel Management are PMIR, PHRM. The Lexicon of personnel management was traditionally dominated by Plippo, Julius, Pigors and Myres, Strauss and Sales. The new scholars in the field include Andrew Dubrin, Dennis Middlemist, Lloyd Byars, Leslie W. Rue, Deris Torrington, Michael Hitt and Charles Carrer etc. Let us briefly see their views on human resource management.

PHRM is that organizational function, which provides specialized concepts, methods, techniques and professional judgement, geared toward effective and efficient utilization of human resources.

Human Resource Management encompasses those activities designed to provide for coordination the human resources of an organisation.

Personnel management is a series of activities enabling working man and his employing organization to reach an agreement about the nature and objectives of the employment, the relationship between them and then to fulfil those agreements.

Personnel management is that function of all enterprises which provides for effective utilization of human resources to achieve both the objectives of the enterprise and the satisfaction and development of employees.

Personnel management is the integration and coordination of human resources in order to move effectively toward the desired objectives.

These definitions need little explanation. What we study in Personnel/HRM:
The organisation is definitely in the people business. Human resource management is that function performed in the organization to facilitate the most effective use of people to achieve organizational goals. Human resource management, in this process, is concerned with –

1. Manpower planning.
2. Employee recruitment, selection, training and placement.
3. Performance evaluation (appraisal), counselling, career development, and training.
4. Employee’s development.
5. Employee’s welfare, safety and health.
6. Maintenance of harmonious Labour relations.
7. Compensation and fringe benefits.
8. Job analysis and employment opportunities programmes.

The Objectives of Personnel/HRM:
As things stand now, the management scholars, pedagogues, and researchers – all unanimously agree that human resource management may be conceived as the process of developing, applying and evaluating policies, procedures methods and programmes relating to the individual members and groups in the organization. The conception applied whether the specific employee is a file clerk, a maintenance mechanic, a research and development scientist a marketing executive, a finance view-president or a production superintendent.

Essentially as noted in the previous paragraphs, personnel/human resources management is basically concerned with the management of human resources in sharp contrast to the management of material and other financial resources.

Another sophisticated way of defining human, resource management is in terms of goals/objectives. The goals of HRM, frankly speaking, are the same as the goals of management of an organization in general. Actually, HRM starts with objectives – what the organization is aiming to do about the people it employs.

The overall aim of the personnel/human resource management is to make an effective contribution to the achievement of overall organizational objectives and to the fulfilment of corporate social responsibility. But unfortunately, there are no universal objectives just as there are no universal (absolute) principles governing personnel policies and practices. Personnel objectives and the means for achieving them depend on their context. At the most, they are only certain basic heading and guidelines which provide a conceptual and analytical framework within which organization does what it needs to do in the \yay which best suits itself.

In every organisation, although the human resource managers tend to carry out a unique set of activities having to do with the utilization of human resources, this work is performed with the Primary objective of accomplishing the exact same objective as is the work of other managers – finance, marketing, production and research etc.

Human resource management is basically aimed at –

1. Helping the organization to reach its goals.
2. Employing the skilful, intelligent workforce in an organization.
3. Providing the organization with well-trained and well-motivated employees.
4. Increasing to the fullest the employee’s job satisfaction and self-actualization.
5. Developing and maintaining the quality of work life.
6. Helping the members to maintain ethical policies and., behaviour.
7. Managing change to the mutual advantage of individuals groups the enterprise and the general public.

Personnel management thus aims at the attainment of maximum individual development maintaining desirable working relationships (between employee and organization) handling human problems in the organization and acquiring, developing, utilizing and maintaining an effective workforce. In more sophisticated terms, the personnel objectives are concerned with the organization, manpower, relationship and responsibility.

Question 4.
Name the components of staffing.
Answer:
The modern concept of staffing comprises of three important components.

1. Recruitment: Recruitment is a positive step which aims as attracting a number of candidates to apply for the given job. The higher the number of people who apply for a job, the higher will be the possibility of getting a suitable employee one of them.
2. Selection: Selection, on the other hand, is a negative process. It aims at selecting the most reliable person out of the candidates who have applied for the job.
3. Training: Training is concerned with up-gradation the knowledge and skills of the employees so that their abolition to perform can be enhanced.

Components of Staffing

Question 5.
Explain Employment Interview and its importance.
Answer:
Employment Interview: According to Julius Michael “An interview is a face to face, oral, observational and personal appraisal method.” Usually, it is used as a means of getting information from the candidate. It also involves giving information that will help the applicant make up his mind about the company.

Interviewing the candidates is an important aspect of the selection procedure. The final selection is partly based on the performance of the candidate in different tests and partly on his performance in his final interview. In the interview, the candidate has to appear before the interview or group interviewers. The candidate’s overall personality is judged in the interview. The interview may last for 10 to 20 minutes or even more. Various questions are asked from the candidates and so on. interviewing technique is used in all companies and in the case of all categories of Staff to be recruited.

Importance of Interview: For the selection of the right type of people, employment interview is very important. The advantages of employment interview are as follows:

1. There is face-to-face contact between the employer and the candidate, the employer can assess the personality traits of the candidate.
2. The candidate can seek more information about the employer and the job. This creates better the employer and the job. This creates a better understanding of the mind of the candidate.
3. The communication skill of the candidate can be judged in the interview. His way of thinking can also be known.
4. the interview is very important where the candidate has not to go through employment tests. The information contained in the application form can be checked during the interview.
5. Many companies do not follow the elaborate selection procedure as it is costly and time-consuming. They can relay on an interview if it is properly planned and administered.

Question 6.
Explain in brief the types of training.
Answer:
Depending upon the purpose of training of the following kinds of training programmes are used in industry:-

1. Induction or Orientation Training
2. Apprenticeship Training
3. Internship Training

Now we shall discuss these kinds of training:
1. Induction or Orientation Training: Induction is concerned with introducing or orienting a new employee to the organisation and its procedures, rules and regulation.

When a new employee reports for work, he must be helped to get acquainted with the work environment and fellow employees. It is better to give him a friendly welcome when he joins the organisation, get him introduced to the organisation and help him to get a general idea about the rules and regulations working conditions etc. of the organisation.

The benefits of induction or orientation and socialisation of new employees are as follows

1. It builds up the new employee’s confidence in the organisation and in himself so that he may become an efficient employee.
2. It gives the new entrant the information he needs such as the location of locker rooms, cafeteria and other facilities, time to break off, leave rules etc.
3. It promotes a feeling of belonging and loyalty to the organisation among newcomers.
4. It ensures that new employee does not form false impressions regarding the place of work because the first impression is the last impression.

2. Apprenticeship Training: Apprenticeship training involves imparting knowledge and skills, in a particular craft or trade such as printing tool making etc. The government of various countries have passed laws which make it obligatory on certain employers to provide apprenticeship training to young people. Apprenticeship training is desirable in industries which require a constant flow of new employees expected to become all-round craftsmen. It is very much prevalent in printing trade building and construction and vocations like mechanics, electricians, welders etc. it is similar to on-the-job training.

Under apprenticeship training, the trainee is placed under the supervision of an experienced person who imparts him the necessary skills and regulates his performance. The advantages of apprenticeship training to the trainees are that they receive a stipend while learning and acquire valuable skills which command a high wage in the labour market. In India, there are so many ‘earn when you learn’ schemes, both in the private as well as public sector undertakings. This is also advantageous to employers. Some employers look upon apprentices as a source of cheap labour.

3. Internship Training: Under this method, an educational institute enters into an arrangement with industrial enterprises for providing practical knowledge to its students. Internship training is usually meant for such vocations where advanced theoretical knowledge is to be backed up by practical on the job experience. For instance, engineering students are sent to big industrial enterprises for gaining practical work experience and medical students are sent to big hospitals to get practical knowledge.

The period of such training varies from six months to two years. The trainees do not belong to the business enterprises but they come from the vocational or professional institutions. It is quite usual that enterprises giving them training absorb them by offering suitable jobs.

Question 7.
Explain in brief the importance of training.
Answer:
Training is beneficial to both, employers and employees. A well-trained employee is an asset to the enterprise because his efficiency and productivity are high. Training enables the employees to obtain job security, high earnings and promotion. In fact, management has no choice. Whether or not to train employees. The only choice left is whether training will be imported through a formal and systematic programme or not. In the absence of formal training employees learn by ‘trial and error’. They pick the wrong ways of doing things and the time involved in learning is very long. Formal training helps to minimise time, cost and wastage involved in training. The main advantages of training are as follows

1. Higher Productivity: Training helps to improve the job knowledge, skills and job performance of employees. Well trained employees are more efficient and as a result the quantity and quality of performance increases.

2. Reduced Supervision: Well-trained employees are self-reliant. Trained employees tend to be more professional and disciplined. They take more interest in their jobs. They do not require continuous and intensive supervision. Therefore the supervisors can save their time and energy.

3. Better Safety: Human error or negligence is the major cause of accidents in industries. Employees who lack knowledge and skills regarding their job often commit mistakes. Training makes employees proficient and reduces accidents. Training makes employees safety conscious and enables them to make better use of safety devices.

4. Economy: Trained employees make better and economical use of the materials and machinery. Proper handling of facilities reduces wastage, spoilage and breakage. The loss to damage is minimised and the cost of production is reduced.

5. Higher Morale: Effective training improves job attitudes and self-confidence of employees. They feel that management cares for them. Trained employees can work better and thereby earn rewards. As a result, their motivation and morale are boosted. Higher morale helps to reduce absenteeism and labour turnover. Relations between management and labour can be improved.

6. Promotion and Career Growth: Training enables employees to acquire knowledge and skills for more responsible jobs. It prepares employees for higher positions in the organisation. They can earn promotions more quickly. Thus training facilitates career growth of an employee.

7. Stability and Growth: Through training, an organisation can develop its future executives and thereby ensure its stability. It becomes flexible as well-trained employees can handle a great variety of jobs. Training makes employees more dynamic and adaptive to changes. With the help of well-trained staff, an organisation can smoothly expand and diversity. It can face adverse conditions more effectively.

Question 8.
Explain the term Job Analysis, Job Description and Job Specification.
Answer:
Job Analysis: Job analysis is the process of determining the tasks which comprise the job methods and equipment used in the job and the skill and knowledge required for the successful performance of the job. It involves a systematic and detailed study of a job so as to determine its contents and requirements.

Job analysis serves the following purposes:

1. Job analysis provides a scientific basis for proper recruitment and selection of personnel.
2. It helps in placing the right person on the right job.
3. Job analysis facilitates the training and development of employees by identifying the abilities required for a job.
4. It helps in the proper evaluation of a job.
5. Job analysis helps in improving the design and methods of jobs. The information generated by job analysis is used to prepare two statements
   (a) job description and
   (b) job specification.

Job Description: Job description is a written, organised and factual statement of the nature and contents of a job.

It consists of the following information:
(a) Title or name of the job
(b) Location, code no. of the job
(c) Department concerned
(d) Duties involved in the job
(e) Working conditions
(f) Equipment used
(g) Relationship with other jobs.

Job Specification: Job specification is a formal and written statement of the minimum human qualities required for the successful performance of a job. It specifies the knowledge, skills, experience and aptitude which the job holder should possess. Job specification helps in selecting and training the right person for a job.

Question 9.
Explain in brief the merits and demerits of internal sources recruitments.
Answer:
Internal Sources: Such sources of labour supply exist within the organisation. There are two internal sources of recruitment, namely, transfer and Promotion. These are discussed below.

1. Transfer: It involves shifting of an employee from one job to another, one department to another or from one shift to another, Transfer is a good source of filling vacancies with employees from over-staffed departments or shifts. It may also be used as a tool for training.

At the time of transfer, it is ensured that the employee to be transferred to the new job is capable of performing it. In fact, the transfer does not involve any drastic change in the responsibilities, pay and status of the employee.

2. Promotion: It leads to shifting on the employee to a higher position, carrying higher responsibilities, facilities, status and pay. Many companies follow the practice of filling higher jobs by promoting employees who are considered fit for such positions. Filling vacancies in higher jobs from within the organisation has the benefit of motivating the existing employees. It has a great psychological impact on employees. A promotion at the higher level may also lead to a chain of promotions at lower levels in the organisation.

3. Recalling of Laid Off Employees: The term lay off means temporary separation of the employees from the employer because of lack of work or shortage of raw materials, or other reasons. When the situation gets normal, the demand for labour F will increase. The management can recall laid-off employees to fill the vacant positions.

Merits of Internal Sources:
Filling vacancies in higher jobs from within the organisation has the following merits

1. Employees are motivated to improve their performance.
2. The moral of the employees is increased.
3. Industrial peace prevails in the enterprise because of promotional avenues.
4. Filling of jobs internally is cheaper as compared to getting candidates from external sources.
5. A promotion at a higher level may lead to a chain of promotions at lower levels in the organisation. Thus many employees are satisfied.
6. Transfer or job rotation is a tool of training employees for higher jobs.
7. The transfer has the benefit of shifting the workforce from the surplus departments to those where there is a shortage of- staff.

Demerits of Internal Sources:

1. When vacancies are filled through internal promotions, the scope for fresh talent is reduced.
2. The employees may become lethargic if they are sure of time-bound promotions.
3. The spirit of competition among the employees may be hampered.
4. Frequent transfer of employees may reduce the overall productivity of the organisation.

Question 10.
Explain in brief on the job methods of training.
Answer:
Under this method, the worker is given training at the workplace by his immediate supervisor. In other words, the worker learns in the actual work environment. It is based on the principle of learning by doing’. On-the-job training is considered to be the most effective method of training the operative personnel.

On the job training is suitable for imparting skills that can be learnt in a relatively short time. It has the chief advantage of strongly motivating the trainee to learn. It is not located in an artificial situation. It permits the trainee to learn on the equipment and in the work- environment, On-the-job training methods are relatively cheaper and less time-consuming. Another important factor in on-the-job training is that supervisor playing an important part in training subordinates.

There are four methods of on-the-job training described below –

1. Coaching: Under this method, the supervisor imparts job knowledge and skills to his subordinate. The emphasis in coaching or instructing the subordinate is on ‘learning by doing’ This method is very’ effective if the superior has sufficient time to provide coaching to his subordinate.

2. Understudy: The superior gives training to his subordinate as his understudy or assistant. The subordinate learns through experience and observation. This technique prepares the subordinate to assume the responsibilities of the superior’s job in case the superior is absent or . he leaves the organisation.

3. Job Rotation: The trainee is systematically transferred from one job to another so that he may get the experience of different jobs. This will broaden his horizon and capacity to do a variety of jobs. Rotation of an employee from one job to another should not be done frequently. He should be allowed to stay on a job for a sufficient period so that he ’ may acquire the full knowledge of the job.

Job Rotation is used by many organisations to develop all-round workers. The employees learn new skills and gain experience in handling, different kinds of jobs. They also come to know the interrelationship between different jobs. Job rotation is also used to place workers on the right jobs and prepare them to handle other jobs in case of need.

4. Vestibule Traning: Vestibule training is adapted to the same work environment as prevails at the actual work-place in the factory. Vestibule training is suitable where a number of persons are to be trained at the same time for the same kind of work. A vestibule training workshop may be set up by an industrial organisation when it is not possible to give training to the employees at the work-place. The training job is entrusted to – the qualified instructors. The main emphasis is on learning rather than on production.

Vestibule training is an attempt to duplicate as nearly as possible the actual conditions of the work-place. The learning conditions are carefully controlled. The trainees can concentrate on training because they are not under any pressure of work. Their activities do not interfere with the regular process of production. Thus vestibule training is very must suitable where a large number of persons are to be trained arid where mistakes are likely to occur which will disturb the production schedules.

Staffing Important Extra Questions Lomg Answer Type

Question 1.
Today staffing is the activity of personnel Department/ Human Resource Management. Explain the functions of Human Resource Management?
Answer:
Creation of Human Resource or Personnel Department: Staffing’ is the responsibility of every manager. However, in not organisation, personnel or Human Resource Department is set up under the charge of Personnel or Human Resource Manager. The personnel department serves as a service department. It performs various personnel functions assigned to it by the other departments. The Personnel Manager enjoys the status of a specialist in personnel matters. Normally, persons with post-graduate qualifications in Human Resource Management, Personnel Management and Industrial Relations are preferred for this post.

The establishment of the Personnel Department does not relieve the line managers of the staffing responsibilities. In fact, the staffing function is an inherent part of the job of every manager. The Personnel Manager is appointed to provide expert assistance to them in the performance of their staffing functions of manpower planning, employment, placement, induction, training and performance appraisal. Besides these functions, the personnel department is also responsible for motivation. Working conditions, human relations and personnel records. We shall study these functions under the heading of operative Functions or Responsibilities.

Functions of Human Resources Management.
There are two sets of functions of human resources management. These include

1. Managerial functions
2. Operative functions

1. Managerial Functions: The Human resources or Personnel Manager is a part of the management. So he performs the basic managerial functions of planning, organising, directing and controlling in relation to his department Like any other manager, the Personnel Manager performs all the managerial functions.

2. Operative Functions or Responsibilities: The operative functions are the specific responsibilities which are entrusted to the personnel department under the supervision of the Human Resource Manager. There are concerned with, employment, training, development, compensation, integration and maintenance of personnel of the organisation.

A brief description of the basic responsibilities or functions of the Personnel Manager is given below –
1. Employment of Personnel: The first major responsibility of the Personnel Manager is the employment for proper kinds and a number of persons necessary to do various jobs in the Organisation. It involves .manpower, planning, recruitment, selection, placement etc. of the personnel.

Manpower planning helps to determine the manpower requirements for various departments. Recruitment is concerned with the sources of supply of work force, whereas selection involves a number of steps to employ the right type of people for various jobs. The selected employees are placed in the jobs for which they are better suited.

2. Training and Development: After placing the people on various jobs, personnel management is concerned with imparting them training to do their work efficiently. Proper development of Personnel is essential to increase their skills in the performance of their jobs. The personnel department designs and runs the appropriate training programmes for developing the necessary skills among the personnel.

3. Compensation: This function is concerned with the determination of adequate .and fair remuneration of the people for their work. The employees can be compensated both in terms of monetary as well as non-monetary rewards. Factors which must be borne in mind while fixing the compensation or remuneration of personnel are their basic need, requirements of jobs, legal provisions regarding minimum wages, the capacity of the organisation to pay, wage level afforded by the competitors etc. For fixing the wage levels, the Personnel Manager can also make use of techniques like job evaluation, performance rating etc.

