Oswaal NTA CUET (UG)| Question Bank Chapterwise & Topicwise Business Studies For 2024 Exam 9789359588582, 935958858X

Citation preview

For 2024 Exam

Highly Recommended

CHAPTER-WISE

QUESTION BANK Includes SOLVED PAPERS (2022 - 2023)

BUSINESS STUDIES

Section - II (Domain Specific Subject) Strictly as per the Latest Exam Pattern issued by NTA

The ONLY book you need to #AceCUET(UG)

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2

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100% Updated

Previous Years’ Questions

Revision Notes

Concept Videos

800+ Questions

With 2023 CUET Exam Paper

(2022-2023) for Better Exam Insights

for Crisp Revision with Smart Mind Maps

for Complex Concepts Clarity

for Extensive Practice

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1st EDITION

I S BN

YEAR 2024 "9789359588582"

CUET (UG)

SYLLABUS COVERED

PUBLISHED BY OSWAAL BOOKS & LEARNING PVT. LTD.

COP Y RIGHT

RESERVED

1/11, Sahitya Kunj, M.G. Road, Agra - 282002, (UP) India

BY THE PUBLISHERS

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without written permission from the publishers. The author and publisher will gladly receive information enabling them to rectify any error or omission in subsequent editions.

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DI SCL A IM ER

This book is published by Oswaal Books and Learning Pvt Ltd (“Publisher”) and is intended solely for educational use, to enable students to practice for examinations/tests and reference. The contents of this book primarily comprise a collection of questions that have been sourced from previous examination papers. Any practice questions and/or notes included by the Publisher are formulated by placing reliance on previous question papers and are in keeping with the format/pattern/ guidelines applicable to such papers. The Publisher expressly disclaims any liability for the use of, or references to, any terms or terminology in the book, which may not be considered appropriate or may be considered offensive, in light of societal changes. Further, the contents of this book, including references to any persons, corporations, brands, political parties, incidents, historical events and/or terminology within the book, if any, are not intended to be offensive, and/or to hurt, insult or defame any person (whether living or dead), entity, gender, caste, religion, race, etc. and any interpretation to this effect is unintended and purely incidental. While we try to keep our publications as updated and accurate as possible, human error may creep in. We expressly disclaim liability for errors and/or omissions in the content, if any, and further disclaim any liability for any loss or damages in connection with the use of the book and reference to its contents”.

Kindle Edition (2)

Preface Welcome to the ultimate resource for your Common University Entrance Test (CUET) preparation! The Common University Entrance Test (CUET) marks a significant shift in the admission process for UG programs in Central Universities across India. The introduction of CUET aims to create a level playing field for students nationwide, regardless of their geographical location, and revolutionize the way students connect with these prestigious institutions. CUET (UG), administered by the esteemed National Testing Agency (NTA), is a prestigious all-India test that serves as a single-window opportunity for admissions. The NTA consistently provides timely notifications regarding the exam schedule and any subsequent updates. The curriculum for CUET is based on the National Council of Educational Research and Training (NCERT) syllabus for class 12 only. CUET (UG) scores are mandatory required while admitting students to undergraduate courses in 44 central universities. A merit list will be prepared by participating Universities/organizations. Universities may conduct their individual counselling on the basis of the scorecard of CUET (UG) provided by NTA. Oswaal CUET (UG) Question Bank is your strategic companion designed to elevate your performance and simplify your CUET journey for success in this computer-based test.

Here’s how this book benefits you: • 100% Updated with 2023 CUET Exam Paper • Previous years Questions (2022-2023)for Better Exam insights • Revision Notes for Crisp Revision with Smart Mind Maps • Concept Videos for complex concepts clarity • 800+ questions for Extensive Practice Almost 1.92 million candidates registered for CUET (UG) in 2023. Candidates have been quite anxious about appearing for CUET (UG), however, with the right preparation strategy and resources, you can secure a good rank in CUET (UG). We believe that with dedication, hard work, and the right resources, you can conquer CUET and secure your place in the Central Universities of your choice. Good luck with your preparations, with this trusted companion on your journey to academic success! All the best! Team Oswaal Books

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Contents l Know your CUET(UG) Exam

6 - 6

l Latest CUET (UG) Syllabus

7 - 8

l Examination Paper CUET 2023



Chapter-1 – Nature and Significance of Management

11 - 16

1-9

Chapter-2 – Principles of Management

10 - 19

Chapter-3 – Business Environment

20 - 29

Chapter-4 – Planning

30 - 39

Chapter-5 – Organising

40 - 50

Chapter-6 – Staffing

51 - 61

Chapter-7 – Directing

62 - 73

Chapter-8 – Controlling

74 - 84

Chapter-9 – Business Finance

85 - 95

Chapter-10 – Financial Markets

96 - 106

Chapter-11 – Marketing

107 - 117

Chapter-12 – Consumer Protection

118 - 126

Chapter-13 – Entrepreneurship Development

127 - 136 qqq

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15 Mock Test Papers General Studies Paper-1, 15 Mock Test Papers (CSAT) General Studies Paper-2

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2 Languages + 6 Domain Specific Subject + General Test

OR

3 Languages + 5 Domain Specific Subjects + General Test

Subject/Language Choice

Objective Type with MCQs

CBT

Mode of Test

Test Pattern

Know Your CUET (UG) Exam SECTIONS

SECTION I (A) 13 Languages

Tested through reading Comprehension (i) Factual (ii) Literary (iii) Narrative

SECTION III SECTION I (B)

SECTION II

20 Languages

Domain Specific Subjects ( 27 Subjects)

General Test (Compulsory)

INCLUDES : NCERT Model syllabus (only of 12th Standard) is available on all the Subjects

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• • • • • •

General Knowledge Current Affairs General Mental Ability Numerical Ability Quantitative Reasoning Logical & Analytical Reasoning

Latest CUET (UG) Syllabus BUSINESS STUDIES - 305 Note: There will be one Question Paper which will have 50 questions out of which 40 questions need to be attempted. • Steps in the staffing process. • Recruitment – meaning and sources. • Selection – meaning and process. • Training and Development – meaning, need, methods – on the job and off the job methods of training.

Principles and Functions of Management Unit I: Nature and Significance of Management • Management – concept, objectives, importance. • ature of management; Management as Science, Art, Profession. • Levels of management – top, middle supervisory (First level). • Management functions – planning, organizing, staffing, directing, and controlling. • Coordination – nature, and importance.

Unit VII: Directing • Meaning, importance, and principles. • Elements of Direction: – Supervision – meaning and importance – Motivation – meaning and importance, Maslow’s hierarchy of needs; Financial and non-financial incentives. – Leadership – meaning, importance; qualities of a good leader. – Communication – meaning and importance, formal and informal communication; barriers to effective communication.

Unit II: Principles of Management • Principles of Management – meaning, nature and significance. • Fayol’s principles of management. • Taylor’s Scientific Management – Principles and Techniques.

Unit III: Business Environment • Business Environment – meaning and importance. • Dimensions of Business Environment – Economic, Social, Technological, Political, and Legal. • Economic Environment in India; Impact of Government policy changes on business and industry, with special reference to the adoption of the policies of liberalization privatization, and globalization.

Unit VIII: Controlling • • • •

Meaning and importance. Relationship between planning and controlling. Steps in the process of control. Techniques of controlling.

Business Finance and Marketing Unit IX: Business Finance

Unit IV: Planning

• Business finance – meaning, role, objectives of financial management. • Financial planning – meaning and importance. • Capital Structure – meaning and factors. • Fixed and Working Capital – meaning and factors affecting their requirements.

• Meaning, features, importance, limitations. • Planning process. • Types of Plans – Objectives, Strategy, Policy, Procedure, Method, Rule, Budget, Programme

Unit V: Organising

Unit X: Financial Markets

• Meaning and importance. • Steps in the process of organizing. • Structure of organization – functional, and divisional. • Formal and informal organization. • Delegation: meaning elements and importance. • Decentralization: meaning and importance. • Difference between delegation and decentralization.

• Concept of Financial Market: Money Market – nature instruments; • Capital market: nature and types – primary and secondary market. • The distinction between capital market and money market. • Stock Exchange – meaning, functions, NSEI, OCTEI, Trading Procedure. • Securities and Exchange Board of India (SEBI) – Objectives, Functions.

Unit VI: Staffing • Meaning, need, and importance of staffing. • Staffing as a part of Human Resources Management.

Unit XI: Marketing • Marketing – meaning, functions, role.

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Contd... • The distinction between marketing and selling. • Marketing mix – concept and elements: – Product – nature, classification, branding, labeling, and packaging – Physical distribution: meaning, role; Channels of distribution, – meaning, types, factors, determining the choice of channels. – Promotion – meaning and role, promotion mix, Role of Advertising and personal selling; objections to Advertising. – Price: factors influencing pricing.

• Consumer responsibilities. • Ways and means of consumer protection – Consumer awareness and legal redressal with special reference to the Consumer Protection Act. • Role of consumer organizations and NGOs.

Unit XIII: Entrepreneurship Development • Concept, Functions, and Need. • Entrepreneurship Characteristics and Competencies. • Process of Entrepreneurship Development. • Entrepreneurial Values, Attitudes, and Motivation – Meaning and Concept.

Unit XII: Consumer Protection • Importance of consumer protection. • Consumer rights.

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MATHURA

Sapra Traders, 9410076716, Vijay Book House , 9897254292

SILIGURI

Agarwal Book House, 9832038727, Modern Book Agency, 8145578772

FARRUKHABAD

Anurag Book Agencies, 8844007575

DINAJPUR

Krishna Book House, 7031748945

NAJIBABAD

Gupta News Agency, 8868932500, Gupta News Agency, ( E & C ), 8868932500

MURSHIDABAD

New Book House, 8944876176

DHAMPUR

Ramkumar Mahaveer Prasad, 9411942550

Sanjay Publication, 8126699922 Arti book centre, 8630128856, Panchsheel Books, 9412257962, Bhagwati Book Store, (E & C), 9149081912

Ideal Book Depot, (0121) 4059252, 9837066307

WEST BENGAL Oriental Publishers & Distributor (033) 40628367, Katha 'O' Kahini, (033) 22196313, 22419071, Saha Book House, (033), 22193671, 9333416484, United Book House, 9831344622, Bijay Pustak Bhandar, 8961260603, Shawan Books Distributors, 8336820363, Krishna Book House, 9123083874

Om Stationers, 7007326732

Entrance & Competition Distributors PATNA

BIHAR

CUTTAK

A.K.Mishra Agencies, 9437025991

Metro Books Corner, 9431647013, Alka Book Agency, 9835655005, Vikas Book Depot, 9504780402

BHUBANESHWAR

M/s Pragnya, 9437943777

CHATTISGARH KORBA

Kitab Ghar, 9425226528, Shri Ramdev Traders, 9981761797

PUNJAB JALANDHAR

Cheap Book Store, 9872223458, 9878258592

DELHI

RAJASTHAN

DELHI

Singhania Book & Stationer, 9212028238, Radhey Book depot, 9818314141, The KOTA Book Shop, 9310262701, Mittal Books, 9899037390, Lov Dev & Sons, 9999353491

Vardhman Book Depot, 9571365020, Raj Traders, 9309232829

NEW DELHI

Anupam Sales, 9560504617, A ONE BOOKS, 8800497047

Goyal Book Distributors, 9414782130

JAIPUR

HARYANA AMBALA

BOKARO

UTTAR PRADESH

Bharat Book Depot, 7988455354

AGRA

BHAGWATI BOOK STORE, 9149081912, Sparsh Book Agency, 9412257817, Sanjay Publication, 8126699922

JHARKHAND

ALIGARH

New Vimal Books, 9997398868

Bokaro Student Friends Pvt. Ltd, 7360021503

ALLAHABAD

Mehrotra Book Agency, (532) 2266865, 9415636890

MADHYA PRADESH

GORAKHPUR

Central Book House, 9935454590

INDORE

Bhaiya Industries, 9109120101

KANPUR

Raj Book Dist, 9235616506

CHHINDWARA

Pustak Bhawan, 9827255997

LUCKNOW

Azad Book Depot PVT LTD, 7317000250, Rama Book Depot(Retail), 7355078254 Ashirwad Book Depot , 9235501197, Book Sadan, 8318643277, Book.com , 7458922755, Sheetla Book Agency, 9235832418

MAHARASHTRA

PRAYAGRAJ

Format Center, 9335115561, Garg Brothers Trading & Services Pvt. Ltd., 7388100499

NAGPUR

Laxmi Pustakalay and Stationers, (0712) 2727354

PUNE

Pragati Book Centre, 9850039311

MUMBAI

New Student Agencies LLP, 7045065799

ODISHA

Inder Book Agancies, 9634045280

WEST BENGAL KOLKATA

Bijay Pustak Bhandar Pvt. Ltd., 8961260603, Saha Book House, 9674827254 United Book House, 9831344622, Techno World, 9830168159

Trimurti Book World, 9437034735

0808

BARIPADA

UTTAR PRADESH DEHRADUN

( 10 )

CUET QUESTION PAPER - 2023 National Testing Agency Held on 29th May 2023

BUSINESS STUDIES

(This includes Questions pertaining to Domain Specific Subject only) Max. Marks : 200

Time allowed : 45 Minutes

General Instructions:

(i) This paper consists of 50 MCQs, attempt any 40 out of 50. (ii) Correct answer or the most appropriate answer: Five marks (+5). (iii) Any incorrect option marked will be given minus one mark (– 1). (iv) Unanswered/Marked for Review will be given no mark (0). (v) If more than one option is found to be correct then Five marks (+5) will be awarded to only those who have marked any of the correct options. (vi) If all options are found to be correct then Five marks (+5) will be awarded to all those who have attempted the question. (vii) If none of the options is found correct or a Question is found to be wrong or a Question is dropped then all candidates who have appeared will be given five marks (+5). (viii) Calculator / any electronic gadgets are not permitted. 1. Capital structure should emphasize on: (1) Increasing the turnover of firm (2) Increasing the assets and liabilities of firm (3) Increasing the shareholders wealth (4) Increasing voting right of shareholders 2. Identify the rights provided to consumers by the Consumer Protection Act 2019. A. Right to Safety B. Right to be Informed C. Right to choose D. Right to be heard E. Right to be assured Choose the correct answer from the options given below: (1) A, B, C and D only (2) A, B, C and E only (3) A, B, D and E only (4) A, B and C only 3. Arrange the following functions of Management. A. Staffing B. Planning C. Organizing D. Controlling E. Directing Choose the correct answer from the options given below: (1) A → B → C → D → E (2) B → C → A → E → D (3) C → B → A → D → E (4) B → C → A → D → E 4. Planning is an intellectual process that requires logic rather than wishful thinking. Which feature of planning is highlighted by the statement? (1) Futuristic (2) Continuous (3) Mental exercise (4) Pervasive 5. Identify the Non Financial Incentive that give more autonomy and powers to subordinates. (1) Employee participation

(2) Employee empowerment (3) Organisational climate (4) Co-partnership 6. Which Marketing Management philosophy has main focus on existing product? (1) Selling concept (2) Production concept (3) Product concept (4) Marketing concept 7. Identify the specific forces of business environment from following. A. Investors B. Customers C. Social D. Political E. Competitors Choose the correct answer from the options given below: (1) A, B, C and D only (2) A, B and E only (3) C and D only (4) C, D and E only 8. Arrange following elements of communication process in a sequence. A. Sender B. Receiver C. Message D. Media E. Feedback Choose the correct answer from the options given below: (1) A, C, B, E, D (2) C, A, B, D, E (3) A, C, D, B, E (4) A, C, B, D, E 9. “Dependence on technological gadgets is comparatively higher in America than in India”. Which feature of business environment is highlighted by the statement? (1) Relativity (2) Uncertainity (3) Complexity (4) Dynamic 10. Arrange the steps of Trading and Settlement procedure in Securities. A. Open a demat account B. Place an order with the broker C. Sign a broker-client agreement D. Broker match the share price available E. Broker issue a trade confirmation slip

OSWAAL CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

12

Choose the correct answer from the options given below: (1) A, B, C, D, E (2) E, D, C, B, A (3) C, A, B, D, E (4) C, A, D, B, E 11. Identify the correct statements among the following: A. Salary is not a primary economic reward for an entrepreneur. B. A ‘never say die’ attitude of an entrepreneur is termed as self-confidence. C. Acting out of choice rather than compulsion is initiative. D. Entrepreneur’s concern for conservation of time and money is termed as ‘assertiveness’. E. Executive summary and operation strategies are included in Business Plan. Choose the correct answer from the option given below: (1) A, C, E only (2) A, B, E only (3) A, D, E only (4) A, B, C only 12. A company has replaced their obsolete machinery with a Hi-Tech machine as it could not achieve its target in the previous month due to slow production process. Which step in the process of controlling is executed by the company? (1) Measurement of actual performance (2) Comparing actual performance with standards (3) Analysing deviations (4) Taking Corrective action 13. As per Consumer Protection Act, 2019, State Commission has a jurisdiction to entertain complaints where value of goods and services paid“ as consideration. (1) Does not exceed one crore but more than 20 lakh rupees (2) Exceeds one crore but does not exceed ten crore rupees (3) Exceeds five crore but does not exceed ten crore rupees (4) Exceeds four crore but does not exceed five crores rupees 14. Staffing is the part of which functional area of Management ? (1) Marketing Management (2) Human Resource Management (3) Production Management (4) Financial Management 15. Match List I with List II: List -I (A) (B) (C) (D)

Regulatory Function of SEBI Development Function of SEBI Protective Function of SEBI Objective of SEBI

List - II (I) (II) (III) (IV)

Levying fee or other charges Training of intermediaries Controlling insider training Regulate stock exchanges

Choose the correct answer from the options given below: (1) (A)-(I), (B)-(II), (C)-(IV), (D)-(III) (2) (A)-(I), (B)-(II), (C)-(III), (D)-(IV) (3) (A)-(III), (B)-(II), (C)-(IV), (D)-(I) (4) (A)-(III), (B)-(I), (C)-(II), (D)-(IV)

16. “The principles of management are not rigid prescriptions, these can be modified by the manager when the situation so demands.” What nature of principles of management has been indicated in above statement? (1) General guidelines (2) Flexible (3) Contingent (4) Mainly behavioural 17. Which technique of Scientific Management violates Fayol’s principle of Equity? (1) Standardization of work (2) Motion study (3) Differential piece wage system (4) Mental revolution 18. Match List I with List II: List -I (A) (B)

(C) (D)

List - II

District Commission State Commission

(I)

National Commission Supreme Court

(III)

(II)

(IV)

One crore to ten crore rupees Appeal against National Commission in matter of its original jurisdiction. Upto one crore rupees Exceeds ten crore rupees

Choose the correct answer from the options given below: (1) (A)-(I), (B)-(II), (C)-(III), (D)-(IV) (2) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (3) (A)-(III), (B)-(I), (C)-(IV), (D)-(II) (4) (A)-(III), (B)-(I), (C)-(II), (D)-(IV) 19. Social environment includes: (1) Consumption habits and life expectancies (2) Money supply in the economy (3) Rate of savings (4) New ways of producing goods 20. Arrange the steps of controlling process in a logical sequence. A. Measurement of Actual performance B. Setting performance standards C. Taking Corrective action D. Comparison of actual performance with standards E. Analysing deviations Choose the correct answer from the options given below: (1) B, A, D, E, C (2) C, D, A, B, E (3) A, B, C, D, E (4) C, E, D, B, A 21. Which element of Marketing Mix refers to activities that make firm’s product available to the target customers? (1) Promotion (2) Place (3) Price (4) Product

13

CUET (UG) Exam Paper 2023

22. Which quality of a leader requires that he should understand people and maintain good human relations with them? (1) Initiative (2) Communication skills (3) Integrity (4) Social skills 23. Which of the following are the features of leadership? A. It tries to bring change in the behaviour of a person. B. It is an internal feeling. C. It indicates interpersonal relationship between leaders and followers. D. It is a continuous process. Choose the correct answer from the options given below: (1) A, C and D only (2) A and C only (3) A, B and D only (4) C and D only 24. The primary aim of financial management is: (1) Maximise profit of firm (2) Maximise sales of firm (3) Maximise shareholders’ wealth (4) Maximise number of customer of firm 25. Identify the market that is known as stock exchange. (1) Secondary Market (2) Money Market (3) Capital Market (4) Primary Market 26. External Sources of recruitment does not include: A. Casual callers B. Employment exchange C. Transfer D. Advertising E. Promotions Choose the correct answer from the options given below: (1) A and B only (2) B and C only (3) C and E only (4) D and E only 27. Match List I with List II: List -I

List - II

(A)

Job Enrichment

(I)

(B)

Organisational Climate Laissez -faire Grapevine

(II)

(C) (D)

(III) (IV)

Indicates the characteristics which describe an organisation Informal Communication Leadership Style Concerned with designing jobs that include greater variety of work content

Choose the correct answer from the options given below: (1) (A)-(III), (B)-(IV), (C)-(II), (D)-(I) (2) (A)-(III), (B)-(IV), (C)-(I), (D)-(II) (3) (A)-(IV), (B)-(II), (C)-(III), (D)-(I) (4) (A)-(IV), (B)-(I), (C)-(III), (D)-(II)

28. ........ refers to vertical shifting of employees in an organisation. (1) Promotion (2) Transfer (3) Interview (4) Placement 29. Process which provides for learning opportunities that helps employee growth is: (1) Education (2) Development (3) Training (4) Education and Training 30. Identify for the following under whose overall administrative control, SEBI functions. (1) Ministry of Corporate Affairs, GOI (2) Ministry of Home Affairs. GOI (3) Ministry of Finance, GOI (4) Ministry of External Affairs, GOI 31. Match List I with List II: (A) (B) (C) (D)

List -I Convenience products Shopping products Speciality products Non durable products

(I) (II) (III) (IV)

List - II Consumed in one or few uses Brand loyality of the highest order Purchased frequently Buyer devote considerable time

Choose the correct answer from the options given below: (1) (A)-(III), (B)-(IV), (C)-(II), (D)-(I) (2) (A)-(III), (B)-(II), (C)-(IV), (D)-(I) (3) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (4) (A)-(I), (B)-(II), (C)-(III), (D)-(IV) 32. Planning is pervasive because: (1) It is required in setting special goals. (2) It is required at all levels of management. (3) It is forward looking and backward looking. (4) It lays down the base for other functions of management. 33. Identify the trend in stock market when equity shares are more easily sold even at higher price. (1) Bearish (2) Bullish (3) Horse trading (4) Badla 34. Match List I with List II: (A) (B) (C) (D)

List -I Advertising Expenditure Quality Labour Turnover Liquidity

(III)

List - II Human Resource Management Finance and Accounting Marketing

(IV)

Production

(I) (II)

Choose the correct answer from the options given below: (1) (A)-(III), (B)-(IV), (C)-(II), (D)-(I) (2) (A)-(III), (B)-(IV), (C)-(I), (D)-(II) (3) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (4) (A)-(IV), (B)-(III), (C)-(I), (D)-(II)

OSWAAL CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

14

35. Which technique of Scientific Management violates Unity of Command? (1) Time study (2) Standardisation of work (3) Functional foremenship (4) Simplification of work 36. Identify the correct sequence of first five steps of staffing process. A. Estimating the manpower requirement B. Recruitment C. Training and development D. Placement and orientation E. Selection Choose the correct answer from the options given below: (1) A, B, D, E, C (2) A, B, C, D, E (3) A, B, E, D, C (4) A, C, B, D, E 37. Select from following who is considered risk taker? (1) Manager (2) Customer (3) Entrepreneur (4) Government 38. According to which principle of management, “Organisation should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates.” (1) Centralisation and Decentralisation (2) Subordination of individual interest to general interest (3) Scalar chain (4) Espirit De Corps 39. Arrange the Channels of Distribution in order for a consumer product. A. Consumer B. Retailer C. Wholesaler D. Producer Choose the correct answer from the option given below: (1) A, B, C, D (2) D, C, B, A (3) C, A, B, D (4) A, D, C, B 40. Match List I with List II: List -I

List - II

(A)

Treasury Bill

(I)

(B)

Commercial paper

(II)

(C)

Call money

(III)

(D)

Certificate of Deposit

(IV)

Mobilise large amount of money Maturity period of one day to fifteen days Maturity period of 15 days to one year Issued by RBI

Choose the correct answer from the options given below: (1) (A)-(III), (B)-(I), (C)-(II), (D)-(IV) (2) (A)-(II), (B)-(III), (C)-(IV), (D)-(I) (3) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (4) (A)-(IV), (B)-(III), (C)-(I), (D)-(II)

41. Rohan is the Head Boy of Ethos Public School school. The School is going to hold a covid vaccination camp for students of age group 12-14 yrs in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shorlisted following activities: (1) Identification of students eligible for vaccination under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress. ............ is the function of management discussed in the above passage. (1) Planning (2) Directing (3) Organising (4) Staffing 42. Rohan is the Head Boy of Ethos Public School school. The School is going to hold a covid vaccination camp for students of age group 12-14 yrs in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shorlisted following activities: (1) Identification of students eligible for vaccination under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress. Rohan has shortlisted following activities” Identify the step highlighted in the above line in the process of organisation. (1) Setting objectives (2) Assignment of duties (3) Identifying the alternative courses of action (4) Identification and division of work 43. Rohan is the Head Boy of Ethos Public School school. The School is going to hold a covid vaccination camp for students of age group 12-14 yrs in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shorlisted following activities: (1) Identification of students eligible for vaccination under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents

CUET (UG) Exam Paper 2023

He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress. “Later he grouped the similar natured activities into different units” Identify the step highlighted in the above line in the organisation process. (1) Implementing the plan (2) Measurement of actual performance (3) Departmentalisation (4) Selecting an alternative 44. Rohan is the Head Boy of Ethos Public School school. The School is going to hold a covid vaccination camp for students of age group 12-14 yrs in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shorlisted following activities: (1) Identification of students eligible for vaccination under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress. “Then he allocated these to different prefects under his prefectorial board” Which step of organisation process is discussed in these lines? (1) Assignment of duties (2) Implementing the plan (3) Division of activities (4) Follow up action 45. Rohan is the Head Boy of Ethos Public School school. The School is going to hold a covid vaccination camp for students of age group 12-14 yrs in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shorlisted following activities: (1) Identification of students eligible for vaccination under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress.

15 “Thereafter he devised a computer software where each perfect was supposed to enter his data of vaccination for further submission to school headmistress.” Identify the step of organisation process discussed in above statement. (1) Follow up action (2) Establishing reporting relationship (3) Corrective action (4) Assignment of duties 46. Management is the process of planning, organising, staffing, directing and controlling the enterprise resources efficiently and effectively for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. Answer the following questions on the basis of above case. Company’s target production is 10,000 units in a year. To achieve this target the manager has to operate on double shifts due to power failure most of the time. In the above case manager was: (1) Effective and efficient both (2) Only efficient (3) Efficient but not effective (4) Effective but not so efficient 47. Management is the process of planning, organising, staffing, directing and controlling the enterprise resources efficiently and effectively for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. Answer the following questions on the basis of above case. Cutting down the cost but not achieving the target production is an example of: (1) Effective but not efficient (2) Effective and efficient both (3) Efficient but not effective (4) Neither efficient nor effective 48. Management is the process of planning, organising, staffing. directing and controlling the enterprise resources efficiently and effectively for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. Answer the following questions on the basis of above case. ............ implies setting goals in advance and developing a way of achieving them efficiently and effectively (1) Organising (2) Controlling (3) Planning (4) Coordination

16

OSWAAL CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

49. Management is the process of planning, organising, staffing, directing and controlling the enterprise resources efficiently and effectively for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. Answer the following questions on the basis of above case. .......... is the management function of monitoring organisational performance towards the attainment of organisational goals. (1) Planning (2) Organising (3) Directing (4) Controlling

50. Management is the process of planning, organising, staffing. directing and controlling the enterprise resources efficiently and effectively “ for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. Answer the following questions on the basis of above case. ........... determines what activities and resources are required. (1) Planning (2) Organising (3) Controlling (4) Directing 

CHAPTER

1

  Revision Notes ¾ Management: Management is the process of planning, organizing, staffing, directing, or controlling resources to achieve organizational goals. Planning, organizing, staffing, directing, and managing are all interconnected functions. Effectiveness entails doing the correct thing on time, whereas efficiency focuses on doing the right thing at the lowest possible cost.

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Management as a Science and Art

¾ Characteristics: { Management is a goal-oriented process that coordinates the efforts of diverse persons to achieve corporate objectives. { Management is universal and applies to all sorts of organizations, departments, and levels, with managerial tasks conducted in all of them. { Management has three dimensions: work management, people management, and operations management. { Work management focuses on selecting which tasks to accomplish, people management entails assigning authorities, and responsibilities, and establishing reporting connections, and operations management entails supplying fundamental products and services. { Management is a continuous process that performs multiple duties at the same time, with diverse personnel collaborating to achieve common corporate goals. { Management is dynamic, adjusting to changing business environment needs while remaining intangible, allowing its presence to be felt in the operation of the organization.

¾ Objectives: Management aims to attain certain goals that are the expected outcome of every action. They must be drawn from the primary goal of the company. There are several objectives in each organization, and management must achieve all of them effectively and efficiently. Organizational aims, societal objectives, and personal or individual objectives are the three types of objectives.

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Objectives of Management

(i) Organizational Objectives: Management is in charge of creating and attaining organizational goals. It must fulfill a range of objectives in all sectors while taking into account the interests of all stakeholders, including shareholders, workers, customers, and the government. The primary goal of

every organization should be to maximize the use of people and material resources, i.e., to meet the economic objectives of the organization. These are survival, profit, and expansion. ƒ Survival: Survival is the most fundamental goal of every firm. Management must work hard to secure the organization’s longevity. An organization must make enough money to pay its expenditures to exist. ƒ Profit: In business, mere survival is insufficient. Management is responsible for ensuring that the organization produces a profit. Profit offers an important motivation for the enterprise’s sustained prosperity. Profit is required to pay the costs and hazards of the firm. ƒ Growth: To increase its long-term prospects, a company must expand. To stay in the industry, management must fully utilize the organization’s development potential. A company’s growth may be assessed in terms of increased sales volume, increased personnel numbers, increased product lines, increased capital investment, and so on. Other growth indicators may exist. (ii) Social objectives: It entails generating societal benefit. Every organization, whether for profit or not, has a social duty to fulfill as a member of society. This relates to continually providing economic benefits for diverse societal elements. This involves adopting environmentally friendly production processes, offering job opportunities to underprivileged areas of society, and providing basic community facilities such as schools and healthcare, among other things. (iii) Personnel goals: Organizations are made up of people with diverse personalities, backgrounds, experiences, and goals. To meet their various demands, they all become members of the organization. These range from financial requirements like competitive pay and benefits to social needs like peer recognition and higher-level wants like personal growth and development. For organizational harmony, management must harmonize personal desires with organizational objectives. ¾ Importance: (i) Management aids in the achievement of group goals: Management is essential not for its own sake, but for the achievement of the organization’s goals. A manager’s job is to provide a common direction for individual efforts to achieve the organization’s ultimate aim. (ii) Management improves efficiency: A manager’s goal is to minimize expenses and boost productivity by better

ge m en

Second Level

Trace the Mind Map

First Level

Third Level

Coordination

Management

Coordination is a process through which harmony is established among different activities of an organisation.

• Coordination integrates group efforts. • Coordination ensures unity of action. • It is a continuous process. • It is the responsibility of all managers. • Coordination is an all pervasive function. • Coordination is a deliberate function.

• Growth in size • Functional differentiation • Specialisation

t

ep

nc

Co

• Management helps in achieving group goals. • Management increases efficiency. • Management creates dynamic organization. • Management helps in the development of society. • Management helps in achieving personal objectives.

• Recognition • To earn fame • Expansion in market

• Fulfil social needs • Employment opportunity • Social Services

• Survival of business • Profit earning • Growth of business

• Management is an intangible force. • Management is a goal oriented process. • Management is all pervasive. • Management is multidimensional. • Management is a continuous process. • Management is a group activity. • Management is a dynamic function.

