Bihar Board 12th Business Studies Important Questions Short Answer Type Part 4 are the best resource for students which helps in revision.
Bihar Board 12th Business Studies Important Questions Short Answer Type Part 4
Give the meaning of finance.
Money required for carrying business activities is called business finance. Almost all business activities require some finance. Finance is needed to establish a business, to run it, to modernise it, to expand to diversity it. It is thus, needed at every stage in the life of a business entity. Availability of adequate finance is thus very crucial for the survival and growth of a business.
Give the meaning of Financial Management.
All finance comes at some cost. It is quite imperative that it needs to be carefully managed. Financial management is concerned with optimal procurement well as usage of finance. For optimal procurement different available sources of finance are compared with associated risks. Similarly, the finance; so procured needs to be invested in a manner that the returns for the investment exceed the cost at which procurement has taken place.
Financial managment aims at reducing the cost of funds procured. Keeping the risk under control, and achieving effective deployment of such funds is covered under financial management. It also aims at ensuring availability of enough funds whenever required as well as avoiding idle finance.
What are the main objectives of financial management?
The main objectives of financial management are as follow:
1. Profit maximization: It is the chief aim of every investor, while purchasing the share of company, the investor see the profitability of that company. When a company earns maximum profit, chances are that the rate of dividend will be high. Thus the main objectives of financial management is to safeguard the interest of shareholders, creditors, the company, employees and the government at large.
The arguments behind the concept of maximization of profit are:
- Profit is the indicator of economic efficiency of the company.
- Profit leads to efficient allocation of resources and the distribution to the users.
However, it suffers from certain limitations:
- It assumes perfect competition in the economy which may always be not so. Thus it may not lead to optimisation of owner’s interest and society.
- It ignores the impact of dividend policy on market price of the share.
- It is a vague concept and is subject to varied interpretation.
2. Wealth maximisation: It is also known as value maximisation or net present worth maximisation. It is universally accepted as the objective for financial decision. As per this concept the value of an asset should be viewed in terms of benefits it can produce.
What are the characteristics of sound financial plan?
The following are the main characteristics which should be kept in mind while making a sound plan:
- Simplicity: The financial plan should be simple so that every one can understand it easily.
- Based on organizational objectives: The financial plans are prepared with a view to cover the main objectives of that organization. Hence, it is suggested that funds should be procured at the lowest cost otherwise the profitability of the organisation will suffer.
- Best utilisation of resources: The best financial plan is the one which utilises its own resources for the benefit of the company. Ploughing back of profit is the best way of financing the business enterprises.
- Flexibility: The financial plan should be flexible, which means due scope for adjustment as and when needed may be incorporated in it.
- Utility: The proper use of capital should be for the development of the organisation.
Define the capital structure.
Debt and equity differ significantly in their cost and riskiness for the firm. Cost of debt is lower than cost of equity for a firm because lender’s risk is lower than equity shareholder’s risk, and therefore, they should acquire a lower rate of return. Additionally, interest paid on debt is deductible expense for computation of tax liability whereas dividends are paid out of after tax profits.
Increased use of debt, therefore, is likely to lower the overall cost of capital of the firm provided that cost of equity remains unaffected cost. Hence, capital structure refers to the mix between owner and borrowed funds.
Distinguish between owner’s capital and borrowed capital.
Distinction between owner’s capitals and borrowed capital:
|Basis of difference||Owner’s capital||Borrowed capital|
|1. Meaning||It consists of the amounts contributed by the owner and their profits reinvested in the business.||It includes funds available in the form of loans or credit.|
|2. Redemption||It remains permanently invested in the business.||It is not permanent source of business finance. The borrowed funds have to be paid back after the stipulated period.|
|3. Risk||It carries the risk of business. It is also called risk capital.||The debts or the company are generally secured. in case of winding up, the creditors are paid first before anything is paid to the shareholders.|
What is “Financial Risk”? Why does it arises?
Financial risk is the chance that a firm would fail to meet its payment obligations. Increased use of debt increases the financial risk of a business. It arises on account of use of debt in Capital Stricture, any default in meeting these commitments may force the business to go into liquidation. Higher use of debt increases the fixed financial charges of a business.