4. Motivation of Workforce: Employees work in the Organisation for the satisfaction of their needs. In many cases, it is found that they do not contribute towards the organisational goals as much as they can. This happens because employees are not adequately motivated. The personnel Manager helps the various department managers to devise a system of financial and non-financial rewards to motivate the employees.

5. Maintainance of Good Working Conditions: The employees must be provided with good working conditions so that they like their work and work-place and maintain their efficiency. Working conditions influence the motivation and morale of the employees. These include the measures taken for the health, safety and comfort of the working force. The personnel department also provides for various welfare services which relate to the physical and social well-being of the employees. These may include the provision of the cafeteria, restrooms, counselling, group insurance, education of children of employees, recreational facilities etc.

6. Achieving Good Human Relations: The personnel Manager must provide an efficient system of communication to ensure the two-way exchange of information. Many time industrial disputes occur because of poor communication. The personnel manager should always keep himself in contact with, the trade union leaders to understand their grievances and attempt to remove them so that harmony is maintained in the organisation,

7. Personnel Records: It is the duty of the personnel department to maintain records of the employees working in the enterprise. It keeps full records about their training, achievement, transfer, promotion etc. It preserves many other records relating to the behaviour of personnel like absenteeism and labour turnover and personnel programmes and policies of the organisation. It also maintains various records and registers as required by the Factories Act, the employees state Insurance Act and other Labour Laws.

Question 2.
What is manpower planning? Explain the different steps to be taken while preparing Manpower Planning?
Answer:
Manpower planning or human resource planning is the process of determining scientifically the number and type of employees that an enterprise will need in a specified period of time in future. Its purpose is to ensure that the organisation will have an adequate number c of qualified persons at the proper time to perform various jobs efficiently and with personal satisfaction. Manpower planning consists of the following steps

1. Forecasting Manpower Needs: First of all number and type of personnel required are anticipated. The number of employees required in a future period can be estimated by keeping in mind the expected workload. Workload depends upon the production and sales budgets, expansion plans etc. of the company. The type of employees required is estimated by keeping in view the requirements of job vacancies to be filled. Job requirements can be determined by analysing jobs. Job analysis is a thorough analysis of the job to identify the knowledge, skills and experience required for effective performance.

2. Preparing Manpower Inventory: A detailed list of existing manpower is prepared. Then the number and quantity of existing staff are assessed to determine the extent to which manpower forecast can be met from within the organisation. The qualifications, experience, aptitude etc. Of every employee are analysed. Such an inventory of existing manpower is called manpower inventory or manpower audit.

Manpower inventory will give an idea as to how far the future requirements of manpower can be met from within the organisation. It will reveal the adequacy of manpower in terms of number and skills. Absenteeism and labour turnover and such other manpower problems are also anticipated. A comparison between manpower for cast and manpower inventory will reveal gaps in manpower to be filled in form outside.

3. Formulating Manpower Programmes: Detailed programmes are prepared for recruitment, selection, training, transfer and promotion of employees so as to meet future manpower needs, The first step in the staffing process is the estimation of manpower requirements. It is known as human resource planning or manpower planning. Under it the number and kind of personnel required by the organisation during a specified future period (e.g. one year) are determined. Then the number and type of existing personnel are assessed.

This indicates the extent to which the future manpower needs can be met from within the organisation. It also gives an idea as to how far it is necessary to recruit people from outside. Finally, programmes are formulated to recruit, select and train the required staff over the planning period.

The objectives of estimating staff requirements are to ensure that the organisation has adequate number and quality of employees to fill in the various positions. It is useful in many ways. It continuously provides the personnel required at various levels in the organisation. It enables the organisation to make full use of its resources. The organisation can meet its changing manpower needs without any problem. It is also in a position to fill in vacancies arising from the retirement of its senior managers.

While estimating man-power requirements, the managers should consider several factors which is as follows:
(a) Plans of the organisation concerning products services, expansion of operations etc:
(b) Nature and size of the organisation including the degree of decentralisation, a span of control staff units, departmentation etc.
(c) Type of technology to be adopted i.e. a degree of mechanisation and automation.
(d) Retirement schedule of the existing staff.
(e) Number of employees who may leave the organisation.
(f) the Average number of personnel absent from the job.

Systematic manpower planning necessary due to the following reasons:
(a) Future man-power needs: Future manpower needs cannot be determined without systematic manpower planning. With the help of manpower planning, an organisation can secure the services of the right type of people at the right time.

(b) Scarce talent: Modem organisations require highly specialised technicians and professionals. There is a scarcity of such talent. Manpower planning helps in ensuring an adequate supply of skilled personnel for an organisation. ,

(c) Coping with changes: Changes in technology, products, marketing conditions etc. require
changes in job content, skill requirements, kind of people etc. Manpower planning helps in avoiding a shortage of manpower in some areas and surplus in other areas.

(d) Growth and expansion: Manpower planning is necessary for ensuring replacements from time to time due to retirement and death of existing employees. Moreover, an organisation can properly meet its manpower requirements arising out of expansion and growth schemes. Manpower planning helps in optimum utilisation of manpower and in minimising the cost of labour. Workers who become redundant due to automation can be absorbed in new jobs after some training. This helps to improve industrial.

Question 3.
Describe three off-the-job methods of training.
Answer:
Off-the-job Training: Off-the-job training as the name itself indicates, refers to training conducted away from the actual work setting. There may be a special site in the organization itself or in a non-organizational location elsewhere (for example, vocational school or university). Off-the-job training is particularly useful and appropriate for certain managerial skills such as interpersonal abilities and also for certain production jobs where machinery is employed to control the pace of work-an example may be the assembly-line operation and is also useful for some technical jobs where teaching expertise is found elsewhere.

Some of the common methods of off-the-job training include lectures, conferences, group discussions, role-playing, case studies, programmed instruction, and T. group training.

(a) Lectures and classroom instruction: Classroom training is conducted off the job and is probably the most familiar method. It is an effective means of imparting the information and knowledge quickly to a large chunk of members „ with limited knowledge or no knowledge of the subjects being taught. Lecturing is particularly useful for teaching the factual material, concepts, principles, theories and their application to job situations.

In general, classroom instructions are more frequently used for technical, professional and managerial employees. These ‘ lectures are formally organized talks by the training specialists themselves. Lecturing is an effective method and is interesting especially when able lecturers are employed to impact the knowledge – technical or otherwise. But the disadvantages of lecturing include:

1. the learners may be passive instead of active.
2. there is no feedback from the audience regarding their lecturers.
3. a clear and vigorous presentation on the part of the lecturer requires a great deal of preparation;
4. the untrained and inexperienced lecturer may deliver an unpalatable lecture, he might rumble of pack too much redundant „ information in a single lecture leaving the important technical details.
5. lecturing emphasizes the routine memorization of facts rather than the practical aspects of a job. However, the lecture method in training is useful to introduce the subject matter its overview, its principles, laws, classification, and summaries etc. to the listeners. Because of its simplicity and efficiency in imparting knowledge, the lecture method is still alive in work organizations.

(b) The conference method: Instead of indulging in straight lecturing, some organizations prefer to hold conferences where participants are required to pool their ideas, viewpoints, suggestions and discuss them at conferences. Conferences provide a common plate form for intensive and through group discussion and result in suggesting the improved methods of performing work in the organization.

The conference allows the trainee to look at the problem from a broad angle allow him to analyse it more carefully and arrive at conclusion. Conference method is ideal for analysing problems and issues concerning organizations and their members’ conferences reduce the dogmatism and promote understanding between members. Upon close and intensive discussions, members will be willing to accept change, if any for the betterment of the organization. Conferences method has several limitations such as

1. it is limited to a small group of people ranging from fifteen to twenty-five.
2. progress of learning is slow because all the members have ‘ full freedom to speak and in the curiosity of participation some. members may come out with totally irrelevant issues, and
3. some members may feel that the whole conference is useless unless they are made aware of the objectives of holding the conference.

(c) Group discussion: Also known as team discussion, or seminar in the group discussion the members are requested to present papers and discuss the papers in a common platform. The trainees are allowed to read their respective papers and this is followed by a thorough critical discussion. While preparing the paper, the trainee has free access to files concerning the subject and compile the information.

After consulting the necessary files the trainees may discuss the ramifications and complexities of a particular job or work and suggest solutions for the probable problems the trainees are likely to encounter in near future.

(d) Roleplaying: The role-playing goes by a variety of names, such as psychodrama. role-reversal, social-drama, and soon. Role-playing involves the spontaneous acting out of a situation by two or more people under the specific direction of a trainer. The notable characteristic of role-playing is that dialogue usually ensues and the trainees are enthusiastic, playing out their roles.

In role-playing, trainees act out a given role as they would be performing in a stage play. The role players are informed only about the situation and of the role they are expected to play. Role-playing primarily involves hiring, firing, discussions about the grievance procedures employed, employer-employee relationships. The primary advantages of role-playing include

1. development of leadership skills and decision-making skills of the entire group.
2. trainees learn the importance of participation in bringing about the acceptance of resource allocation decisions.
3. human interaction and sensitivity are emphasized in role-playing and
4. it brings desired changes in employee attitudes and behaviour. However, role-playing can be very time consuming and without competent leadership, it could be a waste of time.

(e) Case studies: Another sophisticated off-the-job- training is through case studies. The case study is based on the firm belief that managerial competence can best be attained through the study contemplation and discussion of concrete cases. The trainees are given the cases and are asked to identify the basic problem and suggest solutions. The case study is primarily useful for supervisory personnel and serves as a useful technique for developing decision-making and problem-analysing skills to the middle managers.

(f) Programmed instruction: Programmed instruction involves breaking, information into meaningful units and rearranging them in a proper sequence to form a learning package. Programmed learning consists of three functions:

1. presenting questions, facts or problems to the learner.
2. allowing the trainee to respond and
3. providing the necessary feedback on the accuracy of his answers. Programmed instruction makes use of books or manuals but normally it is supported by electronic teaching machines, computer systems. In practice, the trainee reads a particular set of materials and then responds to questions usually multiple-choice questions or true-false type questions. If the answer is correct the trainee proceeds to answer the next question. However, if the answer is incorrect the trainee is furnished additional information and is required to respond to questions on that material. This procedure is repeated until the trainee has answered correctly.

Programmed instruction method is appreciated because it incorporates several learning techniques including movement from simple to complex material and provision of feedback. Research reveals that programmed instruction is one of the more effective methods for building knowledge and retention of that knowledge.

(g) T-group training: Also frequently known as sensitivity training T-group training is a process in which several individuals work together for several days for the purpose of buildings self-awareness, understanding of group processes and a greater understanding of interpersonal relationships. The trainees are encouraged to portray their feelings, abilities and needs in building interpersonal relationships.

The basic purpose of sensitivity training to increase the participant’s insight into his own behaviour and the behaviour of others by encouraging an open expression of feelings in the trainer-guided T group laboratory.

Question 4.
Write short notes one
1. Employment Tests
2. Evolution of HRM
Answer:
1. Employment Tests: An employment test is a mechanism (either a paper and pencil test or an exercise) that attempts to measure certain characteristics of individuals. These characteristics range from aptitudes, such as manual dexterity, to intelligence to personality.

Important tests used for selection of employees:
(a) Intelligence Tests: This is one of the important psychological tests used to measure the level of intelligence quotient of an individual. It is an indicator of a person’s learning ability or the ability to make decisions and judgements.

(b) Aptitude Test: It is a measure of individuals potential for learning new skills. If indicates the person’s capacity to develop. Such tests are good indices of a person’s future success score.

(c) Personality Tests: Personality tests provide clues to a person’s emotions, his reactions, maturity and value system etc. These tests provide an overall personality. Hence these are difficult to design and implement.

(d) Trade Test: These tests measure the existing skills of the individual. They measure the level of knowledge and proficiency in the area of professions or technical training. The difference between aptitude test and trade test is that the former measures the potential to acquire skills and the later the actual skills possessed.

2. Evolution of HRM: Human Resource Management has replaced the traditional concept of labour welfare and personnel management. HRM in its – present form has evolved from a number of significant inter-related developments, which date back to the era of industrial revolution emergence of trade union movement lead to the need of a person who could act as an effective line between the owners and workers.

Thus the concept of labour welfare officer came into the being.

His role was limited to the bare minimum welfare activities of employees. In fact, he was looked down by both the workers and the owners.

With the introduction of the factory system, thousands of persons began to be employed under one roof. The job of hiring people for the organisation was given to one man, who later on was assigned the responsibility of recruitment, selection and placement of personnel.

This led to the emergence of a personnel officer in the first place and personnel manager, later on.

Human relations approach recognizes the human factor as the most important instrument of success in the organisation. Fast-changing technological developments, how our, necessitated new skills development and training of employees. People came to be recognized as a valuable resource, which can be further developed. Increase in the scope of the work led to the replacement of personnel manager to the human resource manager. Hence HRM came to mainstream activity due to the failure of the earlier concepts to promote the potential benefit of effective management of the people.

Question 5.
What is the importance of staffing function in today’s environment?
Answer:
Importance of staffing:
Human resources are the foundation of any business. The right people can help you take your business to the top: the wrong people can break your business. Hence staffing function has assured greater ” importance their days because of the rapid advancement of technology, increasing the size of the organization and complicated behaviour of human beings. Human resources are the most important asset of an organisation.

The ability of an organisation to achieve its goals depends upon the quality of its human resources. Therefore, staffing is a very important managerial function. No organisation can be successful unless it can fill and keep filled the various positions provided for in the structure with the right kind of people.

Proper staffing ensures the following benefits to the organisation:

1. helps in discovering and obtaining competent personnel for various jobs;
2. makes for higher performance, by putting the right person on the right job;
3. ensures the continued survival and growth of the enterprise through the succession planning for managers;
4. helps to ensure optimum utilization of human resources.

By avoiding overmanning, it prevents updo utilisation of personnel and high labour costs. At the same time, it avoids disruption of work by indicating in advance the shortage of personnel; and improves job satisfaction and morale of employees through objective assessment and fair rewarding of their contribution. Staffing function must be performed efficiently by all organisation. If the right kind of employees is not available, it will lead to wastages of materials, time, efforts, resulting in lower productivity and poor quality of products.

The enterprise will not be able to sell its products profitably. It is therefore essential that the right kind of people must be available in the right number at the right time. They should be given adequate training so that wastage is minimum: They must also be induced to show higher productivity and quality by offering them. proper incentives.

Staffing and Human Resource Management (HRM): The affiances and effectiveness of an organization in achieving its goals are determined to a great extent on the competence, motivation and general effectiveness of its human resources. Managing the human component or an organisation is the most important task because the performance of the organisation depends upon how well this function ” is performed. Human resource management is that part of management process which develops and managers the human element of the enterprise considering their resourcefulness in terms of total knowledge, skills, creative abilities, talents, aptitudes and potential for effectively contributing to the organisational objectives.

Human Resources Management is concerned with all aspects of managing the human resources of an organisation. More specifically, human resource management involves determining the organisation’s need of human resources, recruiting and selecting the best available employees, developing counselling and rewarding employees, acting as a liaison with unions and government organisations and handling matters related to the well being of employees. Each of these functions is necessary to some degree irrespective of type and size of the organisation.

Here we are providing Business Studies Class 11 Important Extra Questions and Answers Chapter 3 Private, Public and Global Enterprises. Business Studies Class 11 Important Questions with Answers are the best resource for students which helps in class 11 board exams.

Class 11 Business Studies Chapter 3 Important Extra Questions Private, Public and Global Enterprises

Private, Public and Global Enterprises Important Extra Questions Short Answer Type

Question 1.
What are the major objectives of public enterprises?
Answer:
Public enterprises are guided by several socio-economic and political objectives.

Importance/Need/Objectives of Public Enterprises: Public enterprises have got the following motives:
1. Economic Motive/Objectives:
(a) Availability of essential commodities of life in sufficient quantity at cheaper rates: These industries aim at supplying essential commodities at cheaper rates to the people. Mother Daily and Delhi Milk Scheme in Delhi are its examples. Water, electricity, and gas supply are also in this category.

(b) Establishment of basic industries: In order to accelerate the pace of economic growth, basic industries are a must. These industries require heavy expenditure and Carry a lot of risks. This is why private entrepreneurs hesitate in establishing basic industries. These industries are iron and steel, locomotives, aircraft, and ship-building, etc.

(c) Balanced regional development: Private industries are not keen to set up industries in remote and backward regions due to a lack of facilities and infrastructure. It leads to the haphazard and unbalanced development of the country. Public enterprises aim at balanced regional development of the country in addition to their economic motive.

2. Social Motive: Involvement of the government in these enterprises is because of the social welfare of the people. Satisfying the basic needs of the people at cheaper rates shows the social motive of these enterprises. They help to check malpractices on the part of private entrepreneurs.

3. Political Motive: Ministers, Members of Parliament and Legislative Assemblies try to establish a public enterprise in their constituencies for political gain This results in the growth of the area, and the states of the politician, and thus political motive is achieved and regional imbalance takes place.

4. Reduced wasteful expenditures: Wasteful expenditures can be reduced with the nationalization of industries, because under private ownership company may not be managed efficiently, so expenditures of 11 that company may be excessive. Therefore, there is a need b nationalization.

5. Self-Reliance: These enterprises save valuable foreign exchange through import substitution In addition, public sector enterprises export goods on a large scale to attain the goal of economic self-reliance.

6. Infrastructure: Transport, communication, irrigation, power, etc. can be developed only on large scale, with huge resources but a private owner cannot have huge resources. So there should be a nationalization of infrastructure.

Question 2.
Differentiate between Private and Public Sector Enterprises.
Answer:
Difference between Private and Public Sector Enterprises:

Basis	Private Sector Enterprise	Public Sector Enterprise
1. Ownership	It is owned and controlled by private individuals.	It is owned and controlled by the Central or State Govt
2. Profit motive	The profit motive is very important and essential for its survival.	The profit motive is not the main guiding factor. It serves social objectives as well.
3. Purpose	The motivating factor is to earn profits.	Its main objective is to promote public welfare.
4. Social Objectives	Social objectives are not seriously undertaken.	It is guided by social objectives like the development of backward regions, the creation of employment, and the equitable distribution of wealth.
5. Efficiency	Quick decision-making promotes efficiency.	Decision-making is not fast. There is red-tapism. bureaucratic control has reduced its efficiency.
6, Government Control	It is not subject to strict financial control by the Government	It is subject to strict financial control by the Government.
7, Management	It is managed by professional managers.	It is managed mostly by Government officials.
8. Public Accountability	It is accountable to the owners.	It is accountable to the public through Parliament.