Management has been defined as a process of getting things done with the aim of achieving goals effectively and efficiently.

nd Signifi a e c r tu Managemenan f

Nature of Management

Management Functions

Levels of Management

Planning : Deciding in advance what to do. Organizing : Assigning duties. Staffing : To assign right job to right person. Directing : Influencing and motivating employees to perform tasks. • Controlling : To make control on managerial performance.

• • • •

Operational Management (Supervisor, Foreman, etc.)

Middle Management (Finance manager, Production manager, etc.)

Top Management (Board of Directors, Chairman, President, etc.)

• Well defined body of knowledge • Professional association (not fully present) • Ethical code of conduct (not fully present)

Ma na

Na o

• Systematized body of knowledge • Principles based on experiment • Universal validity of principles

• Existence of theoretical knowledge • Personalised application • Based on practice and creativity

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ien



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ta

c aS



2 Oswaal CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

ce t

3

NATURE AND SIGNIFICANCE OF MANAGEMENT

planning, organizing, directing, staffing, and managing the organization’s activities.

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(iii) Management fosters a dynamic organization: All organizations must operate in a continually changing environment. Individuals in an organization of usually oppose change because it frequently Importance Management involves transitioning from a known, secure environment to a newer, more challenging one. Management assists individuals in adapting to these changes so that the organization may keep its competitive advantage. (iv) Management aids in the achievement of personal goals: A manager encourages and leads his team in such a way that individual members can achieve personal goals while also contributing to the wider organizational aim. Management fosters team spirit, cooperation, and dedication to collective achievement via encouragement and leadership. (v) Management contributes to societal development: An organization has many aims to satisfy the needs of the various groups that comprise it. In the process of accomplishing all of these, management contributes to the growth of the organization, and hence to the development of society. It contributes to the provision of high-quality goods and services, the creation of new job opportunities, the adoption of new technology for the better welfare of the people, and the advancement of growth and development. ¾ Nature of Management: Management as an Art: Management as an art can be defined as the individualized application of broad and theoretical ideas to achieve the best potential results. It is the use of information and abilities to attain the desired objectives. Features: (i) The availability of theoretical knowledge: There is a wealth of literature available in numerous sectors of management such as administration, marketing, finance, and so on, in which the manager must specialize. These theories are based on the findings of numerous management professionals. (ii) Individualized applications: The application of management theories by various managers is very dynamic and cannot be employed in isolation. (iii) Practice and creativity: Through practice, managers develop their effectiveness and efficiency, as well as their personal experiences. ¾ Management as a Science: A scientific body of knowledge is a structured collection of knowledge based on observations and experimentation. Its ideas, such as Newton’s first law of motion, are globally applicable. Features: (i) Universal validity: Scientific concepts are globally applicable since they are implemented in all types of organizations, regardless of size or purpose, and at all organizational levels. Division of labor, for example, is required in all sorts of organizations. (ii) Experimentation and observation: Scientific principles provide direction for achieving organizational goals and are created through experiments and observations.

(iii) Organized body of knowledge: The principles are founded on a cause-and-effect relationship. Every managerial choice has an impact on the organization, either positively or negatively. Management is an imprecise discipline because its ideas must be adjusted according to the circumstances. It is a social science since it deals with people. ¾ Management as a Profession: A profession is a specialized body of knowledge that involves extensive academic preparation and is taught in universities, institutes, and so on, and admittance is governed by some representative association. Features: (i) Well-defined body of knowledge: In the subject of management, specialized learnings and abilities have been formed, which are taught in institutions that transmit management knowledge. (ii) Restricted entry: No one can enter the management profession without first completing a stipulated course of study. For example, to become a manager today, one must obtain an MBA. (iii) Professional association: All professions are linked with a professional association, which governs entry and establishes a code of behavior for the profession. (iv) Service motive: Every management commits to fulfilling the social objectives of the company, without which the organization may suffer from poor public relations. (v) Ethical code of conduct: There are numerous environmental rules, consumer laws, and tax laws that managers must strictly follow. Management is on its way to becoming a profession, but not a full-fledged one. Management is a well-defined body of knowledge, while all other characteristics are desirable but not required of a manager. ¾ Level of Management: Management levels relate to several kinds of managers based on their tasks, authority, and position. There are three stages: (i) Top management: Top-level management comprises the Board of Directors, the Chairman, the Managing Directors, the Chief Executives, and so on. The top-level managers’ functions are as follows: ƒ They develop policies to attain the goals that have been established. ƒ Top-level managers give duties to various middle-level employees. ƒ Top-level managers establish overarching corporate goals and objectives. ƒ They organize all of the financing needed to conduct our day-to-day operations and financing for the purchase of fixed assets. (ii) Middle management: Department heads interpret plans, organize resources, motivate employees, and coordinate with other departments as part of Middle-Level Management. The following are the functions of intermediate-level management:

4 Oswaal CUET (UG) Chapterwise Question Bank ƒ Interpretation of top-level management’s plans and policies to lower-level management. ƒ Organizing their department’s resources and operations. ƒ Motivating employees to be more productive to meet goals. ƒ Collaborating with other departments to guarantee the organization’s seamless operation. (iii) Lower management: Lower-level management, such as Foremen, Supervisors, and Superintendents, maintains discipline, accepts comments, assists in employee selection, training, and advancement, and assures worker safety. The functions of lower-level Management are as follows: ƒ Lower-level management is responsible for maintaining worker discipline. ƒ They encourage comments from employees for improved working conditions. ƒ They aid management in selecting, training, and advancing employees. ƒ They are responsible for worker safety and provide safeguards at all important points to prevent mishaps. ¾ Management Functions: (i) Planning: This is the role of determining in advance what to do, when to do it, how to do it, and who will do it. (ii) Organizing is the managerial function of assigning responsibilities, organizing tasks, creating authority, and allocating resources to carry out a given plan. (iii) Staffing ensures that the appropriate people with the relevant qualifications are available at the right time and place to help the business achieve its goals. Staffing is the process of finding the right individuals for the right job. (iv) Directing is the process of overseeing, inspiring, leading, and interacting with subordinates to achieve organizational goals. (v) Controlling is the process of establishing performance criteria, measuring performance, comparing it to established standards, and taking remedial steps if major variations are discovered. (vi) Coordination entails synchronizing departmental efforts to achieve common organizational goals, as well as tying management tasks together. ¾ Characteristics: (i) Coordination integrates collective activities by directing different and unrelated individual interests toward the attainment of common organizational goals. (ii) Coordination leads the activity of several departments

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and personnel toward the attainment of shared goals and creates unity in individual efforts. (iii) Coordination is an essential component of management and is required in all management tasks, coordination is a continuous process rather than a one-time activity. (iv) Nature has made it universal. It synchronizes all levels and departments’ operations since they are interrelated to preserve organizational equilibrium. (v) All managers at all levels are responsible for coordination. ƒ Top-level management works together to guarantee that all plans are followed. ƒ Middle-level management collaborates with top-level and lower-level management. ƒ Lower-level management coordinates workers’ work to ensure that it is completed by the plan. (vi) Coordination is a purposeful management function. Even when individuals of a department freely coordinate and work, a manager must deliberately coordinate the activities of diverse employees. ¾ Nature: (i) Coordination is an ongoing process that combines collective efforts, ensures action unity, and is universal. (ii) To preserve organizational balance, it is the responsibility of all managers at all levels to synchronize the operations of all levels and departments. (iii) To guarantee that all plans are carried out, top-level management coordinates with middle-level management, which coordinates with top and lower-level management, and lower-level management coordinates workers’ tasks. (iv) Even when department employees actively coordinate and work, coordination is an intentional function of management. ¾ Importance: (i) Coordination is critical in management since it is required for planning, organizing, staffing, directing, and managing. (ii) Coordination is vital to integrate operations, accomplish functional differentiation, and assure work progress at all levels of management, including top, medium, and lower levels. (iii) Coordination is necessary for planning, organizing, staffing, directing, and controlling, as well as attaining organizational goals and maintaining a balance between work requirements and personnel characteristics.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Arrange the following functions of Management I. Staffing II. Planning III. Organizing IV. Controlling V. Directing [CUET 2023] Choose the correct answer from the options given below: (A) I → II → III → IV → V (B) II → III → I → V → IV (C) III → II → I → IV → V (D) II → III → I → IV → V 2. Rohan is running a small business producing homemade craft items. He believes that since the business is small,

he does not require ‘management’. Which feature of management has been neglected? [CUET 2022] (A) Management is all-pervasive. (B) Management is goal-oriented. (C) Management is a continuous process. (D) Management is a dynamic function. 3. The effect of management is noticeable in an organization where targets are met according to plans, employees are happy and satisfied, and there is orderliness instead of

5

NATURE AND SIGNIFICANCE OF MANAGEMENT

chaos.” Which characteristic of management is highlighted here? [CUET 2022] (A) Management is pervasive. (B) Management is multi-dimensional. (C) Management is a group activity. (D) D. Management is an intangible force. 4. Which of the following features of management states that the management functions cannot be performed in isolation? (A) Management is a goal-oriented process. (B) Management is all-pervasive. (C) Management is a continuous process. (D) Management is a group activity. 5. Top-level management consists of: (i) Vice President (ii) Board of Directors (iii) Manager (iv) Chief Operating Officer Choose the correct answer from the options given below: (A) i, ii and iii only (B) i, iii and iv only (C) i, ii and iv only (D) ii,iii, and iv only 6. Management is __________. (A) A Science (B) An Art (C) Both science and art (D) None of these 7. Alo a mobility platform is in the process of laying off 400500 employees in a move aimed at driving cost efficiency.

Which objective of management will the firm not be able to achieve by carrying out this process? (A) Efficiency (B) Social (C) Profit (D) Survival 8. Which level of management is responsible for the welfare and survival of the organization? (A) Top level of management (B) Middle level of management (C) Supervisory level (D) Both (B) and (C) 9. The purchase, production and sales managers at Sharda Ltd, a firm manufacturing ready made garments are generally at a conflict, as they have their own objectives. Usually, each think that only they are qualified to evaluate, judge and decide on any matter, according to their professional criteria. Name the concept which will be required by the CEO Mr. Raman, to reconcile the differences in approach, interest or opinion in the organisation. (A) Coordination (B) Management (C) Profession (D) Employment 10. Match the different objectives of management given in column I and Column II and choose the correct alternative: Column – A

Column – B

(a)

Profit

(i)

Competitive salaries and perks

(b)

Growth

(ii)

Environmental friendly methods of production

(c)

Social Objectives

(iii) Revenue enough to cover costs and risks

(d)

Personal Objectives

(iv) Adding prospects to fully exploring its potential in long run.

Options: (A) (a) – (iii), (b) – (iv), (c) – (ii), (d) – (i) (B) (a)– (iv), (b) – (ii), (c) – (i), (d) – (iii) (C) (a)– (ii), (b) – (i), (c) – (iv), (d) – (iii) (D) (a)– (i), (b) – (ii), (c) – (iv), (d) – (iii) 11. Efficiency means doing the task correctly and with _____________cost. (A) Minimum (B) Maximum (C) Same (D) None of these 12. Management is the process of designing and maintaining an environment in which _____________ work together _____________, efficiently and effectively accomplishing selected aims. (A) groups, independently (B) individuals, in groups (C) individuals, independently (D) None of the above 13. Which of the following is the function of low-level management? (A) To integrate diverse elements and coordinate the activities of different departments. (B) To the business environment and its implications for the survival of the firm. (C) To be responsible for implementing and controlling plans and strategies developed by top management. (D) To interact with the actual workforce and pass on instructions of the middle management to the workers. 14. ______________is used extensively for all types of activities and mainly for taking charge of different activities in any enterprise. (A) Planning (B) Management (C) Coordination (D) Staffing 15. Following are the managerial functions against their respective aspects: Column – A

Column – B

(a) Planning

(i)

Deviations

(b) Staffing

(ii)

Objectives

(c)

(iii)

Abilities

(iv)

Leadership

Direction

(d) Controlling

Options: (A) (a) – (iv), (b) – (iii), (c) – (ii), (d) – (i) (B) (a)– (iv), (b) – (i), (c) – (iii), (d) – (ii) (C) (a)– (ii), (b) – (iii), (c) – (iv), (d) – (i) (D) (a)– (iii), (b) – (i), (c) – (ii), (d) – (iv) 16. ‘Even where members of a department willingly cooperate and work, a manager has to coordinate the efforts of different people in a conscious manner.’ Identify the characteristics of coordination discussed above. (A) Coordination ensures unity of action. (B) Coordination is a deliberate function. (C) Coordination is a continuous process. (D) Coordination is an all-pervasive function. 17. Functions performed by a middle-level manager: (i) Assigns duties and responsibilities (ii) Motivating Employees

6 Oswaal CUET (UG) Chapterwise Question Bank (iii) Ensures the availability of personnel in departments (iv) Highly concerned with policy formulation. (A) i, ii and iv only (B) i, ii and iii only (C) ii, iii, and iv only (D) i, iii and iv only 18. Which level of management is responsible for the welfare and survival of the organization? (A) Top level of management (B) Middle level of management (C) Supervisory level (D) Both (B) and (C) 19. “Management is a force that cannot be seen but its presence can be felt in the way the organisation functions.’’ Which feature has been explained in this statement of Management? (A) Pervasive (B) Dynamic (C) Multi-dimensional (D) Intangible 20. “The task of management is to make people work towards achieving the organization’s goals, by making their strengths effective and their weaknesses irrelevant.” The above statement highlights which of the following dimensions of management: (A) Management of work (B) Management of people (C) Management of operations (D) All of these (B) ASSERTION & REASON In the questions given below, there are two statements marked as Assertion (A) and Reason (R). Read the Statements and choose the correct option: Options are: (A) Both (A) and (R) are true and (R) is the correct explanation of (A). (B) Both (A) and (R) are true but (R) is not the correct explanation of (A). (C) (A) is correct but (R) is wrong. (D) (A) is wrong but (R) is correct. 1. Assertion (A): Management helps in achieving personal objectives. Reason (R): Through motivation and leadership the management helps individuals to develop team spirit, cooperation, and commitment to group success. 2. Assertion (A): Lower-level managers spend more time in planning and organizing. Reason (R): Top Management consists of the senior-most executives of the organization. 3. Assertion (A): Coordination integrates group efforts. Reason (R): Coordination unifies unrelated or diverse interests into purposeful work activity. 4. Assertion (A): Management is a dynamic function and has to adapt itself to the changing environment. Reason (R): The effect of management is noticeable in an organization where targets are met according to plans. 5. Assertion (A): Scientific principles have universal application and validity. Reason (R): Management principles are not exact like scientific principles so their application and use are not universal. 6. Assertion (A): Planning is a primary function of management. Reason (R): Planning is required at all levels of management as well as in all departments of the organization.

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7. Assertion (A): The middle-level management includes the Board of Directors and the Chief Executive. Reason (R): The top-level level determines the objectives of the business as a whole and lays down the policies to achieve these objectives. 8. Assertion (A): Coordination is the essence of management. Reason (R): Coordination is the force that binds all the other functions of management. 9. Assertion (A): Middle Management is the link between top and lower-level managers. Reason (R): Middle management is subordinate to top managers and superior to the first-line managers. 10. Assertion (A): Coordination begins at the planning stage and continues till controlling. Reason (R): Coordination is a one-time process.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5) Management is the process of planning, organising, staffing, directing and controlling the enterprise resources efficiently and effectively for achieving the goals of the organisation. Effectiveness in Management is concerned with doing the right task, completing activities and achieving goals. Efficiency means doing the task correctly with minimum cost. [CUET 2023] 1. Company’s target production is 10,000 units in a year. To achieve this target the manager has to operate on double shifts due to power failure most of the time. In the above case, manager was: (A) Effective and efficient both (B) Only efficient (C) Efficient but not effective (D) Effective but not so efficient 2. Cutting down the cost but not achieving the target production is an example of: (A) Effective but not efficient (B) Effective and efficient both (C) Efficient but not effective (D) Neither efficient nor effective 3. __________ implies setting goals in advance and developing a way of achieving them efficiently and effectively. (A) Organising (B) Controlling (C) Planning (D) Coordination 4. __________ is the management function of monitoring organisational performance towards the attainment of organisational goals. (A) Planning (B) Organising (C) Directing (D) Controlling 5. __________ determines what activities and resources are required. (A) Planning (B) Organising (C) Controlling (D) Directing II. Read the following text and answer the questions that follow: (Q6-Q10) Sana is the branch manager of ABC Handicrafts Pvt. Ltd. The company’s objective is to promote the sales of Indian handloom and handicraft products. It sells fabrics, furnishings, and ready-made and household items made out of traditional Indian fabrics. Sana decides on quantities,

7

NATURE AND SIGNIFICANCE OF MANAGEMENT

variety, color, and texture of all the above items and then allocates resources for their purchase from different suppliers. She appointed a team of designers and craftspeople in the company, who developed some prints for bed covers in bright colors on silk. Although the products looked very attractive and impressive, they were relatively expensive on the front of affordability for an average customer. Sana suggested that they should keep the silk bed covers for special festive occasions and offer the cotton bed covers regularly to keep costs under control. 6. Identify the type of category of objective of management shown in the above case. (A) Organisational (B) Personnel (C) Social (D) All of the above 7. “She appoints a team of designers and craftspeople in the company, who developed some prints for bed covers in bright colour on silk.” Which function of management is highlighted in this context? (A) Controlling (B) Staffing (C) Planning (D) Directing

8. In the above case “company’s objective is to promote the sales of Indian handloom and handicraft products.” The above given line focuses on which feature of management? (A) Management is an intangible force (B) Management is a goal-oriented process (C) Management is pervasive (D) Management is a continuous process 9. Concerning the above case, at which level of management Sana is working? (A) Lower level (B) Top level (C) Middle level (D) Shop floor 10. “Sana suggested that they should keep the silk bed covers for special festive occasions and offer the cotton bed covers regularly to keep costs under control.” Which function of management is highlighted in this context? (A) Controlling (B) Staffing (C) Organising (D) Planning

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (B)

2. (A)

3. (D)

4. (D)

5. (C)

6. (C)

7. (B)

8. (A)

9. (A)

10. (A)

11. (A)

12. (B)

13. (D)

14. (B)

15. (C)

16. (B)

17. (B)

18. (A)

19. (D)

20. (B)

8. (A)

9. (A)

10. (C)

8. (B)

9. (C)

10. (A)

[B] ASSERTION & REASON 1. (A)

2. (D)

3. (A)

4. (B)

5. (B)

6. (B)

7. (D)

[C] CASE BASED QUESTIONS 1. (D)

2. (C)

3. (C)

4. (D)

5. (B)

6. (A)

7. (B)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (B) is correct. Explanation: Planning is the primary function of management, upon which organising helps to frame the organisational structure, leading to assigning jobs under staffing, further directing the employees and controlling function is performed to measure the achievement of organisational goals. 2. Option (A) is correct. Explanation: Management is required in all types of organizations whether it is political, social, cultural, or business because it helps and directs various efforts towards a definite purpose. 3. Option (D) is correct. Explanation: Management is an intangible force, its presence may be felt via orderliness, motivated staff, and efficient work. When contrasted to management, we can feel the consequences of mismanagement more vividly and early. Management is an intangible force because it has no physical appearance. 4. Option (D) is correct. Explanation: Management always refers to a group of people involved in managerial activities. The management functions cannot be performed in isolation. Even the result of management affects every individual and every department of

the organization. So, it always refers to a group effort and not the individual effort of one person. 5. Option (C) is correct. Explanation: Top-level management consists of the Chairman, Board of Directors, Managing Director, General Manager, President, Vice President, Chief Executive Officer (C.E.O.), Chief Financial Officer (C.F.O.), and Chief Operating Officer, etc. 6. Option (C) is correct. Explanation: It is considered a science because it has an organized body of knowledge that contains certain universal truths. It is called an art because managing requires certain skills which are personal possessions of managers. Science provides knowledge & art deals with the application of knowledge and skills. 7. Option (B) is correct. Explanation: Social objectives of business include the production and supply of quality and standard goods and services, adoption of fair-trade practices and contribution to the general welfare of society, and provision of welfare amenities. 8. Option (A) is correct. Explanation: The major task of top management is to integrate diverse elements and coordinate the activities of different departments according to the overall objectives of

8 Oswaal CUET (UG) Chapterwise Question Bank the organization. These top-level managers are responsible for the welfare and survival of the organization. They analyze the business environment and its implications for the survival of the firm. 9. Option (A) is correct. Explanation: Coordination brings harmony in carrying out the different tasks and activities to achieve the organization’s objectives efficiently. 10. Option (A) is correct. Explanation: Management seeks to accomplish three sorts of objectives: organization, social, and personal. Organizational objectives are concerned with survival, profit, and expansion, whereas social objectives are concerned with generating societal advantages. Personal aims entail addressing employees’ different wants and ambitions, whereas organizational harmony entails balancing financial, social, and personal goals to ensure the organization’s success. 11. Option (A) is correct. Explanation: Being effective can lead to increased productivity since it involves identifying the most important tasks and doing them first. Efficiency doesn’t necessarily lead to productivity because you could be doing the wrong tasks. 12. Option (B) is correct. Explanation: Management unites the efforts of different individuals and creates an environment to work in groups in the organization towards achieving the goals. 13. Option (D) is correct. Explanation: Supervisors coordinate workforce activities with intermediate management and employees. They report output value, cut waste, and verify security measures are in place. Top management defines the power and ability of supervisors. 14. Option (B) is correct. Explanation: The activities involved in managing an enterprise are common to all organizations whether economic, social, or political. 15. Option (C) is correct. Explanation: Planning entails coordinating organizational and departmental plans, organizing entails authority, responsibility, and accountability, staffing entails balancing job requirements and personnel qualities, directing entails supervision, motivation, and leadership, and controlling ensures actual results match expected outcomes. 16. Option (B) is correct. Explanation: The characteristic of coordination being a deliberate function means that it requires conscious effort and intention on the part of a manager. It implies that coordination doesn’t happen automatically but needs active planning and direction to ensure that the efforts of different individuals or departments align towards common goals. This deliberate aspect of coordination helps in achieving unity of action and efficient collaboration within an organization. 17. Option (B) is correct. Explanation: Superior managers assign duties, middle-level managers motivate employees and create cooperation among divisions to achieve organizational objectives. Whereas highly concerned with policy formulation is done by top-level management. 18. Option (A) is correct. Explanation: The Top Level of Management is the level of management where managers are responsible for the organization’s well-being and existence. Top-level

BUSINESS STUDIES

management is responsible for developing strategies to ensure the organization runs smoothly and successfully. 19. Option (D) is correct. Explanation: Management is intangible as it cannot be seen or touched one can feel its presence through efficient working, enthusiasm among employees, and orderliness 20. Option (B) is correct. Explanation: Human resources or people are an organization’s greatest asset. Despite all developments in technology “getting work done through people” is still a major task for the manager. Managing people has two dimensions: (i) it implies dealing with employees as individuals with diverse needs and behaviour; (ii) it also means dealing with individuals as a group of people. The task of management is to make people work towards achieving the organization’s goals, by making their strengths effective and their weaknesses.

[B] ASSERTION & REASON

1. Option (A) is correct. Explanation: A manager motivates and leads his team in such a manner that individual members can achieve personal goals while contributing to the overall organizational objective. 2. Option (D) is correct. Explanation: Top-level managers spend more time in planning and organizing. They are usually referred to as the chairman, the chief executive officer, the chief operating officer, the president, and the vice president. They formulate overall organizational goals and strategies for their achievement. 3. Option (A) is correct. Explanation: Coordination gives a common focus to a group effort to ensure that performance is as it was planned and scheduled. 4. Option (B) is correct. Explanation: An organization interacts with its external environment which consists of various social, economic, and political factors. To be successful, an organization must change itself and its goals according to the needs of the environment. 5. Option (B) is correct. Explanation: Scientific principles are based on truth and they can be applied at every time and in every situation. Thus, its universal application is possible. In the field of management, too, managerial knowledge and principles of management are considered to be based on truth and they, too, can be applied anywhere and in every situation. 6. Option (B) is correct. Explanation: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions. 7. Option (D) is correct. Explanation: Top Management consists 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, the chief operating officer, the president, and the vice president. Top management is a team consisting of managers from different functional levels, heading finance, marketing, etc. They formulate overall organizational goals and strategies for their achievement. 8. Option (A) is correct. Explanation: Coordination is the common thread that runs through all activities such as purchase, production, sales, and finance to ensure continuity in the working of the organization. Coordination is implicit and inherent in all functions of an organization.

NATURE AND SIGNIFICANCE OF MANAGEMENT

9. Option (A) is correct. Explanation: Middle management is responsible for implementing and controlling plans and strategies developed by top management. At the same time, they are responsible for all the activities of first-line managers. 10. Option (C) is correct. Explanation: Coordination is a continuous process. It is not a one-time function but a continuous process. It begins at the planning stage and continues till controlling.

[C] CASE BASED QUESTIONS

1. Option (D) is correct. Explanation: Effectiveness is concerned with minimum time whereas, efficiency is concerned with minimum cost incurred. Here, the manager is effective as he is willing to get the work done in time, however, achieving this at huge cost considering running the factory double shifts due to power failure. 2. Option (C) is correct. Explanation: Completion of job/work at minimum cost but not reaching the targets leads to efficiency but not effectiveness. 3. Option (C) is correct. Explanation: Planning is bridging the gap between where we are and where we want to reach. It is setting goals in advance and developing the ways to achieve the same, effectively and efficiently. 4. Option (D) is correct. Explanation: Planning works as the base for controlling function. Controlling is measurement of actual performance and comparison of the same against the set standards, checking deviations, if any and taking corrective measures; in order to attain the organisational goals. 5. Option (B) is correct. Explanation: Planning is the primary function of management. Organisational structure is formed on the plans

9 framed. Under organising, activities and resources required to meet the organisational goals are determined. 6. Option (A) is correct. Explanation: The objective mentioned, “to promote the sales of Indian handloom and handicraft products,” falls under the category of “Organisational” objectives. These objectives are directly related to the organization’s core mission and goals and are focused on its specific operations and functions. 7. Option (B) is correct. Explanation: Staffing is the process of finding the best people for the right position. A critical management viewpoint is to ensure that the right people with the right abilities are available at the right places and right times to help the organization accomplish its goals. 8. Option (B) is correct. Explanation: Management is the process of arranging, leading, and regulating resources to achieve certain goals and objectives. It is a goal-oriented process since it entails creating and attaining objectives to achieve the intended results. 9. Option (C) is correct. Explanation: Here Sana works under middle-level management. The executor level is middle management. They report to top management and are superior to lower-level management. They serve as a connection between top and operational management. They are in charge of carrying out the strategies established by upper management. 10. Option (A) is correct. Explanation: Here Sana’s management activity shows monitoring and regulating organizational success to fulfill organizational goals which is known as controlling management function. Controlling includes determining performance standards, calculating current performance, comparing it to organized guidelines, and taking corrective action when any deviation is discovered.

CHAPTER

2

PRINCIPLES OF MANAGEMENT

  Revision Notes ¾ Principles of Management: Management principles are broad standards for managerial decision-making and behaviour. Management principles are not as rigid as scientific principles since they deal with human behaviour and must therefore be implemented creatively based on the needs of the circumstance. ¾ Nature: (i) Universal applicability: Management principles apply to all sorts of organisations, business and non-business, small and large, depending on the nature of the organisation. (ii) Broad guidelines: Principles provide basic guidelines for action, they do not give ready-made solutions to all managerial challenges. (iii) Formed via practice and experience: They are formed by experimentation, experience, and the managers’ collective expertise. (iv) Modifiable: They may be changed by management based on the situation; they are not hard prescriptions. (v) Primarily behavioural: Because the principles attempt to influence complicated human behaviour, they are primarily behavioural in nature. (vi) Cause and effect relationship: It creates a relationship between cause and effect, i.e., what will happen if a specific principle is implemented in a specific scenario. (vii) Contingent: The use of management concepts is contingent or dependent on the prevailing situation at a given moment. ¾ Significance: (i) Provide relevant insights into reality to managers: Using these concepts promotes management efficiency by increasing the knowledge and capacity of managers to effectively interpret numerous real-world situations. (ii) Optimal resource utilisation Scan to know more about and effective administration: Management this topic principles assist managers in anticipating the cause-and-effect relationship of their actions and reduces the waste associated with the trial-and-error method. They contribute to good Significance of administration by making administrative judg- Management Principles ments free of personal biases. (iii) Scientific judgments: Management principles assist in making scientific decisions based on logic and objective appraisal of conditions rather than blind faith and personal preconceptions. (iv) Meeting changing environment needs: Management principles can be modified to assist managers in meeting

changing environment requirements. (v) Meeting social responsibility: Management principles have been designed in such a way that they assist a company in meeting its social responsibilities. (vi) Management education, training, and research: Management principles serve as the foundation for management theories, which are employed in training, education and research. They are a part of the curriculum for professional courses like MBA, BBA, etc. ¾ Fayol’s Principles of Management: Henry Fayol (18411925) earned a degree in Mining Engineering and worked as an Engineer for a French mining firm in 1860. In1888, he was promoted to Managing Director. When the firm was on the edge of bankruptcy, he embraced the challenge and turned the company’s fortunes by utilising his extensive administrative skills. He is known as the “Father of General Management” for his achievements. ¾ Fayol’s 14 Principles of Management: (i) Division of work: Work should be separated into discrete jobs that can be accomplished by a competent worker to bring specialisation. (ii) Authority and Responsibility: Authority and responsibility must be balanced. (iii) Discipline: Adherence to organisational rules and employment contracts. (iv) Unity of Command: Each employee should receive orders in a hierarchy from one boss only and report to just one superior. (v) Unity of Direction: A group of activities with the same objective must have one head and one plan. It leads to unity of action and coordination in the organisation. (vi) Subordination of Individual Interest to General Interest: Organisational interest should take precedence over individual interest. (vii) Remuneration of Employees: Overall pay and compensation should be equitable to both employees and the organisation. (viii) Centralisation and Decentralisation: Balance subordinate engagement via decentralisation with the preservation of final power with managers through centralisation. (xi) Scalar Chain: There should be a chain of authority and communication from the top to the lower levels of management.

Instruction Route Card Clerk Clerk

Speed Boss

Workman

Time and Cost Clerk

Factory manager

Gang Boss

Repair Inspector Boss

Production Incharge

Second Level



Trace the Mind Map

First Level

Third Level





Fayol's Principles of Management

Fayol Vs. Taylor

Management Principles

Father of Scientific Management

• Division of work • Authority and Responsibility • Discipline • Unity of Direction • Subordination of individual interest to general interest • Remuneration of employees • Centralisation and Decentralisation • Scalar Chain • Order • Equity • Stability of personnel • Initiative • Espirit De Corps

Father of General Management

Scientist

Practitioner Personality Status

Applicable to specialised situations

Shop Floor level of Management

Top level of Management Universally applicable

Taylor

Fayol

Applicability

Basis Perspective

nce

ifica

• Help to take scientific decision • Meeting changing environment requirements • Optimum utilisation of resources • Provide managers with insights into reality • Fulfilling social responsibility • Management training, education and research

n Sig

• Universal Applicability • General Guidelines • Formed by Practice and Experiment • Flexible • Cause and Effect Relationship • Contingent

Management Principles are broad and general guidelines for decision making and behaviour. They are not as rigid as pure science. They deal with human behaviour so to be applied creatively according to demand of the situation.

ciple Prin gems of ent na Ma

Taylor's Scientific Management

Techniques

• To maintain quality standards • To set up performance standards • To achieve targets on time

· Science, not rule of thumb · Harmony, not discord · Cooperation, not individualism · Development of each and every person to his or her greatest efficiency and prosperity.

Disciplinarian

Planning Incharge

• Method Study • Motion Study • Time Study • Fatigue Study

Wages are paid on the basis of work done.

It advocates cooperation between workers and management.