Define a current asset and gave four examples.
Current assets are those assets which are the normal routing of the business, get converted into cash or cash equivalents within one year. Current assets facilitate smoothing day-to-day operations of the business. Current assets are usually more liquid but contribute less to the profits than fixed assets e.g., 1. Cash in hand/Cash at bank, 2. Marketable securities, 3. Bills receivables, 4. Debtors, 5. Finished goods inventory, 6. Work in progress, 7. Raw materials, 8. Prepaid expenses.
These assets are expected to get converted into cash or cash equivalents within a period of one year. There provide liquidity to the business. An asset is more liquid if it can be converted into cash quicker and without reduction in value. Insufficient investment in current assets may make it more difficult for an organization to meet its payment obligations. However, these assets provide little or low returns. Hence a balance needs to be struck between liquidity and profitability.
Give the functions of financial market.
Financial market is a merket for the creation and exchange of financial assets. Its functions are as follows:
- Mobilization of savings and channelising them into the most productive uses.
- Facilitate price discovery.
- Provide liquidity to financial assets.
- Reduce the cost of transactions.
What do you mean by money market?
Or, “Money market is essentially a market for short-term funds.” Discuss.
The money market is a market in which short-term money loan or financial assets that are close or near substitute of money are traded. The ‘short term’ means generally for the period upto one year. The term ‘close substitutes for money’ is used to denote financial assets which can be turned into cash quickly. It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded everyday. It has no physical location, but is an activity conducted over the telephone and through the internet.
It enables the raising of short term funds for meeting the temporary shortage of cash and obligations of the temporary deployment of excess funds for earning returns. The major participants in the market are the Reserve Bank of India (RBI), commercial banks, non-banking finance companies, state governments, large corporate houses and mutual funds.
Discuss the objectives for evolution of money market.
There are mainly four objectives of money market:
- It provides an equilibrating mechanism for earning out short term surpluses and deficits.
- The money market provides a focal point for Central Bank intervention for influencing liquidity in the economy.
- It provides reasonable access to users of short-term money to meet their requirements at realistic, price.
- From the point of view of an efficient banking system, the money market should genuinely equilibrate in the short term to provide a viable alternative to default in the maintenance of reserve requirement by banks.
Discuss the functions of money market.
There are various functions performed by money market for overall economic development of country, main are as follows:
- It provides outlets to commercial banks, non-banks financial concerns, business corporations and other investors for short-term.
- It also provides short term funds to business man, industrialists, traders, etc. to meet their day-to-day requirement of working capital.
- It enables businessmen with temporary surplus funds to invest them for a short periods.
- By discounting the bills and commercial papers the money market bridges the time limit between the sale and actual payment of money.
What is Capital market?
Capital market is concerned with long term finance for industry and government, just as money market is concerned with supply of short-term finance to trade and industry. Capital market consists of series of channels through which the saving of community are made available for industry and government.
It refers to all the facilities and industrial arrangement for the borrowing and lending term funds. It directs savings into most productive uses leading to growth and development of the economy. An ideal capital market is one where finance is available at reasonable cost.
How capital market function?
The term capital market refers to facilities and industrial arrangement through which long term funds, both debt and equity are raised and invested. The capital market consists of development banks, commercial banks and stock exchanges.
An ideal capital market is one where finance is available at reasonable cost. The process of economic development is facilitated by the existence of a well-functioning capital market. Infact, development of the financial system is seen as a necessary conditions for economic growth. It is essential that financial institutions are sufficiently developed and that market operations are free, fair, competitive and transparent. The capital market should also be efficient in respect of the information that it delivers, minimize transaction cost, allocate capital most productively.
Explain the two parts of Capital market.
The capital market can be divided into two parts:
- Primary market
- Secondary market
1. Primary market: The primary market is known as the new issues market. It deals with flow securities being issued for the first time. The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seek to establish new entereprise or to expand existing ones.
2. Secondary Market: The secondary market is also know, as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity arid marketability to existing securities.
What are the features of Indian capital market?
The capital market in India has exhibited following special features in the recent years:
- Greater reliance on debt instruments as against equity and in particular borrowing from financial, institutions.