Question 3.
Mention, in brief, the significant features/characteristics of Global Corporations.
Answer:
Features of Global Corporation: The important features of most multinational corporations are as under:
1. Giant-Size: The assets and sales of MNCs run into billions of dollars and they make huge profits through their operations. For example, the physical assets of IBM are worth around 8 billion dollars. The sales turnover of some global corporations exceeds the gross national product of several developing countries.

2. International Operations: An MNC operates in many countries through a parent corporation in the home country. It runs its operations through a network of branches, subsidiaries, and affiliates in host countries. Production, marketing, and other operations are scattered in different countries to get the economies of local operations.

3. Centralized Control: An MNC has its headquarters in the home country in order to control the branches and subsidiaries. The local management of branches and subsidiaries operate within the policy framework of the parent corporation. This is possible due to the fact the parent-company holds40% to 100% of the equity of the subsidiary company.

4. Oligopolistic Power: Many multinational corporations enjoy oligopolistic power. They occupy a dominant position in the market. Through the process of merger and takeover of other firms, an MNC may acquire a huge economic power. This makes it oligopolistic in character because of which it has a dominant position in the market. For example, Hindustan Lever Limited acquired Tata Oil Mills to improve its market shares.

5. Collective Transfer of Resources: A multinational corporation facilitates a multilateral transfer of resources. Such transfer takes place in the form of a” package” which includes technical know-how, machinery, and equipment, raw materials, management expertise, etc.

6. Professional Management: These corporations employ professional skills, specialized knowledge, and training. These managers have specialized training and skills in different functional areas like finance, marketing, and human resources.

7. International Market: MNCs have access to international markets as a result of vast resources and superior marketing skills. Because of this, MNCs are in a position to sell whatever products they manufacture in different countries throughout the world.

Question 4.
Explain the term Foreign Collaboration in brief.
Answer:
Foreign Collaboration: Enterprises having equity participation V of foreign units is known as foreign collaboration. It is an enterprise jointly owned, managed, and controlled by Indians and foreigners. These enterprises are enjoying the vast resources of the country and abroad. It combines the financial resources and managerial and technological expertise of two or more countries.

The amount of profit is shared ( between the Indian owner and the foreign partner. The government these days has liberalized its policies regarding foreign participation in Indian i: enterprises. According to New Industrial Policy, 1999 approval will be given for direct foreign investment up to 51% equity in high priority industries and automatic permission will be given to foreign technology agreements in identified high priority industries.

Question 5.
What do you mean by the term “Disinvestment of Shares”?
Answer:
Disinvestment of Shares-The major plank of the privatization program in India has been the disinvestment of government shareholdings in a select number of public enterprises. The rationale behind this program is to raise a non-inflationary form of finance for the budget.

The program commenced in 1991-92 and till 1995-96 the „ government had disinvested a part of its equity in 40 public sector enterprises and had raised an amount of Rs. 10,915 crore through the various rounds of disinvestment undertaken between this period. The shares were offered to financial institutions, mutual funds, private sector enterprises, and the general public as well.

The Union Government constituted Disinvestment Commission in August 1996 to advise it on the disinvestment program of public sector enterprises. The government referred 40 public sector undertakings to the Commission for advice about disinvestment. The government has now been taking steps to implement the report of the Disinvestment Commission.

To ensure transparency in the Disinvestment program, bids are invited for the sale of shares of selected public enterprises and the shares are sold to the highest bidder. During 2000-01, the Government raised Rs. 1,869 crores through disinvestment in public undertakings as compared to Rs. 1,829 crores during 1999-2000 and Rs. 5,371 crores during 1998-99. The target of disinvestment for the year 2002-03 was Rs. 0 crores.

Question 6.
What is Departmental Undertaking? Mention its advantages and disadvantages.
Answer:
Departmental Undertaking – It works as the ministry or a department of the government. The budget of these departmental organizations is presented to the parliament just like other ministries. Indian Railways and Post and Telegraph departments are its examples.

Departmental organizations are entirely owned and controlled by either the Central Government or by a State Government.

Advantages of Departmental Undertaking: Departmental organization enjoy the following merits:
1. Service Motive: These enterprises are formed with a service motive. Public interest and social welfare hold priority for them. These undertakings also help to reduce the burden of tax on the public.

2. National Importance: Activities that have got national importance are performed by these departmental organizations. The risk of misuse of public money minimized due to strict budget, accounting, and audit.

3. Secrecy: These organizations are capable of maintaining secrecy. because these are under the control of the government. The government can avoid disclosure of facts on the plea of public interest.

4. Proper Management: These enterprises are managed by qualified government staff. Their work is systematic. They are properly v managed and supervised. Such control and management keep the government official alert.

Disadvantages of Departmental Undertaking – Departmental organization suffer from the following disadvantages:
1. Least profit earning venture: Departmental organization is owned and controlled by the government. It is formed with a service motive, so it does not remain an excellent profit earning venture.

2. Red tape: Employees follow the beaten track. They do not take much interest in the work. They are careless and bother much for their salaries. Officers worry much for their status and respect. Decisions are generally delayed due to bureaucratic procedures and political considerations.

3. Lack of competent workers: Government employees are not much efficient in business affairs. They have sufficient administrative experience but not experienced enough to manage the activities of, the enterprise. Promotion to the higher rank is based upon seniority, so competent employees are not recruited.

4. Political evils: Every important decision in the departmental organization has a political motive. It is managed and controlled by the minister, who is the representative of a political party. The minister has to look after the interest of his party.

5. Lack of competition: Generally departmental organizations have the status of monopoly. Lack of competition makes them incompetent. In the absence of competition and profit motive, there is little incentive for hard work and efficiency. There is hardly any link between reward and performance.,

Question 7.
What are statutory/public corporations? Present their advantages and disadvantages.
Answer:
Statutory/Public Corporations: Public corporations are; formedbythespecialactofParliamentorLegislativeAssemblies. Their existence is separate from the government. This is why these corporations are called autonomous bodies. Though these corporations are independent in financial matters, even then they remain under the control of the government. It is an autonomous body fully financed by the government.

AccordingtoMorrison, “Public corporation is a combination of public ownership, public accountability, and business management for the public end.” Examples of such corporations are Air India, Life Insurance Corporation of India, etc.

Merits/Advantages of Statutory Corporations – Public corporations enjoy the following merits:
1. Free from government control: These are autonomous bodies, which are not under the direct control of the government.

2. Service motive: These corporations are also formed in the public interest for social welfare like other public enterprises. Service motive dominates their activities.

3. Independent decision: Public corporations are independent in making their own decisions, policies, and plans.

4. Efficient management: These corporations are benefited from efficient management because they are managed by a competent board of directors, who are professional in their attitude and work. As changes in government do not affect its stability, it can take long term policy decisions.

5. Economic self-independence: Public corporations are financially independent. They have to arrange their own finances. It is free from political interference by ministers and bureaucrats.

Demerits/Disadvantages of Statutory Corporations – Public corporations have got the following disadvantages:

1. Red Tape: Like other public enterprises and government departments public corporations are also victims of red-tapism.
2. Rigid structure: The constitution of such a corporation is rigid. The objects and powers of such corporations cannot be changed without amending the statute, which is a time-consuming and cumbersome process.
3. Theoretical autonomy: The autonomy of these corporations exist only on paper. In actual practice, interference by political bosses and ministers gives the wrong signal to their autonomy. Red-tapism and bureaucratic control reduce the flexibility of operations.

Question 8.
What is a Government Company? Define its merits and demerits.
Answer:
Government Company – A Government company is a company in Which not less than 51 percent of paid-up capital is held by the Central Government or State Government jointly by both Governments. It is formed and registered under the Companies Act 1956.

Merits of a Government Company: A government company enjoys the following benefits:
1. Internal autonomy: A government company is a separate entity and so can manage its affairs on its own. There is the absence of direction. parliamentary and ministerial control. Thus, it is an autonomous body. It can be operated on commercial principles. It can manage its affairs independently.

2. Flexibility in operations: It can be operated on commercial principles because of independence in respect of internal management, finance, and appointment of person.

3. Collaboration: It is the only form of organization by which the Government can make use of managerial skill, technical know-how, and expertise of the private sector.

4. Easy formation: It is relatively easy to form a government company as no statute is required to be enacted. It can be created by the executive decision of the Government.

5. Expert management: Since the annual report on the working of the enterprise is placed before the Parliament or the State Legislature, the management of a government company tends to be cautious, and efficient to avoid its criticism.

6. Sound management policies: It cannot afford to follow unsound policies because its working can be compared with similar companies in the private sector.

Demerits of a Government Company-The government companies usually suffer from the following weaknesses:
1. Board composed with yes men: The Board of Directors of a government company usually consists of politicians and civil servants which may not be able to follow sound business principles.

2. Theoretical autonomy: The independent character of a government company exists in paper only. Government officials, ministers, and politicians often interfere with its work.

3. Lacking responsibilities: A government company evades the constitutional responsibilities which other state enterprises owe to the Parliament. The Parliament is not, taken into confidence for its creation as government decision is sufficient in this regard. The accounts of a government company need not be audited by the Comptroller and Auditor General of India. Thus, it concentrates more power in the hands of the Government than a statutory corporation.

4. The practice of forming government companies has been regarded as a fraud on the Companies Act because the Government is empowered to specify the provisions of the Company Act to be followed or applied and modifications if any.

Question 9.
Present a comparative view of different forms of public enterprises.
Answer:
A comparative view of different forms of Public Enterprises:

Basis of comparison	Departmental Organisation	Statutory Corporation	Government Company
1. Formation	It is formed by a Ministry Concerned.	Formed by Special Act of Parliament or State Legislature	It is established Under the Companies Act by a Ministry with or without private sector participation.
2. Ownership	The departmental organization is wholly under Government Department.	It is wholly owned by the Government Central or State.	At least 51 percent of paid-up share capital owned by the Government.
3. Legal Status	No separate entity is distinct from the Government Department.	It enjoys a separate legal entity.	Separate legal entity as per Companies Act 1956.
4. Control /Management	Control vested with Government officials from the Ministry concerned.	Control is exercised by the Nominated Board of Directors.	Board of Directors as required under Companies Act 1956.
5. Staffing System	Staff mainly consists of Civil Servants- Govt. Service	It is managed by professionals under a contract of service (not Govt. Service)	Managed by professionals under a contract of service (not Govt. Service)
6. Financing	Budgetary allocation, can’t borrow from the general public.	Separate arrangements can borrow also.	Separate arrangements can borrow also.
7. Autonomy	It enjoys no autonomy. Sufficient autonomy.	Govt does not interfere in day-to-day affairs.	Sufficient autonomy Government does not interfere so much in operations.
8. Public Accountability (Parliamentary control)	Highest	Higher	High accountability for investors and creditors.
9. Suitability	The public utility, defense, etc.	Industrial and Commercial Undertakings,	Industrial and Commercial undertakings, providing for the participation of domestic and foreign private capital.

Question 10.
The role of the public sector is not satisfactory. What are the suggestions for improvement in public sector operations?
Answer:
Suggestions for the improvement of Public enterprises- In order to make public sector enterprises more efficient and prone to public welfare the government set up various committees from time to time. Some important committees set up by the government are as under:

Name of Committee	Year of Inception of Committee/Commission
(1) Chagla Commission	1958
(2) Krishna Mohan Gupta Committee	1959
(3) Administrative Reforms Committee	—
(4) F. Mohammad Committee	1980
(5) Arjunsen Gupta Committee	1998

The annual evaluation is made by the Standing Conference of Public Enterprises (SCOPE) of al 1 committees made by the government. Some of the main and important suggestions offered by the various committees are as follows:

1. Labour policy: Public enterprises should design their labor policy in such a fashion that there should be a cordial relationship between the workers and the management. Actions should be initiated in such a fashion to minimize industrial disputes.

Appointments should be based not on pulls and pressures but on ability and expertise. Efficient workers must be suitably rewarded. The compensation of employees should be linked with their productivity. Workers must have a sense of belonging to their organization. There should be only one trade union in an industry whose role is to maintain industrial peace.

2. Price policy: The government has realized that the price policy of public enterprises should be based on the existing price structure because there is no clear-cut perception about the price policy of public sector enterprises. Prices of commodities must commensurate to the public. The seventh plan emphasized that public enterprises must generate at least a 10% profit margin. So, the price should be determined with a view to raising the level of profitability in the government monopolies and promote public welfare.

3. Commercial outlook: In any case; public sector enterprises must generate the surplus which may be plowed both in the form of investment for economic development. This is possible only when the cost is reduced and productivity is raised. It will benefit the consumer and the entire society. So, the public enterprises must adopt a commercial outlook by which there would Beacon-ordination between national and profitability.

4.Autonomy to public enterprises: Public sector enterprises should have complete autonomy and minimum possible government interference in operation and routine matters. Politicians should not be appointed to control public sector enterprises. However, incompetent and able politicians are available, they should better be appointed as honorary consultants. In no case, should they be directly involved in the control and management of the enterprises?

Only professionals should be appointed as managers. They have been given greater autonomy so as to make them more efficient and competitive.

5. Inspection of public enterprises: Public Sector Enterprises Bureau has been established for the annual inspection of public enterprises for preparing their annual progress reports offering guidelines to public enterprises. Public enterprises are also inspected by Public Accounts Committee and Estimates Committee. Every public enterprise should publish a comprehensive report of its functioning, so that people may come to know of their performance. The government lays down performance targets for the management of public sector enterprises.

Dr. Lanka Sundram suggested that “Parliamentary committees be appointed for inspection of public enterprises.” Accepting this suggestion the government set up the Parliamentary Committee of Public Undertaking in 1963 which controls the public sector enterprises.

6. Proper auditing: According to the Administrative Reforms Committee, there should be three or four audit boards established under the direct control of the Comptroller and Auditor General so that accounts of public enterprises should be properly audited. Any lapse in this regard must be brought to the notice of the government by an independent auditor.

7. Full utilization of productive capacity: The public sector enterprises should fully utilize their productive capacity; the Productive capacity of the existing enterprises should be raised only if at least 85% of the existing capacity is being utilized. Thus new industries and enterprises should be established only after complete utilization of the existing productive capacity.

Question 11.
DefineMultinational Corporations and their role in the economic development of a nation.
Answer:
Definition of Multinational Corporation (MNC): A Multinational Corporation refers to an organization that has its headquarters in one country and business operations in other countries. This means that this type of organization will have business across many countries. An MNC has its registered office in one country (called home country) and it carries its business operations in a number of foreign countries (called host countries).

A multinational corporation controls production and marketing facilities in more than one country. For instance, Coca-Cola is a company registered in the U.S.A., has production and marketing operations in many countries of the world.

Role of MNCs – Multinational companies have been playing an important role in several developing economies including India.

Multinationals can offer the following gains to the host country:
1.Investment of Foreign Capital: MNCs can help the developing economies to secure capital from the developed countries as they suffer from a shortage of capital required for rapid industrialization. They facilitate the transfer of capital from countries where it is abundant to countries where it is scarce. Thus, MNCs can help increase the investment level and thereby the pace of development of the host country. Since liberalization, India has attracted foreign investment worth several billion dollars.

2. Advanced Technology: The developing countries have old and obsolete technology. MNCs can be used as vehicles for the transfer of superior technology to developing countries. Advanced technological know-how, improved skills, and consultancy help the developing countries to improve the quality of products and reduce costs.

3. Creation of Job Opportunities: The MNCs set up facilities for the production and distribution of goods and thereby create employment opportunities it is In the host country. M u Itinational offer excess lent pay scales and career advancement opportunities to managers, technical and other staff.

4. Utilization ofldleResources: TheMNCs help in the utilization of idle resources of the host country and thus generate income for the country.

5. Creation of Healthy Competition-MNCs increase competition and break domestic monopolies. The inefficient firms are forced to either improve or withdraw from the market. Many Indian companies now compete with multinationals after liberalization through improved technology.

6. Professional Management: The MNCs kindle a managerial revolution in the host countries by professional management and the employment of the latest management techniques. The host countries are thus able to develop a culture of professional management. Multinationals build up a knowledge base through management techniques like MBO and corporate planning.

7. Growth of Domestic Firms: The MNCs can help the growth of domestic firms to supply them materials, components, etc. Over the years, several ancillary units have grown to provide support to the MNCs.

8. Higher Standard of Living: Because of their superior technology, MNCs provide a large variety of quality products to the people in the host country. This helps to increase their standard of living.

9. Integration with the World Economy: The MNCs facilitate the integration of the economy of the host country with the world market. They encourage international brotherhood and cultural exchanges in the host country.

Question 12.
Write down the full form of the following: BIFR, MOU, MNC, MOFA, VRS, NRF, PSES, IMF, IBRD.
Answer:

BIFR	Board of Industrial and Financial Reconstructions
MOU	Memorandum of Understanding
MNC	Multi-National Corporation
MOFA	Majority Owned Foreign Affiliates
VRS	Voluntary Retirement Scheme
NRF	National Renewal Fund
PSES	Public Sector Enterprises
IMF	International Monetary Fund
IBRD	International Bank for Reconstruction and Development

Question 13.
What are the objectives of privatizing public sector enterprises?
Answer:
The primary objectives of privatizing public sector enterprises are following:

1. Releasing the large amount, to utilize on other social priority areas.
2. Reducing the huge amount of public debt and interest burden.
3. Transferring the commercial risk to the private sector.
4. Freeing these enterprises from government control.

Question 14.
State some danger of MNC towards the domestic economy?
Answer:
Dangers from MNC:
1. Creation of Monopoly: MNC joins hands with big business houses and gives rise to monopoly and concentration of economic power in host countries.

2. Threat to National Sovereignty: These corporations tend to interfere in the political affairs of host nations. Some MNCs like IT1 are accused of overthrowing governments in countries such as Chile.

3. Alien Culture: MNCs tend to vitiate the cultural heritage of local people and propagate their own culture to sell their products. For example, MNCs have encouraged the consumption of synthetic food, soft drinks, etc. in India.

4. Depletion of Natural Resources: MNCs cause rapid depletion of some of the non-renewable natural resources in host countries.

Here we are providing Business Studies Class 11 Important Extra Questions and Answers Chapter 9 Small Business and Entrepreneurship. Business Studies Class 11 Important Questions with Answers are the best resource for students which helps in class 11 board exams.