PRINCIPLES OF MANAGEMENT

11

12 Oswaal CUET (UG) Chapterwise Question Bank (x) Order: For optimal efficiency, people and material should be in the right place at the right time. (xi) Equity: Fair and just treatment of all employees without prejudice. (xii) Stability of Personnel: Reduce staff turnover to sustain organisational efficiency. (xiii) Initiative: Encourage staff to take the initiative in planning and carrying out the plans. They should be self-motivated to take the first step. (xiv) Esprit de Corps: Encourage teamwork. ¾ Taylor’s Principles and Techniques Scan to know more about of Scientific Management: F. W. Taylor this topic (Fredrick Winslow Taylor) (1856-1915) was a mechanical engineer in the United States. He began working as a Mechanical Engineer at Midvale Steel Company in 1878. During Taylor’s his 26-year career, he experimented with his Scientific concepts and made substantial contributions Management to management theory. He stressed the use of scientific methodologies to managerial difficulties. His two most important publications, ‘Shop Management’ and ‘Principles of Scientific Management,’ were published in 1903 and 1911, respectively. He is known as the “Father of Scientific Management” for his contributions. Scientific management is defined as the application of scientific, methodical, objective, and logical ideas and methodologies to diverse managerial activities. It emphasise that there is always “One Best Way to Do a Work.” ¾ Scientific Management Principles: (i) Science, not rule of thumb: Decisions should be based on scientific research and analysis rather than trial and error. (ii) Harmony, not discord: Reduce class strife and foster concord between management and labour. (iii) Cooperation, not individualism: Cooperation should take the place of competition. Both management and employees should recognise their mutual needs. (iv) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity: Personnel competencies should be developed via scientific selection, and training should be provided to maximise efficiency and prosperity. ¾ Scientific Management Techniques: (i) Functional Foremanship: A foreman is a person in charge of operational-level staff. The planning and production functions, according to this method, should be separated. That is, under the manager, there should be one in–charge of planning and one in– charge of production. Each in-charge should have four people reporting to him or her Planning and execution are separated in this method.

BUSINESS STUDIES

(b) Instruction Card Clerk: This foreman is responsible for laying out the instructions and guidelines that workers must follow to accomplish their jobs. (c) Time and Cost Clerk: This foreman keeps track of how long it takes a worker to complete a project. He also keeps track of the cost of the job done. (d) Disciplinarian: He is in–charge of job discipline and methodical performance. ƒ Under Production Department: (a) Gang Boss: He is responsible for keeping machinery, supplies, tools, and so on available for use by the concerned workforce. (b) Speed Boss: He is responsible for ensuring that the work is completed on schedule and at the required speed. (c) Repair Boss: He is in–charge of keeping machinery and equipment in good operating condition. (d) Inspector: He is accountable for the quality of work and instils a quality consciousness in the personnel. (ii) Standardisation and Simplification of Work: It is the process of setting standards for every business activity. These standards are benchmarks that must be adhered to during the production process. The standards should be set for every business activity i.e., standardisation of process, raw material, time, product, etc. Simplification aims at eliminating superfluous varieties, sizes, and dimensions. (iii) Method Study: It is a study to find out the best way of doing the job and includes all activities from procurement of raw materials till the final product is delivered to the customer. It helps to minimise the cost of production and maximise the quality and satisfaction of the customer. (iv) Motion Study: This is the study of productive motions. It is the science of detecting and removing inefficient movements caused by superfluous, accidental, and unproductive actions of workers so that the job may be completed in less time.

Scan to know more about this topic

(v) Time study: Time study is a technique used to assess the average amount of time it takes a worker of moderate competence and efficiency to complete a well-defined job. It aids in determining the amount of people to be hired, designing appropriate incentive programs, and calculating labour expenses.

Scientific Management Techniques

(vi) Fatigue study: A fatigue study tries to discover the quantity and frequency of rest intervals required to complete a task efficiently. The rest periods will assist one in regaining stamina and working at the same capacity. As a consequence, productivity will increase.

ƒ Under Planning Department: (a) Route Clerk: This foreman establishes the order of operations that each class of machines and employees will follow.

(vii) Differential piece wage system: A differential piece wage system distinguishes between efficient and inefficient workers. It compensates productive workers while motivating inefficient ones to improve their productivity. There are twopiece rates in this plan: greater for workers who create the standard output or more, and lower for those who produce less than the standard output.

13

PRINCIPLES OF MANAGEMENT

¾ Mental Revolution: (i) A complete shift in the management-worker relationship attitude. Workers’ and supervisors’ attitudes must be changed as part of the Mental Revolution. (ii) The goal of mental revolution is to improve both parties’ thinking to create a better working environment.

(iii) Workers and managers must adjust their attitudes, and each must recognise the value of the other. Both should work together to achieve the organisation’s common goals. (iv) The management should look after the workers’ needs and share benefits with them. Workers, on the other hand, should make every effort to improve their efficiency and production while making the best use of available resources.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS

7. Match list I with list II.

1. “The principles of management are not rigid prescriptions, these can be modified by the manager when the situation so demands.”

[CUET 2022]

List I

List II

A

What nature of principles of management has been indicated in above statement? [CUET 2023] (A) General guidelines (B) Flexible (C) Contingent (D) Mainly behavioural

People and material must be in I suitable places at appropriate time for maximum efficiency.

Espirit de corps

B

This principle resembles with II military organisation.

Order

2. Which technique of Scientific Management violates Fayol’s principle of Equity? [CUET 2023] (A) Standardisation of Work (B) Motion Study (C) Differential Piece wage System (D) Mental Revolution

C

It will minimise the need for us- III Stability ing penalties. of tenure

D

Employees should be given rea- IV sonable time to show results.



3. Which technique of Scientific Management violates Unity of Command? [CUET 2023] (A) Time study (B) Standardisation of work (C) Functional foremanship (D) Simplification of work



Choose the correct answer from the options given below:

(A) A-II, B-I, C-IV, D-III

(B) A-II, B-III, C-IV, D-I

(C) A-II, B-IV, C-I, D-III

(D) A-III, B-II, C-I, D-IV

8. Match list I with list II.

4. According to which principle of management, “Organisation should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates.”  [CUET 2023] (A) Centralisation and Decentralisation (B) Subordination of individual interest to general interest (C) Scalar chain (D) Espirit De Corps 5. Match list I with list II. List-I



To ensure fairness to all employees through kindness and justice.

B

II

To implement a good suggestion system.

Remuneration



List II

A

Separation of planning I and execution function.

Standardisation of work

B

Setting benchmarks for II every business activity which must be adhered during production.

Simplification of work

C

Eliminating superfluous III varieties, sizes and dimensions.

Method study

D

Minimising the cost of IV production and maximising the quality and satisfaction of customers.

Functional foremanship

List-II I

[ CUET 2022]

List I

[CUET 2023]

A Initiative

Unity of command

Choose the correct answer from the options given below:

C Equity

III Clear and fair agreements.

(A) A-I, B-III, C-II, D-IV

(B) A-IV, B-I, C-II, D-III

D Discipline

IV

(C) A-III, B-II, C-IV, D-I

(D) A-II, B-III, C-I, D-IV

Fair wages for a reasonable standard of living.

Choose the correct answer from the options given below:

9. Match list I with list II. List-I

(A) A ‑ II, B ‑ IV, C ‑ III, D ‑ I (B) A ‑ II, B ‑ I, C ‑ IV, D ‑ III (C) A ‑ II, B ‑ IV, C ‑ I, D ‑ III (D) A ‑ II, B ‑ I, C ‑ III, D ‑ IV 6. ________________ is the scientific technique through which F.W. Taylor devised the concept of Assembly Line.  [CUET 2022] (A) Motion Study

(B) Time Study

(C) Method study

(D) Standardisation and simplification



[CUET 2022] List-II

A

Speed Boss

I

Keeps machines and tools ready for work.

B

Gang Boss

II

Proper working conditions of machines and tools.

C

Repair Boss

III

Checks quality of work.

D

Inspector

IV

Timely completion of work.

Choose the correct answer from the options given below:

14 Oswaal CUET (UG) Chapterwise Question Bank (A) A – II, B – IV, C – I, D –III (B) A – IV, B – I, C – II, D – III (C) A – II, B – III, C – I, D – IV (D) A – IV, B – III, C –II, D –I 10. Which of the following statements is false concerning principles of management? [CUET 2022] (A) Principles of management are formed by experience and collective wisdom of managers as well as experimentation. (B) Principles of management are not rigid prescriptions, which have to be followed absolutely. (C) Management principles aim to influence the behaviour of human beings. (D) The application of principles of management is not possible in contingent situations. 11. Pioneer Ltd. is dealing in fruit juices and hair oils. To ensure unity of action and coordination, it has made two separate divisions for each product. Each division has its charge, plans, and execution resources. Thus, both divisions are moving towards the same objectives through focused efforts.

Identify the principle of management followed by Pioneer Ltd. in the above case. (A) Esprit de corps (B) Equity (C) Unity of direction (D) Authority and responsibility [CUET 2022] 12. Vidhya Public School is a renowned school in Nagpur. The management recently appointed a new Business Studies teacher, Shweta, who taught classes XI and XII and gave her a monthly salary of ₹50,000. Shweta is not satisfied with it and said “The salary is not just and equitable as per the amount of work required to be done by a Business Studies teacher. Other schools in the city are paying ₹70,000 to their teachers teaching classes XI and XII”.

Name the principle of management that has been violated by Vidhya Public School in the above case: [CUET 2022] (A) Discipline (B) Remuneration of employees (C) Equity (D) Esprit de corps  13. The technique of Scientific Management given by Taylor, which aims to establish the interchangeability of manufactured parts and products is ____________. (A) Method Study (B) Motion study (C) Standardisation (D) Differential piece wage system. 14. In ‘Delight Ice Creams Ltd.’, decision making authority is concentrated at the top level and no authority has been delegated among the subordinates. On the other hand, in “Tasty Ice Creams Ltd.”, a big organization as compared to ‘Delight Ice Creams Ltd.’, decision making authority is always delegated among more than one person. (A) Stability of personnel (B) Centralisation and decentralisation (C) Authority and responsibility (D) Scalar chain

BUSINESS STUDIES

15. Fayol’s book was published in English as ‘General and Industrial Management’ in: (A) 1949 (B) 1947 (C) 1918 (D) 1933 16. Why did F.W. Taylor propose eight specialists under Functional Foremanship? i. Because all qualities like intelligence, education, tact, grit, manual dexterity, energy, etc., could not be found in a single person. ii. Because the number of foremen or supervisors in a factory set-up is very large. iii. Because the number of workers in a factory set-up is very large. (A) (i) only (B) (i) and (ii) only (C) (ii) and (iii) only (D) (i), (ii) and (iii) 17. Which of the following are the Principles of Scientific Management: i. Science, not rule of thumb ii. Harmony, not discord iii. Standardisation and Simplification iv. Co-operation, not individualism Option (A) i, ii and iii only (B) ii, iii, and iv only (C) i, ii, and iv only (D) i, iii, and iv only 18. Management principles are contingent or dependent upon the situations prevailing in the organisation. Which is the correct explanation associated with this statement? (A) Application of principles is suitable in similar situations in a large number of cases. (B) The application of principles has to be changed as per requirements. (C) Principles of management cannot be modified. (D) None of the above. 19. Savita joined ‘Aykaa Ltd.’ as Head of the Production Department. In the past, the performance of the company was not so good. She analysed that production was not scientific. Then, she developed the best method using several parameters from deciding the sequence of operations, place of men, machines, and raw materials to the delivery of the product to the customers. Out of the following, identify the technique of scientific management followed by Savita: (A) Motion study (B) Fatigue study (C) Method study (D) Time study 20. The concept of ‘mental revolution’, as prescribed by Taylor involves a change in the mindset of: (A) Workers towards the management. (B) Management towards the workers. (C) Workers and management towards one another from competition to cooperation. (D) Customers towards the management of the organisation. (B) ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

15

PRINCIPLES OF MANAGEMENT

(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): Under functional foremanship, work is divided into many small parts and each part is assigned to an expert. Reason (R): Managerial activities should be divided into two parts, i.e., planning and production. 2. Assertion (A): Managers require authority commensurate with their responsibility. Reason (R): In an organisation, there should be a chain of superiors ranging from the ultimate authority to the lowest. 3. Assertion (A): Management principles are not exact like scientific principles so their application and use are not universal. Reason (R): Scientific principles have universal application and validity. 4. Assertion (A): Division of work leads to specialisation. Reason (R): Segregating work in the workforce amongst the workers will enhance the quality of the product. 5. Assertion (A): There should be one and only one boss for every individual employee. Reason (R): If an employee has to follow more than one boss, there begins a conflict of interest,which can create confusion. 6. Assertion (A): Method study makes the use of many techniques like process charts and operations research to achieve its main objective. Reason (R): The main objective of method study is to minimise the cost of production and maximise the quality and level of consumer satisfaction.  7. Assertion (A): There should be complete cooperation between the labour and the management instead of individualism. Reason (R): The employees in an organisation must work together, keeping aside their objectives and ego to achieve the common goals set by the management. 8. Assertion (A): According to the Differential Wage system, wages are paid based on work done and not based on time spent for doing the work. Reason (R): Those workers who can produce the standard number of units within a fixed duration are paid as per the high wage rate. 9. Assertion (A): Principles of management help in effective administration by limiting the boundaries of management discretion. Reason (R): All social, economic, political, or religious organisations apply management principles for their successful operations 10. Assertion (A): The application of principles of management is contingent. Reason (R): The principles of management are not rigid prescriptions, which have to be followed absolutely.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Raj completed his MBA from a reputed college of management. After completing his degree, he joined his father’s business of manufacturing chips. The business was doing fairly well but Raj wanted to be a market leader in this segment. His decision was based on logic, and facts and was free from bias and prejudice. For this, he implemented a lot of changes in the organisation. He recruited a large number of employees based on their qualifications and paid them adequately. He created a spirit of teamwork amongst the workers and appreciated the suggestions given by the employees.



He made sure that the employees got sufficient breaks during office hours so that they regain energy and work efficiently. During working hours of the employees, he monitored the movements of the workers to eliminate unnecessary movement to achieve goals.

1. “His decision was based on logic, and facts and was free from bias and prejudice.” Which importance of the Principle of Management is discussed in the above lines? (A) Optimum utilisation of resources and effective administration (B) Useful insight into reality (C) Scientific decisions (D) Meeting changing environment requirements 2. “He recruited a large number of employees based on their qualifications and paid them adequately.” Which principle is followed by Raj in the above lines? (A) Principle of Equity (B) Principle of Remuneration of Employees (C) Principle of Discipline (D) Principle of Stability of Personnel 3. “He created a spirit of teamwork amongst the workers and appreciated the suggestions given by the employees”. A. Principle of Discipline B. Principle of Equality C. Principle of Initiative D. Principle of Espirit de Corps E. Principle of Stability of Personal

Choose the correct answer from the options given below:

(A) D and E only

(B) C and D only

(C) D only (D) C and E only 4. “He made sure that the employees get sufficient breaks during office hours so that they can regain energy and work efficiency”. Identify the technique of scientific management mentioned in the above lines. (A) Method Study (B) Time Study (C) Fatigue Study (D) Different Piece wage system

16 Oswaal CUET (UG) Chapterwise Question Bank 5. Identify the techniques of scientific management which aim at eliminating unnecessary movements while working. (A) Motion Study (B) Method Study (C) Time Study (D) Fatigue Study II. Read the following text and answer questions that follow: (Q6-Q10) Krishna and Saroj are both qualified CAs and good friends. After obtaining a certificate of practice, they decided to pursue a career of their own choice. Krishna starts his practice in the city whereas Saroj joins a Government Company. They meet after a long time at a party. Krishna invites Saroj to visit his office and she accepts his invitation. She observes at his office that there is a fixed place for everything and everyone and it is present there so that there is no hindrance in the activities of the office. Also, Krishna always tends to replace ‘I’ with ‘We’ in all his conversations with the staff members. Later on, Krishna shares with her that he always deals with lazy staff sternly to send the message that everyone is equal in his eyes. 6. “She observes at his office that there is a fixed place for everything and everyone”. Identify the Principle of Management highlighted here. (A) Equity (B) Order (C) Espirit De Corps (D) Unity of Command

BUSINESS STUDIES

7. “Krishna always tend to replace ‘I’ with ‘We’ in all his conversations with the staff members”. Which principle of management is being highlighted here? (A) Stability of Personnel (B) Equity (C) Espirit de Corps (D) None of these 8. “Krishna shares with her that he always deals with lazy STAFF sternly to send the message that everyone is equal in his eyes”. Identify the management principle. (A) Equity (B) Subordination of Individual interest to general interest (C) Scalar Chain (D) None of the above 9. All the Principles of Management applied by Krishna are given by: (A) Fayol (B) Taylor (C) Both (A) and (B) (D) Neither (A) nor (B) 10. What is the primary significance of Krishna’s stern approach towards lazy staff members in the context of management principles? (A) Ensuring scientific selection of workers (B) Facilitating decision-making and achieving organizational goals (C) Promoting unity and equality in the workplace (D) Maintaining a clear hierarchy in the organization

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (B)

2. (C)

3. (C)

4. (C)

5. (C)

6. (C)

7. (C)

8. (B)

9. (B)

10. (D)

11. (C)

12. (B)

13. (C)

14. (B)

15. (A)

16. (A)

17. (C)

18. (B)

19. (C)

20. (C)

8. (A)

9. (B)

10. (B)

8. (A)

9. (A)

10. (B)

[B] ASSERTION & REASON 1. (B)

2. (B)

3. (D)

4. (A)

5. (A)

6. (A)

7. (A)

[C] CASE BASED QUESTIONS 1. (C)

2. (B)

3. (B)

4. (C)

5. (A)

6. (B)

7. (C)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

1. Option (B) is correct. Explanation: The principles of management can be changed subject to the situation and circumstances; they do not have to be blindly followed. 2. Option (C) is correct. Explanation: Principle of Equity states that all the members of an organisation should be treated in a fair and just manner. For the same job done, they should be paid the same salary or wages. However, this principle is violated in ‘differential piece wage system’ technique of scientific management, wherein, the efficient and inefficient workers are paid differently. The efficient workers are paid more than the inefficient ones, leading inefficient workers to work with more motivation and enhance their productivity so that they can also be paid more, equal to efficient workers.

3. Option (C) is correct. Explanation: As per the principle of Unity of Command, one subordinate should receive and be responsible to only one superior. It follows, ‘ONE SUPERIOR, ONE SUBORDINATE’. However, functional foreman is a scientific technique as given by Taylor that violates the principle of unity of command as there, the workers get orders from eight foremen. 4. Option (C) is correct. Explanation: Scalar chain as the principle of management states that the chain of authority and communication in an organisation should run from top to bottom. It also suggests to follow ‘gang plank’, the shortest route of communication, only in case of emergency.

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PRINCIPLES OF MANAGEMENT

5. Option (C) is correct. Explanation: The principle of Initiative states that employees should be self-motivated to think and execute the plans. Remuneration of Employees states that pay and compensation should be fair to both the employees and the organisation. Principle of Equity emphasises on kind and just behaviour with all employees without discrimination. Discipline is the obedience to organisational rules and employment agreements which are necessary for the working of the organisation. 6. Option (C) is correct. Explanation: Method study aims to find the best way of doing the task, He devised the concept of Assembly line using method study. 7. Option (C) is correct. Explanation: The principle of Espirit de corps states that management should promote team spirit and unity which will create a spirit of mutual trust and belongingness among the team members. This is turn can minimise the need for penalties. According to the principle of order everything should have a place and everything should be at its right place for maximum efficiency. According to the principle of stability of tenure, the management must minimise employee turnover. The principle of Unity of command states that there should be only one boss for every individual employee. It resembles the working of the military organisations to maintain coordination of action. 8. Option (B) is correct. Explanation: Under the technique of functional foremanship, the planning and production are separated and each of them have four people working under them. Standardisation of work aims to set the standards which each product should match. Simplification of work eliminates the extra activities to increase the efficiency of production. Method study aims to find one best way of doing the work. 9. Option (B) is correct. Explanation: Taylor wanted to improve foremen’s efficiency by identifying the characteristics of a good foreman. He classified foremanship into eight categories: intellect, tact, grit, judgment, particular knowledge, energy, and honesty. Taylor offered eight specialists to fulfil these requirements. He separated the planning and execution roles, with a factory manager in–charge of both planning and production. The planning in–charge was made up of four people, while the production in–charge was made up of people like the speed boss, gang boss, repair boss, and inspector. 10. Option (D) is correct. Explanation: The application of principles of management is contingent or dependent upon the prevailing situation at a particular point in time. The application of principles has to be changed as per requirements. The principles of management are not fixed or permanent. They are affected by situations or circumstances. 11. Option (C) is correct. Explanation: Unity of Direction means all the units of an organisation should be moving towards the same objectives

through coordinated and focused efforts. Each group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination. 12. Option (B) is correct. Explanation: The overall pay and compensation should be fair to both employees and the organisation. Remuneration should be just and equitable. This will ensure a congenial atmosphere and good relations between workers and management. Consequently, the working of the company would be smooth. 13. Option (C) is correct. Explanation: Standardisation refers to the process of setting standards for every business activity; it can be the standardisation of process, raw material, time, product, machinery, methods, or working conditions. These standards are the benchmarks, which must be adhered to during production. The objective of standardisation is to establish the interchangeability of manufactured parts and products. 14. Option (B) is correct. Explanation: The concentration of decision-making authority is called centralisation whereas its dispersal among more than one person is known as decentralisation. The degree of centralisation will depend upon the circumstances in which the company is working. In general, large organisations have more decentralisation than small organisations. 15. Option (A) is correct. Explanation: Fayol’s work became more generally known with the 1949 publication of “General and Industrial Administration”. 16. Option (A) is correct. Explanation: Taylor concentrated on improving the performance of this role in the factory set-up. He identified a list of qualities of a good foreman/supervisor and found that no single person could fit them all. This prompted him to suggest functional foremanship through eight persons. 17. Option (C) is correct. Explanation: All Science, not rule of thumb, Harmony, not discord, Cooperation, not individualism are principles of scientific management and Standardisation and simplification is technique of scientific management. 18. Option (B) is correct. Explanation: The principles of management are not fixed or permanent. They are affected by situations or circumstances. Therefore, the decision to implement them or not is taken according to the situation or circumstances. 19. Option (C) is correct. Explanation: The objective of method study is to find the best way of doing the work. 20. Option (C) is correct. Explanation: The mental revolution involves a change in the attitude of workers and management towards one another from competition to cooperation. Both should realise that they require one another.

18 Oswaal CUET (UG) Chapterwise Question Bank [B] ASSERTION & REASON 1. Option (B) is correct. Explanation: Functional foremanship is an extension of the principle of division of work and specialisation to the shop floor. To improve the quality of supervision of workers at the supervisor level, Taylor developed the concept of functional foremanship. He advocated the separation of planning and execution functions. 2. Option (B) is correct. Explanation: There should be a balance between Authority and Responsibility. Authority facilitates the management to work efficiently, and responsibility makes them responsible for the work done under their guidance or leadership. 3. Option (D) is correct. Explanation: Scientific principles are based on truth and they can be applied at every time and in every situation. Thus, its universal application is possible. In the field of management, too, managerial knowledge and principles of management are considered to be based on truth and they, too, can be applied anywhere and in every situation. 4. Option (A) is correct. Explanation: Division of work leads to specialisation, and specialisation helps to increase efficiency, which results in an improvement in the productivity and profitability of the organisation. 5. Option (A) is correct. Explanation: According to Fayol, there should be one and only one boss for every individual employee. If an employee gets orders from two superiors at the same time the principle of unity of command is violated. He felt that if this principle is violated “authority is undermined, discipline is in jeopardy, order disturbed and stability threatened”. 6. Option (A) is correct. Explanation: Managers come across numerous ways of performing a particular task or carrying out the production of goods or services. Out of all these possible methods, the selection of the most appropriate way, which is cost-effective and also increases the production is considered a method study. 7. Option (A) is correct. Explanation: Cooperation, confidence, sense of goodwill should prevail among both, managers as well as workers. The intention is to replace internal competition with cooperation. 8. Option (A) is correct. Explanation: Taylor wanted to differentiate between efficient and inefficient workers. The standard time and other parameters should be determined based on the work-study. The workers can then be classified as efficient or inefficient based on these standards. He wanted to reward efficient workers. So, he introduced different rates of wage payment for those who performed above standard and for those who performed below standard. 9. Option (B) is correct. Explanation: Principles of management help in effective administration by limiting the boundaries of management discre-

BUSINESS STUDIES

tion so that their decisions may be free from personal prejudice and bias. Management principles are applied in every situation where the objectives are attained through group efforts. All social, economic, political, or religious organisations apply management principles for their successful operations. Every organisation must make the best possible use of its available resources by the application of management principles along with managerial functions such as planning, organising, staffing, directing, and controlling. 10. Option (B) is correct. Explanation: The application of principles of management is dependent upon the prevailing situation at a particular point of time. It has to be changed as per the requirements. Principles of management are flexible and can be modified by the manager when the situation so demands.

[C] CASE BASED QUESTIONS 1. Option (C) is correct. Explanation: Scientific decision-making involves the use of data mining and big data to source relevant data to inform decisions. Raj made his decisions based on logics, data and facts. 2. Option (B) is correct. Explanation: The remuneration system must be such that it provides adequate remuneration to the employees, motivates the employees to perform better, and ensures safety and security, raises the standard of living of the employees. Raj motivated the employees to perform better by recruiting and compensating fairly. 3. Option (B) is correct. Explanation: 1. “Spirit of teamwork” corresponds to the Principle of Espirit de Corps, which is about promoting a sense of unity and team spirit among the employees. 2. “Appreciated the suggestions given by the employees” corresponds to the Principle of Initiative, which encourages employees to offer suggestions and take the initiative. 4. Option (C) is correct. Explanation: In management, fatigue study refers to the long working hours with sufficient breaks which results in stress, which is also known as fatigue. 5. Option (A) is correct. Explanation: Motion study refers to the study of movements like lifting, putting objects, sitting and changing positions, etc., which are undertaken while doing a typical job. Unnecessary movements are sought to be eliminated so that it takes less time to complete the job efficiently. 6. Option (B) is correct. Explanation: The principle of order states that resources (manpower, money, materials, etc.) should be placed in the appropriate location at the right time. This guarantees that resources are used properly and systematically. Misuse and chaos in the organisation will result if any of these resources are misplaced. 7. Option (C) is correct.

19

PRINCIPLES OF MANAGEMENT

Explanation: Esprit de Corps is French word for “Team Spirit.” According to Henry Fayol’s management theory, management should aim to develop staff unity, morale, and cooperation. The organisation benefits greatly from team spirit. Employees who are happy and motivated are more likely to be productive and efficient. For example, using the phrase ‘We’ instead of ‘I’ while outlining the new plan of action for meeting the following month’s goals in stills a sense of collaboration in the group. 8. Option (A) is correct. Explanation: Equity is a blend of kindness and justice. This concept emphasizes that managers should treat everyone they oversee with kindness and justice. This fosters employee loyalty and dedication to the organisation for which they work. For example, regardless of gender, religion, colour, or sexual orientation, all workers must feel protected, seen, and heard, and they

must be given equal opportunities to grow and prosper in their careers inside the firm. 9. Option (A) is correct. Explanation: Henry Foyal’s management principles applied by Krishna are still frequently used in making solid management decisions and achieving the greatest results for both the organisation and the workforce. 10. Option (B) is correct. Explanation: Krishna’s stern approach toward lazy staff members is primarily significant in facilitating decision-making and achieving organizational goals. It ensures that all employees are held to the same standard of productivity and discipline, contributing to the overall effectiveness and success of the organization.

CHAPTER

3

  Revision Notes The term “business environment” refers to any individuals, institutions, and other forces that are outside the control of a commercial entity but may have an impact on its performance. ¾ Features:

BUSINESS ENVIRONMENT Scan to know more about this topic

Business Environment

(i) Totality of External Forces: The business environment is the sum of all factors/forces accessible outside the firm and over which the business has no influence. (ii) Specific and General Forces: Specific forces, such as clients and investors, influence individual firms directly and instantly in their day-to-day operations General forces, such as political, economic, and technical conditions, indirectly and equally impact all the companies. (iii) Interconnectedness: Different facts or aspects of the business environment are inextricably linked. One aspect of the corporate environment influences the operation of others. (iv) Dynamic Nature: The environment is a conglomeration of numerous components, and changes in one or more of these factors continue to occur. As a result, the business environment is considered to be dynamic. (v) Uncertainty: It is uncertain since, it is difficult to predict the behaviour of environmental elements because they change rapidly. (vi) Complexity: The business environment is a complicated phenomenon that is easy to comprehend in parts but harder to grasp in its entirety. (vii) Relativity: The business environment is a relative notion because it varies from country to country and region and region. Scan to know ¾ Importance: more about

this topic (i) It enables the firm to find opportunities and get first-mover advantage: It assists in recognizing opportunities in the business environment, allowing the Importance firm to gain first-mover advantage. of Business Environment (ii) It assists the company in identifying dangers and early warning signals: It is critical to discover warning signs ahead of time. Awareness of business environment helps managers devise the innovative ways to deal with such dangers and mitigate their impact.

(iii) It helps in tapping useful resources: If growth indicators are available, businesses will plan ahead of time for human resources, increased working capital, and other operations such as marketing. (iv) It aids in dealing with quick changes: Today’s corporate environment is becoming increasingly dynamic, with rapid changes occurring. As a result, managers must comprehend the business environment to adapt the quick changes. (v) It aids in planning and policy formulation: It gives numerous hints about rivals, investors, consumers, and staff, among other things, which aids in planning and policy formation. (vi) It aids in performance enhancement: Identifying organisational opportunities and dangers by scanning the business environment and developing policies based on an enterprise’s strengths and weaknesses can improve organisational performance. ¾ Dimensions of Business Environment: (i) Economic Environment: This is the mix of a country’s economic system, economic policies, and economic conditions. Interest rates, inflation rates, changes Scan to know more about in people’s disposable income, stock market this topic indices, and the value of the rupee are some of the economic elements that might influence management practices in a corporation. (ii) Social Environment: Social enviDimensions ronment is the sum of all the features of the of Business Environment society in which the organization operates. Customs and traditions, morals, social trends, society’s expectations from business, and so on are all important components of the social environment. (iii) Technological Environment: This relates to advancements in many corporate operations. It encompasses factors related to scientific advancements and inventions that give new methods and techniques for creating the products and the services and new methods and techniques for doing business. (iv) Political Environment: This relates to the country’s political climate and the government’s attitude towards business. It encompasses political factors like the country’s overall stability and peace, as well as specific views held by elected government officials towards business.

economy

Second Level

Third Level





Trace the Mind Map

•Economic Environment : Includes interest rates, inflation rates, etc. •Social Environment : Includes social forces like customs, traditions, values, social trends, etc. •Technical Environment : Includes scientific and technological innovations and improvements. •Political Environment : Includes political conditions of a country. •Legal Environment : Includes various policies, rules and regulations of the government.

building process

B

u

Dimensions of Business Environment

ss Environm e n en si

• Giving greater role to the private sector in the nation

all unnecessary controls and restrictions.

• lt liberalizing the Indian business and industry from

First Level



leading towards the emergence of a cohesive global

• Integration of the various economies of the world

• Privatisation

• Globalisation

• Liberalisation

• New Economic Policy

Business Environment

• Relativity

• Complexity

• Uncertainty

• Dynamic in nature

• Inter– relatedness

• Specific and general forces

• Totality of external forces

• It enables the firm to identify opportunities and get the first mover advantage. • It helps the firm to identify threats and early warning signals. • It helps in optimum utilisation of useful resources. • It helps in coping with changes. • It helps in assisting in planning and policy formation. • It helps in improving performance.

Features

The term 'business environment' means the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance.