- Issue of debentures, particularly convertible debentures with automatic and compulsory conversion into equity without the normal option given to investors.
- Floation of equity issues for the purpose of takeover, amalgamation, etc. and avoidance of borrowing from financial institutions for fear of their discipline and conversion clause by bigger companies.
- Avoidance of underwriting by some companies to reduce the costs and avoid scrutiny by financial institutions.
Discuss the functions of stock exchange.
The functions of a Stock Exchange are as follow:
1. A ready and continuous market for trading: Stock exchange provides a ready market for those who wish to buy and sell securities. Buyers and sellers do not have to search for each other. They come in contact with each other through brokers who provide a quick intermediation between them.
2. Liquidity: It provides quick liquidity to investors who are motivated by liquidity factors. People with surplus cash can invest in securities which provide them a return higher than the bank rate and people with deficit it cash can sell their securities to convert them into cash.
3. Time efficiency: It enables the security holder to dispose off his securities at the best price in the shortest possible time period. So it true for buyers.
4. Source of finance: Government local bodies, financial corporations and corporate enterprises have been able to raise crores of rupees by channelising individuals funds in securities. It thus, provides an effective source of finance to them where by they connect their financial requirements for their day-to-day working, setting up to new ventures, expansion, diversifications and modernisation of their existing units.
5. Pricing of securities: It, prices the securities as close as possible to their net worth. The prices are based on their present and future income earning capacity. Though some degree of speculation is always present, buyers and sellers deals in securities which almost reflect their true “work. Prices are quoted and published daily in the forms of stock market quotations.
6. Equity and safety in dealings: A stock exchange operates in accordance with rules and regulations framed by the government. The government is empowered under the Securities Contracts (Regulations) Act, 1956 to grant and withdraw approval or change bye-laws, demand enquiries on the members of stock exchange, supersede and suspend the governing body of the stock exchange, suspend its business etc.
7. Mobilisation of savings: It provides an outlet for investment of surplus funds of corporates and non-corporates in corporate securities that would fetch them a ratio of return generally higher than the rate offered by banks.
8. Capital formation: By channelising savings in the most productive investment outlets, stock exchanges provides for capital formation and economic growth of an economy.
What is meant by National Stock Exchange of India (NSE)?
The National Stock Exchange is the latest, most modem technology driven exchange. It was incorporated in 1992 and was recognised as a Stock Exchange in April 1993. It started operations in 1994, with trading on the wholesale debt market segment. Subsequently, it lanched the capital market segment in November 1994 as a trading platform for equities and the futures and option segment in June 2000 for various derivate instruments. NSE has set f up a nation-wide fully automated screen based trading system.
The NSE was set up by leading financial institutions, banks, insurance companies and other financial intermediaries. It is managed by professional, who do not directly or indirectly trade as on the exchange. The trading rights are with the trading members who offer their services to the investors. The board of NSE comprises of senior executives.
Authority can be delegated but not responsibility. Explain.
The power of taking decision in order to guide the activities of others is called authority. Authority can be delegated where the obligation of a subordinate to perform assigned duties. The manager divides some of work and authority among his subordinates. No manager can perform all the function himself. Responsibility can not be delegated in any circumstances.
What are the reasons for the establishment of SEBI?
The capital market has witnessed a tremendous growth during 1980’s charactered particularly by the increasing participation of the public. This ever expanding investors population and market capitalization led to a variety of malpractices on the part of companies and others involved in the securities market. The glaring examples of these malpractices include existence of self-styled merchant bankers, unofficial private placements rigging off prices, unofficial premium on new issues, non-adherence of provision of the Companies Act, violation of rules and regulations of stock exchanges and listing requirements, delay in delivery of shares etc. These malpractices and unfair trading of shares etc. These malpractices and unfair trading practices have eroded investors’ confidence and multiplied investors’ grievances.
The government and the Stock Exchange authorities were helpless in redressing the investors problems because of lack of proper penal provision in the existing legislation. This gave rise reasons to establish Securities Exchange Board of India.
Define the Securities and Exchange board of India (SEBI).