Class 11 Business Studies Chapter 9 Important Extra Questions Small Business and Entrepreneurship

Small Business and Entrepreneurship Important Extra Questions Short Answer Type

Question 1.
Write the full form of the following:
SIDO, KVIC, DIC, LPG, NABARD, RSBDC, NSIC, StDBI, NCEUS, RWED, WASME, SFURTI, DWCRA, TRYSEM, WTO.
Answer:

(i) SIDO	Small Industries Development Organisation
(ii) KVIC	Khadi and Village Industries Commission
(iii) DIC	District Industries Centers Liberalisation, Privatisation and Globalisation
(iv) LPG	Liberal isation. Privatisation and Globalisation
(v) NABARD	National Bank for Agriculture and Rural Development
(vi) RSBOC	Rural Small Business Development Centre
(vii) NSIC	National Small Industries Corporation
(viii) STDBI	Small Industries Development Bank of hid la
(ix) NCEUS	The National Commission for Enterprises in the IJnorganised Sector.
(x) RWED	Rural and Women Entrepreneurship Development
(xi) WASME	World Association for Small and Medium Enterprises
(xii) SFURTI	Scheme of Fund for Regeneration of Traditional Industries
(xiii) DWCRA	Development of Women and Children in Rural Areas
(xiv) TRYSEM	Training of Rural Youth for Self-Employment
(xv) WHO	World Health Organization

Question 2.
Compare different small scale business on the basis of the investment.
Answer:

Types of Industries	Investment Unit	Remarks
Small Scale Industry	One crore	Up to 5 crores in export
Ancillary Industry	One crore	50% of output should be supplied to a parent unit
Tiny Enterprise	25 lakh	—
Service and Business enterprise	10 lakh	—
Women Enterprise	Any of the above	51% equity holding by women and managed by women.
Export Oriented Unit	One crore	100% EOU can sell 25% in the domestic market.

Question 3.
Name the major industry groups that come in the small scale sectors.
Answer:
The following major industry group comes in the small scale sectors:

1. Food Products
2. Paper Products and Printing
3. Chemical and Chemical Products
4. Basic Metal Industries
5. Electrical Machinery and Parts
6. Rubber and Plastic Products
7. Machinery and Parts expect Electrical Goods
8. Hosiery and Garments – wool product
9. Non-metal lie Mineral Products
10. Transport Equipment and Parts
11. Leather and leather products
12. Miscellaneous Manufacturing Industries
13. Beverages, Tabacco and Tobacco products
14. Repair Services
15. Cotton Textiles
16. Wool. Silk, Synthetic Fibre, and Textile
17. Jute, Hemp, and Mesta Textiles
18. Other Services.

Question 4.
What are the different forms of support offers to small industries by the Government?
Answer:
The Government provides support to anal industries in the following forms:

1. Institutional support in respect of credit facilities.
2. Provision of developed sites for the construction of sheds.
3. Provision of trading facilities.
4. Supply of machinery on hire purchase terms.
5. Assistance for domestic and export marketing.
6. Technical and financial assistance for technological Upgradation.
7. Special incentives for setting up enterprises in backward areas.

Question 5.
What are the main characteristics of a small business?
Answer:
Any small business is characterized by at least two of the following key features:

1. Management is independent. Usually, the managers are also owners.
2. Capital is supplied and ownership is held by an individual or a small group.
3. The area of operations is mainly local. Workers and owners are of one home community. Markets need not be local.
4. Relative size within the industry the business is small when compared to the biggest units in its field. The size of the top bracket varies greatly so that what might seem large in one field would be definitely small in another.

Question 6.
Distinguish between cottage and small scale industries.
Answer:
The basis of classification between the cottage and small-scale business is that the cottage industry embraces a predominantly manual process of work.

The difference between the small-scale and cottage industries are basically two:

1. Small-scale industries are mainly located in urban centers as separates establishments, the cottage industries are generally associated with agriculture and provide subsidiary employment in rural areas.
2. Small-scale industries produce goods with partially or wholly mechanized equipment employing outside labor, while cottage industries involve operations mostly by hand which is carried on primarily with the help of members of the family.

Question 7.
What are the main objectives/features of small scale business?
Answer:
Objectives of small-scale business:

1. To provide an opportunity for large-scale employment at a minimum cost.
2. To provide a steady source of income to the low-income groups living in rural and urban areas of the country.
3. To meet the growing demands of the consumer’s goods and simple producers goods.
4. To mobilize resources of capital and skill and their optimum utilization.
5. To eliminate the economic backwardness of rural and underdeveloped regions in the country.
6. To attain self-reliance.
7. To reduce regional imbalances.
8. To effect an integration of the activities of a small business with the rural economy on the one hand and with the large scale business on the other.
9. To reduce disparities in income, wealth, and consumption.
10. To provide substitutes for various industrial products now being imported into the country.
11. To improve the quality of industrial products manufactured in the cottage industry sector and to enhance both production and exports.
12. To remove the problems created by urbanization and the consequent growth of big towns and cities.

Question 8.
Discuss the role and importance of small-scale enterprises in the economic development of India?
Answer:
The small-scale sector promotes entrepreneurship and helps to earn foreign exchange and is very important to the Indian economy.

The following points will highlight the importance of small scale enterprises.

1. Innovation and productivity: It is the small-scale enterprises that lead to innovation and productivity although they do not maintain their own research and development wings.
2. Individual tastes, fashion, and personalized service: Small- scale firms are receptive to change in taste and fashions of consumers and in adjusting the production process accordingly.
3. Symbols of national identity: They are locally owned and controlled. They can strengthen the social system and cultural traditions of India. They are perceived as valuable symbols of national identity.
4. The tendency of dispersal over wide-area: Small-scale enterprises have a tendency to disperse over wide areas. More than 62.19% of the units are located in the backward areas.

Question 9.
What type of problems faced by small scale sector in the field of marketing?
Answer:
Problems faced by the small scale sector in marketing their products are briefly enumerated below:

• Lack of standardization.
• Financial weakness.
• Unfamiliarity with expert activities-procedures and market know-how.
• Poor designing.
• Poor quality.
• Ignorance of potential markets.
• Competition.
• Lack of quality control.
• Lack of precision.
• Lack of knowledge of marketing.
• Distribution contacts.
• Poor finish.
• Poor bargaining power.
• Brand preferences.
• The scale of production.
• Lack of service after-sales.

Here we are providing Business Studies Class 11 Important Extra Questions and Answers Chapter 2 Forms of Business Organisation. Business Studies Class 11 Important Questions with Answers are the best resource for students which helps in class 11 board exams.

Class 11 Business Studies Chapter 2 Important Extra Questions Forms of Business Organisation

Forms of Business Organisation Important Extra Questions Short Answer Type

Question 1.
Differentiate sole proprietorship and partnership form of business.
Answer:
Difference between Partnership and Sole Trader:

Points of Difference	Partnership	Sole Trader
l. Specific Act	It is governed by Partnership Act 1932.	There is no specific Act.
2. Number of Member	The minimum number of partners is two and the maximum number in the case of banking business is ten and in other business is twenty.	It is owned and carried on by only one person. He may employ other persons or take help from the members of his family.
3. Agreement	It arises only by agreement among partners.	No agreement is required in a sole proprietorship.
4. Distribution of profit	Profit is shared among partners.	The entire profit is enjoyed by the proprietor alone.
5. Capital	It has got more capital because there are more members.	It has limited capital because the capital is contributed by one person only.
6. Secrecy	In a partnership business, secrets are open to each partner.	Business secrecy is maintained.
7. Personal touch	It does not have a personal touch as much as the sole trader has with his customers.	It is located amidst consumers, so it has personal contact and touch with them.

Question 2.
What is partnership deed and mention in brief the provisions contained in partnership deep?
Answer:
Partnership Deed: A partnership agreement contains the terms and conditions relating to partnership and the rules and regulations governing its management. It may be oral or in writing. A written agreement of partnership is called ‘Deed of Partnership’. A partnership deed contains all the details on which partnership has been formed. These terms and conditions are also known as articles of partnership.

A partnership deed usually contains the following details:

1. The names and addresses of the partnership firm and its partners.
2. The nature of the business proposed to be carried on by the firm.
3. The duration of the partnership.
4. The amount of capital contributed by each partner.
5. The rate of interest payable to partners on their capital or to be paid by partners on the amount drawn by them.
6. The mode of maintaining accounts and operation of the bank account.
7. Rights and duties of the partners for the management of the business of the firm.
8. The ratio in which profits will be shared by the partners.
9. The amount of salary and/or commission payable to the partners
10. Arbitration clause for settlement of disputes between the partners,
11. Mode of dissolution and settlement of accounts.

Question 3.
What are the advantages and disadvantages of employment of Paid Assistant insole proprietorship business?
Answer:
Employment of Paid Assistant When the sole proprietor employs a paid assistant, he has the following advantages and disadvantages –

Advantages:
(a) Division of work: A specialist assistant can be appointed whose expertise can be used for the benefit of the business. By delegating some of the work, the proprietor can concentrate on more important matters.

(b) No share in profits: The assistant is not entitled to any share in the profits of the firm. He gets a fixed salary which is an expense of the business. The assistant is not given a share in the profits.

(c) Complete control: The paid assistant has no right to interfere in the decision making. Therefore, the proprietor has full control over the affairs of the business.

(d) Independent decision: The proprietor can take decisions independently without consulting the assistant. There is no interference from the assistant.

(e) Easy to dismiss: The proprietor can terminate the services of the assistant as and widen he likes.

Disadvantages:
(a) Lack of motivation: The assistant does not have sufficient incentive to work hard unless he is given a share in the profits. Therefore, he may not be as sincere and careful as the proprietor himself,

(b) Lack of sharing right: The employee is not responsible for the losses incurred in the business. The risk of failure has to be borne by the proprietor himself. The monthly salary of a paid assistant is assured as long as he remains in business.

(c) Problem of capital: Appointing a paid assistant does not solve the problem of finance. The employee does not bring any capital with him.

(d) Disclosure of secrets: The business is, in a way, at the mercy of the paid assistant. He may leak out trade secrets to competitors or join them. He may quit his job and set up his own business in competition.

Question 4.
What are the advantages and disadvantages of admitting a partner in a sole proprietorship form of business?
Answer:
Admission of a Partner:
By taking one or more partners, the proprietor obtains the following benefits and drawbacks –

Advantages:
(a) Availability of additional capital: The new partner brings some capital into the business. This strengthens the financial position of the business.

(b) Division of work: Work can be divided between the original proprietor and the partner on the basis of knowledge and skills. There is the pooling of judgment and experience. This will improve the efficiency of the business.

(c) Motivation: A partner gets a share in profits and, therefore, has an incentive to work hard for the success of the business. Admission of partners also increases the goodwill and borrowing capacity of the firm.

(d) Reduced risk: Each partner shares the loss and liability of a business. As a result, the risk of the sole proprietor is reduced.

(e) Economy of costs: No wage or salary is to be paid to the partner. Therefore, the cost of management is comparatively low.

Disadvantages:
(a) Profit-sharing: The proprietor has to share the profits with the partner.

(b) Dilution of freedom: Every partner has a right to be consulted. The proprietor cannot take decisions independently without consulting his partner. Freedom of action and complete control of one individual in the decision: making are lost. As a result, there may be delays in taking decisions.

(c) Lack of stability: By taking a partner the continuity of business is endangered. Lunacy, insolvency or death of one partner may terminate the partnership.

(d) Difficulty in removing partner: A partner cannot be pushed out from the business without the consent of all the other partners. The capital is blocked as a partner cannot withdraw his capital or transfer his interest to outsiders without the approval of the other partners.

(e) Source of disputes: When the partners are unable to take decisions unanimously, conflicts may develop between the partners.

(f) Risk of dishonesty: If a partner is not fair and honest in dealings, the risk of the business may increase manifold.

Question 5.
Explain the difference between a private limited company and a public limited company form of business.
Answer:
Difference Between Private Company And Public Company:

Basis	Private Limited Company	Public Limited Company
1. Number of Members	Minimum – 2, Maximum – 50	Minimum – 7, Maximum As large as paid-up shares divided by the share lot.
2. Articles of association	It must prepare its own articles of association.	It may adopt Table A given, in the Companies Act
3. Minimum no. of Directors	Minimum -2	Minimum – 3
4. Use of the word ‘Limited’	Use the word ‘Private Limited’ after its name.	Use only the word ‘Limited after its name.
5. Commencement of Business	Can commence business immediately after Incorporation.	Can commence business only after complying with certain statutory’ formalities and obtaining the ‘Certificate to Commence Business.
6. Issue of Shares and Debentures	Prohibited from inviting the public to subscribe to its shares and debentures.	Can issue its shares and debentures to the general public.
7. Issue of Prospectus	Not required to issue a prospectus. Can proceed to allot after incorporation.	It must issue a prospectus or statement in lieu of a prospectus. Can proceed to allot shares only after compliance with certain statutory formalities.
8. Transferability of Shares	Restricted by the Articles of associations.	Shares are freely transferable.
9. Share Certificates	Cannot issue share warrants or share certificates.	Can do so.
10. Statutory Meeting	Not required to bold such a meeting.	Required to hold such a meeting and submit a statutory report to the Registrar of Companies.
11. Qualification Shares	Not prescribed for the directors.	Prescribed as a stipulation to become a director.
12. Filling of Documents	Need not send the list of directors and their consent to act as directors to the Registrar.	Must send the list of directors and their consent to act as directors to the Registrar.

Question 6.
What is the difference between a Joint Stock Company and a Cooperative Society? Explain.
Answer:
Difference between Joint Stock Company and Cooperative:

Points of Difference	Joint Stock Company	Cooperative
1. Formation	Companies are formed under the Companies Act. 1956.	It is formed under the Cooperative Societies Act, 1912 in general.
2. Number of Members	There must be at least 2 members in Private and 7 in Public company. The maximum number in the case of a Private company is fifty and unlimited in the case of a Public company.	There should be at least ten members to form a cooperative. The maximum number is unlimited, as many as the number of shares.
3. Objective	The profit motive is the main objective.	Service motive is the main objective.
4. Liability	The maximum liability of its shareholders is limited to the face value of shares held by them	The liability of its members may’ be both limited and unlimited.
5. Transfer of shares	The shares of the public company are transferable.	Shares are not transferable but can be returned to society.
6. Voting rights	One share one vote is the principle regarding voting rights of the company.	One member one vote
7. Distribution of profits	A dividend is distributed on the basis of shares held by the shareholders.	The dividend is distributed on an equitable basis i.e. equal to all members irrespective of the number of shares held by them.
8. Return of capital	No member can demand back his capital except at the time of winding up.	A member can demand his capital during the Lifetime of the society.
9. Privileges	No special exemption except in the case of a Private Company.	Special exemptions by the government.

Question 7.
Explain in brief the merits or advantages of a joint-stock company.
Answer:
Merits/Advantages of Joint Stock Company:
A joint-stock company form of business organization is based on the following advantages –
1. Permanent existence: The life of the company is permanent, ft is not affected by the death, incapability, lunacy, and insolvency of the shareholders. It has a separate legal entity. The ownership and the management of the company change smoothly without the dissolution of the company.

2. Limited liability: The liability of a shareholder is limited to the face value of shares held by him. The personal assets of the shareholders cannot be attached, even if the company is unable to meet the claims of outsiders.

3. Availability of large capital: The capital of the company is contributed by its shareholders, whose number is unlimited as much as the company requires. Different types of securities can be issued to mobilize funds from different kinds of investors.

4. Transferability of shares: The shares of the company are listed on the stock exchange so that member can easily sell their shares. These special features also ensure that the company will not be required ‘to refund the capital. The shares of the company are purchased and sold in the stock exchange in the open market.

5. Economies of large scale: The company form of a business organization provides tremendous scope for growth and expansion. urge capital facilitates. This is why the company enjoys internal and external economies of large scale enterprise.

6. Tax relief: Tax law s offer certain developmental rebates and concessions on certain commodities of export promotion and for the establishment of industries in backward regions. The company is charged income tax at the Hat rate. As such the tax liability on higher-income is comparatively lower.

7. Diffused risk: The risk of business is shared among innumerable shareholders, so every shareholder has to bear the nominal risk. This is not the case in proprietorship and partnership, where the loss has to be borne by the individual proprietor and a limited number of partners of a firm individually or collectively.

Question 8.
Mention in brief the main features of sole: proprietorship.
Answer:
Features of Sole Proprietorship: The salient features or characteristics of sole proprietorship form of organization are discussed below:

1. Single Ownership: A sole proprietorship is wholly owned by an individual. It is run entirely at his risk of loss. The sole trader provides both capital and management to the business from his own resources or borrowed funds.

2. Common Identity: A sole trader ship concern has no separate 1 legal entity independent of the owner. The owner and business exist together. Thus, there is no difference between the sole trader and his business.

3. Capital: Insole tradership, the capital is employed by the owner himself from his personal resources. He may also borrow money from his friends and relatives for investment in the business.

4. Unlimited Liability: The proprietor is personally liable for all the debts of the business. The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay the debts.

5. Management and Control: Sole leadership is a one-man show. The sole trader provides management to the business. He takes all the decisions, procures materials and other resources, employs workers, and directs and controls the affairs of the enterprise. He is not required to consult anyone else in taking any decision. The sole trader may delegate some of his authority to his employees, but the ultimate authority to manage and control rests with him.

6. No Profit Sharing: The sole proprietor alone is entitled to all the profits and losses of a business. He bears the complete risk and there is nobody to share the profits or losses.

(vii) No Legal Formalities: No legal formalities are required to start, manage and dissolve this type of business. Only a license is necessary for certain business-like chemist shops etc.

Question 9.
Explain the meaning and important features of the Joint Hindu Family business.
Answer:
Meaning of Joint Hindu Family (JHF) The Joint Hindu Family firm is a form of business organization in which the family possesses some inherited property and the ‘Karta’, the head of the family, manages its affairs. It comes into existence by the operation of Hindu Law and not out of a contract between the members or coparcener. If the persons who have coparcenary interest in the ancestral property canyon business, k is a case of Joint Hindu Family firm. Thus, the Joint Hindu Family Business is a business by a coparcener of a Hindu undivided estate.

The Joint Hindu Family Business may be defined as a form of business organization in which all the male members of a Hindu undivided family carries on business under the management and control by the head of the family called ‘Karta’. The property is managed and held by the senior male member of the father as the Head of the Family, technically known as Karta’.

In Hindu law, a family business is taken as a part and parcel of the inheritable property, and therefore’, the family business becomes the subject matter of coparcenary interest. The rights and liabilities, of coparcener, are determined by the general rules of the Hindu Law. It should be noted that a joint family firm is created by the operation of law and does not arise out of a contract between the coparceners.

Features of Joint Hindu Family Firm:
The Joint Hindu Family Firm possesses the following features –
1. Status: The membership of the family business is the result of / status arising from birth in the family. There is no question of the members being discriminated against in terms of minority and majority on the basis of age.