BUSINESS ENVIRONMENT

21

t

22 Oswaal CUET (UG) Chapterwise Question Bank (v) Legal Environment: The legal environment includes all the acts enacted by the government, court judgments, and decisions made by various commissions and agencies in the country. Non-compliance with the laws can create legal problems for the business. ¾ The economic environment in India: The Indian economic environment is influenced by macro-level factors such as wealth production and distribution. Since independence, the business environment has evolved largely due to government policy. To address economic challenges, the government implemented initiatives like state ownership, central planning, and reduced private sector influence. However, these measures yielded mixed results until 1991 when the economy faced a severe foreign exchange crisis, a large government deficit, and rising prices. In response, the government proposed a new industrial policy as a part of a economic reforms. ¾ The following were the policy’s main features: (i) The government decreased the number of industries subject to compulsory licensing to six. (ii) Many of the industries formerly protected for the public sector were de-reserved.The public sector’s engagement was confined to four industries of critical importance. (iii) There was a disinvestment in many public sector enterprises. (iv) Foreign capital policy was liberalized. Foreign equity involvement was raised, and 100 percent Foreign Direct Investment (FDI) was authorised in numerous activities. (v) Technology agreements with international corporations were given automatic approval. (vi) To channelize and promote the foreign investments, Foreign Investment Promotion Board (FIPB) was set up. Appropriate efforts were taken to reduce impediments to the growth and expansion of big industrial houses’ industrial units. The small-scale sector was guaranteed full assistance and recognition. Essentially, this strategy attempted to free the industry from the constraints of the licensing system (liberation), dramatically limit the role of the public sector (privatization), and attract foreign private engagement in India’s economic growth (globalization). ¾ Liberalization: The economic reforms has implemented attempted to free Indian businesses and industries of all superfluous constraints and limitations. They signalled the end of the quota system for licenses. ¾ The Indian industry has been liberalized in the following ways: (i) Abolishing of licensing requirements in most industries except a few. (ii) Freedom in deciding the scale of business activities, i.e., no restrictions on expansion or contraction of business activities.

BUSINESS STUDIES

(iii) Removal of restrictions on the movement of goods and services. (iv) Freedom in fixing the prices of goods and services. (v) Lowering tax rates and removing needless economic rules; (vi) Simplifying processes for imports and exports; and (vii) Making it simpler to attract foreign money and technology to India. ¾ Privatisation: { It refers to a new set of economic changes aimed at providing the private sector with a larger role in nation development and reducing the role of the public sector. This was a reversal of Indian planners’ previous development approach. { To do this, the government reinterpreted the role of the public sector in the New Industrial program of 1991, implemented a program of planned public sector disinvestment, and chose to submit loss-making and ill firms to the Board of Industrial and Financial Reconstruction. { The phrase “disinvestment” refers to the transfer of public-sector firms to the private sector. As a result, the government’s stake in the public enterprise is diluted. ¾ Globalisation: { Globalisation refers to the integration of the world’s diverse economies, which leads to the formation of a unified global economy. { Until 1991, the Indian government rigorously regulated imports value and volume. These rules dealt with ƒ Import licensing, ƒ Tariff limits, and ƒ Quantitative restrictions { The

new economic changes targeted at trade liberalisation were intended for import liberalisation, export promotion through tariff rationalisation, and foreign exchange reforms to ensure that the nation does not stay isolated from the rest of the world. { The Indian government shifted the country to this globalisation pattern through its 1991 strategy. The government’s liberalisation, privatisation, and globalisation policies have had a significant impact on the operations of businesses and industries in terms of:

ƒ Increased competition ƒ More demanding customers ƒ Rapidly changing technological environment ƒ Need for change ƒ Need for human resource development ƒ Market orientation ƒ Loss of budgetary support to the public sector. In the changing economic climate, Indian businesses have devised a variety of tactics to tackle the challenge of competition.

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BUSINESS ENVIRONMENT

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Social Environment includes: [CUET 2023] (A) Consumption habits and life expectancies (B) Money supply in the economy (C) Rate of savings (D) New ways of producing goods 2. “Dependence on technological gadgets is comparatively higher in America than in India”. Which feature of the business environment is highlighted by the statement? [CUET 2023] (A) Relativity (B) Uncertainty (C) Complexity (D) Dynamic 3. Identify the specific forces of the Business Environment from the following : [ CUET 2023] A. Investors B. Customers C. Social D. Political E. Competitors Choose the correct answer from the options given below: (A) A, B, C, and D only (B) A, B, and E only (C) C and D only (D) C, D, and E only 4. Match list I with list II.

[CUET 2022]

List I (Part-A) A Interest rates, inflation B

List II (Part-B) I

Customs and Traditions II

Technological Environment Economic Environment

C Advancement in the medical field

III Social Environment

D General stability and peace

IV Political Environment

Choose the correct answer from the options given below: (A) A-I, B-II, C-III, D-IV (B) A-I, B-III, C-II, D-IV (C) A-II, B-III, C-II, D-IV (D) A-II, B-III, C-IV, D-I 5. Even though the political conditions vary from country to country, they impact the sentiment of an investor in the business, if the instability of the political conditions causes uncertainty and makes it difficult for him to predict the future. Which feature of the business environment is being highlighted in the above statement? [CUET 2022] (A) Specific and general forces (B) Dynamic nature (C) Relativity (D) All of the above 6. Rate of saving and investment, money supply in the economy, public debt, volume of imports and exports are components of ________ dimension of business environment.  [CUET 2022] (A) Economic (B) Political (C) Legal (D) Social 7. Identify the statement that does not refer to the feature of business environment: [CUET 2022] (A) Dynamic nature (B) Innovative (C) Totality of external forces (D) Specific and general forces

8. Which of the following dimensions of the Business Environment includes legislations passed by the Government administratives orders issued by government authorities: (A) Technological Environment (B) Social Environment (C) Legal Environment (D) Economic Environment 9. “The increase in the demand for many Ayurvedic medicines, health products, and services in the past few months, is related to the need for building immunity and an increased awareness for health care due to the spread of Coronavirus.” Identify the feature of the business environment described above. (A) Specific and general forces (B) Inter-relatedness (C) Relativity (D) None of these 10. Which dimension of the Business Environment is described by the following statement: ‘Ban on cigarette advertisements.’ (A) Social Environment (B) Legal Environment (C) Technological Environment (D) Political Environment 11. The Economic Survey 2019, suggests that the psychological studies can be used in the realm of tax compliance. It is in the favour of using religious norms such as “dying debt is a sin” to improve tax compliance. Identify the related dimension of business environment. A. Economic B. Social C. Technological D. Legal E. Political Choose the correct answer from the options below: (A) A & D (B) B & D (C) E & C (D) A & E 12. Mohammad Kanjiwal, a beekeeper since April 2021 is now part of the growing tribe of at least 50 urban dwellers across Maharashtra raising bees and harvesting honey in their balconies, rooftops and backgardens. As he had been focused on eating right the thought of domesticating honey bees to promote healthy consumption habits and seeing honey being cultivated right before his eyes was mesmerizing for him. Identify the factor constituting the general environment being discussed above. (A) Economic environment (B) Social environment (C) Technological environment (D) Political environment 13. Match list I with list II: List-I

List-II

A Life expectancy

I

Economic environment

B Relationship between two countries

II

Social environment

C Planned outlay in public and private sectors

III Political Environment

D The Companies Act, IV Legal 2013 environment Choose the correct answer from the options given below: (A) A – IV, B – III, C – I, D – II (B) A – II, B – III, C – I, D – IV (C) A – III, B – IV, C – II, D – I (D) A – IV, B – II, C – III, D – I

24 Oswaal CUET (UG) Chapterwise Question Bank 14. As a part of regulations to be followed by advertisers, the advertisement for a new brand of baby in continuation food for infants provides important information for potential buyers that it is “Not recommended for infants under the age of four months”. Which dimension of the business environment is highlighted in the above statement? (A) Social Environment (B) Legal Environment (C) Political Environment (D) Economic Environment 15. Which of the following statements is incorrect? A. Business environment is a relative concept. B. Business environment is the total of all things internal to business firms. C. Opportunities refer to the positive internal trends or changes that will help a firm to improve its performance. (A) A and B (B) B only (C) B and C (D) C only 16. The service sector contributes to almost half of India’s GDP but employs only one-third of its workforce. Which of the following dimensions of Business Environment is stated in the above line: (A) Economic (B) Social (C) Political (D) Legal 17. Airlines will be able to offer the benefit of lower pricing to customers on sectors/routes due to the decision of the Civil Aviation Ministry to remove price caps from August 31, 2022. This can help an airline to perform better performance if they make early decisions regarding future courses of action after understanding and doing analysis. Which importance of the business environment and its understanding by managers is not highlighted above? (A) It helps in improving performance. (B) It helps in assisting in planning and policy formulation. (C) It helps in tapping useful resources. (D) It enables a firm to identify opportunities and get a first-mover advantage. 18. Which out of the following are a part of the Social Environment? A. Educational system and literacy rates B. Public debt (internal and external) C. Shifts in the position of women in the workforce D. Rates of saving and investment Choose the correct answer from the options given below: (A) A and D only (B) A and B only (C) B and E only (D) A and C only 19. India has launched its most advanced Geo-imaging satellite which will allow better monitoring of the subcontinent, including its borders with neighbouring countries, by imaging the country 4–5 times a day. The satellite is capable of near real-time monitoring of floods and cyclones. The factor constituting the Business Environment being discussed above is: (A) Social environment (B) Economic environment (C) Technological environment (D) Political environment

BUSINESS STUDIES

20. Aiming to revive Jammu and Kashmir’s attraction as a top location for film shooting the J&K Film Policy, 2021 offers a host of incentives to the filmmakers, such as subsidies and low long-term interest rates, for films with patriotic and certain other themes shot in J&K, providing work opportunities to local artistes, etc. This will have an impact on business enterprises in the state. Which component of the business environment is highlighted above? (A) Specific and general forces (B) Technological environment (C) Economic environment (D) Totality of external forces (B) ASSERTION & REASON Directions: In the question given below, there are two statements marked as Assertion (A) and Reason (R). Read the Statements and choose the correct option: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): The business environment helps in understanding the threats that are likely to happen in the future. Reason (R): Environmental awareness can help managers identify various threats on time and serve as an early warning signal. 2. Assertion (A): The business environment includes both specific and general forces. Reason (R): General forces such as investors, customers, competitors, and suppliers affect individual enterprises directly and immediately in their day-to-day work. 3. Assertion (A): ‘The shift in demand from propeller airplanes to jets and from typewriters to computer-based word processors have all been responsible and creating new business’. This is an example of technological environment. Reason (R): The technological environment includes forces relating to scientific improvements and innovations, which provide new ways and techniques of operating a business. 4. Assertion (A): Changes in the fashions and tastes of consumers may shift demand in the market from existing products to new ones. Reason (R): The business environment is dynamic, i.e., it keeps on changing consumer preferences. 5. Assertion (A): If an Indian firm finds that a foreign multinational is entering in the Indian market with new substitutes, it should act as a threat to that Indian firm. Reason (R): Threats refer to the external environment trends and changes that will hinder a firm’s performance. 6. Assertion (A): Business environment is complex in na-

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BUSINESS ENVIRONMENT

ture. Reason (R): Business environment can be understood if we study it in parts. 7. Assertion (A): Understanding of business environment helps in coping with rapid changes. Reason (R): By designing the policies that allow it to get the resources it needs, so that, it can convert those resources into outputs that the environment desires. 8. Assertion (A): The economic environment includes economic policies of the Government, including industrial, monetary, and fiscal policies. Reason (R): Business enterprises in India do realize the importance and impact of the economic environment on their work. 9. Assertion (A): Understanding of legal knowledge is a prerequisite for the smooth functioning of business and industry. Reason (R): The legal environment includes various legislations passed by the Government, administrative orders issued by government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government; Centre, State, or Local. 10. Assertion (A): The business environment helps in coping with rapid changes. Reason (R): The business environment enables the firm to identify opportunities and get the first-mover advantage.  [C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5) As the government has opened up its economy to Multinational Corporations, it has encouraged foreign companies to invest in some sectors of retailing. It has also put in place new rules and regulations for FDI (Foreign Direct Investment) in the retail sector. The FDI policy allows foreign investment through two modes. It may be either under the ‘automatic route’ or under the ‘approval route’ where prior approval of the Indian Government is required for any foreign investment in an Indian company that is carrying on retailing business in India. Moreover, the policy also talks about ‘Single brand retailing’ like Nike or ‘Multi-brand retailing’ like Walmart. The argument is that customers can afford to purchase the products of these companies as their income is rising gradually. It will increase research and innovations in the retail sector which will provide new ways of producing goods as well as increase the variety of goods in the market. This will eventually improve the quality of life. 1. “As the government has opened up its economy to Multinational Corporations, it has encouraged foreign companies to invest in some sectors of retailing.” Identify which dimension of the business environment is depicted here : (A) Political environment (B) Legal environment (C) Technological environment

(D) Economic environment 2. “Customers can afford to purchase the products of these companies as their income is rising gradually.” Identify which dimension of the business environment is depicted here : (A) Social environment

(B) Legal environment

(C) Technological environment (D) Economic environment 3. “It will increase research and innovations in the retail sector…” Identify which dimension of the business the environment is depicted here : (A) Social environment

(B) Political environment

(C) Technological environment (D) Economic environment 4. “This will eventually improve the quality of life.” Identify which dimension of the business environment is depicted here : (A) Social environment

(B) Legal environment

(C) Technological environment (D) Economic environment 5. “The Government is required for any foreign investment in an Indian company that is carrying on retailing business in India”. Identify which dimension of the business environment is depicted here : (A) Social environment

(B) Legal environment

(C) Technological environment (D) Economic environment II. Read the following text and answer questions that follow: (Q6-Q10) Shruti after completing her degree in MBA, runs a restaurant in a reputed residential area in Delhi. To open a restaurant, she borrowed loan from the bank at a low rate of interest. Low long-term rates are beneficial for banks and consumers both. The restaurant was located in the center of the city and attracted lots of customers. Her business was flourishing very well. To run a restaurant, she needs to assemble various resources called inputs like finance, machines, raw materials, power and water, labour, etc, She keeps all her staff happy by giving them good salaries and bonuses at times. Due to COVID-19 breakout and lockdown in the country, she has to close her restaurant as per the rules and laws imposed by the government. She must obey the law of the law. The COVID-19 pandemic changed the environment and had a significant impact on the supply of her food items. The number of customers started decreasing because of the imposition of the government’s restrictions on travel and gatherings. The impact of COVID-19 was devastating her business. She talked about this situation with her father. Her father suggested creating a website and selling the food items online with free home delivery. She created a website called ‘Food for you’. She ensures that complete hygiene will be maintained and proper safety measures will be followed while cooking the food and will be delivered on time. After creating this website, she found a huge difference in her business and her sales started increasing. 6. Business environment ___________ (A) Keeps on changing (B) Remains stable

26 Oswaal CUET (UG) Chapterwise Question Bank (C) Has a constant approach

(D) None of these

7. Identify the dimension of the business environment stated in the below-mentioned lines. “She borrowed a loan from the bank at a low rate of interest. Low long-term rates are beneficial for banks and consumers both”. (A) Social

(B) Political

(C) Economic

(D) Legal

8. Which of the following dimensions of the business environment is being highlighted in the below-mentioned lines?

‘Her father suggested creating a website and selling the food items online with free home delivery. She created a website called ‘Food for you’.

(A) Technological

(B) Political

(C) Legal

(D) None of these

BUSINESS STUDIES

9. Identify the dimension of the business environment stated in the below-mentioned lines. “It is imperative for her to obey the law of the land”. (A) Political (B) Legal (C) Economic (D) Technological 10. Identify the importance of the business environment stated in the below-mentioned lines. “To run a restaurant, she needs to assemble various resources called inputs like finance, machines, raw materials, power and water, labor, etc.” (A) It helps in tapping useful resources. (B) It helps in coping with rapid changes. (C) It helps in assisting in planning and policy formulation. (D) It helps the firm to identify threats and early warning signals.

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (A)

2. (A)

3. (B)

4. (C)

5. (D)

6. (A)

7. (B)

8. (C)

9. (B)

10. (B)

11. (B)

12. (C)

13. (B)

14. (B)

15. (B)

16. (A)

17. (C)

18. (D)

19. (C)

20. (C)

8. (B)

9. (B)

10. (B)

8. (A)

9. (B)

10. (A)

[B] ASSERTION & REASON 1. (A)

2. (C)

3. (A)

4. (A)

5. (A)

6. (B)

7. (B)

[C] CASE BASED QUESTIONS 1. (A)

2. (D)

3. (C)

4. (A)

5. (D)

6. (A)

7. (C)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (A) is correct. Explanation: The components and dimensions of the business environment are as follows: Consumption habits and life expectancies – Social Money supply in the economy – Economic Rate of savings – Economic New ways of producing goods – Technological 2. Option (A) is correct. Explanation: The business environment differs from one place to another. Therefore, it is relative to the place. 3. Option (B) is correct. Explanation: The forces that have an immediate and direct effect on the affairs of business are termed as specific forces. From the given options, it can be ascertained that the investors, customers, and competitors affect the business directly, rather than social or political factors which are more general. 4. Option (C) is correct. Explanation: Customs, traditions, and literacy rates are examples of social environment influences. Inflation and interest rates are examples of economic environmental

influences. Scientific breakthroughs and commercial practices are part of the technology environment. The political climate comprises the stability of the ruling party and the beliefs of the administration. 5. Option (D) is correct. Explanation: The business environment includes both specific and general forces. The business environment is dynamic, i.e., it keeps on changing whether in terms of technological improvement, shifts in consumer preferences, or entry of new competition in the market. Business environment is a relative concept since it differs from country to country and even region to region. 6. Option (A) is correct. Explanation: Economic dimension is the mix of a country’s economic system, economic policies, and economic conditions. 7. Option (B) is correct. Explanation: The business environment is dynamic as it keeps changing. It is a sum total of all external forces. It consists of specific and general forces. Innovation is not a feature of business environment. 8. Option (C) is correct. Explanation: The legal environment includes all the actions

27

BUSINESS ENVIRONMENT

and changes taken by the government and the ruling party.

16. Option (A) is correct.

9. Option (B) is correct. Explanation: Different forces of the business environment are interrelated to each other. One component of the business environment affects the functioning of other components.

Explanation: The economic environment includes all economic factors which affect the performance of a business. The factors can be macro and micro and is totally out of the control of the company.

10. Option (B) is correct.

17. Option (C) is correct.

Explanation: The legal environment includes the laws passed by the government as well as the decisions rendered by the various commissions and agencies at every level of the government.

Explanation: Understanding of business environment helps in tapping useful resources by designing the policies that allow it to get the resources it needs so that it can convert those resources into outputs that the environment desires.

11. Option (B) is correct.

18. Option (D) is correct.

Explanation: Compliances are a part of the legal environment as it is a law which the businesses need to follow. Using religious norms is a part of the social environment.

Explanation: Educational system and literacy rates and shift in the presence of women in the workforce are elements of the social environment whereas public debt (internal and external) and rates of saving and investment are a part of the economic environment.

12. Option (B) is correct. Explanation: The passage describes the growing trend of urban dwellers in Maharashtra engaging in beekeeping on their balconies, rooftops, and back gardens. This trend reflects a social change where people are increasingly interested in promoting healthy consumption habits and engaging in activities like beekeeping. Therefore, the social environment, which encompasses societal trends, cultural values, and lifestyle choices, is the relevant factor in this context. 13. Option (B) is correct. Explanation: The economic environment is the economic structure, policies, and conditions of a country that might impact the management practices of a firm. The social environment includes societal characteristics such as conventions, traditions, life, expectancy rate, morality, social trends, and commercial expectations, etc. The term “technological environment” refers to the developments in company operations, such as scientific breakthroughs and technologies. The political environment includes the country’s political atmosphere as well as the government’s approach to business, including stability and peace. The legal environment includes all acts passed by the government, court rulings, and decisions made by the country’s numerous commissions and agencies. 14. Option (B) is correct. Explanation: The legal environment includes various legislations passed by the Government administrative orders issued by government authorities, court judgments as well and the decisions rendered by various commissions and agencies at every level of the government center, state, or local. The impact of the legal environment can be illustrated with the help of government regulations to protect the consumer’s interests. 15. Option (B) is correct. Explanation: The term ‘business environment’ means the total of all individuals, institutions, and other forces that are outside the control of a business enterprise but that may affect its performance.

19. Option (C) is correct. Explanation: The technological environment includes forces relating to scientific improvements and innovations that provide new ways of producing goods and services and new methods and techniques of operating a business. For example, recent technological advances in computers and electronics have modified how companies advertise their products. It is common now to see computerised information kiosks and World Wide Web multimedia pages highlighting the virtues of products. 20. Option (C) is correct. Explanation: Interest rates, inflation rates, changes in disposable income of people, stock market indices, and the value of the rupee are some of the economic factors that can affect management practices in a business enterprise. Short-term and long-term interest rates significantly affect the demand for products and services. For example, in the case of construction companies and automobile manufacturers, low longer-term rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money. Similarly, a rise in the disposable income of people due to an increase in the gross domestic product of a country creates increasing demand for products. [B] ASSERTION & REASON 1. Option (A) is correct. Explanation: The environment happens to be the source of many threats. Environmental awareness can help managers to identify the various threats on time and serve as an early warning signal. 2. Option (C) is correct. Explanation: General forces such as social, political, legal, and technological conditions have an impact on all business enterprises and thus, may affect an individual firm only indirectly. 3. Option (A) is correct.

28 Oswaal CUET (UG) Chapterwise Question Bank Explanation: The technological environment includes the discovery of new methods and techniques for the production of goods and services. Technological changes make available better methods of production and that makes the optimum use of the raw material possible. 4. Option (A) is correct. Explanation: The business environment is dynamic, i.e., it keeps on changing whether in terms of technological improvement, shifts in consumer preferences, or entry of new competition in the market. 5. Option (A) is correct. Explanation: Threats refer to the external environment trends and changes that will hinder a firm’s performance. Besides opportunities, the environment happens to be the source of many threats. Environmental awareness can help managers to identify various threats on time and serve as an early warning signal. 6. Option (B) is correct. Explanation: Since the business environment consists of numerous interrelated and dynamic conditions or forces that arise from different sources, it becomes difficult to comprehend at once what exactly constitutes a given environment. The environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality. 7. Option (B) is correct. Explanation: Understanding of business environment helps in coping with rapid changes by developing suitable courses of action to deal with changes taking place in the environment as well as with the pace of change. 8. Option (B) is correct. Explanation: The economic environment in India consists of various macro-level factors related to the means of production and distribution of wealth which have an impact on business and industry. 9. Option (B) is correct. Explanation: Non-compliance with the laws of the land can put business firms into legal problems. 10. Option (B) is correct. Explanation: Today’s business environment is getting increasingly dynamic and changes are taking place at a fast pace. It is not the fact of change itself that is as important as the pace of change. All sizes and all types of enterprises are facing increasingly dynamic environments. To effectively cope with these significant changes, managers must understand and examine the environment and develop suitable courses of action. The environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors. [C] CASE BASED QUESTIONS 1. Option (A) is correct. Explanation: The political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. 2. Option (D) is correct.

BUSINESS STUDIES

Explanation: Economic environment refers to the factors like interest rates, inflation rates, and changes in disposable income of people, etc. which have an impact on business enterprise. 3. Option (C) is correct. Explanation: The technological environment includes forces relating to scientific improvements and innovations that provide new ways of producing goods and services and new methods and techniques of operating a business. 4. Option (A) is correct. Explanation: The social environment of business includes social forces like customs and traditions, values, social trends, society’s expectations of business, etc. 5. Option (D) is correct. Explanation: Retailing in India is on the rise, and many businesses have plans to expand in this area. This is due to an increase in client revenue, a preference for higher-quality products, and, most crucially, economic liberalisation, which allows for 100 percent direct investment in some areas of the economy. 6. Option (A) is correct. Explanation: The business environment is dynamic in that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences, or entry of new competition in the market. 7. Option (C) is correct. Explanation: Interest rates, inflation rates, changes in disposable income of people, stock market indices, and the value of rupees are some of the economic factors that can affect management practices in a business enterprise. Short- and long-term interest rates significantly affect the demand for products and services. For example, in the case of construction companies and automobile manufacturers, low longer-term rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money. Similarly, a rise in the disposable income of people due to an increase in the gross domestic product of a country creates increasing demand for products. 8. Option (A) is correct. Explanation: The technological environment includes forces relating to scientific improvements and innovations that provide new ways of producing goods and services and new methods and techniques of operating a business. 9. Option (B) is correct. Explanation: Legal environment includes various legislations passed by the Government administrative orders issued by the government authorities, court judgments as well as the decisions rendered by various commissions and agencies at every level of the government. The management of every enterprise must obey the law of the land. Therefore, an adequate knowledge of rules and regulations framed by the Government is a prerequisite for better business performance. 10. Option (A) is correct. Explanation: The environment is a source of various resourc-

BUSINESS ENVIRONMENT

es for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs like finance, machines, raw materials, power and water, labour, etc., from its environment including financiers, government, and suppliers. They decide to provide these resources with their expectations to get something in return from the enterprise. The business enterprise supplies the environment with its outputs

29 such as goods and services for customers, payment of taxes to the government, return on financial investment to investors, and so on. Because the enterprise depends on the environment as a source of inputs or resources and as an outlet for outputs, it only makes sense that the enterprise designs policies that allow it to get the resources that it needs so that it can convert those resources into outputs that the environment desires.

CHAPTER

4

PLANNING

  Revision Notes ¾ Planning: Planning entails choosing ahead of time what to accomplish and how to do it. It is a fundamental managerial role. Before doing anything, the manager must have a concept of how to work on a certain assignment. Planning is inextricably linked to creativity and innovation. However, the manager must first establish objectives; only then will the manager know where he needs to go. Planning is concerned with bridging the gap between where we are and where we want to go. Planning is something that managers at all levels undertake. It necessitates of decision-making since it entails selecting between distinct courses of action.  Features: (i) Planning focuses on attaining objectives: It helps to achieve pre-determined organisational goals by determining various techniques, procedures, and methods to be performed in advance. (ii) Planning is the main function of management: It serves as the foundation for all other management tasks. Other management activities, such as organising, staffing, directing, and controlling, are carried out within the framework of plans. (iii) Pervasive: Planning is essential at all levels of management as well as in all areas of the organisation. (iv) Continuous: Plans are produced for a certain period, such as a month, quarter, or year. After that term, a new plan must be developed based on new requirements and future situations. As a result, planning is an ongoing activity (v) Planning is futuristic: Planning involves making predictions. Future events and situations are predicted through forecasting, and preparations are made accordingly. (vi) Planning entails decision-making: During planning, many choices are evaluated and one is chosen. As a result, just one decision is made. (vii) Mental Exercise: Planning is a mental exercise in which foresight and intellect are required. It is a cognitive process of thought. It involves thinking rather than doing. ¾ Importance: (i) Planning provides direction: Planning provides direction for action by defining in advance how work is to be done. Planning ensures that the goals or objectives are clearly articulated so that they may be used as a guide to decide what action to take and in which direction. When goals are clear-

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Importance of Planning

ly stated, employees understand what the organisation must do as well as what they must do to attain those goals. (ii) Planning minimizes uncertainty of risks: Planning is an activity that allows management to look ahead and anticipate the changes. Planning demonstrates how to deal with changes and unknown situations by determining the activities to be completed in advance. (iii) Reduces overlapping and wasteful activities: Planning eliminates duplication and unnecessary actions by serving as the foundation for coordinating the activities and efforts of several divisions, departments, and individuals. It aids in the avoidance of ambiguity and misunderstanding. Work is completed without interruptions because planning provides clarity of mind and execution. Unnecessary and duplicate actions are reduced or eliminated. It is easier to identify inefficiencies and implement corrective steps to address them. (iv) Planning promotes innovation: Because planning is the initial job of management, fresh ideas for specific plans are welcome. It is the most difficult job for management since it leads all future activities that lead to the business’s growth and profitability. (v) Planning aids in decision-making: Planning allows the management to see into the future and select one out of several different courses of action. The management must assess each possibility and choose the most viable idea. Planning entails creating goals and forecasting future situations, which aids in making sound decisions. (vi) Planning creates the base for controlling: Planning entails goal setting. Through planning, organising, staffing, directing, and controlling the entire managerial process is focused on achieving the predetermined goals. Planning establishes the objectives or benchmarks against which actual performance is judged. Managers can determine if they have met their objectives by comparing actual performance to some Scan to know norm. It is possible to fix any deviations. more about ¾ Limitations: (i) Planning leads to rigidity: In an organisation, a well-defined plan with precise goals to be completed within a certain time frame is created. Following a pre-determined strategy when conditions change may not be in the best interest of the organisation.

this topic

Limitations of Planning

• Setting objectives for the organization • Developing premises • Identifying alternative courses of action • Evaluating alternative courses of action • Selecting an alternative • Implementing the plan • Follow-up actions

Process

Concept

nning Pla

First Level

Second Level

Trace the Mind Map Third Level

• Planning leads to rigidity in the organizational work. • Planning may not work in a dynamic environment. • Planning reduces creativity. • It is a time consuming process. • Planning provides only a base for success but it is not a guarantee of success.

Limitations



Importance



what to do and how to do



Planning is deciding in advance

• Provides direction • Reduces the risk of uncertainity • Facilitates decision making • Establishes standards for controlling

PLANNING

31

32 Oswaal CUET (UG) Chapterwise Question Bank (ii) Planning may not function in a dynamic environment: Nothing is consistent in the corporate world. The environment has several dimensions: economic, political, physical, legal, and social. Changes in these dimensions may have an impact on the business. (iii) Planning limits creativity: Only top-level managers are permitted to formulate the plans. With the planning, the organisation’s middle and lower management begin to operate strictly and become blind followers of the plan. (iv) Planning incurs significant expenses: The planning process incurs significant costs since it is an intellectual activity that requires organisations to recruit experienced specialists to carry out the process. (v) Planning is time-consuming: Developing planning premises can take a long time. This preparation is useless when fast decisions must be made. (vi) Planning does not ensure success: Planning just serves as a foundation for analysing the future. It does not guarantee that each plan will work. ¾ Planning Process: Planning is an activity. There are certain logical processes that every management must do.

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(i) Setting Objectives: The manager Process of Planning begins the planning function by establishing the objectives since all policies, processes, and techniques are designed only to achieve objectives. (ii) Developing Premises: Making assumptions about the future is referred to as developing premises. Forecasting is used to make the assumptions. Forecasting is a method of acquiring information. Interest rates, tax rates, and so forth are predicted. (iii) Identifying Alternative Courses of Action: After the establishment of objectives, managers develop a list of alternatives through which the organisation can achieve its goals. (iv) Evaluating Alternative Courses: After creating a list of various alternatives and the assumptions that support them, the manager begins evaluating each alternative with its positive and negative aspects. (v) Choosing an Alternative: This is the time for decision making., there is no mathematical method for doing so. Sometimes, instead of choosing just one option, a mixture of alternatives might be chosen. (vi) Plan Implementation: This is the stage at which additional managerial duties enter in the picture. The phase is concerned with carrying out the plan, or accomplishing what is necessary. (vii) Follow-up action: Because planning is an ongoing process, the manager’s responsibility does not end with putting the plan into effect. The manager closely supervises the plan’s implementation. ¾ Types of Plans: Single-use plan: - A single-use plan is created for a single event or project. Such a line of action is unlikely to be

BUSINESS STUDIES

repeated in the future, indicating that they are for nonrecurring situations. The length of this plan may vary depending on the nature of the project. It might last a week or a month. A project can occasionally be completed in a single day, such as organising an event, seminar, or conference. Budgets, programs, and projects are all part of these plans. They provide specifics such as the names of personnel who are in charge of completing the task and contributing to the single-use strategy. For example, a program may consist of defining the actions and procedures needed to start a new department to handle small tasks. Projects and programs are comparable in scope and complexity. A budget is a summary of costs, revenue, and income for a given period. Standing Plan: A standing plan is used for actions that occur regularly over a period of time. Its purpose is to guarantee that an organisation’s internal processes work smoothly. A plan like this considerably improves the efficiency of regular decision-making. It is often created once and then adjusted to match the demands of the business. Policies, processes, techniques, and guidelines are all part of a standing plan. ¾ Objectives The intended or target position that the company wishes to achieve is referred to as an objective. Objectives are sometimes referred to as ‘ends’. All organisational efforts are directed toward accomplishing these goals. This is also the initial stage in the planning process. Objectives should be specific, so that everyone working on them is aware of the specifics of the goal. { Objectives

have the following characteristics:

ƒ Objectives should be straightforward to understand. ƒ Quantifiable or measurable ƒ Attainable ƒ Realistic or rational ƒ Time is of the essence. Objectives should be established based on these features. For example, a mobile device manufacturer wishes to boost sale by 10% in the next two years. ¾ Strategy A strategy defines the general boundaries of a company’s operations. It will also allude to future decisions that will define the organisation’s long-term direction and scope. As a result, we may define a strategy as a thorough plan for achieving an organisation’s objectives. This comprehensive plan will have three dimensions: (i) identifying long-term objectives, (ii) deciding on a course of action, and (iii) allocating resources needed to attain the goal. Whenever a plan is developed, the business environment must be considered. The economic, political, social, legal, and technical environments all have an impact on an organisation’s strategy. Strategies are often used to shape an organi-

33

PLANNING

sation’s identity in the business environment. Major strategic decisions will include whether the organisation will stay in the same line of business, merge new lines of activity with the present firm, or attempt to gain a dominating position in the same market. ¾ Policy Policies are broad declarations that steer thought or channel energy in a certain direction. Policies serve as a foundation for understanding strategy, which is often presented in a broad strokes. They serve as a guidance for managerial action and decisions in strategy execution. For example, the corporation may have a recruiting strategy and a pricing policy, both of which define objectives and make choices. It is easier to address difficulties or issues when a policy is in place. As such, a policy is a broad reaction to a certain problem or circumstance. The organisation has policies at all levels and divisions, ranging from significant business rules to small policies. Major corporate rules are for everyone to know, including consumers, clients, rivals, and so on, whereas small policies apply only to insiders and contain minute pieces of information crucial to an organisation’s personnel. However, there must be some foundation for disclosing information to others. Policies establish the broad limits within which management may operate. The management may interpret and apply a policy at his or her discretion. For example, decisions made under a Purchase Policy would be of the manufacturing or purchasing variety. ¾ Procedure Procedures are the standard processes for carrying out tasks. They specify exactly how a job is to be carried out. They are listed in chronological sequence. For example, there may be a process for requisitioning supplies before manufacturing. Procedures are steps that must be taken under specific conditions. They are often intended for insiders to follow. The sequence of activities or actions to be followed is normally to implement a policy and achieve certain goals. Policies and processes are inextricably intertwined. Procedures are steps that must be taken within the context of a larger policy framework.