The Securities and Exchange Board of India was established by the Government of India on 12th April for the orderly and healthy growth of securities market and for investors protections. It was to function under the administrative control of the ministry of finance of the Government of India. The SEBI was given all powers through the ordinance passed in Parliament to redress the investors and to control the malpractices prevailing in stock exchanges, the government of India took initiative to set up a separate regulatory body known as Securities and Exchange Board of India.
What is ‘Treasury Bills’?
Treasury Bills: Treasury bills are issued by the Reserve Bank of India on behalf of the Government of India as a short term liability, and sold to banks and to the public, The issue period ranges from 14 to 364 days. Treasury bills are negotiable instrument, i.e,. there are freely transferable. They do not pay any interest but are issued at a discount. Their marketability makes them popular and they are considered a safe investment.
What is marketing? What functions does it play in process of exchange of goods and services? Explain.
According to Candiff and Still marketing is the business process by which products are matched with the markets and through which transfers of ownership are affected. If a business organization produces the products after assessing the requirements of prospective customers, it is more likely to be successful to achieve its objective. The process of marketing works through the exchange mechanism.
The individual buyers and sellers obtain what they need and want through the process of exchange i.e. the process of marketing involves exchanges of products and services for money or something considered valuable by the people. Exchange mechanism refers to the process through which two or more parties come together to obtain the desired products or service from someone.
Give the important features of marketing.
Features of Marketing:
1. Need and wants: The process of marketing helps individuals and groups in obtaining what they heed and want. Thus, the primary reason for people to engage in the process of marketing is to satisfy some of their needs or wants. Needs are basic to human beings and do hot pertain to a particular product. Wants are culturally defined objects that are potential satisfiers of needs.
2. Creating a market offering: Marketing offering refers to a complete offer for a produce for service, having given features, like size, quality, taste, etc. at a certain price, available at a given outlet or location and soon. A good ‘market-offer’ is the one which is developed after analysing the needs and preference of potential buyers.
3. Customer value: The process of marketing facilitates exchange of products and services between the buyers and sellers. The buyers make buying decision on their perception of the value of the product or service in satisfying their need, in relations to its cost. A product will be purchased only if it is perceived to be giving greatest benefit or value for the money.
4. Exchange mechanism: The process of marketing works through the exchange mechanism. The individuals (buyers and sellers) obtain what they need and want through the process of exchange. In the modem world, goods are produced at different places and are distributed over a wide geographical area through various middlemen, involving exchanges at different levels of distribution.
In short marketing is not merely a business phenomenon or confined only to business organiations but marketing activities are equally relevant to nonprofit organisations such as hospitals, schools, sports-clubs and social and religious organizations.
What are the main objectives of marketing?
The main objectives of marketing are:
- Consumer Satisfaction: A business organisation can survive only if its products and services are demanded by customers. Effective marketing makes an effort to supply goods and services to the consumer.
- Identification of consumers’ demand: Marketing is concerned with assessment of consumers’ demand so that the producer can know what goods be produced and in what quantity.
- Co-ordination with other business activities: Marketing makes an effective effort of Co-operation with other aspect’s of business.
- Sales promotion: The aim of marketing is to boost sales through advertisement of mass contact technique. The new and old customers should be kept well informed about the quality and price of product.
- Control on sales areas: Marketing is useful in controlling the sales areas of any business organisation. Every organisation plans its sales according to an area or region, if any variation in sales then it sounds be corrected as soon as possible.
What are the differences between marketing and selling.
The differences between marketing and selling are:
- Focuses on customer heeds.
- Customer enjoys supreme importance.
- Product planning and development to match products with markets,
- Inregrated approach to achieve long term goals.
- Converting customers needs.
- Caveat vender (let the sellers beware)
- Profit through customer satisfaction.
- Focuses on seller needs.
- Product enjoys supreme importance.
- High pressure selling to sell goods already produced.
- Fragmented approach to achieve immediate gains.
- Converting products into cash.
- Caveat emptor (let the buyers beware).
- Profit through sales volume.
Define the marketing management.
Marketing management involves planning, organising, directing and controlling all marketing activities. It is responsible for developing and executing an appropriate marketing mix so as to achieve the organisational objectives. According to Philip Kotler, marketing management is the analysis, planning, implementation and control of programmes designed to create, build and maintain mutually beneficially exchanges and relationships with target market for the purpose of achieving organisational objectives.