2. Male Members: Only male persons of the family can claim coparcenary’s interest in the Joint Hindu Family business firm. The male child becomes copartners immediately on his birth.:

3. Karta: The right to manage the business vests in Karta alone. He has the legal right to obtain loans through a mortgage, etc. for the purpose of the business. Other members have neither any right to manage the affairs of the business nor any right to take loans on the mortgage of business property.

4. Liability: The liability of Karta is unlimited and that of other members of the family is limited to the extent of their share in the property.

5. No need for Registration: The activities of a Joint Hindu Family business are governed by Hindu Law. But the law does not require any registration of the business.

Forms of Business Organisation Important Extra Questions Long Answer Type

Question 1.
Explain the important characteristics and differentiate between the various types of business enterprises.
Answer:
Characteristics of Business Enterprises:
The main characteristics of various types of business enterprises are given below –
1. Public Sector Enterprises: Public enterprises or public sector enterprises are those enterprises that are owned and operated by the government. The capital of such enterprise is contributed by the central government, state government, or the local government.

Their characteristics are as follows:
(a) State ownership: Public enterprises are owned by the government. Even where private entrepreneurs are permitted to invest capital, more than 50 percent of capital is in government hands.

(b) Government control: The management and control of public enterprise exclusively risk with the government. Parliamentary control is exercised over public enterprises.

(c) Service motive: The public welfare or service is the main objective of public enterprise though it may also earn profits. There is usually benevolent management in public enterprises.

(d) Public accountability: The capital of public enterprise is supplied from the public exchequer or government department in charge of public money. Therefore, public enterprises are accountable to the general public.

2. Private Sector Enterprises: The characteristics of private sector enterprises are as follows:
(a) Private ownership: It is owned and managed by a private enterprise or group of individuals. The entire share capital is provided by these businessmen.

(b) No state participation: There is no participation by the Central or state governments in the establishment and ownership of a private-sector enterprise.

(c) Independent management: The management and control of a private-sector enterprise are vested in the hands of one or more private businessmen.

Management is accountable to the owners (their elected representatives). There is no interference by the government in internal management.

(d) Profit motive: The main object of a private-sector enterprise is to earn profits rather than to render service to society.

3. Joint Sector Enterprises: The characteristics of joint sector enterprises are as follows:
(a) Mixed ownership: The government, private entrepreneurs, and the investing public jointly own a joint sector enterprise.

(b) Combined management: The management and control of a joint sector enterprise lie with the nominees or representatives of the government, private businessmen, and the public.

(c) Share capital: The shares of the government, private businessmen and the public in the capital are 26 percent, 25 percent, and 49 percent, respectively. The aim is to pool the financial resources and technical knowledge how of the state and the private individuals.

Comparison Between Private, Public, And Joint Sector Enterprises:

Point of Distinction	Public enterprise	Private enterprise	Joint sector
1. Ownership	Government-owned	Private persons	Government and private both
2. Management	By government officials	By private owners or professional managers	Both government and private individuals
3. Capital	51 percent or more by the government	By private investors	Government and private both
4. Purpose	Service to the society	Barning profits	Profit and social objectives
5. Government control	Control by Parliament	No strict control by Parliament	Mayor may not be
6. Audit	By Comptroller and Auditor General. Compulsory in all cases	By practicing chartered accountants. Not compulsory in all cases	By qualified auditors
7. Accountability	To the public	To the owner authority	To both government and private

Question 2.
What is the scope of setting small business and also give reasons for considerable scope of setting small scale businesses in our country?
Answer:
Scope of setting up small business enterprises:
There is considerable scope for setting up small scale units due to the following reasons –

1. Limited Demand:
The demand for certain products is local and seasonal. In such cases, it is not economical to attempt a scale of operation which exceeds local demands. Brick kilns, hair: cutting saloons, restaurants, etc. are examples of such cases. In the case of perishable goods also, the size of firms tends to be small. In certain cases, the nature of the production process favors small units.

2. Specialised Service:
When an enterprise supplies specialized services, small scale firms are more suitable. Beauty parlors, interior decorators, and tailoring shops are examples of this type. A small firm can understand its customers and can provide personal attention which may not be possible in a large-scale enterprise. Similarly, firms providing professional services like eye clinic, tax consultancy, chartered accountancy, etc. are also organized as a small scale because they must maintain, personal touch with their clients. Thus, small firms are required to cater to individual tastes and fashions and to render personalized services to consumers.

3. Flexibility:
Certain businesses are subject to wide variations in demand, e.g. manufacture of jewelry, ready: made garments, etc. In such cases, greater flexibility of operations is required. Small firms can be more flexible due to simple technology and low overheads. They are capable of being adapted to changing tastes and fashions. They can easily make changes in products and can shift to new lines of business whenever the need arises. Therefore, small firms are more suitable for manufacturing and selling specialty items that may be popular for only a short period of time.

4. Employee relations:
When close rapport with employees is essential to provide high-quality products to the customers, small scale unit is in a better position. The owners, also the managers of such business have the most valuable advantage of being close to the employees. They know better their problems and can take necessary remedial measures quickly and efficiently.

5. Introduction of New Products:
Before starting the production of a new product on a commercial scale, it is always desirable to test it in the market. In the initial stages, the requirements of customers and management are uncertain and unknown. Therefore, operations are usually carried on a small scale when new products or ideas are being introduced in the market. This also helps to reduce the risk.

6. Direct Motivation:
Small scale enterprises foster individual initiative and skill. The identity of ownership and management serves to curb misconduct as mistakes bear directly on one’s property and income. There is maximum incentive to put the resources to best use because the resulting gains accrue directly to the owner. Red: tapis is absent and prompt decisions are possible.

7. Human Inertia:
Many businessmen do not want to expand their business due to fear of loss of freedom. Growth may involve more work and worry. People who want to lead a comfortable and simple life may be satisfied with the small scale of business.

8. Shield to Big Business Many small firms serve as ancillary units or feeders to large firms. Such units also provide a training ground for entrepreneurs. Small firms also provide some guarantee against the emergence of new competition. A threat to the big firms. They provide superficial evidence that monopoly does not exist in the industry.

9. Social Utility:
Small scale industries are helpful in generating self: employment for a large number of persons. These industries are also useful in preventing the concentration of income and wealth. They facilitate the economic development of rural and backward areas. Small firms use local resources and their social cost is comparatively low.

10. State Assistance and Patronage:
Small scale industries get several concessions from the government on account of their social benefits. The government provides then loans on concessional rates of interest. Technical, managerial, and marketing assistance is also provided. The government has reserved several products for exclusive production in the small scale sector. Several institutions have been set up to protect and promote the growth of small scale industries in the country.

Question 3.
Discuss the main types of partners.
Answer:
A partnership firm can have different types of partners with different roles and liabilities. There can be the following types of partners:

1. Active Partner
2. Sleeping or Dormant Partner
3. Secret Partner
4. Nominal Partner
5. Partner by estoppel
6. Partner by holding out
7. Minor Partner

1. Active Partner: Those partners who contribute capital and also takes an active part in the management of the firm are called active partners. These partners act as agents of the firm and have unlimited liability. All other partners are responsible for their deals.

2. Sleeping or dormant partner: Those partners who contribute capital only but do not take an active part in the affairs of the business are called sleeping partners. They have shared in the profit loss of the firm and also have unlimited liability. But they do not come face to face with the third party.

3. Secret Partner: This type of partner contributes capital and takes an active part in the management of the firm’s business. He shares in the profit and losses of the firm and has unlimited liability. However, his connection with the business of a partnership firm is not known to the outside world.

4. Nominal Partner: Those partners who neither invest money nor have shared in the profit and loss and also have no role in the administration of the firm. The firm makes them partners to gain from their personal goodwill. They have unlimited liability also.

5. Partner by estoppel: A person who by his words or conduct, represents himself as a partner becomes liable to those who advance money to the firm on the basis of such representation. He cannot avoid the consequences of his previous act.

6. Partner by holding out: When a person is declared as a partner and he does not deny this even after becoming aware of it, he becomes liable to third parties who lend money or credit to the firm on the basis of such a declaration.

7. Minor Partner: A minor is a person who has not completed 18 years of age. Minor may be admitted as a partner only for the benefits of the partnership with the mutual consent of all the partners. On being so admitted, a minor can impact and copy the books of accounts but could not take an active part in the management. His liability is limited to the intent of his share in the capital and profit of the firm.

Question 4.
Explain the various types of partnerships.
Answer:
A partnership can be classified on the basis of two factors:

1. Duration,
2. Liability.

On the basis of duration, there can be two types of partnership:

1. Partnership at will,
2. Particular partnership

On the basis of liability, the two types of partnership are:

1. Partnership with limited liability
2. Partnership with unlimited liability.

On the basis of Duration:
1. Partnership at will: It is a partnership formed for an indefinite period. It can continue for any length at any time depending upon the will of the partners. It can be dissolved by any partner by giving notice to the other partners of his desire to quit the firm.

2. Particular Partnership: It is a partnership formed for a particular objective. It is formed fora specific time period or to achieve specified objectives. It is automatically dissolved on the expiry of the specified period or on the completion of the specific purpose for which it was formed.

On the basis of liability:
1. Partnership with limited liability:
In this type of partnership the liabilities of partners are limited to the amount of capital introduced by them except one partner who has unlimited liability. Registration of such a partnership is compulsory. The limited partner could not take an active part in the firm’s management and their acts also do not bind the firm or other partners.

2. Partnership with unlimited liability:
This is also called a general partnership. In this liability of the partner is unlimited and joint. They enjoy the right to participate in the management of the firm and their acts are binding on each other as well as on the firm. Registration of this type of firm is optional. Because of unlimited liability, the firm’s creditors can realize these dues in full from any of the partners by attaching their personal property if the firm’s assets are found to be inadequate to pay off its debts.

Here we are providing Class 12 Accountancy Important Extra Questions and Answers Chapter 8 Financial Statements of a Company. Accountancy Class 12 Important Questions and Answers are the best resource for students which helps in class 12 board exams.

Class 12 Accountancy Chapter 8 Important Extra Questions Financial Statements of a Company

Financial Statements of a Company Important Extra Questions Very Short Answer Type

Question 1.
State the importance of financial analysis for labour unions. (CBSE SP 2019-20)
Answer:
Labor unions analyse the financial statements to assess whether an enterprise can increase their pay.

Question 2.
If operating is not given, what is the time for the operating cycle assumed?
Answer:
12 months.

Question 3.
If the operating cycle is given for 12 months and the payment cycle for trade payables is 15 months, how will you classify the liability?
Answer:
Non-current Liability.

Question 4.
Name any one line item that can be shown under the major heading ‘Equity and Liabilities’ in a company’s Balance Sheet.
Answer:
Shareholders’Funds

Question 5.
Name any one item that can be disclosed under ‘Short Term Provisions’.
Answer:
Provision for Doubtful debts.

Question 6.
How would you treat preliminary expenses?
Answer:
Preliminary expenses are written off in the year in which they are incurred.

Question 7.
Give one example of unamortised expenses.
Answer:
Discount on issue of shares / debentures.

Question 8.
State any one component of shareholders’ funds.
Answer:
Reserves & Surplus.

Question 9.
How would you treat share forfeiture account?
Answer:
Added in the subscribed.

Question 10.
Mention one component of Reserves and Surplus.
Answer:
Securities Premium Reserves.

Question 11.
Pratiksha Cartons Limited has given guarantee of ₹ 75,00,000 to a bank for raising loans from the bank by its subsidiary’ company. Where will this be shown in books of the company?
Answer:
This will be mentioned in Notes to Accounts.

Financial Statements of a Company Important Extra Questions Short Answer Type

Question 1.
Explain briefly any four objectives of ‘Analysis of Financial Statements’.
Answer:
Four objective of ‘Analysis of Financial statements are as follows:

• To assess the current profitability and operational efficiency of the firm as a whole as well its different departments so as to judge the financial health of firm.
• To ascertain the financial position of firm.
• To identify the reasons for change in the profitability and financial position of the firm.
• To Judge the ability of the firm to repay its debt and assessing the short-term as well as the long-term liquidity position fo the firm.

Question 2.
State under which major headings and sub-headings will the following items be presented in the Balance
Sheet of a company as per Schedule-Ill, Part-I of the Companies Act, 2013. (CBSE Delhi 2019)
(i) Prepaid Insurance
(ii) Investment in Debentures
(iii) Calls-in-arrears
(iv) Unpaid dividend
(v) Capital Reserve
(vi) Loose Tools
(vii) Capital work-in-progress
(viii) Patents being developed by the company.
Answer:

Items	Major heads	Sub-heads
1. Prepaid insurance	Current Assets	Other curretn Assets
2. Investment in debenture	Non-current Assets	Non-current investment
3. Calls in Arrears	Shareholders Fund	Subscribed capital (less from subscribe but not fully paid)
4. Unpaid dividend	Current liabilities	Other current liabilities
5. Capital Reserve	Shareholder Fund	Reserve and Surplus
6. Loose tools	Current Assets	Inventories
7. Capital work in progress	Non-current Assets	Fixed Assets (Capital work in progress)
8. Patent being developed by the company	Non-current Assets	Fixed Assets (intangible asset under development

Question 3.
Under which major heads and sub-heads will the following items be placed in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013 ? (CBSE Outside Delhi2019)
(i) Cheques and Bank Drafts in Hand
(ii) Loose tools
(iii) Securities Premium Reserve
(iv) Long-Term Investments with maturity period less than six months
(v) Work-in-Progress
(vi) Mining Rights
(vii) Publishing titles
(viii) Debtors
Answer:

Items	Heads	Sub-heads
Cheques and Bank Drafts in Hand	Current Assets	Cash & Cash Equivalents
Loose Tools	Current Assets	Inventories
Securities Premium Reserve	Shareholders’ Funds	Reserves & Surplus
Long term Investments with maturity period less than six months	Current Assets	Current Investments
Work-in-Progress	Current Assets	Inventories
Mining Right	Non Current Assets	Fixed Assets-Intrangible
Publishing Titles	Non Current Assets	Fixed Assets-Intangible
Debtors	Current Assets	Trade Receivables

Question 4.
From the following details calculate Interest Coverage Ratio:
Net profit after tax – ₹ 7,00,000
6 % debentures of – ₹ 20,00,000
Tax Rate 30%
Answer:

Question 5.
Under which major heads and sub-heads will the following items be placed in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013? (CBSE SP2019-20)
(i) Debentures with maturity period in current financial year
(ii) Securities Premium Reserve
(iii) Provident Fund
Answer:

S. No.	Item	Major Head	Sub Head
(i)	Debentures with maturity period in current financial year	Current Liabilities	Other Current Liabilities
(ii)	Securities Premium Reserve	Shareholder’s Fund	Reserves and Surplus
(iii)	Provident Fund	Non-Current Liabilities	Long Term Provision

Question 6.
Under which sub-headings will the following items be placed in the Balance Sheet of a company as per Schedule-Ill, Part-I of the Companies Act, 2013? (CBSE Compt.2019)
(i) Prepaid Expenses
(ii) Loose Tools
(iii) Loans Repayable on Demand
(iv) Provision for Employee Benefit
(v) Negative Balance in the Statement of Profit and Loss
(vi) Bank Overdraft
(vii) Bills Receivables
(viii) Trade Marks
Answer:

	Items	Sub-Head
(i)	Prepaid Expenses	Other Current Assets
(ii)	Loose Tools	Inventories
(iii)	Loans repayable on demand	Short Term borrowings
(iv)	Provision for employees benefit	Long term provisions
(v)	Negative balance in Statement of Profit and Loss	Reserves and Surplus
(vi)	Bank Overdraft	Short Term borrowings
(vii)	Bills Receivable	Trade Receivables
(viii)	Trade Marks	Fixed assets Intangible

Question 7.
(a) Classify the following items under Major Head and Sub-Head (if any) in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013.
(i) Capital Work in progress; and
(ii) Provision for warranties.
(b) State any two objectives of ‘Analysis of Financial Statements’. (Compt. Delhi 2017)
Answer:
(i) Classification of items

S.No.	Items	Headings	Sub-headings
(i)	Capital work in progress	Non-current assets	Fixed assets
(ii)	Provision for warranties	Non-current liabilities	Long term provisions

(ii) Objectives of analysis of financial statements

Question 8.
(i) One of the objectives of analysis of financial statement is to ascertain the relative importance of the different components of the financial position of the firm’. State two other objective of this analysis.
(ii) List any four items of ‘reserve’ that are shown under the headings ‘Reserves and Surplus’ in the Balance Sheet of a company as per scheduel III of the Companies Act 2013.
(CBSE Outside Delhi 2016)
Answer:
(i) Objectives of Analysis of Financial Statement:

• Assessing the earning capacity or profitability of the firm as a whole as well as its different departments so as to judge the financial health of the firm.
• Judging the ability of the firm to repay its debts and assessing the short term as well as long term liquidity position of the firm.

(ii) Reserve and Surplus

• Capital Reserve
• Securities Premium Reserve.
• Revaluation Reserve.
• Capital Redemption Reserve.

Question 9.
(i) One of the objectives of ‘financial Statement Analysis, is to identify the reasons for change in the financial position of the enterprise. State two more objectives of this analysis.
(ii) Name any two items that are shown under the head ‘Other Current Liabilities’ and any two items that are shown under the head ‘Other Current Assets’ in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013. (CBSE Outside Delhi 2016)
Answer:
(i) Objectives

• To evaluate the business in Terms of profit in present and future.
• To evaluate the efficiency of various parts or departments of the business.

(ii) Other Current Liability

• Unpaid dividend
• Current maturity of long term debts.

Other Current Assets.

• Discount in issue of debentures (to be written off within 12 months).
• Accrued incomes.