¾ Method Methods define the defined ways or manner in which a work must be completed while keeping the goal in mind. It is concerned with a job that consists of one step of a method and defines how that step is to be carried out. The approach may differ depending on the task. Choosing the right solution saves time, money, and effort while increasing efficiency. Different approaches may be used to the teach staff at various levels, from high-level management to supervisory. For upper-level management orientation programs, for example, lectures and seminars can be organised, while on-the-job training techniques and work-oriented approaches are suited at the supervisory level. ¾ Rules Rules are explicit statements that specify what should be done. They do not allow for any wiggle room or discretion. It indicates a managerial judgment on whether or not to pursue a specific action. They are generally the most straightforward plans since there is no room for compromise or revision unless a policy choice is made. ¾ Programmes Programmes are extensive statements about a project that explain the objectives, policies, processes, regulations, tasks, people and physical resources needed, and the money to carry out any plan of action. Programmes will include the whole range of operations as well as the organisation’s policy and how it will contribute to the overall business strategy. Within the broad policy framework, the smallest aspects, such as processes, rules, and budgets, are worked out. ¾ Budget A budget is a numerically stated declaration of expected results. It is a strategy that quantifies future facts and data. A sales budget, for example, may anticipate the sales of various items in each location for a specific month. A budget may also be created to illustrate how many people are needed in the plant during peak production hours. As the budget reflects all things numerically, it is easy to compare actual figures to expected figures and take corrective action. As a result, a budget is also a control of mechanism that may be used to address deviations. However, because budgeting entails predicting, it falls within planning. It is a critical planning tool in many organisations.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Planning is an intellectual process that requires logic rather than wishful thinking. Which feature of planning is highlighted by the statement? [CUET 2023] (A) Futuristic (B) Continuous (C) Mental exercise (D) Pervasive 2. Planning is pervasive because: [CUET 2023] (A) It is required to set special goals. (B) It is required at all levels of management. (C) It is forward-looking and backward-looking. (D) It lays down the base for other functions of management.

3. “Planning function precedes the other functions of Management.” [CUET 2022] The characteristic of planning mentioned here is: (A) Planning is goal-oriented. (B) Planning is a continuous function. (C) Planning is the primary function of Management. (D) Planning is pervasive. 4. Sunita is going to start a venture for which she has to follow the process of planning. Identify the correct sequence of the planning process. A. Implement the Plan B. Select an alternative C. Follow-up action

34 Oswaal CUET (UG) Chapterwise Question Bank D. Evaluate alternative courses E. Identify the alternative course of action.

Choose the correct answer from the options given below:  [CUET 2022] (A) E, D, B, A, C (B) A, B, C, D, E (C) D, E, B, A, C (D) E, D, C, A, B  5. Identify the statement which is not the meaning of ‘planning function’ of management?  [CUET 2023] (A) Deciding in advance what to do, how to do and when to do. (B) It involves setting objectives. (C) It seeks to bridge the gap between where we are and where we want to go. (D) It gives shape to the organisational structure 6. The workers of a factory went on strike. To handle the issue, a meeting of the Board of Directors of the company was called on an urgent basis. The meeting continued for seven long hours. As a result, the strike continued and productivity was zero. Which limitation of planning is referred to in the above example/case?  [CUET 2022] (A) Planning may not work in a dynamic environment. (B) Planning involves huge costs. (C) Planning does not guarantee success. (D) Planning is a time-consuming process. 7. Mr. Raj is the MD of the wrist watch company. He has systematically divided the work among all the departments to ensure the clarity in thoughts and actions, so that work is carried on smoothly without any interruptions. Identify the importance of planning highlighted in the above case.  [CUET 2022] (A) Planning reduces overlapping and wasteful activities (B) Planning promotes innovative ideas (C) Planning facilitates decision making (D) Planning reduces the risk of uncertainty 8. Which of the following statements are related to limitations of planning? [CUET 2022] A. Planning leads to rigidity. B. Planning is futuristic. C. Planning reduces creativity. D. Planning does not guarantee success. E. Planning involves decision making. Choose the correct answer from the options given below: (A) A, B, C and D only (B) A, C and D only (C) B, C, D and E only (D) A, C, D and E only 9. Match list I with list II. List-I

List-II

A

Results

I

Policy

B

Method

Base to interpret strategy

II

C

Do’s and Don’ts

III Objectives

D

One step of a procedure

IV

Rules

Choose the correct answer from the options given below: (A) A – I, B – II, C – III, D – IV (B) A – II, B – IV, C – I, D – III (C) A – III, B – I, C –IV, D – II (D) A – IV, B – I, C – II, D – III

BUSINESS STUDIES

10. Meena, a proofreader in Akash Publications, has been given a target of reading at least 40 pages per day. She has a habit of doing things differently. While doing her work, an idea struck her that a summary of a chapter in the form of a map where all the concepts related to that chapter would be interlinked should be given in starting of each chapter. It will give students a gist of the chapter as well as provide a competitive edge over other publishers. But instead of appreciating her idea, her immediate boss scolded her and asked her to complete the work as per the prescribed format. Out of the following, identify the limitation of planning stated in the above paragraph : (A) Planning reduces creativity. (B) Planning involves huge costs. (C) Planning is a time-consuming process. (D) Planning does not work in a dynamic environment. 11. Match list I with list II. A B

C D

List-I Anticipate changes Planning decides in advance how work is to be done Establishing standards for controlling Planning encourages new ideas.

List-II Planning Reduces the risk of uncertainty III Promotes innovation IV Provides directions I II

Choose the correct answer from the options given below: (A) A – I, B – II, C- III, D – IV (B) A – II, B – IV, C – I, D – III (C) A – III, B – IV, C – I, D – II (D) A – IV, B – I, C – III, D – II 12. Planning is closely connected with _____________ and ________________ (A) Responsibility and accountability (B) Delegation and decentralization (C) Stability and security (D) Creativity and innovation 13. Which of the following statements correctly explains the limitation of planning, ‘Planning does not Guarantee success’? (A) Planning is required at all levels of management and in all the departments of the organisation. (B) Planning involves thorough examination and evaluation of available alternatives. (C) Relying on a previously tried and tested successful plan just because it had worked before and will work again. (D) By deciding in advance the tasks to be performed, planning shows the way to deal with changes and uncertain events.  14. Name the step in the process of planning which is considered the “real point of decision-making”. (A) Developing premises (B) Selecting an alternative (C) Implementing the plan (D) Follow up action

35

PLANNING

15. Match list I with list II. List-I

List-II

A

Methods

I

General Statements that guide thinking towards a particular direction.

B

Procedure

II

Provides the prescribed manner in which a task has to be performed.

C

Policies

III Provides the broad contours of an organization’s business.

D

Strategy

IV

Routine steps to carry out activities.

Choose the correct answer from the options given below: (A) B – I, D – II, A – III, C – IV (B) A – II, B – IV, C – I, D – III (C) A – III, B – IV, C –II, D – I (D) A–IV, B – I, C – II, D – III 16. Which of the following types of plans provide the broad contours of an organisation’s business? (A) Strategy (B) Objective (C) Policy (D) Procedure 17. Which of the following is the correct type of plan? A. Budget B. Policy C. Cost D. Objective Choose the correct answer from the options given below: (A) A, B, and C only (B) B, C, and D only (C) A, C, and D only (D) A, B, and D only 18. Which of the following is correct to describe the importance of planning? A. Planning provides directions. B. Planning does not guarantee success. C. Planning reduces risks of uncertainty. D. Planning reduces and establishes standards for controlling. Choose the correct answer from the options given below: (A) A, B, and C only (B) B, C, and D only (C) A, C, and D only (D) A, B, and D only  19. Which step in the process of planning function of management involves weighing the pros and cons of each alternative? (A) Developing premises (B) Identifying alternative courses of action (C) Evaluating alternative courses (D) Selecting an alternative 20. R-Ox Ltd. wants to increase its market share by 4.5% in the next two years. It spent a lot of money to hire specialised people to frame their plans, collecting important facts about the environment which took a lot of time. The competition has started increasing, and it is not able to beat its competitors because it has already spent a huge amount. The plan failed and the company suffered a huge loss. Identify the limitation of planning stated in the given case. (A) Planning involves huge costs. (B) Planning may not work in a dynamic environment. (C) Planning is a time-consuming process. (D) All of the above.

(B) ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): Planning is futuristic. Reason (R): Planning is regarded as a forward-looking function based on forecasting. 2. Assertion (A): Implementing the plan is the step where other managerial functions also come into the picture. Reason (R): The positive and negative aspects of each proposal need to be evaluated in light of the objective to be achieved.  3. Assertion (A): Planning is a time-saving process. Reason (R): The success of an enterprise is possible only when plans are properly drawn up and implemented. 4. Assertion (A): The success of an enterprise is possible only when plans are properly drawn up and implemented. Reason (R): Planning provides solutions to all problems.  5. Assertion (A): Planning is a primary function of management. Reason (R): Planning is required at all levels of management as well as in all departments of the organisation. 6. Assertion (A): Planning is pervasive. Reason (R): Planning is required in all types of organisations and at all levels of management. 7. Assertion (A): Planning cannot foresee everything and thus, there may be obstacles to effective planning. Reason (R): Following a pre-decided plan, when circumstances have changed, may not turn out to be in the organisation’s interest. 8. Assertion (A): Monitoring of plans is very important to ensure that the plans are being implemented according to the schedule. Reason (R): Regular checks and comparisons of the results with set standards are done to ensure that objectives are achieved.  9. Assertion (A): Developing Planning Premises is the primary step of planning process. Reason (R): Objectives are results that the management wants to achieve through its operations. 10. Assertion (A): The manager is required to make certain assumptions about the future. Reason (R): Planning is concerned with the uncertain future.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Mogra Manufacturing Ltd. deals with manufacturing of herbal shampoos and hair oil. It’s an oil that controls hair fall and cures headaches, neck pain, and other problems as

36 Oswaal CUET (UG) Chapterwise Question Bank well while shampoo supports hair growth. The main ingredients used by the company are aloe vera and rosehip oil which helps in softening and nourishing the hair and scalp. The company sets an objective to increase its sales by 20% in the next year as all business firms would like to be successful, increase their sales, and earn profits. The company dreams of earning high profits and strives to achieve its goals. But to turn these dreams into reality the company needs to work hard in thinking about the future, in making business predictions, and in achieving targets. To achieve its targets, the company started planning its strategies and policies. Unsurprisingly, since the start of the coronavirus COVID-19 pandemic, the demand for hand sanitizers and hand washes have increased massively. Using hand sanitizer in particular has become part of the new normal and demand for shampoos and hair oil started slowing down. This shattered the dream of the company. Because of the rising coronavirus cases and growing safety concerns, the demand for hand sanitizers has been increased boosting the growth of the market. By looking at this trend, the manager of the company decided to move in a new direction and diversify its business into hand sanitizers and hand washes. Within no time the company achieved its target of 20% and started booming in the economy and has witnessed remarkable growth in the hand sanitizer market. 1. Planning provides _______________. (A) Scope (B) Directions (C) Solutions (D) None of these 2. Planning is deciding in advance : (A) What to do and where to do (B) What to do and how to do (C) How to do and where to do (D) How to do and why to do 3. Which of the following features of planning is described in the below-mentioned lines: “The company sets an objective to increase its sales by 20% in the next year as all business firms would like to be successful, increase their sales, and earn profits”. (A) Planning focuses on achieving objectives (B) Planning is continuous activity (C) Planning is the main function of management. (D) None of these 4. Which of the following features of planning is described in the below-mentioned lines : “By looking at this trend, the manager of the company then decided to move into a new direction” (A) Planning is a mental exercise. (B) Planning is a primary function of management. (C) Planning is futuristic. (D) None of the above 5. What is the next step the company will follow after setting objectives in the process of planning? (A) Developing Premises (B) Selecting an alternative (C) Implementing the plan (D) Identifying alternative courses of action

BUSINESS STUDIES

II. Read the following text and answer questions that follow: (Q6-Q10)

Sana inherited a 20-acre ancestral land from her grandparents. She decided to venture into agriculture. For this purpose, she set out specific goals, objectives, and activities. Everything was a challenge because she was not aware of farming. She learned every activity and, in the process, thought of assisting other farmers as well. She eventually launched her own company Agricultural Solutions Ltd. She wanted to be sure that the activities effectively met the best interests of the company and the farmers. Hence, she prepared an annual plan for production, sales, and marketing through sales forecasting. She also realized that farmers were growing only one or two crops. On account of this; the land remained idle for the rest of the year. Thus, she identified and evaluated different alternatives through which the farms could be utilized throughout the year. She used her foresight and logical and systematic thinking based on analysis of all facts and examined and evaluated all the alternatives. She presented a plan to the farmers’ union, where after harvesting the primary crop, seasonal vegetables and fruits could be grown.

6. “For this purpose, she set out specific goals, objectives, and activities.” Which feature of planning is depicted in the statement? (A) Planning focuses on achieving objectives. (B) Planning is a primary function of management. (C) Planning is pervasive. (D) Planning is continuous. 7. “Hence, she prepared an annual plan for production, sales, and marketing through sales forecasting.” Which feature of planning is depicted in the statement? (A) Planning is continuous. (B) Planning is futuristic. (C) Planning involves decision making. (D) Planning is a mental exercise. 8. “Thus, she identified and evaluated different alternatives through which the farms could be utilised throughout the year.” Which feature of planning is depicted in the statement? (A) Planning is pervasive. (B) Planning is continuous. (C) Planning is futuristic. (D) Planning involves decision-making. 9. “She used her foresight and logical and systematic thinking based on analysis of all facts and examined and evaluated all the alternatives.” Which feature of planning is depicted in the statement? (A) Planning focuses on achieving objectives. (B) Planning is a primary function of management. (C) Planning involves decision-making. (D) Planning is a mental exercise. 10. In the above case, Sana manages every task possible to make her venture successful. There are other functions of management also required to enhance her plan. Which fea-

37

PLANNING

ture of planning is used in the above case? (A) Planning focuses on achieving objectives. (B) Planning precedes other functions.

(C) Planning involves decision-making. (D) Planning is a mental exercise.

ANSWER KEY

[A] MULTIPLE CHOICE QUESTIONS 1. (C)

2. (B)

3. (C)

4. (A)

5. (D)

6. (D)

7. (A)

8. (B)

9. (C)

10. (A)

11. (B)

12. (A)

13. (C)

14. (B)

15. (B)

16. (A)

17. (D)

18. (C)

19. (C)

20. (D)

8. (B)

9. (D)

10. (A)

8. (D)

9. (D)

10. (B)

[B] ASSERTION & REASON 1. (A)

2. (B)

3. (D)

4. (C)

5. (B)

6. (A)

7. (B)

[C] CASE BASED QUESTIONS 1. (B)

2. (B)

3. (A)

4. (C)

5. (A)

6. (A)

7. (B)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

9. Option (C) is correct.

1. Option (C) is correct.

Explanation: Results are closely connected to the objectives of a process or plan. A base to interpret something often relates to the policy or overarching strategy in place. Do’s and Don’ts, like rules, provide guidance on what is allowed and what should be avoided. One step of a procedure is often understood through methods employed to execute it. 10. Option (A) is correct.

Explanation: Planning is a mental activity since it necessitates an intellectual process to make logical plans and reasonable conclusions. 2. Option (B) is correct. Explanation: Planning is pervasive as it is required in all organizations, in all departments, and at all levels of management. 3. Option (C) is correct. Explanation: Planning is often called the primary management function because it establishes the basis for all the other functions. 4. Option (A) is correct. Explanation: Planning entails determining ahead of time what to accomplish and how to execute it. It is a decision-making process. Because planning is an activity, there are certain logical processes that every management must do. 5. Option (D) is correct. Explanation: Span of management gives shape to the organisational structure not planning. Span of management refers to the number of subordinates that can be effectively managed by the superiors. 6. Option (D) is correct. Explanation: Planning is a very lengthy process as it consumes a lot of time for the collection, analysis, and interpretation of data. Due to such a lengthy process, sometimes decisions get delayed, and opportunities are lost. 7. Option (A) is correct. Explanation: Planning provides the basis for coordinating the activities of different departments and divisions. It helps in avoiding the confusion and misunderstanding. 8. Option (B) is correct. Explanation: Planning leads to rigidity as actions are done according to the plans only. Due to the rigidity, it reduces creativity. Same plan might not always work as a result, planning does not guarantee success.

Explanation: Planning is an activity that is done by the top management. Usually, the rest of the members just implement these plans. As a consequence, middle management and other decision-makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, much of the initiative or creativity inherent in them also gets lost or reduced. 11. Option (B) is correct. Explanation: All are important in planning as planning gives direction, minimizes unknown risks, eliminates overlapping and inefficient tasks, encourages new ideas, helps decision-making, and defines control standards. 12. Option (D) is correct. Explanation: Planning is deciding in advance what to do and how to do it. It is one of the basic managerial functions. Before doing something, the manager must formulate an idea of how to work on a particular task. Thus, planning is closely connected with creativity and innovation. 13. Option (C) is correct. Explanation: Managers have a tendency to rely on previously tried and tested successful plans. It is not always true that just because a plan has worked before, it will work again. Besides, there are so many other unknown factors to be considered. This kind of complacency and a false sense of security may lead to failure instead of success. However, despite its limitations, planning is not a useless exercise. 14. Option (B) is correct. Explanation: Selecting an alternative means the best plan has to be adopted and implemented.

38 Oswaal CUET (UG) Chapterwise Question Bank 15. Option (B) is correct. Explanation: The broad dimensions of an organisation’s business and future decisions are provided by strategy. Policies direct ideas and direct energy in a specific direction. Procedures are standard processes for carrying out tasks. Methods provide the prescribed ways or manner in which a task has to be performed considering the objective. 16. Option (A) is correct. Explanation: A strategy is a complete and all-inclusive plan for achieving said objectives. 17. Option (D) is correct. Explanation: Management’s objectives are the anticipated future position. Policies direct thought, procedures define routine steps, rules define particular activities, and programs define objectives, policies, procedures, rules, tasks, resources, and budgets. A budget defines projected outcomes as well as future facts and numbers. 18. Option (C) is correct. Explanation: “Planning does not guarantee success” is a limitation of planning. 19. Option (C) is correct. Explanation: Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in the light of objectives to be achieved. 20. Option (D) is correct. Explanation: Planning requires a lot of time to collect information, its analysis, and interpretation. So, it is a time-consuming process. When plans are drawn up huge costs are involved in their formulation. The environment in which a business survives is dynamic as it keeps on changing. The dynamic environment may sometimes lead to the failure of plans.

[B] ASSERTION & REASON 1. Option (A) is correct. Explanation: Planning essentially involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organisation. It implies peeping into the future, analysing it, and predicting it. 2. Option (B) is correct. Explanation: Implementing the plan is the step where other managerial functions also come into the picture. The step is concerned with putting the plan into an action, i.e., doing what is required. For example, if there is a plan to increase production then more labour, and more machinery will be required. This step would also involve organising labour and purchase of machinery. Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in light of the objective to be achieved. 3. Option (D) is correct. Explanation: Planning is a time-consuming process. Sometimes plans to be drawn up take so much time that there is not much time left for their implementation. 4. Option (C) is correct. Explanation: The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into a action or it becomes meaningless. Managers have a tendency to rely on previously tried and test-

BUSINESS STUDIES

ed successful plans. It is not always true that just because a plan has worked before it will work again. Besides, there are so many other unknown factors to be considered. This kind of complacency and a false sense of security may lead to failure instead of success. However, despite its limitations, planning is not a useless exercise. It is a tool to be used with caution. It provides a base for analysing future courses of action. But it is not a solution to all problems. 5. Option (B) is correct. Explanation: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions. 6. Option (A) is correct. Explanation: Planning is required at all levels of management. It is not a function restricted to top-level managers only but planning is done by managers at every level. Formation of major plans and framing of overall policies is the task of top-level managers whereas departmental managers form plans for their respective departments and lower-level managers make plans to support the overall objectives and to carry on day-to-day activities. 7. Option (B) is correct. Explanation: The business environment is dynamic, nothing is constant. The environment consists of several dimensions, economic, political, physical, legal, and social dimensions. The organization has to constantly adapt itself to changes. It becomes difficult to accurately assess future trends in the environment if economic policies are modified. 8. Option (B) is correct. Explanation: To see whether plans are being implemented and activities are performed according to schedule is also part of the planning process. Monitoring the plans is equally important to ensure that objectives are achieved. 9. Option (D) is correct. Explanation: Setting objectives is the primary step in the process of planning which specifies the objective of an organization, i.e., what an organisation wants to achieve. 10. Option (A) is correct. Explanation: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in the future. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises.

[C] CASE BASED QUESTIONS

1. Option (B) is correct. Explanation: By stating in advance how work is to be done planning provides direction for action. Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction. 2. Option (B) is correct. Explanation: Planning is deciding in advance what to do and how to do it. It is one of the basic managerial functions. Before doing something, the manager must formulate an idea of how to work on a particular task. Planning seeks to bridge the gap between where we are and where we want to go. Planning is what managers at all levels do. It requires making decisions since it involves choosing from alternative courses of action.

PLANNING

3. Option (A) is correct. Explanation: Organisations are set up with a general purpose in view. Specific goals are set out in the plans along with the activities to be undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organisational goals. 4. Option (C) is correct. Explanation: Planning essentially involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organisation. It implies peeping into the future, analysing it, and predicting it. Planning is, therefore, regarded as a forward-looking function based on forecasting. Through forecasting, future events, and conditions are anticipated and plans are drawn accordingly 5. Option (A) is correct. Explanation: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in the future. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises. Assumptions are the base material upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans, or any past information about policies. The premises or assumptions must be the same for all and there should be total agreement on them.

39 6. Option (A) is correct. Explanation: Specific goals are set out in the plans along with the activities to be undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning unless it contributes to the achievement of predetermined organisational goals. 7. Option (B) is correct. Explanation: Planning essentially involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organisation. It implies peeping into the future, analysing it, and predicting it. 8. Option (D) is correct. Explanation: Planning essentially involves a choice among various alternatives and activities. Planning involves thorough examination and evaluation of each alternative and choosing the most appropriate one. 9. Option (D) is correct. Explanation: Planning requires the application of the mind involving foresight, intelligent imagination, and sound judgment. It is an intellectual activity of thinking rather than doing because planning determines the action to be taken. 10. Option (B) is correct. Explanation: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions.

CHAPTER

5

ORGANISING

  Revision Notes ¾ Organising: Organising is fundamentally a process that combines human activities, gathers resources, and merges both into a coherent whole to be used to achieve certain goals. Organising is the process that helps in the implementation of plans by clarifying the jobs and working relationships and effectively deploying the resources to achieve the organisational goals.

the organisation must undertake. The manager must determine the work and activities that must be completed to meet the organisation’s goals. Identifying and dividing Scan to know the task into manageable activities helps to more about this topic reduce confusion, overlapping roles, and wastage of time and efforts.

¾ Importance: (i) Advantages of specialisation: Scan to know Organising allows for the methodical distrimore about this topic bution of tasks. Repeating a certain activity helps a person build expertise in that field, which leads to specialization. Such specialization aids in reducing efforts and increasing production. Importance of Organising (ii) Working relationship clarity: Establishing working relationships simplifies communication lines and explains who is accountable to whom. It aids in defining responsibility and scope of authority for each employment role. (iii) Optimal resource utilization: The right assignment of jobs prevents work from overlapping and also allows for the optimal utilization of resources. This helps to avoid misunderstanding and waste of efforts and resources. (iv) Adaptation to change: The organisational process enables a commercial company to adjust to changes in the business environment. (v) Efficient management: Organising gives a detailed explanation of roles and related responsibilities. Clarity in the working connection allows for good task performance. Each job position’s power and responsibilities are clearly stated. All of this leads to efficient administration. (vi) Personnel development: Organising encourages managers’ innovation and creativity. Delegating authority effectively allows managers to lessen their burden. Delegation also helps subordinates to acquire the capacity to deal with problems and achieve their full potential. (vii) Expansion and Growth: Organisation aids in the expansion and diversification of a business. It enables a firm to add additional employee roles, divisions, product line diversification, and so on.

(ii) Departmentalisation: Similar jobs and activities should be grouped to proProcess of vide a seamless flow of work and the smooth Organising operation of the business. As a result, we establish departments inside the corporation and divisions within each department. Such a structure makes the company’s operations far more methodical and brings specialisation. An organisation may have multiple departments and divisions depending on its size and volume of activity. And each department has a manager who represents them at the highest level of management. In smaller firms, these departments may be grouped under a single management.

¾ Steps in the process of Organising:

¾ Types:

The phases in the organising process are as follows: (i) Identifying and dividing the Work: The obvious first step in the organising process is to determine the tasks that

(iii) Assignment of duties: After departmentalisation, the work of different job positions is defined and accordingly work is allocated to various employees. Jobs are allocated to members of each department according to their skills and competencies to ensure specialisation. (iv) Establishing authority and reporting relationships: After the work is allocated, it is important for each member to know who he has to take orders from and to whom is accountable. Clear relationships increase coordination among different departments. ¾ Organisational Structure: The organisational structure is the result of the organising process. An organisation’s structure is the established pattern of relationships among its various employment positions. It is the framework within which management and operational duties are carried out. It defines the interaction of people, labour, and resources. Span of Management (Span of Control): The number of subordinates that can be efficiently controlled by a superior is referred to as the span of management. Scan to know This establishes the structure’s management more about this topic tiers. I. Functional Structure: A functional structure is created by grouping occupations of similar kinds under function and

Organisation Structure

Disadvantages of Formal organization

Structure of Organization

Authority : It implies the right of an individual to take decisions and to command his subordinates. Responsibility : It is an obligation of a subordinate. Accountability : It implies being answerable for the final outcome.

It refers to the downward transfer of authority from a superior to subordinate to operate within the prescribed limit.

Better coordination

Motivation to employees

Employees’ development

Effective management

Delegation

• Ignores psychological and social needs of the employees

• Does not allow any deviations from rigidly laid down policies

• Leads to procedural delays in decision making

An organization structure in which various departments are created on the basis of products, territory or region.

Importance

ganising Or

po

e nc rta

Organising Process

Importance

Concept

Decentralization

Mean ing

First Level

Second Level

Trace the Mind Map Third Level

 Establishing reporting relationships

 Assignment of duties

 Departmentalization

 Identification and division of work

 Expansion and growth

 Effective administration

 Optimum utilization of resources

 Clarity in working relationship

 Benefits of specialization

relationships among them.

establishing authority and responsibility

grouping the activities of an enterprise and

Organising is the process of defining and

 It develops managerial talent for the future.

 It helps in quick decision making

 It gives relief to top management



An organization structure in which departments are created on the basis of different functions.



Im

 It facilitates growth



It refers to systematic effort to delegate work to the lowest level, all authority except that which can be exercised at central point.

ORGANISING

41

42 Oswaal CUET (UG) Chapterwise Question Bank organising these primary functions into different departments. A coordinating head oversees all departments. In a manufacturing company, for example, major functions include production, purchasing, marketing, accounting, and staff. These departments can be subdivided further into parts. As a result, a functional structure is an organisational architecture that combines occupations that are comparable or linked together. ¾ Suitability: (i) It is particularly appropriate when the organisation is huge. (ii) It is appropriate if the firm manufactures a single or comparable type of product. (iii) When operations necessitate a greater level of specialization. ¾ Advantages: (i) Occupational specialization: A functional framework promotes occupational specialization. This enhances personnel efficiency and their performance. (ii) Improved control and coordination: It increases control and coordination within a department due to the similarity of duties done. (iii) Minimal duplication: Work duplication is eliminated, resulting in cost savings. (iv) Easier Training: Employee training becomes easier because each employee requires a restricted set of abilities. (v) Appropriate attention: Functional organisation guarantees that various functions receive adequate attention. (vi) Managerial and operational efficiency: It contributes to greater managerial and operational efficiency, which leads to higher profit. ¾ Disadvantages: (i) Limited perspective: Managers want to construct their functional empires, which leads to disputes. Instead, then focusing on the organisation as a whole, they narrow their emphasis to functional processes solely. (ii) Lack of coordination: As the organisation expands, departments may become excessively big, causing problems in coordination and decision-making delays. (iii) Conflicts: As experts labour in their particular fields, their perspectives narrow, increasing the likelihood of conflict between them. (iv) Fewer opportunities for advancement: By becoming specialized in a single job, individuals may be unable to gain knowledge of other areas. II. Divisional Structure: In a divisional structure, the organisation is divided into various business units or divisions. Each unit has a divisional manager who is in charge of performance and has responsibility for the unit. In general, business is classified according to the type of product manufactured. Each division is multifunctional because tasks such as manufacturing, marketing, finance, and purchasing are conducted together to achieve a shared goal. Each division is self-contained because it develops competence in all product-related operations. In other words, the functional structure is often used within each division. However, functions may differ among divisions depending on the product line. Furthermore, each divi-

BUSINESS STUDIES

sion operates as a profit centre, with the divisional leader liable for the division’s profit or loss. A huge corporation, for example, may include divisions such as cosmetics, clothes, and so on. ¾ Suitability: (i) It is appropriate for businesses that create a wide range of items employing a variety of productive resources. (ii) When a high level of product expertise is required by the company. (iii) When an organisation expands and requires additional staff, departments, and new levels of management. (iv) When the activities are dispersed geographically. ¾ Advantages: (i) Product Specialization: It involves the integration and coordination of multiple operations associated with a certain product line. (ii) Executive development: A divisional head will obtain knowledge in all functions associated with a certain product. (iii) Greater accountability: Divisional heads are held accountable for profits since revenues and costs from various departments are easily identifiable and assigned to them. (iv) Greater flexibility and initiative: Each division operates as an autonomous entity. This encourages swift decision-making, adaptability, and initiative. (v) Expansion and growth: Divisional structure allows for expansion and growth by allowing new divisions to be added without disrupting existing operations by simply adding another divisional head. ¾ Disadvantages: (i) Conflicts: There may be disagreements between divisions on the allotment of cash. (ii) Expensive: Because there may be duplication of activities, expenses may rise. (iii) Abuse of autonomy: A high degree of autonomy may result in divisional interests taking precedence over organisational interests. ¾ Formal Organisation: A formal organisation is one which is designed by the management to achieve a certain goal. It clearly defines authority and responsibility, and there is methodical coordination among diverse operations to meet organisational goals. ¾ Features: It has the following characteristics: (i) It describes the links between various work roles and the nature of their inter-relationships. (ii) It is a way of achieving the goals outlined in the plans since it establishes the rules and procedures required to achieve them. (iii) The formal organisation coordinates, interconnects, and integrates the efforts of many departments. (iv) It prioritizes work-related activities over interpersonal interactions among employees. (v) It is purposefully created by senior management to assist the smooth operation of the organisation. ¾ Advantages: (i) Simple to fix responsibility: Responsibility is simple to fix since mutual relationships are clearly stated.