Marketing management is thus marketing concept in action. It is an important functional are a of business. In most of the large concerns it is organised as a separate marketing department under the control of a marketing manager.
Explain the significance of marketing mix.
Marketing mix represents a blending off our elements, product, price, promotion and physical distribution. Determination of marketing mix is an important decision which the market manager has to take. If proper marketing mix is determined the following benefits will accure to the organisation:
- Marketing mix serves as the link between the business firm and its customers. It focuses attention on the satisfaction of customers. Thus, it helps in pursuing consumer oriented marketing.
- Since marketing mix takes care of the needs of the customers it helps in increasing.sales and earning higher profits.
- Marketing mix gives consideration to the various elements of marketing system. There is a balanced relation between these elements.
- Marketing mix signifies that its four dements are closely inter-related. Decisions or changes in one element usually affect decisions or changes in the other.
- Marketing mix facilitates melting the requirements of different types of customers, product design, pricing, promotion and distribution will depend upon the needs and purchasing power of the customers.
Define advertising. What arc its main features? Explain.
Advertising: Advertising is the dissemination of information, concerning an idea, product or service to induce action in accordance with the intent of the advertiser. According to William J. Stanton, “Advertising consists of all the activities involved in presenting to a group a non-personal oral or visual, openly sponsored message regarding a product, service or idea, this message called an advertisement, is disseminated through one or more media and is paid for by the identified sponsor.”
Features of advertising:
- The purpose of advertising is to promote ideas about the products and services of a business firm. It is directed towards increasing the sales of a business.
- Advertising is a non-personal form of presentation and promotion of ideas, goods or services, There is no face to face direct contact with the customers,
- It is also described as non-personal sales-manship. It is complementary to personal selling because it simplifies the task of sales force by creating awareness about the message in the minds of potential customers.
- Advertising is a paid form of communication. The advertisements are communicated through various advertising media and the advertiser has to pay for the space or time hired by him to communicate the message to the present and prospective customers.
- Advertising is done by an identified sponsor.
Give the functions of labeling in the marketing of products.
The functions of labeling are as follows:
1. It suggests the product’s usage, cautions in use, etc. and specify its components.
2. It helps in identifying the product or brand. For example, the name Parle, Monaco imprinted on the pack helps us to identify from number of packs which one is Parle’s Monaco Biscuit.
3. It helps in grading the products into different categories. For example, Gamier. Hair conditioner comes in different categories for different hair say for ‘normal hair’ and for other categories.
4. It helps in promotion of the products. A carefully designed level can attract attention and give reason to purchase it. For example, the pack of Dabur Amla hair oil states, “Baalon mein dum, life main fun”. The label for Surf Excelmatic says, “Keep cloth, good look and your machine in top condition.”
5. Labelling performs the functions of providing information required by law. For example, the statutory warning on the package of cigarette or Pan masala is, “Smoking is injurious to health” or “Chewing tobacco is injurious to health”. Such information is required on processed goods, drugs and tobacco products also.
Give the distinction between Advertisement and Personal Selling.
Distinction between advertisement and personal selling:
|1. Nature of contract||Advertisement is a non-personal form of communication. There is no contact between the advertiser and the buyer.||Salesmanship means personal selling, i.e the salesperson has face-to-face contact with the buyer.|
|2. Scope of contract||The scope of advertising is very wide. In another words it is addressed to a large number of people.||Salesmanship is a personalised communication and so its scope is very limited. The impact of salesmanship is visible on the buyer who comes into contact with Salesman.|
|3. Purpose||Advertisement aims at popularising a product and enhancing the reputation of its advertiser in the long run Its basic purpose is to create customers.||Personal selling aims at effecting sales in the short run.|
|4. Feedback||Immediate feedback from the public is not feasible.||Personal selling gets immediate feedback from the buyers.|
|5. Flexibility||Advertisement is not flexible||Personal selling buyers.|
|6. Payment||Direct payment has to be made for each piece of advertisement.||There is no need of direct payment in case of each contact between the salesmen and the prospective buyers.|
Product is a bundle of utilities. Do you agree?