Question 10.
List the major heads under which the ‘Equity and Liabilities’ are presented in the balance sheet of a company as per Schedule III Part I of the Companies Act, 2013. (CBSE Guidance Notes July 2013)
Answer:
The major heads under which ‘Equity and Liabilities’ are presented:

• Share holders Fund
• Share Application Money Pending allotment
• Non-Current liabilities
• Current Liabilities

Question 11.
List the major heads under which the ‘Assets’ are presented in the balance sheet of a company as per Schedule III Part I of the Companies Act, 2013. (CBSE Guidance Notes July 2013)
Answer:
The major heads under which the ‘Assets’ are presented:
(a) Non-current Assets
(b) Current Assets

Question 12.
Name the sub-heads under the head
(a) shareholders Funds’ and
(b) Non-Current Liabilities as per Schedule III Part I of the balance sheet. (CBSE Guidance Notes July 2013)
Answer:
(a) The sub-heads under‘Shareholders Funds’are

• Share Capital
• Reserves and surplus
• Money received against share warrants

(b) The sub-heads under ‘Non-current liabilities’ are

• Long-term Borrowings
• Deferred Tax Liabilities (Net)
• Other Long-term Liabilities
• Long-term Provisions

Question 13.
X Ltd. has an authorized capital of₹ 15,00,000 divided into 1,00,000 equity shares of ₹ 10 each and 50,000, 9% preference shares of ₹ 10 each. The company invited applications for all the preference shares but only 90,000 equity shares. All the preference shares were subscribed, called and paid while subscriptions were received for only 85,000 equity shares.
During the first year ₹ 8 per share were called.
Ram holding 1,000 shares and Shyam holding 2,000 shares did not pay first call of ₹ 2.
Shyam’s shares were forfeited after the first call and later on 1,500 of the forfeited shares were reissued at ₹ 6 per shares ₹ 8 called up.
(a) Show share capital in the Balance Sheet as per revised Schedule VI as at 31st March 2013.
(b) Prepare relevant ‘Notes to Accounts’ (CBSE Guidance Notes July 2013)
Answer:

Question 14.
From the following information extracted from the books of XY Ltd., prepare a Balance sheet of the company as at March 31, 2012 as per Schedule III of the Companies Act, 2013.

Particulars	Amount in ‘000’ (₹)
Long-Term Borrowings	500
Trade Payable	300
Share Capital	400
Reserve and surplus	90
Fixed assets (angible)	800
Inventories	20
Trade receivables	80
Cash and cash equivalents	120

Answer:

Question 15.
JW Ltd was a company manufacturing geysers. As a part of its long term goal for expansions, the company decided to identify the opportunity in rural area. Initial plan was rolled out for Bhiwani village in Haryana. Since, the village did not have regular supply of electricity, the company decided to manufacture solar geysers. The core team consisting of the Regional Managers, Accountant and the Marketing Manager was taken from the Head office and the remaining employee were selected from the village and neighbourhood area. At the time of preparation of financial statement the accountant of the company fell sick and the company deputed a junior accountant temporarily from the village for two months. The Balance Sheet prepared by the junior accountant showed the following items against the Major heads and sub-head mentioned which were not as per Schedule III of the Companies Act 2013. Items Major Head

• Loose Tools Trade Receivable
• Cheque in Hand Current Investment
• Term Loan from Bank Other long Term Liabilities
• Computer Software Tangible Fixed Assets

Present the above items under the correct major head and sub-head as per the Schedule III of Companies Act 2013. (CBSE Delhi 2018)
Answer:

Item	Heads	Sub-heads
Loose Tools	Current assets	Inventories
Cheques in hand	Current assets	Cash and Cash Equivalent
Term loan from Bank	Non-Current Liabilities	Long Term Borrowings
Computer Software	Non-Current assets	Fixed Assets-Intangible Assets

Question 16.
M K Limited is a computer hardware manufacturing company. While preparing its accounting records it takes into consideration the various accounting principles and maintains transparency. At the end of the accounting year, the company follows the ‘Companies Act, 2013 and Rules there under’ for the preparation of its Financial Statements. It also prepares its Income Statement and Balance Sheet as per the format provided in Schedule III to the Act. Its Financial Statements depict its true & fair financial position. For the financial year ending March 31,2017, the accountant of the company is not certain about the presentation of the following items under relevant Major Heads & Sub Heads, if any, in its Balance Sheet:

• Securities Premium Reserve
• Calls in Advance
• Stores & Spares

Advice the accountant of the company under which Major Heads and Sub Heads, if any, he should present the above items in the Balance Sheet of the company, (CBSE Sample Paper 2017-18, Modified)
Answer:

S. No.	Items	Major Head	Sub Head
(i)	Securities Premium Reserve	Shareholders’ Funds	Reserves & Surplus
(ii)	Calls in Advance	Current Liabilities	Other Current Liabilities
(iii)	Stores & Spares	Current Assets	Inventory

Question 17.
M.M. Limited is registered with an Authorised capital of ₹ 200 Crores divided into equity shares of ₹ 100 each. On 1st April 2016 the Subscribed and Called up capital of the company is ₹ 10,00,00,000. The company decided to help the unemployed youth of the naxal affected areas of Andhra Pradesh, Chhattisgarh and Odisha by opening 100 ‘Skill Development Centres’. The company also decided to provide free medical services to the villagers of these states by starting mobile dispensaries. To meet the capital expenditure of these activities the company further issued 1,00,000 equity shares during financial year 2016-17. These shares were fully subscribed and paid.
Present the share capital of the company in its Balance Sheet. (CBSE Sample Paper 2017-18 Modified)
Answer:

Question 18.
Financial statements are prepared following the consistent accounting concepts, principles, procedures and also the legal environment in which the business organizations operate. These statements are the sources of information on the basis of which conclusions are drawn about the profitability and financial position of a company so that their users can easily understand and use them in their economic decisions in a meaningful way.
State under which major headings and sub-headings the following items will be presented in the balance sheet of a company as per Schedule III of the Companies Act 2013.

• General Reserves,
• Short term loans and advances,
• Capital work in progress and
• Design.

Answer:

	Heads	Sub-head
General Reserves	Shareholders’ Funds	Reserves and Surplus
Short term loans and advances	Current assets	–
Capital work in progress	Non current assets	Fixed assets
Design	Non current assets	Fixed assets/intangible assets

Question 19.
Mudra Ltd. is in the process of preparing its Balance Sheet as per Schedule III, Part I of the Companies Act, 2013 and provides its true and fair view of the financial position.
(a) Under which head and sub-head will the company show ‘Stores and Spares’ in its Balance Sheet₹
(b) What is the accounting treatment of ‘Stores and Spares’ when the Company will calculate its Inventory Turnover Ratio?
(c) The management of Mudra Ltd. want to analyse its Financial Statements. State any two objectives of such analysis. (CBSE Sample Paper 2016, 2017, Modified)
Answer:
(a) Head: Current Assets Sub head; Inventories
(b) While calculating Inventory Turnover Ratio it is not included in Inventories
(c) Objectives – Assessing the ability of the enterprise to meet its short term and long term commitments, Assessing the earning capacity of the enterprise

Question 20.
(a) Under which major headings and sub-headings the following items will be shown in the Balance Sheet of a company as per Schedule VI, Part I of the Companies Act, 2013.
(i) Bank Overdraft
(ii) Cheques in Hand
(Hi) Loose Tools
(iv) Long term provisions
(b) State any two limitations of Financial Statement Analysis.
Answer:

S. No.	Items	Headings	Sub Headings
1.	Bank overdraft	Current liabilities	Short term borrowings
2.	Cheques in hand	Current assets	Cash and cash equivalents
3.	Loose Tools	Current assets	Inventories
4.	Long Term Provisions	Non current liabilities	–

Historical Analysis: Financial statements are based on fast figures. So, we cannot predict about the future accurately.
Ignores price level changes: Financial statements are prepared at the end of year. When these are analysed, values of figures tend to change.

Question 21.
Under which major heads and subheads of the Balance Sheet of a company, will the following items be shown:
(i) Loose Tools
(ii) Retirement Benefits Payable to employees
(iii) Patents
(iv) Interest on Calls in Advance (CBSE Sample Paper 2018-19)
Answer:

S. No.	Items	Major Head of Balance Sheet	SubHead of Balance Sheet
(i)	Loose Tools	Current Assets	Inventories
(ii)	Retirement Benefits Payable to employees	Non-Current Liabilities	Long Term Provisions
(iii)	Patents	Non-Current Assets	Fixed Asset (Intangible)
(iv)	Interest on Calls in Advance	Current Liabilities	Other current Liabilities

Question 22.
(a) Name the sub-heads under the head ‘Current Liabilities’ in the Equity and Liabilities part of the Balance Sheet as per Schedule III of the Companies Act 2013.
(b) State any two objectives of Financial Statements Analysis. (CBSE Sample Paper 2015)
Answer:
(a) Current Liabilities:

• Short Term Borrowings
• Trade Payables
• Other Current Liabilities
• Short Term Provisions

(b) Objectives of financial statement analysis

• Helps in assessing financial earning capacity of a company
• Helps in assessing managerial efficiency

Question 23.
Name the sub-heads under the head ‘Non-Current Assets’ in the Balance Sheet under Schedule III of the Indian Companies Act, 2013. (CBSE Guidance Notes July 2013)
Answer:
The sub-heads under ‘Non-current assets’ are

• Fixed Assets
• Non-Current Investments
• Deferred Tax Assets (Net)
• Long-term loans and advances
• Other Non-current Assets

Question 24.
Under which major headings and sub-headings the following items will be shown in the Balance Sheet of a company as per Schedule III, Part I of the Companies Act, 2013.
(i) Bank Overdraft
(ii) Cheque in hand
(iii) Loose tools
(iv) Long term provisions
Answer:

Items	Headings	Sub-headings
Bank Overdraft	Current liabilities	Short term borrowings
Cheques in hand	Current assets	Cash and cash equivalents
Loose Tools	Current assets	Inventories
Long Term Provisions	Non-Current liabilities	–

Question 25.
Under which heads the following items will be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013.
(a) Cash in hand
(b) Mining rights
(c) Short term deposits
(d) Debenture redemption reserve
(e) Income received in advance
(f) Balance in statement of profit and loss
(g) Office equipment
(h) Work in progress (CBSE Delhi 2015)
Answer:

Items	Major Heads
Cash in hand	Current Assets
Mining rights	Non Current Assets
Short term deposits	Current Assets
Debenture redemption reserve	Shareholders’ Funds
Income received in advance	Current Liabilities
Balance in the statement of profit and loss	Shareholders’ Funds
Office equipment	Non Current Assets
Work in progress	Current Assets

Question 26.
Under which headings the following items will be presented in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013₹ [Any four]
(a) Loans provided repayable on demand
(b) Goodwill
(c) Copyrights
(d) Loose tools
(e) Cheques
(f) General reserve
(g) Stock of finished goods and
(h) 9% Debenture repayable after three years
Answer:

Items	Major Heads
Loans provided repayable on demand	Current Liabilities
Goodwill	Non Current Assets
Copyrights	Non Current Assets
Loose tools	Current Assets
Cheques	Current Assets
General reserve	Shareholders’ Funds
Stock of finished goods	Current Assets
9% Debenture repayable after three years	Non current Liabilities

Question 27.
Under which head the following items will appear in case of financial company₹
(i) Interest Received
(ii) Dividend Received
(iii) Profit and sale of securities
(iv) Loss an sale of plot
(y) Wages paid
(vi) Depreciation on building
Answer:

Items	Headings
Interest Received	Revenue from operations
Dividend Received	Revenue from operations
Profit and sale of securities	Revenue from operations
Loss an sale of plot	Other Income
Wages paid	Employee Benefit Expenses
Depreciation on building	Depreciation and Administration Expenses

Question 28.
Under which head the following items will appears in case of non-financial company₹
(i) Sales
(ii) Sale of scrap
(iii) Interest received
(iv) Profit and sale of Investments
(v) Bonus
(vi) Interest paid on loans
(vii) Administration Expenses
(viii) Excess Provision written bank
(ix) Raw Material
(x) Leave encashment
Answer:

Items	Headings
Sales	Revenue from operations
Sale of scrap	Revenue from operations
Interest received	Other Incomes
Profit on sale of Investments	Other Incomes
Bonus	Employee benefit Expenses
Interest paid on loans	.Finance Cost
Administration Expenses	Other Expenses
Exam Provision written bank	Other Incomes
Raw Material	Cost of Material
Leave encashment	Employee benefit Expenses

Question 29.
How would you show ‘Employee Benefit Expenses with the help of Notes to Accounts in the Statement of Profit & Loss₹
(i) Salaries & wages ₹ 5,20,000
(ii) Dividend received ₹ 5000,
(iii) Leave encasement ₹ 400,000
(iv) Salaries to manages ₹ 10,00,000
(v) Depreciation on fixed assets ₹ 200,000
(vi) Contribution to provident fund ₹ 5000.
Answer:

Question 30.
Which of the following items will form the part of Notes to Accounts on Finance Costs₹
(i) Interest paid an overdraft
(ii) Interest paid on debentures
(iii) bank charges
(iv) Discount an issue of debentures
(v) Premium payable an redemption of debentures
(vi) Discount allowed to debtors
(vii) Bad-debts
(viii) Bonus
(ix) Interest Received on fined deposits
(x) Legal processing fee
Answer:

Please note that bank charges are not related to raising finance. So, bank charges, discount allowed to debtors, Bad-debts are the part of finance cost. Interest received is the part of other incomes & bonus is the part of employee benefits expenses.

Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 10 Financial Markets. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 10 Important Extra Questions Financial Markets

Financial Markets Important Extra Questions Short Answer Type

Question 1.
Explain the concept of the Financial Market?
Answer:
Concept of Financial Market: A business is a part of an economic system that consists of two main sectors – households that save funds and business firms which invest these funds. A financial Market helps to link the savers and the investors by mobilizing funds between them. In doing so it performs what is known as allocative functions. It allocates or directs funds available for investment into their most productive investment opportunity. When the allocative function is performed well, two consequences follow

• The rate of return offered to households would be higher.
• Scare resources are allocated to those firms which have the highest productivity for the economy;

There are two major alternative mechanisms through which allocation of funds can be done: via banks or via financial markets. Households can deposit their surplus funds with banks, who in turn could lend these funds to business firms. Alternately, households can buy the shares and debentures offered by a business using financial markets. The Process by which allocation of funds is done is called intermediation. Banks and Financial Markets are competing intermediaries in the financial system, and give households a choice of where they want to place their savings.

A financial market is a market for the creation and exchange of financial assets. Financial markets exist wherever a financial transaction occurs. Financial transactions could be in a fourth of creation of financial assets such as the initial issue of share and debenture by a firm or the purchase and sale of existing financial assets like equity share debenture and bonds.

Question 2.
Explain the term, Capital Market?
Answer:
Capital Market: The term Capital Market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. It consists of a series of channels through which savings of the community are made available for industrial and commercial enterprises and for the public in general. It directs these saving into their most productive use leading to the growth and development of the economy. The capital market consists of development banks, commercial banks, and stock exchanges.

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

The Capital Market can be divided into two parts:

1. Primary Market
2. Secondary Market.

Question 3.
Mention, in brief, the classification of the financial market?
Answer:
Classification of financial market

Financial Market

Financial Markets are classified on the basis of the maturity of financial instruments traded ‘in them. Instruments with a maturity of less than one year are traded in the money market. Instruments with longer maturity are traded in the capital market.

Question 4.
Give the meaning of various terms used in the stock market in India?
Answer:
Various terms used in the stock market: The following terms in magazines or newspapers when you read about the stock market.

Bourses: Bourses is another word for the Stock Market.

Bulls and Bears: The term does not refer to animals but to the market sentiment of the investors. A bullish phase refers to a period of optimism and a bearish phase to a period of pessimism on the bourses.

Badla: This refers to a carry forward system of settlement, particularly at the BSE. It is a facility that allows the postponement of the delivery or payment of a transaction from one settlement period to another.

ODD lot Trending Trading in multiples of 100 stocks or less.

Penny Stocks These are securities that have no value on the stock exchange but whose trading contributes to speculation.

Question 5.
Explain the meaning of the stock-market Index?
Answer:
Stock Market Index: A stock market index is a barometer of market behavior. It measures overall sentiment through a set of stocks that are representative of the market. It reflects the market direction and indicates day-to-day fluctuations in stock prices. An ideal index must represent a change in the prices of securities and reflect price movements of typical share for better market representation. In the Indian markets, the BSE SENSEX and NSE NIFTY are important indices. Some important global stock market indices are:

• Dow Jones Industrial Average is among the oldest quoted stock market index in the US.
• NASDAQ composite index is the market capitalization weights of prices for a stock listed in the NASDAQ Stock Market.
• S and P 500 index is made up of the 500 biggest publicly traded companies in the US. The S and P 500 is often treated as a proxy for the US stock market.
• FISE 100 consists of the largest 100 companies by full market value listed on the London Stock Exchange. The FISE 100 is the benchmark index of the European market.

Question 6.
Explain the term Listing of securities and mention its advantage.
Answer:
Listing of Securities: A security is said to be ‘listed’ when its name is added to the list of securities in which trading on a particular exchange is permitted. The principal objectives of listing are

1. to provide ready marketability and free negotiability to stocks and shares;
2. to ensure proper supervision and control of dealings therein; and
3. to protect the interests of shareholders and of the general investing public.

Advantages of Listing:
The advantage of listing may be viewed from two angles

1. from the point of view of the management of companies; and
2. from the point of view of the shareholders.

The advantages derived by the management as a result of listing are many. A part of the distinct advertising value, listing enables the management to broaden and diversify shareholding. It is the general, consensus of opinion that a company with broad-based share ownership is better suited for growth and stability than a company with shares concentrated in few hands. Ensuring thus a broadening of share ownership, listing not only brings a company’s shares to the attention of hundreds and thousands of new investors but also encourages institutional investors to be interested in them. It helps the company to gain national importance and widespread recognition.

There is a difference between a listed and non-listed security (particularly from the point of view of the psychological motivation of the investors in applying for subscription to shares) in as much as Section 73 of the Companies Act required that every company intending to offer shares or debentures to the public for subscription through the issue of a prospectus, must seek enlistment with one or more stock exchanges. If such listing is not granted or applied for then the company must return all money to the applicants.

This, in other words, implies that prospective listing prompts the investors to apply for the shares and failure to secure listing entitles the investors to claim a refund of the money. In fact, the listing has tremendous value to a company in regard to the raising of additional capital for expansion or other purposes.

Section 81 of the Companies Act provides that any further issue of the share unless waived by them in a general meeting, must in the first instance be offered to the existing shareholders, the company concerned will be in great difficulty, and will also have to incur great expense in selling them. But in the case of a listed company, there is neither this difficulty nor the additional expenses, for this right can be disposed of by the shareholders through the Stock Exchange.

Further, when a listed company makes such an offer of further shares to the shareholders, the shareholders in their turn get a better estimation of the value of the shares from the price at which the shares of the company are quoted on the stock exchange. Lasting, thus affords a great advantage to the management in ensuring a saving in the cost of raising new capital. This additional business or assets or mergers with the companies because listing enables it to offer its securities in exchange for those of a closely held or of an unlisted company.

The shareholders or investors derive manifold benefits if the shares held or owned by them are listed on the Stock Exchange. The main benefits are
1. It affords liquidity to their holding.