ORGANISING

(ii) Avoid duplication of efforts: Duties are clearly defined, and everyone in the organisation understands what he or she is expected to perform. (iii) Unity of Command: Formal organisation follows unity of command by assuring one superior over one working group. (iv) Goal-oriented: It aids in the achievement of organisational goals in a timely way. (v) Providing organisational stability: When an individual in an organisation meets his or her goals and follows the rules and regulations, the formal organisation provides employment stability. ¾ Disadvantages: (i) Work delay: It causes procedural delays such as obtaining approvals, explaining plans, and so on. (ii) Difficult to grasp human relationships: It focuses on attaining goals rather than understanding the situations of individuals. (iii) Rigidity: Formal structure tries to achieve organisational goals within a specific time limit. More emphasis is placed on structure and work. ¾ Informal Organisation: When people engage outside of their formally specified duties, an informal organisation forms from inside the formal organisation. People who have regular interaction cannot be made to conform to a rigorous formal framework. Rather, depending on their interaction and friendship, individuals prefer to establish groups with similar interests. Examples of such groups developed with a shared interest include those who participate in Sunday cricket matches, gather for coffee in the canteen, are interested in theatre, and so on. Informal organisations lack written rules, are variable in form and scope, and lack set channels of communication ¾ Features: (i) It begins within the official organisation due to personal interaction. (ii) Standards of behaviour emerge from group norms and not from officially laid down rules and regulations. (iii) Group members establish independent lines of communication. (iv) It occurs spontaneously rather than being actively developed by management. (v) Because it is a complicated network of social ties among individuals, it has no clear shape or form. ¾ Advantages: (i) Speed: There is no set mode of communication. It aids in the speedier dissemination of information and feedback. (ii) Satisfaction of social needs: It contributes to the satisfaction of its members’ social needs. This increases their job happiness by giving them a sense of belonging in the organisation. (iii) Contribute to the attainment of organisational objectives: It contributes to the achievement of organisational objectives by compensating for deficiencies in the formal organisation.

43 ¾ Disadvantages: (i) Resistance to change: Management may fail to make changes if the informal organisation rejects them. (ii) Priority given to group interests: Informal organisations may prioritize the needs and interests of their members over organisational aims. (iii) Disruptive force: When rumours spread, an informal group might become a disruptive force. ¾ Delegation of Authority: Delegation of authority occurs when a management share some of their authority with subordinates. The downward transfer of authority from a superior to a subordinate is referred to as delegation. It is required for an organisation’s efficient operation since it allows a manager to focus his time on high-priority operations. ¾ Meaning of Delegation: Delegation is the downward transfer of authority from the superior to a subordinate. It enables the superiors to concentrate on high priority activities and at the same time satisfies the needs of the subordinates for recognition. Even after delegation, the manager remains accountable for the assigned task. ¾ Elements of Delegation of Authority: (i) Authority: The right and power to use organisational resources and make different administrative choices is referred to as authority. The superior-subordinate relationship is determined by authority, in which the superior communicates choices to the subordinate, expecting compliance from him, and the subordinate implements the decision according to the superior’s orders. It is the right of the individual to command his subordinates. (ii) Responsibility: Responsibility is the obligation of the subordinate to do the work as efficiently as possible The subordinate is bound to perform the duty assigned to him by his superior. It flows upwards, from subordinates to superior. (iii) Accountability: Accountability simply implies being answerable. It is the responsibility of the subordinate to report on the completion of the job. It moves upward and cannot be delegated. ¾ Importance of Delegation: (i) Effective Management: By delegating mundane tasks to subordinates, a manager may focus on more significant issues and seek new business prospects. (ii) Employee development: Delegation allows subordinates to put their skills to use and advance their careers. They gain experience and expertise as they advance in their careers. (iii) Employee motivation: Delegation gives subordinates a sense of prestige and appreciation. It encourages them to do better. (iv) Promotes organisational growth: Delegation promotes organisational growth by creating a ready workforce to take on leadership roles in new enterprises. (v) The foundation of management hierarchy: Delegation of authority establishes superior-subordinate relationships, which serve as the foundation of management hierarchy. (vi) Better coordination: The three elements of delegation- authority, responsibility and accountability defines the powers, duties and answer ability of various job positions. This avoids duplication of efforts and helps to maintain effective coordination.

44 Oswaal CUET (UG) Chapterwise Question Bank ¾ Decentralisation: Decentralisation refers to the delegation of authority at all levels of an organisation. Lower levels share decision-making authority and are hence located closest to the point of action. Decentralisation describes how decision-making duties are distributed across hierarchical levels. ¾ Importance of Decentralisation: (i) Encourages initiative among subordinates: Decentralisation encourages self-reliance and confidence among subordinates. (ii) Foster’s future managerial talent: Decentralisation allows lower-level managers to develop knowledge and experience in decision-making and leadership. (iii) Rapid decision-making: In a decentralised organisation, decisions are made at the level closest to the point of action. As a result, decisions may be made rapidly. (iv) Relief for top management: Decentralisation helps to lessen senior executives’ burden. They may concentrate their time and attention on pressing policy issues. (v) Promotes Growth: As the load of management is shared, the company may expand and grow more readily.

BUSINESS STUDIES

(vi) Improved control: Decentralisation enables performance evaluation at all levels. Departments might be held personally accountable for their outcomes. ¾ Difference Between Delegation and Decentralisation: • Decentralisation is the movement of power or decision-making authority away from a centralized authority, whereas delegation is the assignment of particular tasks or obligations to others. • Decentralisation, as opposed to delegation, spreads authority across various persons or entities. • Delegation is frequently used in organisations to flatten or distribute authority, whereas decentralisation is used to flatten or distribute power. • Delegation can be temporary or dedicated to certain duties, whereas decentralisation is a permanent shift in the structure of an organisation. • Decentralisation promotes efficiency, and accountability, and minimizes the risk of failure by dispersing decision-making across various decision-makers.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. “This organisational structure has the disadvantage of increase in costs due to duplication of activities.” Identify the organisational structure being referred to here.  [CUET 2022] (A) Formal Organisation (B) Informal Organisation (C) Functional Structure (D) Divisional Structure 2. Which of the following is not an element of delegation  [CUET 2022] (A) Authority (B) Departmentalisation (C) Responsibility (D) Accountability 3. “Swara felt demoralized and her performance started declining.” Which of the following elements can help Swara to be more confident? A. Planning B. Motivation C. Delegation D. Leadership Choose the correct answer from the options given below:  [CUET 2022] (A) A and B only (B) B and D only (C) B and C only (D) C and D only 4. In a manufacturing concern, division of work into key functions will include production, purchase, marketing, accounts and personnel. These departments may be further divided into sections. Which type of structure is highlighted here? [CUET 2022] (A) Divisional structure (B) Functional structure (C) Rational structure (D) Organisational structure 5. It is defined as the framework within which managerial and operational tasks are performed. Identify it.  [CUET 2022] (A) Span of management (B) Organisational structure (C) Informal organisation (D) Delegation

6. From the below description, arrange the organising process in sequential order. A. Assignment of duties B. Establishing reporting relationship C. Identification and division of work D. Departmentalisation [CUET 2022] (A) D, C, B, A (B) C, D, A, B, (C) A, C, B, D (D) B, D, C, A 7. In this step of the organising process, the work is divided into manageable activities so that duplication of work can be avoided and the burden of work can be shared among the employees. The step referred to above is: (A) Identification and division of work (B) Departmentalisation (C) Assignment of duties to job positions (D) Establishing reporting relationships 8. “Grouping similar nature jobs into larger units called departments” is the step in the process of one of the functions of management. Identify the function of management. (A) Planning (B) Organising (C) Directing (D) Staffing 9. Name the type of ‘organisational structure’ which promotes efficiency in the utilization of manpower. (A) Divisional structure (B) Functional structure (C) Informal organisation (D) Formal organisation 10. Which of the following are the importance of organising? I. Working relationship clarity II. Reduces workload III. Optimal resource utilization IV. Adaptation to change Choose the correct answer from the options given below: (A) I, II, and III (B) I, III, and IV (C) I, III, and IV (D) II, III, and IV

45

ORGANISING

11. _____________ensures that the heads of separate business units in the organisation are responsible for profit or loss of their unit and have authority over it. (A) Span of management (B) Divisional structure (C) Functional structure (D) Hierarchy of authority 12. Which of the following statements is true concerning formal organisation? (A) It gives rise to a network of social relationships among employees. (B) It helps to fulfil the social needs of the members and allows them to find like-minded people (C) It leads to faster spread of information as well as quick feedback. (D) It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures essential for their achievement. 13. Match List-I with List-II. List-I

List-II

A

The framework within which managerial and operating tasks are performed

I

B

The granting of authority II to subordinates

C

The systematic granting III Divisional of authority to the lowest Structure level

D

The structure that is formed based on product specialization

IV

Decentralisation

Organisation Structure

Delegation of Authority

Choose the correct answer from the options given below: (A) A – II, B – IV, C – I, D – III (B) A – I, B – II, C – III, D – IV (C) A – II, B – I, C – III, D – IV (D) A – IV, B – III, C – II, D – I 14. The management hierarchy can be looked upon as a chain of communication. In _______ organisation, because every decision is taken by the top management, the flow of information is slow as it has to traverse many levels. The response also takes time. This reduces the speed of decision-making and makes it difficult for an enterprise to adapt to dynamic operating conditions. (A) Centralised (B) Decentralised (C) Large (D) Small 15. The element of delegation that relates to the obligation of a subordinate to properly perform the assigned duty is known as : (A) Authority (B) Responsibility (C) Accountability (D) Centralisation 16. ‘While performing the organising function, jobs are allocated to the members of each department by their skills and competencies.’ Identify the step in the organising function being discussed above: (A) Identification and division of work. (B) Departmentalisation.

(C) Assignment of duties. (D) Establishment of reporting relationships. 17. Which type of organisational structures is the most suitable for those business enterprises where a large variety of products are manufactured? (A) Functional (B) Divisional (C) Both (A) and (B) (D) None of the above 18. ‘Agile Pvt. Ltd. manufactures athletic footwear. Owing to its popularity among sports teams across the country, it recently decided to enter into manufacturing of sports clothing and accessories. The type of organisational structure which is suitable for the company is: (A) Functional structure (B) Divisional structure (C) Horizontal structure (D) Informal structure 19. Authority is________, responsibility is _____________, accountability is __________. (A) Delegated, assumed, imposed (B) Imposed, assumed, delegated (C) Assumed, delegated, imposed (D) Imposed, delegated, assumed 20. Which of the following statements is true? A. Accountability can be entirely delegated. B. Accountability flows downward. C. Accountability refers to answerability for final outcome of the assigned task. D. Accountability means the right of an individual to command his subordinates. (A) A and B (B) B and C (C) A only (D) C only (B) ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true. 1. Assertion (A): Delegation is a prerequisite to the efficient functioning of an organisation. Reason (R): It enables a manager to use his time on high-priority activities. 2. Assertion (A): It is essential for effective performance that a proper match is made between the nature of a job and the ability of an individual. Reason (R): It is not necessary to define the work of different job positions and accordingly allocate work with various employees. 3. Assertion (A): The structure in a formal organisation can be functional or divisional. Reason (R): In each structure, of various departments are coordinated, interlinked, and integrated through the formal organisation.

46 Oswaal CUET (UG) Chapterwise Question Bank 4. Assertion (A): Delegation develops in the subordinate the ability to deal effectively with challenges and helps them to realize their full potential. Reason (R): Organising provides a clear description of jobs and related duties. 5. Assertion (A): Delegation helps a manager to extend his area of operations. Reason (R): Authority relationships help to maintain order in the organisation by giving the managers the right to exact obedience and give directions to the workforce under them. 6. Assertion (A): Responsibility is derived from accountability and accountability is derived from authority. Reason (R): When an employee is given responsibility for a job, he must also be given the degree of authority necessary to carry it out. 7. Assertion (A): Delegation leaves the top management with more time which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions. Reason (R): Decentralisation compels the management to innovate performance measurement systems. 8. Assertion (A): Organising leads to the proper usage of all material, financial and human resources. Reason (R): The proper assignment of jobs avoids overlapping of work and also makes possible the best use of resources. 9. Assertion (A): A proper organisational structure is essential to ensure a smooth flow of communication and better control over the operations of a business enterprise. Reason (R): An organisational structure provides the framework that enables the enterprise to function as an integrated unit by regulating and coordinating the responsibilities of individuals and departments. 10. Assertion (A): Delegation of authority allows more time for managers to concentrate on the tasks that are of higher importance for the organisation. Reason (R): Delegation allows for changing the routine work which brings a sense of freedom.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

BBS International School is looking forward to celebrating its annual sports day in school in the coming month. It is an occasion where pupils, teachers, and parents come together for a day of competitive sport. The principal and the sports teachers have started planning different races, dances, and events and also started assigning duties and responsibilities to various staff members and students accordingly. Different departments and committees were formed to look into and organise different activities of sports day such as welcoming parents, handing out refreshments, overseeing races, blowing whistles, or awarding medals and prizes, etc. All the decision-making authority is retained by the principal. The responsibility of refreshment was given to Mr. Gopal, who was an art teacher in school. Mr. Gopal calculated the number of students, staff, and parents

BUSINESS STUDIES

and concluded that a minimum of 1,400 audience would be gathered on the sports day. Accordingly, he decided to order 1,500 snack boxes. He gave the order to the local bakery shop and made payment for 700 boxes in advance. On the day of the sports day, only 500 snack boxes were delivered. The distribution and counting of medals were assigned to Ms. Ruchi. But Ms. Ruchi was ignoring her responsibilities. So, the Principal decided to appoint Ms. Salma to work with Ms. Ruchi. Ruchi did not like to work with Ms. Salma. Most of the time, the principal noticed the tension developing between the two. However, she didn’t want to get involved in their issues as long as the work was completed effectively and efficiently by them. One day, the tension between them reached the heights and Ms. Ruchi complained to the principal stating that her duties were being largely taken over by Ms. Salma. The principal issued the order stating the clear allocation of the jobs and related duties between the two. She further clarified the working relationship between them by specifying who will take responsibility for which events as the school has planned many events for the sports day. This helped reduce the workload, enhance productivity, and remove ambiguity. 1. Which of the following importance of organising is highlighted in the below-mentioned lines: “She further clarified the working relationship between them by specifying who will take reasonability of which events as the school has planned many events for the sports day”. (A) Optimum utilization of resources (B) Adaptation to change (C) Effective administration (D) Clarity in working relationships 2. Which of the following concept of organisation is described in the below-mentioned lines: “All the decision-making authority is retained by the principal”. (A) Centralisation (B) Decentralisation (C) Informal organisation (D) None of these 3. Which type of organisation is being followed by BBS International School? (A) Informal (B) Formal (C) Both (A) and (B) (D) None of these 4. _______ organisation places more emphasis on work to be performed than interpersonal relationships among the employees. (A) Informal (B) Formal (C) Both (A) and (B) (D) None of these 5. Which of the following elements of delegation is being described in the below-mentioned lines concerning Mr. Gopal: “He decided to order 1,500 snack boxes. He gave the order to the local bakery shop and made payment for 700 boxes in advance. On the day of the sports day only 500 snack boxes were delivered”. (A) Authority and Responsibility. (B) Accountability and Responsibility. (C) Authority and Accountability (D) None of these

47

ORGANISING

II. Read the following text and answer questions that follow: (Q6-Q10)

Rohan is the Head Boy of Ethos Public School. The school is going to hold a covid vaccination camp for students of age group 12-14 years in the month of May. The entire Prefectorial Board is given the duties for the event under the leadership of Rohan. Rohan has shortlisted following activities:

(1) Identification of students eligible for vaccina¬tion under 12-14 yrs. (2) Obtaining Aadhar card for registration of these students on the covid vaccination App (3) Consent letters of parents

He further divided the execution part activities. Later he grouped the similar natured activities into different units. Then he allocated these to different prefects under his preceptorial board. Thereafter he devised a computer software where each prefect was supposed to enter his data of vaccination for further submission to school headmistress.

6. ________is the function of management discussed in the above passage: (A) Planning (B) Directing (C) Organising (D) Staffing 7. Identify the step highlighted in the above line in the process of organisation.

(A) Setting objectives (B) Assignment of duties (C) Identifying the alternative courses of action (D) Identification and division of work 8. “Later he grouped the similar natured activities into different units”

Identify the step highlighted in the above line in the organisation process (A) Implementing the plan (B) Measurement of actual performance (C) Departmentalisation (D) Selecting an alternative 9. “Then he allocated these to different prefects under his prefectorial board”. Which step of organisation process is discussed in these lines? (A) Assignment of duties (B) Implementing the plan (C) Division of activities (D) Follow up action 10. “Thereafter he devised a computer software where each perfect was supposed to enter his data of vaccination for further submission to school headmistress.”

Identify the step of organisation process discussed in above statement (A) Follow up action (B) Establishing reporting relationship (C) Corrective action (D) Assignment of duties

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (D)

2. (B)

3. (C)

4. (B)

5. (B)

6. (B)

7. (A)

8. (B)

9. (B)

10. (B)

11. (B)

12. (D)

13. (A)

14. (A)

15. (B)

16. (C)

17. (B)

18. (B)

19. (A)

20. (D)

8. (A)

9. (A)

10. (B)

8. (C)

9. (A)

10. (B)

[B] ASSERTION & REASON 1. (A)

2. (C)

3. (A)

4. (B)

5. (B)

6. (D)

7. (D)

[C] CASE BASED QUESTIONS 1. (D)

2. (A)

3. (B)

4. (B)

5. (B)

6. (C)

7. (D)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (D) is correct. Explanation: Divisional Structure has various divisions made under one single organisation. This increases the cost due to duplication of work. 2. Option (B) is correct. Explanation: There are three elements of Delegation: Assignment of Responsibility, Grant of Authority, and Creation of Accountability. 3. Option (C) is correct. Explanation: Motivation and delegation will help Swara to be more confident. Superior’s trust improves employee’s self-esteem and confidence. When a superior entrusts a sub-

ordinate with a task, it is not merely the sharing of work but involves trust on the superior’s part and commitment on the part of the subordinate. 4. Option (B) is correct. Explanation: In a functional structure, the jobs of similar nature are grouped together and placed under a separate department. 5. Option (B) is correct. Explanation: The organisational structure specifies the relationships between people, work and resources in an organisation. It facilitates the correlation and coordination among human, physical and financial resources to achieve the organisational goals.

48 Oswaal CUET (UG) Chapterwise Question Bank 6. Option (B) is correct. Explanation: Organising starts with identification and division of work. After that the departments are made by grouping similar work together. Then the work is assigned to the people according to their skills and competencies and finally the reporting relationships are established to coordinate the efforts. 7. Option (A) is correct. Explanation: The division of work into smaller jobs leads to specialisation because jobs are assigned to individuals according to their qualifications and capabilities. The division of work leads to systematic working. 8. Option (B) is correct. Explanation: Organising involves identifying and dividing the work that has to be done by previously determined plans. Once work has been divided into small and manageable activities then those activities which are similar are grouped. Such sets facilitate specialisation. This grouping process is called departmentalisation. Departments can be created using several criteria as a basis. 9. Option (B) is correct. Explanation: A functional structure is a type of business structure that organizes a company into different departments based on areas of expertise. 10. Option (B) is correct. Explanation: Working relationship clarity, Optimal resource utilization, adaptation to change and many more are important in organising. 11. Option (B) is correct. Explanation: In a divisional structure, the organisation structure comprises of separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit. 12. Option (D) is correct. Explanation: A formal organisation has a well-defined structure of authority and responsibility that defines the delegation of authority and relationships among the organisational members 13. Option (A) is correct. Explanation: Delegation transmits power from one level of management to another, fostering effective management, staff development, motivation, growth, and coordination. Organising entails identifying activities, assigning authority, and dividing tasks. Functional structures organise operations according to functions, allowing for specialisation, control, and efficiency. Divisional structures organise activities by product, providing integration, product specialisation, responsibility, flexibility, and improved coordination. Decentralisation is the delegation of authority throughout the organisation.

BUSINESS STUDIES

superior–subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. 16. Option (C) is correct. Explanation: Once departments have been formed, each of them is placed under the charge of an individual. Jobs are then allocated to the members of each department by their skills and competencies. It is essential for effective performance that a proper match is made between the nature of a job and the ability of an individual. The work must be assigned to those who are best fitted to perform it well. 17. Option (B) is correct. Explanation: A company dealing in large variety of products should have divisional organisation structure because in this system a company segments its employees based on products or market which leads to the success of each division independently. 18. Option (B) is correct. Explanation: Divisional structure is particularly suitable for those enterprises which have more than one category of products to offer. In a divisional structure, the organisation structure comprises separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit. 19. Option (A) is correct. Explanation: Authority determines the superior-subordinate relationship wherein the superior communicates his decision to the subordinate, expecting compliance from him and the subordinate executes the decision as per the guidelines of the superior. Responsibility arises from a superior–subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. Once authority has been delegated and responsibility accepted, one cannot deny accountability. Thus, it can be stated that while authority is delegated, responsibility is assumed, and accountability is imposed. 20. Option (D) is correct. Explanation: Delegation of authority, undoubtedly empowers an employee to act for his superior but the superior would still be accountable for the outcome. Accountability implies being answerable for the final outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability.

[B] ASSERTION & REASON 1. Option (A) is correct.

Explanation: Centralisation refers to the process in which activities involving planning and decision-making within an organisation is concentrated on a specific leader or location.

Explanation: Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a prerequisite to the efficient functioning of an organisation because it enables a manager to use his time on high-priority activities. It also satisfies the subordinate’s need for recognition and provides them with opportunities to develop and exercise initiative. Delegation helps a manager to extend his area of operations as without it, his activities would be restricted to only what he can do.

15. Option (B) is correct.

2. Option (C) is correct.

Explanation: Responsibility is the obligation of a subordinate to properly perform the assigned duty. It arises from a

Explanation: Once departments have been formed, each of them is placed under the charge of an individual. Jobs are then

14. Option (A) is correct.

49

ORGANISING

allocated to the members of each department by their skills and competencies. 3. Option (A) is correct. Explanation: The structure in a formal organisation can be functional or divisional. It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures essential for their achievement. Efforts of various departments are coordinated, interlinked, and integrated through the formal organisation. 4. Option (B) is correct. Explanation: Effective delegation allows the managers to reduce their workload by assigning routine jobs to their subordinates. The reduction in workload by delegation is not just necessary because of the limited capacity of an individual but also allows the manager to develop new methods and ways of performing tasks. It gives them the time to explore areas for growth and the opportunity to innovate thereby strengthening the company’s competitive position. Organising provides a clear description of jobs and related duties. This helps to avoid confusion and duplication. Clarity in working relationships enables proper execution of work. Management of an enterprise thereby becomes easy and this brings effectiveness in administration. 5. Option (B) is correct. Explanation: A manager, no matter how capable he is, cannot manage to do every task on his own. The volume of work makes it impractical for him to handle it all by himself. As a consequence, if he desires to meet the organisational goals, focus on objectives, and ensure that all work is accomplished, he must delegate authority. Authority determines the superior subordinate relationship wherein the superior communicates his decision to the subordinate, expecting compliance from him and the subordinate executes the decision as per the guidelines of the superior. The extent to which a superior can exact compliance also depends on the personality of the superior. 6. Option (D) is correct. Explanation: For effective delegation the authority granted must be commensurate with the assigned responsibility. If the authority granted is more than responsibility, it may lead to misuse of authority, and if the responsibility assigned is more than authority it may make a person ineffective. Responsibility is derived from authority and accountability is derived from responsibility. When an employee is given responsibility for a job, he must also be given the degree of authority necessary to carry it out. Thus, for effective delegation the authority granted must be commensurate with the assigned responsibility. If the authority granted is more than responsibility, it may lead to misuse of authority, and if the responsibility assigned is more than authority it may make a person ineffective. 7. Option (D) is correct. Explanation: Decentralisation leaves the top management with more time which they can devote to important policy decisions rather than occupying their time with both policy as well as operational decisions. Decentralisation makes it possible to evaluate performance at each level and the departments can be

individually held accountable for their results. Feedback from all levels helps to analyse variances and improve operations. In decentralisation, one of the challenges is the accountability of performance. In response to this challenge, better control systems are being evolved such as the balanced scorecard and management information system. Decentralisation compels the management to innovate performance measurement systems. 8. Option (A) is correct. Explanation: Avoidance of duplication of work helps prevent confusion and minimize the wastage of resources and efforts. 9. Option (A) is correct. Explanation: The organisation structure can be defined as the framework within which managerial and operating tasks are performed. It specifies the relationships between people, work, and resources. 10. Option (B) is correct. Explanation: By empowering the employees, the managers can function more efficiently as they get more time to concentrate on important matters. Freedom from doing routine work provides them with opportunities to excel in new areas.

[C] CASE BASED QUESTIONS 1. Option (D) is correct. Explanation: The establishment of working relationships clarifies lines of communication and specifies who is to report to whom. This removes ambiguity in the transfer of information and instructions. It helps in creating a hierarchical order thereby enabling the fixation of responsibility and specification of the extent of authority to be exercised by an individual. 2. Option (A) is correct. Explanation: An organisation is centralised when decision-making authority is retained by higher management. Complete centralisation would imply the concentration of all decision-making functions at the apex of the management hierarchy. Such a scenario would obviate the need for a management hierarchy. 3. Option (B) is correct. Explanation: Formal organisation specifies the relationships among various job positions and the nature of their interrelationship. This clarifies who has to report to whom. It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures essential for their achievement. Efforts of various departments are coordinated, interlinked, and integrated through the formal organisation. It is deliberately designed by the top management to facilitate the smooth functioning of the organisation. 4. Option (B) is correct. Explanation: In all organisations, employees are guided by rules and procedures. To enable the smooth functioning of the enterprise, job descriptions rules, and procedures related to work processes have to be laid down. This is done through the formal organisation. The formal organisation refers to the organisation structure which is designed by the management to accomplish a particular task. It specifies the boundaries of authority and responsibility and there is a systematic coordination among the various activities to achieve organisational goals. It places more

50 Oswaal CUET (UG) Chapterwise Question Bank

BUSINESS STUDIES

emphasis on the work to be performed than on interpersonal relationships among the employees. 5. Option (B) is correct.

Step 1 – Identification and division of work

Explanation: Responsibility is the obligation of a subordinate to properly perform the assigned duty. It arises from a superior–subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. Thus, responsibility flows upwards, i.e., a subordinate will always be responsible to his superior. Delegation of authority undoubtedly empowers an employee to act for his superior but the superior would still be accountable for the outcome. Accountability implies being answerable for the outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability. It cannot be delegated and flows upwards, i.e., a subordinate will be accountable to a superior for satisfactory performance of work. In the above case, Mr. Gopal was both accountable and responsible for performing his duties.

Step 4 – Establishing reporting relationships

6. Option (C) is correct. Explanation: Organising is the function of management being performed by Rohan. The steps in the process of organising have been described in the case. The steps are as follows:

Step 2 – Departmentalisation Step 3 – Assignment of duties 7. Option (D) is correct. Explanation: Identification and division of work helps to identify the activities to be performed to accomplish the goals. 8. Option (C) is correct. Explanation: Grouping of activities that are similar in nature is the second step in the process of organising, and is termed as departmentalisation. 9. Option (A) is correct. Explanation: Assignment of duties is the third step in the process of organising. Under this step, duties are allocated to the employees (in this case, to the prefects), based on their competencies and skills 10. Option (B) is correct. Explanation: Establishing reporting relationship defines who is going to report to whom for the organising function.

CHAPTER

6

STAFFING

  Revision Notes ¾ Staffing: Staffing is the process of assigning individuals to jobs. It starts with human resource planning and progresses to additional tasks such as recruitment, selection, training, development, promotion, and performance evaluation. Staffing is the process of finding the appropriate individuals for the right job. Staffing has been defined as the administrative job of filling and maintaining roles in an organization’s structure. ¾ Need: (i) It is an essential component of management. (ii) It is a ubiquitous management function concerned with manpower or human resources. (iii) It is an ongoing process. (iv) It is broad in scope. (v) It is a multi-purpose activity.

¾ Human Resource Personnel are responsible for the following actions and duties: (i) Recruitment (ii) Job description preparation (iii) Selection (iv) Compensation and incentive planning (v) Employee placement and orientation (vi) Training and development (vii) Performance assessment (viii) Maintaining labour relations through managing employee complaints and problems (ix) Providing social security and employee welfare (x) Handling corporation disputes and legal issues

¾ Importance of Staffing:

¾ Steps in the Staffing Process:

(i) Finding competent individuals: Appropriate staffing aids in the discovery and acquisition of qualified personnel for varied roles.

(i) Estimating Manpower Requirements: The initial stage in staffing is to estimate the number of Scan to know people needed. When establishing the nummore about this topic ber of people needed, internal promotions, retirements, resignations, and dismissals, among other things, are taken into account. It includes the workforce analysis and workStaffing load analysis. Workload analysis helps in Process estimating the number and type of human resources required by the organisation for the attainment of objectives. Workforce analysis would reveal the number and type available in the organisation.

(ii) High performance: Appointing the appropriate individual for the right role assures greater performance. (iii) Enterprise expansion: Proper personnel assures the enterprise’s continued existence and growth. (iv) Optimal utilization of human resources: It avoids under-utilization and over-utilization of workers, lowering labour costs. (v) Increased job satisfaction: It boosts staff morale and job satisfaction. ¾ Staffing as a component of Human Resource Management: In small organisations, the role of Scan to know staffing is performed by all the managers more about this topic while in large organisations, the function of staffing is the duty of a separate department called the ‘’Human Resource Department’’. The staffing function is concerned Staffing as part with the human aspect of management. Manof HRM aging an organisation’s human component is the most significant duty since an organisation’s effectiveness is determined by how well this function is executed. The competence, motivation, and performance of an organisation’s human resources determines its success in attaining its goals to a large extent.

(ii) Recruitment: The recruitment process entails searching for potential workers and encouraging them to submit applications to the company. It is a positive process where the organization focuses on creating a pool of job candidates. (iii) Selection: Competent applicants are chosen from a vast pool of applicants throughout the selection process. It is critical to remember that the candidates’ abilities and the nature of the task must be compatible. It is a negative process where unsuitable candidates are removed. (iv) Placement and Orientation: Placement involves accepting the position for which he or she has been chosen. During orientation, the employee is given a quick overview of the firm and introduced to his supervisors, subordinates, and coworkers.

Internal

External

Transfer Promotion

Estimating Manpower Requirements Recruitment Selection Placement and Orientation Training and Development Performance Appraisal Promotion and Career Planning Compensation

Managerial function of filling and keeping filled positions in organization structure.

Employee motivation Simple process Do not need much training Shifting surplus work force Economical

No induction of fresh talent Time bound promotions Not suitable for a new enterprise Lack of competition Not suitable in case of frequent transfers

Wide choice Qualified and trained personnel Competitive spirit Induction of fresh talent

Process

Meaning

Importance

Training Methods

Importance

Training & Development (process of increasing knowledge, skills and abilities for doing a particular job)

Staffing

(choosing best out of prospective candidates)

Selection Process

(process of finding suitable candidate for job)

Recruitment

Lengthy process Costly process Dissatisfaction among existing employees it s

De m er

First Level

Second Level

Trace the Mind Map Third Level

Discovering and obtaining competent personnel Higher performance Continuous survival and growth of enterprise Optimum utilisation of human resources Improve job satisfaction

Better career opportunities Increases performance Increases efficiency Increases morale and satisfaction

Avoids wastage of efforts and money Enhances employees' productivity Equip future managers Increases employees' performance Obtains effective response to environment

Vestibule Training–Simulated Training with dummy models of machinery, tools, etc.