Or, Product is a mixture of tangible and intangible attributes. Discuss.
A product may be defined as a bundle of utilies consisting of various product features and accompanying services. The bundle of utilities or the bundle of psychological satisfaction that the buyer receives is provided by the seller when he sells a particular product. Anything that can be of value to the buyers termed as products.
It can be tangible i.e. which can be felt seen and touched physically such as pencil, a cycle or an intangible such as services rendered by a doctor, hair dresser or a lawyer. Thus, anything that has value to the other can be marketed. It can be a product or a service or a person or a place, an idea or an event or an organisation or experience or properties.
What are your responsibilities as a customer?
Or, State any two points of responsibility of a consumer.
As a customer our responsibilities are as follows:
- Do not make hurry in buying.
- Do not make forget to get receipt and Guarantee/Warranty card.
- Do not make compromise with quality.
- Beware from false and misleading advertisement.
- Contact immediately to the concerned officer against grievance/complaint.
What is Recruitment? How it is differ from selection?
Recruitment function is concerned with discovering the sources of manpower required and tapping these sources, i.e. attracting the potential employees to offer their services to the working organisation.
Difference between recruitment and Selection:
|1. Meaning||It is process of searching suitable candidates to fill up vacant job position.||It is a process of screening and selecting the most eligible candidates and offering them jobs.|
|2. Stage||Recruitment proceeds the staffing function.||Staffing always start where recruitment ends.|
|3. Nature||It is a positive process as more and more candidates are induced to apply for the job.||It is a negative process and more candidates are rejected than the number of selected candidates.|
|4. Contract of Service||There is no contracted relation created.||Selection involves contract of service between employees and the employer.|
What is meant by ‘Leadership’?
Leadership may be defined as the process of influencing the behaviour of people at work, towards the realisation of specified goals. It involves ability to use non-coercive influence on the activities, goals and motivation of others achieving organisational objectives.
State any two differences between Advertising and Personal Selling.
- Advertising is a means of indirect and impersonal communication.
- It is a means of mass communication.
- Usually there is no personal contact in case of advertising.
- Message reaches the customers quickly.
- Personal selling is a means of direct face-to-face communication.
- Only limited number of people can be contacted.
- There is personal contact.
- Message reaches at a very slow speed.
What is meant by on the job training?
On the job method: The trainees are asked to do a particular job on a machine or in a workshop or laboratory. They are taught the technique of operating a machine or using tools are equipment by an experienced employee or a special supervisor. In this way, the trainees learn a job and also produce goods. Supervisor examines the work done by them from time to time and in case of any defect suggests the way tomend it.
State two points of importance of Supervision.
The term supervision is normally used m management to mean overseeing the employees at work. It implies, instructing, observing, monitoring and guiding the subordinates at work place to ensure that plans and procedure are implemented as intended, (i) It is a universal activity performed at all levels of management, (ii) It is an important part of the directing function of management.
What is Budgetary control?
Budgetary control is a technique of controlling based on budgets. A budget is a quantitative statement for a definite future period of time for the purpose of obtaining a given period. Actual results are compared with budgetary standard. An organisation may have a budget for any activity or function.
State any two features of Scientific Management.
Two features of scientific management:
- Systematic approach: Scientific management is a systematic approach to management and its use ensure that all activities are completed in a systematic and scientific manner.
- Improves the efficiency of workers: The main aim of scientific management is to increase the efficiency of workers. This is done through conducting various kind of studies such as time study, motion study and fatigue study.
How scale of operation affect the requirement of fixed capital?
Fixed capital requirements depend on the size of business. If the size is big, it will need more fixed capital. For smaller organisation the need will be less.
How “scale of oprations” affect the requirement of fixed Capital?
Fixed capital requirements depend on the size of business. If the size is big, it will need more fixed capital. For smaller organisation the need will be less.
“Sales promotion makes advertising effective.” How?
Once the samples of a particular product reach the consumers through sales promotion the advertisement of the same product gets more effective.
Give two advantages of functional Organisation.
The advantages of functional structure are:
- It is easier to organise department based on functions and sub-functions
- It gives balanced weightage to the basic functions on which the survival of a firm depends.