2. It affords them to obtain the best prices for the securities if they want to sell-off.

3. It helps them to avoid the botheration of canvassing from door to door to sell the securities and more telephonic or verbal orders to a stockbroker will help them to buy or sell listed security.

4. Transactions of the Stock Exchange are done by auction bids, so there is no hide or seek about the price at which the investor buys or sells the share.

5. The Stock Exchange quotation helps the investors to keep themselves abreast of the price changes of the securities owned or held by them.

6. The investors get maximum protection in regard to their holding, because the Stock Exchange rules and regulations have been formulated with the end in view.

7. Listing is also advantageous in the matter of income-tax, wealth-tax, estate, duty, and other taxes payable by shareholders in their capacity as assessees. However, from the foregoing discussion, it should not be concluded that the Stock Exchange vouches for the listed securities. In fact, Price determination and value judgments involve constant scrutiny and assessment of each company from business, financial, accounting, legal and technical points of view, and there are primarily the functions of the buyers and sellers in the market.

The Stock Exchange can not and does not stand sponsor for the listed securities or guarantee their investment value, but it does ensure continuing sponsorship and assistance in the establishment arid development of sound and progressively higher standards of corporate practice and procedure. For these reasons, listing carries the hallmark of prestige and confers on the listed company, its securities, and its shareholder a privileged position.

8. Listing gives an added collateral value to the securities held by investors, for the bank in making loans and advances prefer security quoted on the Stock Exchange.

Question 7.
Explain the role of the new issue market in the investment business.
Answer:
Role of the New Issue Market: The analysis of the role of the new issue market in financing
companies can be undertaken by the study of the statistics of the annual volume of the new issues. The data may be broken down in various ways, for example, according to the type of security issued, the kind of organization making the issue, the method of flotation of the issue, and so on.

The Reserve Bank of the organization making the issue, the method, for instance, has been following this method in its regular studies of capital issues in the private corporate sector. However, this approach is partial, and to that extent, an inadequate method of appraisal in that ‘ it does not explain the full significance of the role of the New Issue Market.
1. Its first shortcoming is that the technique to aggregate the amount of all prospectus and right issues, to arrive at the new issues made in a particular year does not reveal die true picture as the entire sum is not necessarily raised by the issuing companies from the investing public in the same year because they are collected through various calls which may be spread over five years. This, of course, is a minor point.

2. The method presents absolute figures, unrelated to the use to which these funds are put.

3. The method leads to the treatment of the New Issue Market in isolation from the rest of the capital market and consequently to a distorted view as to its real functions.

4. Further, it does not disclose as to what kind and size of firms are obtaining funds, nor at what cost they are doing so, and, therefore, gives no clue as to efficiency to explore such questions, obviously, a different approach in necessary.

Another approach that tries to remedy the weaknesses of the first, is the source-and-use-of-funds approach of analysis of company balance sheets. In this connection, two possibilities suggest themselves.
(a) A possible method is to make a direct comparison between new issues and industrial fixed capital formation, but this suffers from a serious limitation to the extent it is based on the simple assumption that long-term source of funds ought roughly to match long-term investment, for it is not virtually impossible for the analysts to relate the sums raised on the market to the uses that are made of those funds by the organization making those, issues, but it is also misleading to link specific sources of funds to a specific use.

True, investment intangible fixed assets in the most important long-term use of funds but is certainly not only important use to which funds are put when a group of companies is expanding output. The expenditure on fixed assets is, therefore not a good yardstick to measure the importance of capital issues. It is particularly misleading when studying different industries in which the relative importance of investment in stock and in fixed assets varies considerably.

What is needed is a much wider and more comprehensive approach in order to get the different sources and uses of funds into perspective. However, since it is not always possible to have the correct data forthcoming, we have to make use of that which is available.

Question 8.
Mention the Organizational Structure and Membership of Secondary Market.
Answer:
Organizational Structure of the Secondary Market: The stock exchanges are the exclusive centers for the trading of securities. At present, there are 23 operative stock exchanges in India. Most of the Stock Exchanges in the country are incorporated as ‘Association of Persons’ of Section 25 companies under the Companies Act. These are organized as ‘mutuals’ and are considered beneficial in terms of tax benefits and matters of compliance. The s trading members, who provide broking services also own, control, and manage the stock exchanges.

They elect their representatives to regulate the functioning of the exchange, including their own activities. Until recently the area of operation/ jurisdiction of exchange was specified at the time of its recognition, which in effect precluded competition among the exchanges. These are called regional exchanges.

In order to provide an opportunity to investors f to invest/trade in the securities of local companies, it is mandatory t for the companies, wishing to list their securities to list on the regional stock exchange nearest to their registered office. If they so wish, they can seek listing on other exchanges as well. The monopoly of the ’ exchanges within their allocated area, regional aspirations of the r people and mandatory listing on the regional stock exchange resulted ‘ in a multiplicity of exchanges. As a result, we have 24 exchanges (The Capital Stock Exchange, the list of the latest, is yet to commence trading) in the country recognized.

Over a period of time to enable investors across the length and – breadth of the country to access the market.

The three newly set up exchanges-over the couples exchange of r India (OTCEI), National Stock Exchange of India (NSE), and Inter-connected Stock Exchange of India (1CSE) were permitted since their inception to have nation-wide trading. Listing on these exchanges was considered adequate compliance with the requirement of listing on the regional exchange. SEBI recently allowed all exchanges to set up trading terminals anywhere in the country. Many of them have already expanded trading operations to different parts of the country.

Membership: The trading platform of a stock exchange is accessible only to brokers. The broker enters into trades in exchanges either on his own account or on behalf of clients. The clients may place their orders with them directly or through a sub-broker indirectly. A broker is admitted to membership of an exchange in terms of the provisions of the security contracts (Regulation) Act, 1956 (SCRA), the Securities and Exchange Board of India (SEBI) Act 1992, the rules, circulars, notifications, guidelines, etc. prescribed thereunder and the bye-laws, rules, and regulations of the concerned exchange.

No stockbroker or sub-broker is allowed to buy, sell or deal in securities unless he or she holds a certificate of registration granted by SEBI, A broker/sub-broker complies with the code of conduct prescribed by SEBI. The stock exchanges are free to stipulate stricter requirements for its membership are in excess of the minimum norms laid down by SEBI. The standards for admission of members laid down by NSE stress factors, such as corporate structure, capital adequacy, track record, education, experience, etc., and reflect a conscious endeavor to ensure quality broking services.

Financial Markets Important Extra Questions Long Answer Type

Question 1.
What is Stock Market? Mention its nature and functions.
Answer:
Stock Markets in India: Stock exchanges are intricately interwoven in the fabric of a nation’s economic life. Without a stock exchange the saving of the community – the sinews of economic progress and productive efficiency – would remain under-utilized. The tasks of mobilization and allocation of savings could be attempted in the old days as a much less specialized institution than the Stock Exchange.

But as business and industry expanded and the economy assured a more complex nature, the need t for “permanent finance”, arose. Entrepreneurs needed money for the long term whereas investors demanded liquidity – the facility to convert their investments into cash at any given time. The answer was a ready market for investments and this was how the Stock Exchange came to being.

Stock Exchange means any body of individuals, whether incorporated 1 or not, constituted for the purpose of regulating or controlling the 5 business of buying, selling, or dealing in securities. These securities include

1. Shares, Scrips, Stock, bonds, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
2. government securities; and
3. rights or interest in Securities.

Nature and function of Stock Exchange: There is an extraordinary amount of ignorance and of prejudice born out of ignorance with regard to the nature and functions of the stock, exchange. As economic development proceeds, the scope for acquisition and ownership of capital by private individuals also groups.

Along with it, the opportunity for the Stock Exchange to render the service of stimulating private savings and channeling such savings into? productive investment exists on a vastly great scale. These are services which the stock exchange alone can render efficiently, it is no exaggeration to say that in a modern industrialist society, which t recognizes the rights of private ownership of capital, stock exchanges are not simply a convenience, they are essential, In fact, they are the markets which exist to facilitate purchase and sale of securities of companies and the securities or bonds issued by the govt, in the course of its borrowing operation.

As our country moves towards liberalization, this tendency is certain to be strengthened. The task % facing the stock exchanges is to devise the means to reach down to the masses, to draw the savings as the man in the street into productive investment, to create conditions in which many millions of little ‘ investors in cities, towns, and villages will find it possible to make use of the facilities, which have so far been limited to the privileged few. This calls for far-reaching changes, institutional as well as operational.

The Stock Exchanges in India, thus, have an important role to play in the building of a real shareholder’s democracy. The aim of the Stock Exchange authorities is to make it as nearly perfect in the social and ethical sense as it is in the economic. To protect the interests of the investing public, the authorities of the stock exchanges have been increasingly subjecting not only its members to a high degree of discipline but also those who use its facilities – joint-stock companies and other bodies in whose stocks and shares it deals.

There are stringent regulations to ensure that directors of joint Stock companies keep their shareholders fully informed of the affairs of the companies before their shares are listed are more rigorous and wholesome than the statutory provisions such as those contained in the Companies Act.

Apart from providing a market that mobilizes and distributes that nation’s savings, the Stock Exchange ensures that the flow of savings is utilized for the best purpose from the community’s point of view. ‘Free’ markets are not simply a matter of many buyers and sellers. If the prices at which stocks and shares change hands are to be ‘fair’ prices, many important conditions must be satisfied. It is the whole vast company of investors, competing with one another as buyers and sellers, this decides what the level of security prices shall be.

But the public is prone to sudden savings of hope and fear. If left entirely to itself, it could produce needlessly violent and-often quite irrational fluctuations. The professional dealers of the stock of these movements. These are valuable activities. So as to ensure that the investors reap the full benefiting them, they need to be regulated by a recognized code of conduct. Fair prices and free markets require, above all things, clean dealings both by professionals and by the investors – and dealings based upon up-to-date and reliable information, easily accessible to all.

Thus a free and active market in stock and shares has become a pre-requisite for the mobilization and distribution of the nation’s savings on the scale needed to support modem business. The Stock Exchange by a process of prolonged trial and error, which is by no means complete, has been continually streamlining its structure to meet these wide and ever-growing responsibilities to the public. The activities of the Stock Exchange to the public.

The activities of the Stock Exchange are governed by a recognized code of conduct apart from statutory regulations. Investors, both actual and potential, are provided, through the daily stock exchange price quotations, with an up-to-the-minute approval of the present worth of their holdings, in the light of all the influences that affect the position and prospectus of the companies in question. But the Stock Market does not determine the health of the company, it merely reflects it. It is a thermometer, not a fever.

The prices are sometimes distorted by excessive speculation but, by and large, they provide a continuous assessment of the current value of assets, not available to those who invest in houses or land or other assets, not traded on the Stock Exchange. In fact, whether our demand for a stock is motivated by income or profits, so long as it is related to a corporation, the prices of the securities markets will play ‘ a realistic part in determining the corporation’s ability to raise funds.

For those enterprises that must finance externally, the receptivity of the market to their offerings establishes both the volume and cost of capital raised. For those companies that finance the bulk of their requirements through reinvested earnings, the willingness of Stockholders to defer dividends in the expectation of a higher return through capital gains establishes both the volume and cost of the capital raised. If a company’s outlook is very promising and buyers bid up the security’s market value new financing becomes easier whether through? external or internal sources – the earnings prices ratio is reduced, and the cost of capital becomes correspondingly low.

However, the capacity, of a business to raise fresh capital for the approved purposes by selling shares to the public, and the cost of capital to the borrower, do not depend simply or even mainly upon the intrinsic merits of the business. They depend upon the public’s estimate of the investment merits of its share in comparison with those of other comparable securities. But these relative investment merits are measured very largely by the prices at which the new securities are offered and the comparable existing securities quoted in the market.

More precisely, they are determined by the relative’s yields, actual or prospective, that can be obtained in interest or dividends on the capital sum that these market prices represent. The cost of a company or raising new capital is not the price at which the new shares are sold to investors, but the effective rate of interest field that has to be offered in order to secure it. Other things being equal, investors will readily accept a lower interest yield for a progressive and promising company than they will demand from a slow-moving and inefficient one.

The tremendous important and socially useful service that the stock exchange renders to the industries is with regard to the shifting of the burden of financing from the mgt. to those of the investor. It will be realized more so from the fact that there is always a conflict of motives between the industries and the investors. Industries require long-term finance, with the end in view of looking it up in land, buildings, plants, etc. Investors, on the other hand, have liquidity preference, that is to say, they want to get back the money or and when they would need it.

In other words, while the industries require permanent finance, the investors can tend it only for a while because the money that they led to the industries comes from their savings which are made for future spending over contingencies. It is not merely the individual investors alone who suffer from the ‘liquidity’ preference complex institutional investors to have the same motive.

It is generally thought that a Stock Exchange serves only those who have money to invest and securities to sell. But a stock benefits the whole community in a variety of ways. By enabling producers to raise capital, it indirectly gives employment to millions of people and helps consumers to get the goods needed by them.

Again, all those who save, put their money either in banks or in life insurance, invest in buying shares and securities, are also help by stock exchanges, because the institutions with which they place their savings avail, themselves of the services of the exchange to invest the money collected by them.

It is efficient from the foregoing analysis that the ready liquidity and constant evaluation of assets, together with a range of available investments act as a powerful inducement to save and invest and draw the savings of the community into the channels which are expected to be most productive. It would be difficult to find a more effective method of doing this.

In addition, the overall trend of prices and volume of business on the stock exchange serve as an economic barometer which faithfully registers the changing events and opinion about the investment outlook. Even allowing for the aberrations of speculation, % this mirror of the investment scene is one that neither economists nor businessmen nor the govt, charged with the formulation of economic policy, can afford to ignore.

Question 2.
Explain the various risks attached to investment?
Answer:
There are many risks attached to the investment, which are as follows:
1. Business and Financial Risk: Business risk and financial risk are actually two separate types of risks, but since they are interrelated it would be wise to discuss them f together. Business risks, which is sometimes called operating risk, is ‘ the risk associated with the normal day-to-day operations of the firm.

Financial risk is created by the use of fixed cost securities. Looking at the two categories in sources and uses, Context, business risk represent the chance of loss and the variability of return created by a firm’s uses of funds. Financial risk is the chance of loss and the variability of the owner’s return created by a firm’s sources of funds.

To clarify this imp. distinction between business and financial risk, let us examine the income statement contained in the exhibit. Earnings before interest and taxes can be viewed as the operating profit of the firm, the profit of the firm before deducting financing charges and taxes.

Business risk is concerned with earnings before interest and taxes and financial risk is concerned with earnings available to equity holders. The two components of business risk signify the chance that the firm will fail because of the inability of the assets of the firm to generate a sufficient level of earnings before interest and the variability of such earnings.

The two components of financial risk reflect the chance that the firm will fail because of the inability, to meet interest and principal payments on debt, and the variability of earnings available to equity holders caused by fixed financing charge. Putting it in another way, this second component of financial risks is the extent to which earnings available to equity holders will vary at a greater rate than earnings before interest and taxes. In case the firm does not employ debt, there will be no financial risk.

An imp. aspect of financial risk is the interrelationship between financial risk and business risk. In effect, business risk is basic to the firm, but the firm’s risk can be affected by the amount of debt financing used by the firm. Whatever be the amount of business risk associated with the firm the firm’s risk will be increased by the use of debt financing.

As a result, it follows that the amount of debt financing used by, the firm should be determined by the amount of business without fear of default, or a market impact on the earnings available to the equity shareholders. Conversely, if the firm faces a lot of business risk, then the use of a lot of debt financing may jeopardize the firm’s future operations.

2. Purchasing power Risk: Whenever investors desire to preserve their economic position over time, they utilize investment outlets whose values vary with the price level. They select investments whose market values change with consumer prices which compensates them for the cost of living increase. If they do not, they will find that their total wealth has been diminished. Inflation is an economic crippler that destroys the economic power of investors over, goods and services.

In essence, investors have to be concerned with the command that their invested money has over goods and services on a continuing basis. In fact, we have been living with increasing consumer prices for many years.

3. Market Risks: This hazard arises from the fact that market prices and collateral values of securities and real property may vary substantially, even when their earning power does not change. The causes of these price uncertainties are varied. At times many markets are simply thin-that is, buyers and sellers, appear only intermittently. More commonly, investment prices vary because investors vacillate in their preference for different forms of investment, or simply because they sometimes have money to invest and sometimes do not have it. But once the equity has developed a particular price pattern, it does not change this pattern quickly. The causes of changes in market price are usually beyond the control of the corporation.

An unexpected war or the end of one, an election year, political activity, illness or death of a President, speculative activity in the market, the outflow of bullion – all are tremendous psychological factors in the market. The irrationality in the securities markets may cause by the general tenor of the market any called market risks.

The market risk in equity shares is much greater than it is in bonds. Equity share value and prices are related in some fashion to earning. Current and prospective dividends, which are made possible by earnings, theoretically, should be capitalized at a rate that will provide yields to compensate for the basic risks, on the other hand, bond prices are closely related to changes in interest rates on new debt. Equity prices are affected primarily by financial risk considerations which, in turn, affect earnings and dividends.

However, equity prices may be strongly influenced by mass psychology, by abrupt changes in financial sentiment, and by waves as optimism or presses. Whenever emotions run high, speculators and gamblers crave action. They cannot refrain from entering the market arena as their greed for profits becomes their overpowering motivation. They do not hesitate to analyze the market .environment. They do not base their judgment on an accurate evaluation of the underlying factors. Instead, do not base their judgments on an accurate evaluation of the semblance of value. Greed pushes-price up and fear drives them down.

In short, the crux of the market risk is the likelihood of incurring. Capital losses from price changes engendered by speculative psychology.

4. Interest Rate Risk: A major source of risk to the holders of high-quality bonds changes in interest rates, commonly referred to as interest rate risk. These high-quali|y bonds are not subjected to either substantial-business risk or financial risk. Consequently, they are referred to as high-quality bonds. But since they are high-quality bonds, their prices are determined mainly, by the prevailing level of interest rate in the market. As a result, if interest rates fall, the prices of these bonds will rise, and vice-versa.

Interest rate risk affects all investors in high-quality bonds regardless of whether the investors hold short-term or long term bonds. Changes in interest rate have the greatest impact on the market position of long-term bonds, Since the longer the period before the bond matures, the greater the effect of the change in interest rates. On the other hand, changes in interest rates will not have much of an impact on-the-market price of short-term bonds, but the interest income on a short-term bonds portfolio may fluctuate markedly from period to period, as interest rate changes. Consequently, changes in interest rates affect investors in long-term as well as short-term bonds.