Apprenticeship training (putting trainee under guidance of master worker) Internship training (practical knowledge imparted along with educational course) Induction Training (to make new employees settle down happily and develop feeling of belongingness)



Process: Preliminary screening (to eliminate unqualified and unfit applicants) Selection tests (to measure certain characteristics of applicants) Employment interview (in depth conversation to check applicant suitability) Reference and background checks (to gain additional information) Selection decision (final decision) Medical examination (to gain fitness details) Job offer (through the letter of appointment) Contract of employment (once the applicant accepts the job offer)



Web publishing Advertising on television, newspaper, etc. Labour contractors Recommendations of employees Campus recruitment Placement agencies and management Consultants Casual callers Direct recruitment Employment exchange



52 Oswaal CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

53

STAFFING

(v) Training and Development: During this stage of the staffing process, employees receive training and development to improve their efficiency and effectiveness. (vi) Performance Appraisal: Each employee’s capacity is evaluated at this stage. His real job performance is compared to the task allotted to him to assess his capacity. Performance appraisal involves evaluating the employee’s performance against pre-determined standards. (vii) Promotion and Career Planning: During the staffing process, individuals are promoted to higher positions based on their capabilities. (viii) Compensation: The compensation of an employee for his contribution to the organisation is determined during this stage of the staffing process. Employee compensation includes all types of wages and benefits. Essentially, it is the cost of the work. ¾ Recruitment: The process of identifying potential applicants for a position or role is referred to as recruitment. Recruitment may be described as the practice of seeking out potential workers and encouraging them to apply for positions in a business. ¾ Sources of recruitment: There are two sources of recruitment- Internal sources and external sources. Internal Sources of Recruitment: This refers to rearranging current employees to fill empty positions. ¾ Type: (i) Transfer: This refers to transferring a person from one position to another, one department to another, or one shift to another with no change in compensation, status, or responsibility. It is essentially a horizontal personnel movement. (ii) Promotion: Most businesses fill higher-level positions by promoting personnel from lower-level positions. It entails transferring an employee to a higher-level position with better compensation, prestige, and responsibility. Employees are promoted in a vertical shift. ¾ Advantages: (i) Encourages employees to enhance their performance. Promotion at higher level leads to chain of promotions at lower level. (ii) Makes the selection and placement procedure easier. It is a reliable source as the candidates are already known. (iii) There is no requirement for introduction training. (iv) Keeping an appropriate staff in an organization to avoid overstaffing and understaffing (v) It is an economical source since it is cheaper as compared to external sources. ¾ Disadvantages: (i) The scope for bringing in new talent is restricted. (ii) Time-bound promotions make staff drowsy. (iii) Does not apply to new businesses. (iv) The spirit of competitiveness among employees is stifled. (v) Frequent transfers lower staff productivity.

¾ External Sources of Recruiting: As all openings cannot be filled through internal recruitment, an organisation must go outside for candidates. It refers to looking for staff from outside the organisation. ¾ Types: (i) Direct recruitment: A notice detailing the available jobs is posted on the enterprise’s notice board. Job searchers will gather on the stated day, and selection will take place on the spot. (ii) Casual callers: Employees are chosen from a database of unsolicited applicants. (iii) Advertisement: Job openings are publicized in newspapers, magazines, websites, and so on. (iv) Employment exchange: Government-run employment exchanges are recognized as a good source of recruiting for unskilled and skilled operative positions. In employment exchanges, job seekers register their names. They provide a list of applicants with the necessary qualifications upon the employer’s request. (v) Placement agencies and management consultants: These companies assist organizations in hiring technical, professional, and managerial staff. These firms aggregate bio-data of a huge number of individuals and propose names to their clients. (vi) Campus recruiting: Management and technology colleges and universities have become prominent sources of recruitment. (vii) Employee recommendation: Applicants suggested by current workers, or their friends and family, may be an excellent source of recruiting. (viii) Labor contractors: They deliver the needed quantity of workers quickly. They maintain close contacts with laborer’s and can provide (ix) Web publishing: Some websites are expressly created to provide information about job searchers and employers. ¾ Advantages: (i) Qualified personnel: It attracts competent candidates to apply for positions. (ii) Wide choice: It provides management with more options during selection. tion.

(iii) Fresh talent: It introduces new talent to the organiza-

(iv) Competitive spirit: It fosters a competitive attitude among existing employees which increases their performance. ¾ Disadvantages: (i) Dissatisfaction among existing employees: It creates unhappiness among current employees. They feel that their chances of promotion are reduced. (ii) Lengthy procedure: The recruitment from external sources takes a lot of time as first the vacancies have to be notified and then they wait for the application to start the process. (iii) Costly: A lot of money has to be spent on the advertisement and on processing the application.

54 Oswaal CUET (UG) Chapterwise Question Bank ¾ Selection: Selection is the process of discovering and selecting the best applicant for a position from a pool of candidates. ¾ Process of Selection: (i) Preliminary Screening: This phase assists in the elimination of unqualified and unsuitable individuals based on information from application forms. (ii) Selection Tests: A selection exam is used to assess a candidate’s aptitude, IQ, personality, and so on. Some of the selection tests are: (a) Intelligence Test (IQ Test): It is used to assess intelligence quotient of the candidate. It is an indicator of the candidate’s decision-making and judgment skills.

Scan to know more about this topic

Meaning and Process of Selection

(b) Aptitude Test: This test assesses an individual’s ability to learn new skills. Its outcome reveals a person’s ability to grow. (c) Personality Test: It provides information on a person’s emotions, reactions, maturity, value system, and so on. (d) Trade test: These exams assess the candidate’s existing skills in the field of profession. (e) Interest Test: These are used to determine a person’s pattern of interest or participation. (iii) Employment Interview: This is a formal, in-depth discussion held to assess the applicant’s suitability for the position. (iv) Reference and background checks: The organisation gathers information and opinions from referees during this process. For example, previous workers, teachers, and wellknown individuals. (v) Selection decision: The ultimate selection must be made from among the candidates who pass the exams, interviews, and reference checks. (vi) Medical Examination: Selected applicants must pass a medical fitness exam. (vii) Job Offer: Candidates who have been medically cleared are given a letter of appointment. (viii) Employment Contract: When a candidate accepts a job offer, a contract of employment is signed with him. ¾ Training: Training is the process of increasing job-related knowledge and abilities. Training is a procedure that improves individuals’ aptitudes, skills, and ability to execute certain professions. It is a process of acquiring new skills and applying information. ¾ Education: Employee education is the process of enhancing their understanding. It is the comprehension and application of knowledge. It does not supply definite solutions, but rather fosters a logical and reasonable mind, capable of determining correlations among relevant factors and therefore, comprehending phenomena. ¾ Development: Employee development refers to the learning opportunities provided to help them grow. It includes not just activities that increase job performance, but also those that

BUSINESS STUDIES

promote personality development and assist persons in reaching adulthood and realizing their full potential. ¾ Importance of Training and Development: (i) To the Organization: (a) Systematic learning saves time and money. (b) Increases staff productivity, resulting in increased earnings. (c) Allows employees to advance to management positions in the future. (d) Improves employee morale while decreasing employee turnover. (e) Improve reaction to a rapidly changing environment. (ii) To the Employee: (a) Improved skills lead to a better career. (b) Increases earnings owing to improved performance. (c) Reduces accidents owing to attentive machine handling. (d) Improves staff satisfaction and morale. ¾ Methods of Training: On-the-job Method: (i) Apprenticeship Programs: In this system, the trainee is placed under the supervision of a master worker for a set length of time. This strategy is employed in skilled industries such as electronics and plumbing. (ii) Internship training: This is a collaborative initiative between educational institutions and business firms. The trainee learns regularly for the specified period. They also work in a factory or office to get practical experience and expertise. Nursing, B.Ed., Hotel Management, CA, and so forth. (iii) Job rotation: Job rotation entails moving trainees from one area to another, allowing them to develop a broader understanding of the business, put their skills to the test, and engage with other employees, building future collaboration. (iv) Coaching: Under this method, the superior guides and instructs the trainee as a coach. They mutually set the goals and try to achieve them through constant efforts. ¾ Off-the-job method: (i) Lectures/Conferences in the Classroom: The lecture or conference technique is best suited to communicating particular knowledge rules, processes, or methodologies. Audiovisuals or demonstrations may frequently make a formal classroom lecture more fascinating, increase recall, and provide a vehicle for clarifying more difficult ideas. (ii) Films: They can offer information and openly illustrate talents that the other techniques cannot. In certain circumstances, it is a particularly effective strategy when used in conjunction with conference discussions. (iii) Case Study: Drawn from genuine organisational experiences, cases reflect attempts to illustrate real difficulties that managers have experienced as precisely as feasible. Trainees examine the examples to identify issues, analyze causes, devise alternative solutions, choose what they feel to be the best option, and put it into action.

55

STAFFING

(iv) Computer Modeling: It simulates the work environment by programming a computer to mimic some of the realities of the job, allowing learning to occur without the danger or high expenses that would be incurred if a mistake were made in a real-life setting. (v) Vestibule Training: Employees are trained on the equipment they will be using, however, the training takes place away from the actual work floor.

(vi) Programmed Instruction: This strategy entails a planned and projected development of specific skills or general information. Information is divided into understandable parts, which are then properly structured to build a logical and sequential learning package, ranging from simple to complicated. These units are completed by the learner by answering questions or filling in the spaces.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Staffing is the part of which functional area of Management ? [CUET 2023] (A) Marketing Management (B) Human Resource Management (C) Production Management (D) Financial Management 2. Identify the correct sequence of first five steps of staffing process: A. Estimating the manpower requirement B. Recruitment C. Training and development D. Placement and orientation E. Selection Choose the correct answer from the options given below:  [CUET 2023] (A) A, B, D, E, C (B) A, B, C, D, E (C) A, B, E, D, C (D) A, C, B, D, E 3. Process which provides for learning opportunities that helps employee growth is: [CUET 2023] (A) Education (B) Development (C) Training (D) Education and Training 4. External Sources of recruitment does not include A. Casual callers B. Employment exchange C. Transfer D. Advertising E. Promotions [CUET 2023] Choose the correct answer from the options given below: (A) A and B only (B) B and C only (C) C and E only (D) D and E only 5. __________refers to vertical shifting of employees in an organisation [CUET 2023] (A) Promotion (B) Transfer (C) Interview (D) Placement 6. Match List-I with List-II List-I

List-II

A

Apprenticeship I

B

Casual caller

II

C

Promotion

III Training

D

Selection

IV

Internal source of recruitment Negative process External source

Choose the correct answer from the options given below: (A) A - I, B - II, C - III, D - IV [CUET 2022] (B) A - II, B - IV, C - III, D - I (C) A - III, B - IV, C -I, D - II (D) A - III, B - I, C - II, D – IV

7. Identify the process by which the aptitudes, skills, and abilities of employees to perform specific jobs are increased. (A) Development

(B) Training [CUET 2022]

(C) Education

(D) Selection

8. Mr. Abhishek, the H.R. Manager has to take the necessary steps in connection with placement and orientation. Identify their right sequence. A. Compensation B. Training and development C. Promotion and career planning D. Performance Appraisal

Choose the correct answer from the options given below:

(A) A, B, C, D

(B) B, D, C, A[CUET 2022]

(C) D, C, A, B

(D) C, A, B, D

9. Vasu is a hard-working employee in the organization. He has been working as a junior clerk for the last five years. As Srinath, the senior clerk retired he expected to fill the vacant position. But instead of vertically shifting Vasu, the company appointed Raman as a senior clerk through a placement agency. Vasu felt demotivated and frustrated.

Identify the limitation of external sources of recruitment discussed above.  [CUET 2022]

(A) Lengthy process (B) Dissatisfaction among existing staff (C) Danger of inbreeding (D) Competition spirit is hampered. 10. Identify the correct sequence in the staffing process: A. The organization conducted inhouse trainings and offered opportunities for career advancement in the long run. B. An advertisement of ‘situation/vacant’ was published in the daily newspaper. C. The selected employee was introduced to the office employees and he occupied the position for which he was selected. D. The number and types of human resource available and required were assessed in the organization. E. A series of tests and interviews was conducted to shortlist a suitable candidate.

Choose the correct answer from the options given below:  [CUET 2022]

(A) D-B-C-E-A

(B) D-B-E-C-A

(C) D-E-C-A-B

(D) E-D-B-C-A

56 Oswaal CUET (UG) Chapterwise Question Bank 11. Which of the following are the specialized activities performed by Human Resource Management: A. Maintaining labour relations and union-management relations B. Recruitment C. Ensuring social security and welfare of employees (A) A and B (B) B and C (C) A and C (D) A. B and C  [CUET 2022] 12. It refers to the learning opportunities designed to help employees grow: [CUET 2022] (A) Job enrichment (B) Development (C) Selection (D) Career Planning 13. Which of the following are external sources of recruitment? A. Direct recruitment B. Transfer C. Casual callers D. Campus recruitment E. Promotions Choose the correct answer from the options given below:  [CUET 2022] (A) A, C and D only (B) A, B and C only (C) B, C and D only (D) A and C only 14. When Lenovo India decided to strengthen its diversity numbers, it decided to tap into its referral system. The company asked its workers to refer candidates and decided to reward those who became successful in this task. Identify the source of the requirement referred to here:  [CUET 2022] (A) Casual Callers (B) Labour Contractor (C) Recommendation of Employees (D) Direct Recruitment 15. From the following identify the drawbacks of external sources of recruitment [CUET 2022] A. Wider choice B. Dissatisfaction among existing staff C. Lengthy process D. Costly process E. Competitive spirit Choose the correct answer from the option given below: (A) B, C and E only (B) B, C and D only (C) A, B and C only (D) B, D and E only 16. Match List-I with List-II: List-I

List-II

A

Employment Interview

I

Source of recruitment

B

Employment Exchange

II

Collaboration of business firm and educational institutions

C

Internship Training

III Formal, in-depth conversation

D

Vestibule Training

IV

Related to handling sophisticated machinery and equipment

BUSINESS STUDIES

Choose the correct answer from the options given below: (A) A - I, B - II, C - IV, D - III [CUET 2022] (B) A - III, B - I, C - II, D - IV (C) A - II, B - III, C - I, D - IV (D) A - IV, B - I, C - III, D - II 17. Which of the following types of selection tests provides clues to a person’s emotions, reactions, maturity value system, etc.? (A) Aptitude Tests (B) Personality Tests (C) Intelligence Tests (D) Interest Tests 18. Selection is a process which involves a series of steps. Arrange the following steps in the correct order: A. Interview B. References check C. Preliminary screening D. Selection test Choose the correct answer from the options given below: (A) (C), (D), (A), (B) (B) (D), (C), (B), (A) (C) (A), (B), (C), (D) (D) (B), (D), (C), (A) 19. Name the ‘On-the-Job’ method of training that is used to give training to plumbers. (A) Vestibule training (B) Apprenticeship training (C) Classroom training (D) Internship training 20. While designing the organizational structure, managers undertake an analysis of the decisions and the decision-making levels, activities as well and relationships among them to evolve the horizontal and vertical dimensions of the structure. Thus, various job positions are created. The performance of each job necessitates the appointment of a person with a specific set of educational qualifications, skills, prior experience, and so on. Identify the step of the staffing function of management highlighted above. (A) Estimating manpower requirements (B) Recruitment (C) Selection (D) Placement and orientation (B) ASSERTION & REASON Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). (A) Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A). (B) Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A). (C) Assertion (A) is true but reason (R) is false. (D) Assertion (A) is false but reason (R) is true. 1. Assertion (A): Internship training is a joint program of training in which educational institutions and business firms cooperate.

Reason (R): In internship training employees are required to handle sophisticated machinery and equipment.

2. Assertion (A): In an existing enterprise, staffing is a continuous process.

Reason (R): In a new enterprise, the staffing function follows the planning and organizing functions.

3. Assertion (A): Human resources are the liability of an organisation.

Reason (R): The ability of an organisation to achieve its goal depends upon the quality of its human resources.

STAFFING

4. Assertion (A): Promotions are an integral part of people’s careers. Reason (R): Managers need to design activities to serve employees’ long-term interests. 5. Assertion (A): Through internal sources of recruitment, employees work with commitment and loyalty and remain satisfied with their jobs. Reason (R): The candidates who are already working in the enterprise can be evaluated more accurately and economically. 6. Assertion (A): Promotion leads to shifting an employee to a lower position. Reason (R): Promotion is a vertical shift of employees. 7. Assertion (A): Placement agencies charge fees for their services and they are useful where extensive screening is required. Reason (R): Placement agencies compile bio-data of a large number of candidates and recommend suitable names to their clients. 8. Assertion (A): By using external sources of recruitment, the management can attract qualified and trained people to apply for vacant jobs in the organization. Reason (R): Recruitment from internal sources takes a long time. 9. Assertion (A): Training makes the employee more efficient in handling machines. Reason (R): Training indicates the process by which attitudes, skills, and abilities of employees to perform specific jobs are increased. 10. Assertion (A): Development enables the overall growth of the employee. Reason (R): Training enables the employee to do the job better.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5) Vipul belongs to a small village in Kolkata. Being the only literate person in his family, he decides to settle in the city of Mumbai. So, he opened a sweets and bakery shop in Mumbai as he possesses extraordinary skills. In no time, his business started flourishing and he opened two more branches. Very soon he starts getting requests from his cousins in the village to engage them in some kind of job in his business. Considering it to be his moral obligation, he engages a few of his cousins in his business without paying any specific attention to their capabilities. This leads to wastage of materials, time, effort, and energy, resulting in lower productivity and poor quality of products. As a result, the profitability of his business starts falling. Soon, he realized that for the success of the business, it is essential that the right kind of people must be available in the right number at the right time. To cope with his business, he decided to appoint some skilled people and started finding possible candidates for a job. For this, he gave advertisements in newspapers and on the internet. He came to know when the present employees may be insufficient or they may not fulfil the specifications of the jobs to be filled. External recruitment provides wider choices and brings new blood to the organization. If a business taps external sourc-

57 es, the existing staff will have to compete with the outsiders. They will work harder to show better performance. 1. Which function of management has been overlooked by Vipul? (A) Organising (B) Staffing (C) Planning (D) Directing 2. Staffing is closely linked to _________ function of management. (A) Organising (B) Staffing (C) Planning (D) Directing 3. Which of the following statements is correct concerning the importance of staffing the function of management? (A) Staffing helps in discovering and obtaining competent personnel for various jobs. (B) Staffing helps to ensure the optimum utilization of human resources. (C) Staffing improves job satisfaction and morale of employees. (D) All of the above 4. Identify the source of recruitment mentioned in the below line : “For this, he gave the advertisement in newspapers and on the internet.” (A) Advertisement (B) Web Publishing (C) Both (A) and (B) (D) None of these 5. Which aspect of staffing is mentioned in the below lines : “To cope with his business, he decided to appoint some skilled people and started finding possible candidates for a job.” (A) Recruitment (B) Selection (C) Training (D) None of these II. Read the following text and answer questions that follow: (Q6-Q10) Motorcycles Ride Pvt. Ltd. decided to modernize the plant as they are going to manufacture on a large scale and cater to the export market as well as the domestic market. So, it has become necessary to provide knowledge and skills to the existing workers to cope with new technology. The company believes that training will help its workers to improve their functioning and performance in many areas. Thus, the company has decided to train its workers to equip them with the latest production technology. However, the company is in a dilemma concerning the training method to be adopted. The HR department wants to adopt a training method that is more suitable for a manufacturing concern than a trading concern as the workers will be involved in operating many sophisticated machines, the majority of which the company is planning to import from Japan. Thus, they have decided to create actual work environments in a classroom and employees to use the same materials, files, and equipment to equip themselves with the imported new technology. The company also plans to shift the trainees from one department to another or from one job to another to make them more versatile. This will enable the trainee to gain a broader understanding of all parts of the manufacturing and assembling unit and how the organization as a whole functions. They also plan to recruit more people especially freshers to meet the rise in

58 Oswaal CUET (UG) Chapterwise Question Bank demand and train them accordingly. For this purpose, they have decided to select candidates who are studying but will also work in their factory or office to acquire practical knowledge and skills. 6. Training will help the company’s workers to improve which of the following areas? (A) Aptitudes (B) Prepare them for any intended job (C) Improve their performance on the current job (D) All the above 7. Which training method has been chosen by Motorcycles Rides Pvt. Ltd. to train its existing workers? (A) Apprenticeship Training (B) Internship Training (C) Vestibule Training (D) None of these

BUSINESS STUDIES

8. How many types of training methods have been used by the company to achieve company goals? (A) 1

(B) 2

(C) 3

(D) 4

9. Which training method has been chosen by Motorcycles Rides Pvt. Ltd. to train its new workers? (A) Lectures

(B) Internship Training

(C) Vestibule Training

(D) Apprenticeship Training

10. Training enhances employee productivity in terms of ________ leading to higher profits. (A) Quality

(B) Quantity

(C) Both (A) and (B)

(D) None of these

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (B)

2. (C)

3. (B)

4. (C)

5. (A)

6. (C)

7. (B)

8. (B)

9. (B)

10. (B)

11. (D)

12. (B)

13. (A)

14. (C)

15. (B)

16. (B)

17. (B)

18. (A)

19. (B)

20. (A)

1. (C)

2. (B)

3. (D)

4. (B)

8. (C)

9. (A)

10. (B)

8. (B)

9. (B)

10. (C)

[B] ASSERTION & REASON 5. (B)

6. (D)

7. (B)

[C] CASE BASED QUESTIONS 1. (B)

2. (A)

3. (D)

4. (C)

5. (A)

6. (D)

7. (C)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

6. Option (C) is correct.

1. Option (B) is correct.

Explanation: Apprenticeship is a type of on-the-job training where the individuals learn by doing under a trained professional. Casual caller is a source of external recruitment where the employees are chosen from a database of unsolicited applicants. Promotion is an internal source of recruitment where a person is promoted to a higher level in his job. Selection is a negative process as unfit candidates are removed to select the most suitable one.

Explanation: Staffing is a distinct function of management, that deals with human resource specifically. Therefore, staffing is the part of human resource management as a functional area. 2. Option (C) is correct. Explanation: Process of Staffing: Step 1 – estimation of manpower requirements Step 2 – recruitment i.e., search of candidates for the required job profiles Step 3 – selection i.e., selecting the right candidate for the job Step 4 – placement and orientation, placing and orienting the employees for the job to be performed at work Step 5 – training and development of employees for making them more job-ready and their overall growth. 3. Option (B) is correct. Explanation: Development of an employee is a process of learning and overall growth. It is career oriented. 4. Option (C) is correct. Explanation: Transfer and promotions are done for already existing employees of the organisation; therefore, they are internal sources of recruitment, held internally 5. Option (A) is correct. Explanation: Promotion is the vertical shifting of employees in the hierarchical order in an organisation. It can be a case of a subordinate being promoted to a superior level.

7. Option (B) is correct. Explanation: Training involves providing employees with the necessary knowledge and skills to excel in their current roles and possibly prepare for future responsibilities. 8. Option (B) is correct. Explanation: Mr. Abhishek needs to do training and development, performance appraisal, promotion, and career planning and compensation. 9. Option (B) is correct. Explanation: When an employee is working for a long period, he expects to be promoted. But when instead of promotion, some fresh talent flows in from outside, it creates a sense of dissatisfaction among the employees. 10. Option (B) is correct. Explanation: The process of staffing starts with estimating the manpower requirement. After that the vacancies are adver-

59

STAFFING

tised under the step of recruitment. This is followed by selection where the right candidate is selected. Once selected, there is placement and orientation. The last step is the training of the employee to ensure efficient performance. 11. Option (D) is correct. Explanation: Human Resource Management includes many specialised activities and duties which the human resource personnel must perform. These duties are recruitment, i.e., search for qualified people, maintaining labour relations and union management relations, providing for social security and welfare of employees etc.

tests, and relevant knowledge examinations. Reference and background checks are required to authenticate the identification of the candidate. The decision-making process includes selecting the best candidate for the organization’s future potential. The candidate must accept the employment offer, which is referred to as the contract. 19. Option (B) is correct. Explanation: Apprenticeship Training program is a combination of on-the-job training and classroom training, wherein the workers earn while learning the skills required for performing the specialized job.

12. Option (B) is correct. Explanation: Development refers to the learning opportunities designed to help employees grow. It is a career-oriented process. 13. Option (A) is correct.

20. Option (A) is correct.

Explanation: Under direct recruitment, a notice is put on the notice board specifying the details of the jobs available. Casual callers involve keeping a database of applicants and calling them whenever required. Under campus recruitment, freshers are recruited from college campus. Transfer and promotion are internal sources of recruitment.

1. Option (C) is correct.

14. Option (C) is correct. Explanation: Employee referrals are an excellent means of locating potential candidates for first hand to fill vacant positions. 15. Option (B) is correct. Explanation: External recruitment involves recruiting people from outside the organization. It faces the drawback that it creates dissatisfaction among the existing staff. Moreover, it is a lengthy and costly process as first the advertisement needs to be published and then they wait for the candidates to apply. 16. Option (B) is correct. Explanation: Employment interview is a formal in-depth , face-to-face conversation between the employer and employee. Employment exchange is a source of external recruitment. Internship training is an on-the-job training where the business firms collaborate with educational institutions to provide real-life job experience to students. Vestibule training is an offthe-job training method where a replica of working conditions is created. It is important when sophisticated machinery has to be handled. 17. Option (B) is correct. Explanation: A personality test is an assessment of an employee’s personality. These tests are from a behavioural perspective and check various traits needed for a job. 18. Option (A) is correct. Explanation: Candidates apply for appropriate employment during the job application procedure. Based on their selection process and corporate needs, the screening and pre-selection step tries to restrict prospects to 3-10 for in-person interviews. Interviews reveal information on verbal correctness and friendliness, as well as job-related questions. Candidates are evaluated through assessments such as work sample exams, integrity

Explanation: The staffing process begins with the estimation of manpower requirements which means finding out the number and type of employees needed by the organisation.

[B] ASSERTION & REASON Explanation: Internship training is a joint program of training in which educational institutions and business firms cooperate. Selected candidates carry on regular studies for the prescribed period. They also work in some factories or offices to acquire practical knowledge and skills. 2. Option (B) is correct. Explanation: In a new enterprise, the staffing function follows the planning and organizing functions. After deciding what is to be done, how it is to be done, and after the creation of the organisation structure, the management is in a position to know the human resource requirements of the enterprise at different levels. Once the number and types of personnel to be selected are determined, management starts with the activities relating to recruiting, selecting, and training people, to fulfil the requirements of the enterprise. In an existing enterprise, staffing is a continuous process because new jobs may be created and some of the existing employees may leave the organization. 3. Option (D) is correct. Explanation: Human resources are the most important asset of an organization. Human resources are the foundation of any business. The ability of an organization to achieve its goal depends upon the quality of its human resources. Therefore, staffing is a very important managerial function. No organization can be successful unless it can fill and keep the various positions provided for in the structure with the right kind of people. 4. Option (B) is correct. Explanation: It becomes necessary for all organizations to address career-related issues and promotional avenues for their employees. Managers need to design activities to serve employees’ long-term interests. They must encourage employees to grow and realize their full potential. Promotions are an integral part of people’s careers. They refer to being placed in positions of increased responsibility. They usually mean more pay, responsibility, and job satisfaction.

60 Oswaal CUET (UG) Chapterwise Question Bank 5. Option (B) is correct. Explanation: Employees are motivated to improve their performance. A promotion at a higher level may lead to a chain of promotion at lower levels in the organization. This motivates the employees to improve their performance through learning and practice. Employees work with commitment and loyalty and remain satisfied with their jobs. Also, peace prevails in the enterprise because of promotional avenues. Internal recruitment also simplifies the process of selection and placement. The candidates that are already working in the enterprise can be evaluated more accurately and economically. This is a more reliable way of recruitment since the candidates are already known to the organization. 6. Option (D) is correct. Explanation: Promotion leads to shifting an employee to a higher position, carrying higher responsibilities, facilities, status, and pay. Promotion is a vertical shifting of employees. This practice helps to improve the motivation, loyalty, and satisfaction levels of employees. It has a great psychological impact on the employees because a promotion at a higher level may lead to a chain of promotions at lower levels in the organization. 7. Option (B) is correct. Explanation: Placement agencies provide a nationwide service in matching personnel demand and supply. These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients. Such agencies charge fees for their services and they are useful where extensive screening is required. These professional recruiters can entice the needed top executives from other companies by making the right offers. 8. Option (C) is correct. Explanation: External recruitment provides a wide choice and brings new blood to the organization. By using external sources of recruitment, the management can attract qualified and trained people to apply for vacant jobs in the organization. When vacancies are advertised widely, a large number of applicants from outside the organization apply. The management has a wider choice while selecting the people for employment. Recruitment from external sources takes a long time. The business has to notify the vacancies and wait for applications to initiate the selection process. Recruitment from internal sources is quick. 9. Option (A) is correct. Explanation: Training is any process by which the aptitudes, skills, and abilities of employees to perform specific jobs are increased. It is a process of learning new skills and application of knowledge. It attempts to improve their performance on the current job or prepare them for any intended job. Training makes the employee more efficient in handling machines. Thus, less prone to accidents. 10. Option (B) is correct. Explanation: The term training is used to indicate the process by which attitudes, skills, and abilities of employees to perform specific jobs are increased. But the term development means the growth of the individual in all respects. Training is a short-term process but development is an ongoing process. Also, development includes training. Development refers to the learning of

BUSINESS STUDIES

opportunities designed to help employees grow. It covers not only those activities which improve job performance but also those which bring about the growth of the personality, and help individuals progress towards maturity and actualization of their potential capacities so that they become not only good employees, but, better men and women.

[C] CASE BASED QUESTIONS 1. Option (B) is correct. Explanation: Staffing has been described as the managerial function of filling and keeping filled positions in the organization structure. This is achieved by, first of all, identifying the requirement of the workforce, followed by recruitment, selection, placement, promotion, appraisal, and development of personnel, to fill the roles designed into the organization structure. Once the number and types of personnel to be selected are determined, management starts with the activities relating to recruiting, selecting, and training people, to fulfill the requirements of the enterprise. 2. Option (A) is correct. Explanation: Staffing is closely linked to organizing since after the structure and positions have been decided, people are required to work in these positions. Subsequently, they need to be trained and motivated to work in harmony with the goals of the organization. 3. Option (D) is correct. Explanation: Staffing helps in discovering and obtaining competent personnel for various jobs. Staffing helps to ensure the optimum utilization of the human resources. Avoiding overmanning prevents underutilization of personnel and high labour costs. At the same time, it avoids disruption of work by indicating in advance the shortages of personnel; and improves job satisfaction and morale of employees through objective assessment and fair reward for their contribution. 4. Option (C) is correct. Explanation: Advertisements in newspapers or trade and professional journals are generally used when a wider choice is required. Most of the senior positions in the industry, as well as commerce, are filled by this method. The Internet is becoming a common source of recruitment these days. There are certain websites specifically designed and dedicated to providing information about both job seekers and job openings. Websites are very commonly visited both by prospective employees and organizations searching for suitable people. 5. Option (A) is correct. Explanation: Recruitment refers to the process of finding possible candidates for a job or a function. It has been defined as ‘the process of searching for prospective employees and stimulating them to apply for jobs in an organization.’ It is the process of searching for prospective employees and stimulating them to apply for jobs in the organization. 6. Option (D) is correct. Explanation: Training is any process by which the aptitudes, skills, and abilities of employees to perform specific jobs are increased. It is a process of learning new skills and application of knowledge. It attempts to improve their performance on the current job or prepare them for any intended job.

61

STAFFING

7. Option (C) is correct.

9. Option (B) is correct.

Explanation: Employees learn their jobs on the equipment they will be using, but the training is conducted away from the actual work floor. Actual work environments are created in a classroom and employees use the same materials, files, and equipment. This is usually done when employees are required to handle sophisticated machinery and equipment.

Explanation: It is a joint program of training in which educational institutions and business firms cooperate. Selected candidates carry on regular studies for the prescribed period. They also work in some factories or offices to acquire practical knowledge and skills.

8. Option (B) is correct.

Explanation: Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning precedes other functions.

Explanation: There is the use of Internship for freshers and Vestibule training for existing employees of the company is being used.