5. Social or Regulatory Risk: The Social or regulatory risk arises where an otherwise profitable investment is impaired as a result of adverse legislation, harsh regulation climate, or in extreme instances nationalization by a socialistic govt. The profits of industrial companies may be reduced by price controls, and rent controls may largely destroy the value of the rental property, hold for income, or as a price-level hedge. The social risk is real political and thus unpredictable, but under a system of representative govt, based on increasing govt, intervention in business affairs, no industry can expect to remain exempt from it.

6. Other Risk: Other types of risk, particularly those associated with an investment in foreign securities, are the monetary value risk and the political environment risk. The investor who buys foreign govt, bonds, or securities of foreign corporations often in an attempt to gain a slightly.

Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 3 Business Environment. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 3 Important Extra Questions Business Environment

Business Environment Important Extra Questions Short Answer Type

Question 1.
Give your views on ‘Economic Environment in India.
Answer:
The economic environment in India consists of various macro-level factors related to the means of production and distribution of wealth which have an impact on business. These are

1. Stage of economic development of the country.
2. The economic structure in the form of a mixed economy.
3. Economic policies of Government including industrial monetary and fiscal policy.
4. Economic planning including five-year plans etc.
5. Infrastructural factors such as financial institutions.

Question 2.
State briefly the influence of the technological environment on business and industries.
Answer:
Positive effects:

1. The efficiency of business increases tremendously to face global competition.
2. The firm is able to produce better quality products at a cheaper price.

Negative effects:

1. Continuous up-gradation as per the changing environment has become a necessity to remain competitive in the market.
2. Small and medium enterprises find it difficult to invest in the new technologies due to limited funds available.

Question 3.
Do you agree with the statement that “Environment offers opportunities as well as threats”? Discuss.
Answer:
Yes, the statement that the business environment offers opportunities, as well as threats, holds true. Threats to the domestic industry can be in the form of increased or cutthroat competition, no availability of a trained workforce.

Shortage of raw materials, a shift in consumer demand to other products, etc. For example, Chinese toy manufacturers have taken over the world toy market. Now they almost have taken monopoly in this sector.

The opportunities can be experienced in the form of easy accessibility to new technology, opening, up of new investment avenues increased orders, world quality products due to competition, etc. For example, there is increased demand for environment-friendly products.

Question 4.
Explain the Environment analysis and its Diagnosis with SWOT analysis.
Answer:
Environment Analysis is the study of various factors of l environment affecting the business, like economic factors, political factors, technological factors, global factors, etc. Environment analysis helps to anticipate opportunities and to plan to take appropriate actions to avail these opportunities. By careful analysis of the environment, the business comes to know the opportunities provided and threats posed by the environment.

However, in general, the manager takes the help of SWOT analysis to analyze the environment. SWOT analysis has have been discussed below:

Swot analysis: Swot Analysis is an analysis of the strengths and weaknesses of the organization and the opportunities and threats in the: environment. SWOT-analysis helps in the formulation of business policy.

Two parts of SWOT analysis are

1. Strengths and Weaknesses: Strengths and weaknesses are related to internal factors such as finance, technology, production facilities, personnel capabilities, etc. of the business organization. The ability of a business organization to exploit the available environmental opportunities depends upon the strength of these internal factors. An organization should concentrate on such business for which it is most competent in case if it does not possess the necessary strength to exploit the opportunities.

2. Opportunities and Threats: Opportunities and threats are related to the external environment. Good opportunities are provided to the business by changes in the external environment. Similarly, the same is responsible for posing threats to the business. Lower rate of interest, development of new market new innovations, etc. are some forms of opportunities. Threats may in the form of increased competition decreasing demand, obsolete technology, etc.

Business Environment Important Extra Questions Long Answer Type

Question 1.
What is Environmental Scanning? Explain the SWOT technique of Environmental scanning.
Answer:
Environmental Scanning: The first and foremost step in corporate planning is environmental scanning. Every organization functions within a specific environment and the various elements of the environment have a significant influence – on its functioning.

SWOT stands for
S – Strengths,
W – Weakness,
O – Opportunities, and
T – Threats.

Strength: Strength is an inherent capacity that an organization can use to gain a strategic advantage over its competitors. For example, superior research and development facilities enable a firm to develop new products and there by gain a competitive advantage:

Some of the examples of a company’s strength are:

1. Management
2. Marketing
3. Finance
4. Production
5. Personal

Weakness: Weakness is an inherent limitation or constraint which creates a strategic disadvantage. For example, over-dependence on a single product is potentially very risky.

Some of the examples of the weakness of a company are:

1. Management
2. Marketing
3. Finance
4. Production
5. Personnel

Opportunity: Opportunity is a favorable condition in the environment. It enables an enterprise to consolidate its position. For exam growth of the demand is an opportunity for the company to grab.

Threat: Threat is an unfavorable condition in the environment. It creates a risk to the business. For example, growing competition is a threat to the business.

Thus we can see that SWOT Analysis helps an enterprise in matching its strengths and weakness with the opportunities and threats operating in the environment.

Question 2.
Explain in detail the External Environment and affecting factors.
Answer:
External Environment: External Environment consists of all the forces, institutions, and events that are relevant to an organization’s operations but which are absolutely beyond the control of the enterprise. It includes all the outside factors that provide opportunities and pose threats to the organization. The main components of the external environment are:

• Micro Environment includes competitors, suppliers, consumers, the public at large, and marketing intermediaries.
• Macro Environment includes economic environment, socio-cultural environment, political environment, legal environment, and technological environment.
• Micro Environment Micro environment includes all those factors which are closely related to the business. These factors have a different effect on various types of enterprises. Every enterprise has its unique dealing with all these factors. The various factors included in the microenvironment are

1. Competitors Every business enterprise and its policies are affected by the competitors to a great extent. The policies of the competitors can affect the pricing of the product, quality, and quantity of the product, the advertising pattern and budget, etc.

2. Suppliers Business enterprise is very much affected by its relationship with its suppliers. It is in the hands of the suppliers to make the uninterrupted supply of raw materials at a reasonable price.

3. Consumers: The satisfaction of the consumers is one of the main aims of a business enterprise. Different types of consumers are of different importance to the enterprise. The business enterprise must be able to provide goods according to the tastes and preferences of different types of consumers.

4. Public at Large The attitude and behavior of different constituents of the public at large like the local public, trade unions, press, etc. affect the business enterprises.

5. Marketing Intermediaries The marketing intermediaries like agents, whole-sellers, retailers, etc. also affect the business enterprises to a great extent. They act as a link between the manufacturer and the ultimate consumer and can be an important factor in the business.

Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 2 Principles of Management. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 2 Important Extra Questions Principles of Management

Principles of Management Important Extra Questions Short Answer Type

Question 1.
Explain the term Principles of Management?
Answer:
Principles of Management:
A Principle is a fundamental statement of truth that provides a guideline to thought and action. It is a universal truth that establishes a cause and effect relationship between two or more variables. These fundamental truths are applicable in specific circumstances and are capable of predicting the result of any Managerial action. Principles are both ‘descriptive’ and Prescriptive’ in nature.

A principle is descriptive if it simply describes the relationship between the variables. It is prescriptive if it indicates what should be done in a given situation. The principle of management lays down guidelines for improving management practice. These principles are the result of the long experience of managers in different fields of organized effort. Most of these principles are applicable in all kinds of managerial situations, be it a government organization, a business enterprise, a religious foundation, or an educational institution.

Question 2.
Why the principles of Management needed?
Answer:
According to Terry, “Principles of management are to a manager as a table of the strength of materials is to a civil engineer,” The utility of principles lies in the foundation they provide for its efficient conduct, by making out the basic features that must characterize the practice of management, irrespective of where it is occurring. By means of the principle of Management, a manager can avoid the fundamental mistakes in his job and foretell the results of his action with confidence.

Question 3.
Explain in brief the major criticisms of scientific management.
Answer:
Demerits or Criticisms of Scientific Management:- Although there are many advantages of Taylor’s scientific management yet it has also been severely criticized. Following are the main points of criticism.

Criticisms by Employers:

1. Costly/Expensive System: In this scientific management system, much cost is required. More capital has to be invested to implement scientific management. It is a very expensive system.
2. Time-Consuming: This system is very time-consuming. It takes too much time to implement scientific management.
3. The fault of Specialisation: The excess specialization creates faults. The problem of certification also arises. It is not suitable for small industrial units.
4. Lack of Freedom: With the appointment of specialists, the producers cannot take decisions freely as most of the responsibilities fall on specialists. So, they feel hesitant in adopting the scientific technique.
5. Unsuitable for Small Scale Business: As the technique of scientific management is much expensive, only large scale enterprises can implement it. It is impossible for small-scale businesses to adopt these techniques.

Criticisms by Employees:

1. Fear of Unemployment
2. Indifference of Work
3. Exploitation
4. End of Initiative
5. Criticism by Labour Unions
6. Bad effect on health
7. Excessive work land

Question 4.
What is the differential piece wage system advocated by F.W. Taylor and also gives an illustration?
Answer:
Differential piece wage system Taylor was a strong advocate of the piece wage system. He wanted to differentiate between efficient and inefficient workers. The standard time and other parameters should be determined on the basis of the work-study discussed above. The workers can then be classified a$ efficient or inefficient on the basis of these standards. He wanted to reward efficient workers.

So he introduced the different rates of wage payment for those who performed above standard and for those who performed below standard. For example, it is determined that standard output per worker per day is unit, and those who made standard or more than standard or more than standard will get Rs 60 per unit and those below will get Rs 30 per unit. Now an efficient worker making 10 units will get 10×60 = Rs 600/- per day whereas a worker who makes 6 units will get 6 × 30 = Rs 180 per day.

According to Taylor, the difference of Rs 420 should be enough for the inefficient worker to be motivated to perform better. It is important to have a re-look at the techniques of scientific management as comprising a unified whole of Taylorian prescription of efficiency. Therefore, the sum and substance of Taylorism lie not in the disjointed description of principles and techniques of scientific management, but in the change in the mindest, which he referred to as mental revolution.

Principles of Management Important Extra Questions Long Answer Type

Question 1.
Name the main principles of Management propounded by Henri Fayol and explain any two?
Answer:
Development of Management Principles: It was Henri Fayol a French mining engineer and chief executive who for the first time stated a set of 14 principles of management. Fayol wrote these principles on the basis of his practical experience as a manager. According to him, these principles can be applied in all types, functions, levels, and sizes of organizations. This had earned him the title universalist’. For a long time, Fayol’s list was accepted as ‘Complete and Comprehensive. A description of these principles follows.

1. Division of Work
2. Authority and Responsibility
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interests to the general interests
7. Remuneration
8. Centralization
9. Scalar chain hierarchy
10. Order
11. Equity
12. Stability of personnel
13. Initiative
14. Esprit de corps

1. Division of Work – This is the principle of specialization which applies to all kinds of work. The more people specialize, the more efficiently they can perform their work. Specialization increases output by making employees more efficient.

2. Authority and Responsibility – Authority is the right to give orders and the power to exact obedience. Managers need authority to get things done. According to Fayol, responsibility is a corollary and a natural consequence of authority. Responsibilities an obligation to perform the tasks in a satisfactory manner.

Question 2.
Give reasons for or against the Universality of the principle of Management?
Answer:
University of Management principles Universality of management suggests that the manager uses the same managerial skills and principles in each managerial position held in various organizations. Accordingly, an industrial manager could manage a philanthropic organization, a retired army general could manage a university, a civil servant could manage an industrial organization, and so on.

Universality implies transferability of Managerial skills across industries, countries, countries. It means that management is generic in content and applicable to all types of organizations. Lawrence A. Appley declared that ‘He who can manage, can manage anything.’ Let us examine the factors that have contributed to the universal application of management in every level of organization and at every level of organizations.

Arguments for Universality:
1. Managers perform the same functions irrespective of their level in the organization, industry, or country. The functions performed by the company president and the office supervisors .are the same Regardless of the label-all managers plan, organize, lead and control. The difference lies in such things as the breadth of the objectives, the magnitude of the decision taken, the organization’s relationships affected, and so on.

2. Classical writers like Fayol, Urwick, and others believed that there are certain principles in management that are universally applicable.

3. The fundamentals governing the management of a business, a Church, or a university are the same, the differences lie in the techniques employed and practices followed. All managers accountable for the performance of other people, they plan, make decisions, organize work, motivate people and implements control, and so forth. In order to achieve the results the techniques employed might differ depending on situational factors like culture, tradition, attitudes, etc.

4. The very fact that managers regularly move from public to private sector organizations bears ample testimony to the fact that management concepts are universal across organizational types.

Arguments against the Universality This is –
1. The universal thesis implies complete substitutability of managerial skills which is rarely found in actual practice. It seems improbable that the captain of a hockey team would excel equally as the president of the charitable agency or as the vice-chancellor of a university. It is true that the manager’s job becomes almost universal in content at the upper levels of organizations. At a lower level of organization, however, transferability of managerial skills may not be possible.

2. Universality thesis presupposes the existence of predictability regarding the outcomes of management actions. A manager working in firm A must be able to predict the likely consequences of his actions in firm B where he is likely to join. And he may have to face serious problems in case the underlying philosophies of these organizations were to differ.

Here we are providing Class 12 Business Studies Important Extra Questions and Answers Chapter 1 Nature and Significance of Management. Business Studies Class 12 Important Questions are the best resource for students which helps in class 12 board exams.

Class 12 Business Studies Chapter 1 Important Extra Questions Nature and Significance of Management

Nature and Significance of Management Important Extra Questions Short Answer Type

Question 1.
Distinguish between coordination and cooperation.
Answer:

Co-ordination	Cooperation
1. It is an orderly arrangement of a group effort to provide for unity of action.	1. It is a voluntary desire to help each other
2. Co-ordination includes cooperation, hence it is a wider term.	2. Co-operation is a narrow term as it is a part of co-ordination.
3. It is a deliberate effort made by the management to balance interrelated activities.	3. It is the voluntary effort made by a group of people depending on their mental needs or liking
4. It is a technique.	4. It is an attitude.

Question 2.
Write the characteristics of management and explain any two.
Answer:
Characteristics The key features of management are –

1. Goal-oriented process,
2. all-pervasive,
3. multidimensional,
4. Continuous process,
5. group activity
6. dynamic function,
7. tangible force.

1. Management is a goal-oriented process:  An organization has a set of basic goals which are the basic reason for its existence. These should be simple and clearly stated.

2. Management is all-pervasive: The activities involved in managing an enterprise are common to all organizations whether economic, social, or political Thus it is all-pervasive.

Question 3.
“Lack of proper management results in wastage of time money and efforts.” Do you agree with this statement? Give reasons in support of your answer. (2003)
Answer:
Yes, the above-mentioned statement holds true as the reasons are as follows.

1. Means to accomplishing goals:  Management is important because it helps in achieving group goals, increases efficiency, and creates a dynamic organization.
2. Unified direction: Management motivates and directs the workforce by unifying goals with the group goals.
3. Establishes sound industrial relations: The success of any organization depends upon its workforce. It is the only factor of production which is movable in nature. Effective management tries to build a feeling of team and loyalty towards the organization.
4. It looks after for future uncertainties: An effective management prepares the organization for future contingencies and paved the way for its survival and growth. In the ‘ absence of this foresightedness, an organization may be forced to wind up its operations resulting in wastage of time, efforts, and resources.

Question 4.
State two objectives of management. (1993, 1996, 1998)
Answer:
The main two objectives of management are –

1. Maximization of profits at minimum cost.
2. Optimum utilization of the given resources by the organization.

Question 5.
What is meant by Administration? (1992, 1999)
Answer:
Administration means a determination of overall policies, the setting of major objectives, the identification of general-purpose, the laying out of broad programs, etc. It is determinative in nature.

Question 6.
Name any two activities undertaken at the top-level management. (1995, 2001, 2004)
Answer:
The two main functions or activities of top-level management are.

1. It does long-term planning and formulating suitable policies, organizing (determination of organization structure), and controlling.
2. It maintains cordial relations with all outside parties like the shareholders, the government, etc.

Question 7.
State two functions of lower-level management. (1992-1994)
Answer:
The main functions are as follows –

1. It translates the intermediate plan of middle-level management into day to day operating plan.
2. It gives directions to operating employees by assigning jobs, evaluating and correcting their performance and sends information and progress reports to higher management.

Nature and Significance of Management Important Extra Questions Long Answer Type

Question 1.
Do you think proper Management is an important part of an organization?
or
Explain the importance of management.
Answer:
Yes, management is a universal activity that is integral to any organization. We now examine some of the reasons that have made management so important.

1. Management helps in achieving group goals: Management is required not for itself but for achieving the goals of the organization, the task of a manager is to give a common direction to all.

2. Management increases efficiency:  The aim of a manager is to reduce costs and increase productivity ” through better planning, organizing directing, staffing, and controlling the activities of the organization.

3. Management creates a dynamic organization: All organizations have to function in an environment that is constantly changing.

4. Management helps in achieving personal objectives: A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organizational objective.

5. Management helps in the development of society: An organization has multiple objectives to serve the purpose of the different groups that constitute it. In the process of fulfilling all these management helps in the development of the organization and through that it helps in the development of society. It helps to provide good ‘ quality products and services, creates employment opportunities, and leads the path towards growth and development.

Question 2.
Explain the level of management and their main functions.
Answer:
Level of Management.

Generally speaking, there are three levels in the hierarchy of an organization.

1. Top Management:
They consist of the senior-most executives of the organization by whatever name they are called. They are usually referred to as the chairman, the chief executive officer, chief operating officer, president, and vice-president. Top management is a team consisting of managers from different functional levels. Their basic task is to integrate diverse elements and coordinate the activities of different departments according to the overall objectives of the organization. They are responsible for the welfare and survival of the organization. Their job is complex and stressful.

2. Middle Management:
It is the link between top and lower-level management. They are subordinate to top managers and superior to the first-line managers. They are usually known as division heads, operation managers, or plant superintendent. They are responsible for implementing and controlling plans developed by top management. At the same time, they are responsible for all the activities of first-line management. Their main task is to carry out the plans formulated by the top management and at the same time, they are responsible for all the activities of first-line managers.

3. Operational Management:
Foreman and supervisors comprise the lower level in the organization. Supervisors directly oversee the efforts of the workforce. Their authority and responsibility are limited according to the plans drawn by the top management. They play a very important role in the organization since they interact with the actual workforce and pass on instructions of the middle management to the Workers. Through the quality of their efforts of output is maintained. Wastage of materials is minimized and safety standards are maintained.