10. Option (B) is correct.

CHAPTER

7

DIRECTING

  Revision Notes ¾ Directing: The process of instructing, guiding, counselling, inspiring, and leading individuals in an organisation to achieve its goals is referred to as directing. It is a key managerial function that takes place throughout the life of the organisation. ¾ Characteristics of Directing: (i) Directing initiates action: Directing initiates action by individuals in the organisation to achieve goals. Other functions prepare the base for action, directing initiates the action. (ii) Directing occurs at all levels of management: It is a pervasive function which is performed by all the managers at all the levels. (iii) Directing is a continuous process: Directing occurs throughout the organisation’s lifespan. (iv) Direction flows from top to bottom: Directing starts from the top level of management and flows to the bottom level. A manager gets instructions from his boss and gives instructions to his subordinates. ¾ Importance of Directing: (i) Aids in commencing action: Directing aids in initiating activity to attain desired goals. (ii) Integrates employees’ efforts: organisation Directing aligns the work of individual employees towards the attainment of organisational goals. (iii) Directs employees to completely realize their potential: The managers direct employees to realise their capabilities via leadership and inspiration. (iv) Facilitates change: Directing aids in the efficient implementation of essential organisational change. (v) Promotes stability and balance: Effective directing contributes to organisational stability by fostering cooperation and commitment among the employees and management. ¾ Principles of Directing (i) Maximum individual contribution: According to this principle, directing must help the individuals to contribute their maximum potential and bring out their inner energy for the attainment of organisational goals. (ii) Harmony of objectives: The objectives of the employees and organisation may differ. Directing aligns them and explains the employees that individual and organisational goals are complementary. (iii) Unity of command: According to this principle, each employee should receive instructions only from one boss to avoid confusion, conflict and disorder.

(iv) Appropriateness of direction technique: Based on the needs of the employees, efficient leadership and motivation techniques must be used to direct the employees. (v) Managerial communication: Clear instructions and effective communication should be there to ensure subordinate’s understanding. Managers should also take proper feedback. (vi) Use of informal organisation: An informal group exists within every formal organisation. Managers should use them for effective directing. (vii) Leadership: Managers must be good leaders to influence the subordinates positively without causing any dissatisfaction. (viii) Follow through: Managers should not concentrate merely on giving orders. Rather, they should review them and modify them to suit the organisation. Scan to know ¾ Elements of Directing: The process of directing entails guiding, coaching, instructing, inspiring, and leading employees to achieve organisational goals.

more about this topic

¾ There are four elements of directing: Element of Directing (i) Supervision leadership (ii) Motivation (iii) Leadership (iv) Communication ¾ Supervision: There are two ways to interpret the phrase supervision. It can be seen as an aspect of directing first, and then as a role done by supervisors in the organisational hierarchy. A supervisory function may be defined as the function to be done by the supervisor, a position in the organisational structure at the operative level, i.e., immediately above the worker. The responsibilities and performance of the supervisor are critical to any organisation since he has direct contact with workers, whilst other managers do not. ¾ Importance of Supervision: The numerous responsibilities that a supervisor plays demonstrate the significance of supervision. These are as follows: (i) The supervisor maintains day-to-day contact and pleasant ties with the workforce. An excellent boss serves as a mentor, companion, and philosopher to his or her employees. (ii) The supervisor serves as a liaison between workers and management. On the one side, he communicates manage-

al ci

H i

M of

Importance

cti Dire ng

Meaning Instructing, guiding, monitoring and observing the employees while they are performing jobs Importance (i) Discipline (ii) Improves motivation (iii) Optimum utilization of resources (iv) Proper feedback (v) Facilitates control (vi) Improves

Supervision

Elements of Directing

Types

Autocratic or Authoritarian : Gives orders and expects subordinates to obey orders Democratic or Participative : Takes actions and decision in consultation with subordinates Laissez Faire or Free Rein : Does not believe in use of power unless absolutely essential

Makes people to contribute positively Provides confidence and support to employees Clarifies and inspires to accept changes Manages conflict Trains subordinates

ss oce (pr and n g o n ti va lati oti u M stim

• Initiates action • Leads to integrated group activity • Attempts to get maximum out of individuals • Helps to implement changes • Provides stability and balance in the organisation

Status Organizational climate Employee participation Employee empowerment Employee recognition Job security Job enrichment Career advancement

Pay & allowances Productivity linked incentives Bonus Profit sharing Stock option Retirement benefits Perquisites

Fi

na

n

Levels of Needs: Basic Physiological needs like hunger, thirst, shelter. Safety and Security needs like job security, pension. Social needs like friends, sense of belongingness. Self Esteem needs like status, self respect. Self Actualization needs like growth, self–fulfillment.

ial

N o n-F ina nc

)

Premature evaluation Lack of attention Poor retention Distrust

ba se d

cess Pro

Fear and challenge to authority Lack of confidence in subordinates Unwillingness to communicate Lack of proper incentives

m

of

n tio ica n u

nts

First Level

Second Level

Trace the Mind Map

Principal

Third Level

(i) Maximum individual contribution (ii) Harmony of objectives (iii) Unity of command (iv) Appropriate technique (v) Managerial communication (vi) Strategic use of informal organisation (vii) Effective leadership (viii) Follow through

• Organizational policy (may cause delay in process) • Rules and Regulations (rigid rules may adversely affect the process) • Status (creates psychological distance between superior and subordinates) • Complexity in organization structure • Organisational facilities ( if these are not provided, people fail to make effective communication, e.g., complaint box, suggestion box, etc.)

Body language and gesture decoding Technical jargon Unclarified assumptions Faulty translation Use of symbols with different meanings Badly expressed message

Sender : One who conveys thoughts Message : Content of the thought Encoding : Converting thoughts into words, pictures, etc. by sender Media : Path of transferring encoded thought Decoding : Converting encoded thoughts into understanding by receiver Receiver : One who receives message Feedback : Actions of receiver indicating understanding of message Noise : Obstruction to communication

Clarity of ideas before communication Communicate as per needs of receiver Consult before communicating Be aware of tone and content of message Ensure feedback Follow–up Be a good listener

m Co

E

e lem

Vertical (superior to subordinate or vice-versa) Horizontal (across various departments)



Without following formal line of organizational structure



ed Ne eory 's w Th lo y as rch a er 

DIRECTING

63

64 Oswaal CUET (UG) Chapterwise Question Bank ment ideas to employees, and on the other, he communicates worker difficulties to management. This position of supervisor aids in the prevention of misunderstandings and disputes between management and workers/employees. (iii) The supervisor is critical in sustaining group cohesiveness among workers under his supervision. He resolves internal conflicts and keeps staff in good spirits. (iv) The supervisor ensures that the task is completed according to the objectives stated. He accepts responsibility for assignment completion and effectively inspires his employees. (v) The supervisor delivers effective on-the-job training to workers and employees. A professional and knowledgeable supervisor can assemble an effective team of workers. (vi) Supervisor increases the morale of the people in the organisation. (vii) Supervisor gives feedback to employees and suggests means of developing work skills. ¾ Motivation: Motivation is defined as the impulse or inducement to act or move. It refers to the practice of persuading subordinates to operate desirably to attain certain organisational goals or job targets. Scan to know

more about ¾ Features of Motivation: this topic (i) Motivation is an Internal Feeling: Human beings’ inclinations, drives, wants, aspirations, striving, or needs are internal feelings which influence the human Features of behaviour. Motivation (ii) Goal-directed behaviour is produced by motivation: Motivation encourages people to behave in such a way that they can attain their objectives. (iii) Motivation is a Complex Process: A motivational strategy may not have the same impact on everyone, making it a complex process. (iv) Motivation can be positive or negative: Positive motivation provides positive rewards such as raise in pay, promotions, and recognition; negative motivation uses negative means such as punishment, stopping increments, threatening, and so on, which may also induce a person to act in the desired manner. ¾ Importance of motivation: (i) Improves performance: Motivation improves the performance of the employees and organisation. It ensures optimum performance of the employees and their maximum contribution towards the organisation. (ii) Change attitude: Motivation changes the indifferent and negative attitude of the employees and makes them more positive towards work. (iii) Reduces employee turnover: Identifying the motivational needs of the employees and providing suitable incentives reduces the employee turnover and saves the cost of the company. It helps to retain talented people in the organisation. (iv) Reduces absenteeism: Through motivation, the deficiencies in the organisation can be removed. A good manager makes work a source of pleasure for the employees and motivates them to work without leaves. (v) Introduction of changes: Employees have a general tendency to resist changes. Managers convince the employees

BUSINESS STUDIES

that changes will bring rewards for them. Proper motivation makes the introduction of changes smooth. ¾ Maslow’s Need Hierarchy Theory of Scan to know Motivation: In a landmark work published more about this topic in 1943, Abraham Maslow, a well-known Psychologist, presented the elements of an overarching theory of motivation. His thinking was based on human needs. He believed that every human being had a hierarchy of Maslow Need Hierarchy five requirements. Theory of Motivation ¾ Abraham Maslow classified human needs into five categories: (i) Basic physiological needs: These are the necessities for human existence, such as food, shelter, clothes, and so on. (ii) Needs for safety or security: It includes protection from physical and emotional harm. example: pension plans, employment security, and so on. (iii) Affiliation/Belonging needs: These needs relate to the social wants like affection, acceptance and friendship needs. (iv) Esteem needs: Desire for self-esteem, autonomy, and attention, such as status and recognition at work. (v) Self-actualization needs: The Desire to become what one is capable of being, such as growth, self-fulfilment, and so on. It assists managers in realizing that employees’ unfulfilled wants must be discovered to motivate them.

Self actualisation needs Exteem needs Affilication/ Belongingness needs Safety/Security needs Basic Physiological needs

¾ Assumptions of Maslow’s theory: (i) People’s behaviour is influenced by their needs. Satisfaction of the needs influences their behaviour. (ii) The needs are organised in hierarchal order. (iii) A satisfied need can no longer motivate a person. (iv) A person moves to the next level need only when the lower need is satisfied. ¾ Financial Incentive: It refers to monetary incentives like: (i) Pay and benefits: The fundamental monetary incentive is salary. It consists of base salary, dearness allowance, and additional allowances. (ii) Productivity-linked wage incentives: These wage incentive programs seek to relate compensation payments to an increase in productivity. (iii) Bonus: A bonus is an incentive given to employees in addition to their wages/salary. (iv) Profit sharing: Profit sharing is intended to give employees a portion of earnings.

DIRECTING

(v) Co-partnership/stock option: Employees are offered business shares at a specified price that is lower than the market price under these incentive programs. (vi) Retirement benefits: Retirement benefits such as provident funds, pensions, and gratuities also serve as inducements. (vii) Perquisites: Perquisites and fringe benefits include automobile allowance, housing, medical assistance, kid education, and so on. ¾ Non-financial incentives: These are rewards based on psychological, social, and emotional factors: (i) Status: This refers to the job’s status, authority, recognition, and reputation. (ii) Organisational environment: A positive attitude taken by a manager fosters a better organisational climate conducive to higher levels of work production. (iii) Chances for advancement: This entails giving employees promotional chances based on their skills. Career advancement should be ensured by providing skill development programmes for the employees. (iv) Job enrichment: Job enrichment is concerned with developing occupations to contain a broader range of work content that necessitates a higher degree of knowledge and competence. (v) Employee appreciation programs: It denotes acknowledgement with a display of appreciation for employees’ excellent performance. Such acknowledgement motivates the employees to perform better. (vi) Job security: It refers to giving employees stability and certainty regarding their future income and work. This ensures that workers work with greater zeal. (vii) Employee participation: Involvement of employees in decision-making on matters affecting them motivates them to adhere to the decisions and achieve the organisational goals (viii) Employee empowerment: Employee empowerment entails providing employees more authority and influence. ¾ Leadership: Leadership is defined as the process of influencing people’s behaviour by motivating them to work willingly towards the attainment of organisational goals. ¾ Features of Leadership: (i) People-influencing process: Leadership denotes an individual’s capacity to influence others. (ii) Bring behavioural changes: Leadership attempts to influence the behaviour of others. (iii) Interpersonal interaction between a leader and a follower: Influencing followers through successful interpersonal relationships. (iv) Exercised to accomplish shared goals: Leadership is used to achieve the organisation’s common goals. (v) Ongoing process: It necessitates regular contact between the leader and his team.

65 ¾ Leadership Styles: Scan to know (i) Authoritarian/Autocratic more about this topic Leadership: A leadership style in which the leader has total authority over his subordinates and centralizes all decision-making abilities. Leadership (ii) Democratic/Participatory Styles Leadership: A leadership style in which the leader interacts with subordinates in decision-making and encourages them to make recommendations. (iii) Free Rein/Laissez-Faire Leadership: A style in which the leader allows total latitude to subordinates in formulating goals and assigns complete decision-making authority to them. ¾ Importance of Leadership: (i) Influences people: Leadership influences the behaviour of people and enables them to contribute positively for the organisational growth and development. (ii) Congenial work environment: Leaders maintain close contacts with their followers and increases their confidence and support to create a cordial working environment. (iii) Introduction of changes: Leaders persuade, clarify and inspire people to adapt to changes wholeheartedly. They help to accept changes without discontentment. (iv) Handles conflicts: Good leaders listen to the employee’s concerns and give them clarification which helps in avoiding conflicts. (v) Training: Leaders provide training to the subordinates and help in a smooth succession process. ¾ Qualities of Good Leader: (i) Leadership impacts people’s behaviour and motivates them to constructively offer their efforts to the advantage of the organisation. Good leaders usually get good outcomes from their followers. (ii) A leader maintains personal relationships and assists followers in meeting their requirements. He instills confidence, support, and encouragement, resulting in a pleasant work atmosphere. (iii) The leader is critical in bringing about the necessary changes in the organisation. He convinces, explains, and motivates individuals to embrace change wholeheartedly. As a result, he solves the issue of reluctance to change and introduces it with little dissatisfaction. (iv) A leader manages disagreements well and does not allow negative consequences to come from the conflicts. A good leader always enables his followers to express their feelings and disagreements, but he persuades them by providing appropriate clarifications. (v) The leader trains their subordinates. A competent leader always develops his successor and aids in the seamless transition process. However, it is important to recognize that not all excellent leaders possess all of the attributes of a good leader. In reality, no one person can possess all of the attributes. However, knowing these attributes enables managers to develop them via training and purposeful effort.

66 Oswaal CUET (UG) Chapterwise Question Bank ¾ Communication: The term communication is derived from the Latin word ‘communis,’ which means ‘common,’ implying a shared understanding. Communication is the process of exchanging information, ideas, points of view, facts, sentiments, and so on between two or more people to establish a shared understanding. ¾ Communication Elements: (i) Sender: He or she originates the thought/idea and conveys it in the form of a message. (ii) Message: This is the primary topic of communication. (iii) Encoding: This is the process of converting a message into symbols. (iv) Media: This is the path or medium used to send a message. (v) Decoding: This is the process of transforming an encoded message into language. (vi) Recipient: The person who gets the communication. (vii) Feedback: It is the reaction of the recipient to the sender. (viii) Noise: This term refers to any type of impediment to good communication. ¾ Importance of communication: (i) Acts as basis of coordination: Communication provides coordination among departments, activities and people in the organisation. (ii) Helps in smooth working of enterprise: Communication facilitates working in a smooth and unrestricted environment. When effective communication stops, organised working ceases to exist in the organisation. (iii) Acts as the basis for decision making: Communication provides all the information required for making sound decisions in the organisation. (iv) Increases managerial efficiency: Communication helps in quick and effective performance of managerial functions. (v) Promotes cooperation and industrial peace: Twoway communication in the organisation promotes cooperation and mutual understanding between the management and workers. (vi) Boosts morale and provides motivation: Good communication assists the workers in their adjustment with the physical and social aspect of work. It improves good human relations which boosts the morale of the managers and employees. ¾ Communication Channels: (i) Formal Communication: This is the formal communication that occurs within the organisation via official channels. (ii) Informal Communication: This is unofficial communication that occurs as a result of people’s social interactions.

Barriers to Communication: (i) Semantic Barriers: These barriers are associated with message encoding and decoding. These are some examples: (a) An unclear communication (b) Symbols with many meanings (c) Incorrect translation (d) Unclarified assumptions (e) Technical jargon (f) Body language and Gesture decoding (ii) Psychological Barriers: These concern both the sender and the receiver’s mental condition. These barriers are as follows: (a) Premature evaluation (b) Lack of attention (c) Loss via transmission and poor retention (d) Distrust (iii) Organisational barriers: These barriers are connected to the structure, rules, laws, and policies of the organisation. These barriers include (a) Organisational policy (b) Rules and regulations (c) Status (d) Complexity in organisational structure (e) Organisational facilities (iv) Personal barriers: These hurdles are connected to the sender’s and receiver’s attitudes and views.

These barriers include: (a) Fear of challenging authority; (b) A superior’s lack of trust in his subordinates; (c) A refusal to communicate; and (d) A lack of appropriate reward

¾ Measures to improve communication effectiveness include: (i) Clarifying ideas before communicating (ii) Communicating according to the receiver’s needs (iii) Consulting others before communicating (iv) Being aware of the message’s language, tone, and content (v) Conveying things of help and value to listeners (vi) Ensuring proper feedback (vii) Communicate for both the present and the future (viii) Follow up (ix) Be a good listener

OBJECTIVE TYPE QUESTIONS [A] Multiple Choice Questions 1. Identify the non-financial incentive that gives more autonomy and power to subordinates. [CUET 2023]

BUSINESS STUDIES

(A) Employee participation (B) Employee Empowerment (C) Organisational climate (D) Co-partnership

67

DIRECTING

2. Arrange the following elements of the communication process in a sequence [CUET 2023] A. Sender B. Receiver C. Message D. Media E. Feedback Choose the correct answer from the options given below: (A) A, C, B, E, D (B) C, A, B, D, E (C) A, C, D, B, E (D) A, C, B, D, E 3. Which quality of a leader requires that he should understand people and maintain good human relations with them? [CUET 2023] (A) Initiative (B) Communication skills (C) Integrity (D) Social Skills 4. Which of the following are the features of leadership ?  [CUET 2023] A. It tries to bring change in the behaviour of a person. B. It is an internal feeling. C. It indicates the interpersonal relationship between leaders and followers. D. It is a continuous process. Choose the correct answer from the options given below: (A) A, C, and D only (B) A and C only (C) A, B, and D only (D) C and D only 5. Match List I with List II: List-I

[CUET 2023] List-II

A

Job Enrichment

I

B

Organisational II climate

C

Laissez-faire

III Leadership style

D

Grapevine

IV

Indicates the characteristics which de-scribe an organisation Informal Communication

Concerned with designing jobs that include greater variety of work content



Choose the correct answer from the options given below: (A) (A)-(III), (B)-(IV), (C)-(II), (D)-(I) (B) (A)-(III), (B)-(IV), (C)-(I), (D)-(II) (C) (A)-(IV), (B)-(II), (C)-(III), (D)-(I) (D) (A)-(IV), (B)-(I), (C)-(III), (D)-(II) 6. Arrange the following needs in a sequence of priority as in Maslow’s Need Hierarchy Theory:[CUET 2022] A. Physiological needs B. Self-actualisation needs C. Safety needs D. Belongingness needs Choose the correct answer from the options given below: (A) D, B, C, A (B) A, C, D, B (C) B, C, D, A (D) A, D, B, C 7. Identify the incentive which indicates the characteristics of an organisation and distinguishes one organisation from the other. [CUET 2022] (A) Status (B) Organisational climate (C) Job security (D) Employee participation 8. “It is a process to oversee what is being done by subordinates and giving instructions to ensure optimum

utilization of resources and achievement of work targets.” Identify the element of directing discussed in the statement. [CUET 2022] (A) Supervision (B) Motivation (C) Leadership (D) Communication 9. “Swara felt demoralised and her performance started declining.” [CUET 2022]

Which of the following elements can help Swara to be more confident? A. Planning B. Motivation C. Delegation D. Leadership

Choose the correct answer from the options given below: (A) A and B only (B) B and D only (C) B and C only (D) C and D only 10. From the following, identify the statement which highlights the importance of motivation.  [CUET 2022] (A) Motivation influences the internal feeling of people. (B) Motivation is an important concept in management. (C) Motivation helps in improving the level of performance of employees. (D) Motivation helps in providing on-the-job training. 11. The group members work on their tasks resolving issues themselves. The manager is there only to support them and supply them with the required information to complete the task assigned. Their particular style of leadership is known as: [CUET 2022] (A) Autocratic (B) Participative (C) Free-rein (D) Authoritative 12. Match List- I with List-II List-I

List-II

A

Basic Physiological Needs

I

Include factors such as growth, self-fulfilment and achievement of goals.

B

Self-Actualisation Needs

II

Acceptance and friendship help to satisfy the need.

C

Affiliation Needs

III Basic salary helps to satisfy the need.

D

Esteem Needs IV

E

Safety Needs

V

Stability of income and pension plans helps to satisfy the need. Include factors such as self-respect, autonomy, status, etc.

Choose the correct answer from the options given below: (A) A-III, B-I , C-II, D-V, E-IV (B) A-III, B-II, C-V, D-IV, E-I (C) A- I, B-II, C-III, D- IV, E-V (D) A-V, B-IV, C-III, D-II, E-I 13. ______________ communication takes place between one division and another. (A) Horizontal (B) Vertical (C) Informal (D) None of these

68 Oswaal CUET (UG) Chapterwise Question Bank 14. Rama, the Marketing Manager of Weaver Garments Ltd., does not allow the salesmen working under her to freely express their frank opinion and feelings regarding work related matters. Identify the organisational barrier to communication that has been created by Rama. (A) Status (B) Rules and regulations (C) Organisational policy (D) Organisational facilities 15. _______________ is an inner state that energizes, activates, or moves and directs behaviour towards the organisational goals. (A) Motivation (B) Motive (C) Motivators (D) All of these 16. At Support.com, there is no reward or appreciation for a good suggestion. Thus, the subordinates are not willing to offer any useful suggestions to their superiors. Identify the type of barrier to communication that has been created in the firm due to this. (A) Semantic barrier (B) Personal barrier (C) Organisational barrier (D) Psychological barrier 17. A company wants to replace manual production techniques with mechanized techniques. Labour unions are resisting this change. Which function of management will help in the introduction of this change: (A) Planning (B) Organising (C) Controlling (D) Directing 18. Which of the following statements is not true regarding the Democratic Style of Leadership? (A) The leader exercises more control by using forces within the group. (B) The leader encourages subordinates to participate in decision-making. (C) The leader gives orders and insists that they are obeyed. (D) The leader supports and respects the subordinate’s opinion. 19. Mr. Prateek Goyal, the Ex-chairman of India Original Ltd., built up his successor before retiring. Following the norms set up himself, he handed over the reins of the company to the co-founder Mr. Arvind Mishra, who had the potential to bring about change in the behaviour of others. Name the concept of management which was the reason, why Mr. Prateek Goyal chose Mr. Arvind Mishra to be his successor. (A) Motivation (B) Leadership (C) Communication (D) Staffing 20. ‘Lack of attention’ indicates which type of Communication barrier? (A) Semantic barrier (B) Psychological barrier (C) Organisational barrier (D) Personal barrier (B) ASSERTION & REASON Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).

BUSINESS STUDIES

(C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): The planning abilities of a manager mainly depend upon his communication skills.

Reason (R): The effectiveness of a manager depends significantly on his ability to communicate effectively.

2. Assertion (A): Decoding is the process of converting the message into communication symbols.

Reason (R): A poor telephone connection causes hindrances to communication.

3. Assertion (A): Directing is a key managerial function.

Reason (R): Directing is a managerial process that takes place throughout the life of an organisation.

4. Assertion (A): Directing facilitates the introduction of needed changes in the organisation.

Reason (R): Directing integrates employee’s efforts in the organisation.

5. Assertion (A): Motivation is a simple process.

Reason (R): Motivation is an internal feeling.

6. Assertion (A): The leaders always play a key role in the success and excellence of any organisation.

Reason (R): Leadership is exercised to achieve the common goals of the organisation.

7. Assertion (A): Participative leaders need to respect other’s opinion and support subordinates.

Reason (R): Democratic leaders exercise more control by using forces within the group.

8. Assertion (A): In Laissez-faire leadership, the followers are given a high degree of independence.

Reason (R): A democratic leader does not believe in the use of power unless it is essential.

9. Assertion (A): There are several bases for classifying leadership styles.

Reason (R): The most popular classification of leadership styles is based on the use of authority.

10. Assertion (A): Under Co-partnership/ Stock option incentive schemes, employees are offered company shares at a set price that is lower than the market price.

Reason (R): In many companies perquisites and fringe benefits are offered which motivates the employees.

[C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Mr. Murthy is the chairman of a leading business organisation. He grabs all possible opportunities and leads the organisation by example and trust. He always motivates his team and introduced a number of motivational schemes:



Employees are offered shares at a price lower than the market price.

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Employees are given individual autonomy and rewards for performance.



He realizes that satisfied and secured employees can best focus on organisational success. He ensures hiring competent people for various jobs. Every employee is required to undergo training, their jobs are well defined and regular feedbacks are provided so that their long-term interest is also served.



In order to keep an eye on employee’s performance, a strategic decision was introduced so that all communication must be recorded and filed in the office. He has also devised various ways to know the reactions of employees on different policies and decisions. As a result, employees are highly motivated, goals are achieved and organisation is growing.

1. “He has also devised various ways to know the reactions of employees”

Above statement highlights one of the elements involved in communication process. Identify it. (A) Sender (B) Media (C) Encoding (D) Feedback 2. “Employees are offered shares at a price lower than the market price.” Financial incentive identified above is: (A) Profit sharing (B) Co-partnership/ Stock option (C) Productivity linked wage benefit (D) Perquisites 3. “Employees are given individual autonomy and rewards for performance.”

Identify the need satisfied as given by Maslow’s need hierarchy theory. (A) Safety/Security need (B) Belongingness need (C) Esteem need (D) Self-Actualization needs 4. “All communication must be recorded and filed in the office.” Which type of communication is best described in the above statement? (A) Lateral communication (B) Informal communication (C) Grapevine communication (D) Formal communication 5. “Employees are given individual autonomy and rewards for performance.” Which non-financial incentive is highlighted in the above statement? (A) Status (B) Organisational climate (C) Employee recognition (D) Career advancement opportunity II. Read the following text and answer questions that follow: (Q6-Q10)



‘Saarthi’, the name has been associated with the manufacturing and sale of Fashion products since 1960, when Kapil Saarthi opened his first retail fashion clothing outlet in Ahmedabad.



Sarathi Cosmetics was incorporated in India in 1940 and became a member of the S&M family of companies in 1959. Saarthi Perfumes began operations in Gujarat in an existing administrative S&M facility in 1985. An important difference between S&M and most other companies are that instead of operating as one large corporation it operates as 180 smaller companies each focused on a specific product and area, implying selective dispersal of authority, recognizing the decision makers’ need for autonomy, as decision making authority is pushed down the chain of command. It enables the company to maintain short lines of communication with customers and employees and accelerate the development of talent.

6. Identify the philosophy that is being followed by S&M through which it is dividing the decision-making responsibilities among hierarchical levels. (A) Delegation of authority (B) Decentralization of authority; (C) Division of work (D) Span of management. 7. ‘Why is there, a need to apply the philosophy being followed by S&M, with caution? (A) it can cause a delay in communication. (B) As it can cause the disintegration of the organisation. (C) it can increase the workload of the top management. (D) it can reduce the chances of growth of the firm. 8. Identify the element that explains this quote. It enables the company to maintain short lines of communication with customers and employees, and accelerate the development of talent.’ (A) Delegation of authority (B) Decentralization of authority; (C) Division of work (D) Span of management. 9. The application of the philosophy discussed above can foster a sense of competition amongst the departments, which in turn will help the firm in the following manner: (A) Facilitates growth (B) Better control (C) Relief to top management (D) Quick decision making. 10. Quote the line from above which highlights the importance of the philosophy towards providing management education to employees. (A) ‘Maintain short lines of communication’ (B) ‘Accelerate the development of talent’ (C) ‘Selective dispersal of authority (D) ‘Recognises decision makers need for autonomy’

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ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (B)

2. (C)

3. (D)

4. (A)

5. (D)

6. (B)

7. (B)

8. (A)

9. (C)

10. (C)

11. (C)

12. (A)

13. (A)

14. (A)

15. (B)

16. (B)

17. (D)

18. (C)

19. (B)

20. (B)

8. (C)

9. (B)

10. (B)

8. (B)

9. (A)

10. (B)

[B] ASSERTION & REASON 1. (D)

2. (D)

3. (B)

4. (B)

5. (D)

6. (B)

7. (B)

[C] CASE BASED QUESTIONS 1. (D)

2. (B)

3. (C)

4. (D)

5. (B)

6. (B)

7. (B)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

8. Option (A) is correct.

1. Option (B) is correct. Explanation: It helps the employees of an organisation to develop the feeling of their jobs being considered important, by providing them more power and autonomy in work.

Explanation: Supervision is a process of overseeing what is being done by the subordinates and giving instructions.

2. Option (C) is correct. Explanation: The sequence of elements is as follows: Sender: The one who wishes to convey his or her thoughts or opinions. Message: It consists of the intended ideas, and suggestions, to be communicated. Media: The channel of communication, it can be written, verbal, internet, etc. Receiver: The one who gets the message from the sender. Feedback: It consists of the actions that convey the receiver’s understanding of the intended message from the sender. 3. Option (D) is correct. Explanation: Social skills help the leaders understand and interact with humans thereby, maintaining good relations with them. 4. Option (A) is correct. Explanation: Leadership tries to bring a change in the behaviour of a person, indicates interpersonal relationship between leaders and followers; is also a continuous process. 5. Option (D) is correct. Explanation: Job enrichment refers to enriching the job by including greater variety of work as a challenge. Organisational climates describe the characteristics of an organisation. Grapevine is a type of informal communication. Laissez-faire is leadership style. 6. Option (B) is correct. Explanation: The hierarchy of needs as given by Maslow is: Basic physiological needs, safety needs, belongingness needs, esteem needs and self-actualization needs. 7. Option (B) is correct. Explanation: Organisational climate is the incentive that indicates the characteristics of the organisation that distinguishes one organisation from other.

9. Option (C) is correct. Explanation: Motivation: Motivation can boost confidence by providing the drive and enthusiasm to overcome challenges and perform better. Delegation: Delegation allows individuals to focus on their strengths and responsibilities, leading to better performance and increased confidence. 10. Option (C) is correct. Explanation: Motivation helps in improving the level of performance of employees by increasing their morale and boosting their productivity. 11. Option (C) is correct. Explanation: : Free rein is a style of leadership where group members do their own tasks and the manager is there just to support them. 12. Option (A) is correct. Explanation: Basic physiological requirements such as food, thirst, shelter, sleep, and sex are included in the hierarchy of wants and are addressed by basic salary in an organisation. Job security and economic stability are examples of safety needs that give protection from physical and mental damage. Affection, acceptance, and friendship are all required for affiliation. Esteem needs requires self-esteem, autonomy, acknowledgement, and attention. The greatest degree of need is self-actualization, which refers to the desire to realise one’s full potential. 13. Option (A) is correct. Explanation: Horizontal or lateral communication takes place between one division and another. For example, a production manager may contact the marketing manager to discuss the schedule of product delivery, product design, quality, etc. 14. Option (A) is correct.

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Explanation: Status of superior may create psychological distance between him and his subordinates. A status conscious manager also may not allow his subordinates to express their feelings freely. 15. Option (B) is correct. Explanation: Motives arise out of the needs of individuals. Realisation of a motive causes restlessness in the individual which prompts some action to reduce such restlessness. 16. Option (B) is correct. Explanation: The personal factors of both sender and receiver may exert influence on effective communication. If there is no motivation or incentive for communication, subordinates may not take initiative to communicate. For example, if there is no reward or appreciation for a good suggestion, the subordinates may not be willing to offer useful suggestions.

with his superiors, subordinates, and external agencies such as bankers, suppliers, unions, and government. 2. Option (D) is correct. Explanation: Encoding is the process of converting the message into communication symbols such as words, pictures, gestures, etc. Decoding is the process of converting encoded symbols of the sender. Noise means some obstruction or hindrance to communication. This hindrance may be caused to the sender, message, or receiver. Some examples of noise are ambiguous symbols that lead to faulty encoding, a poor telephone connection, an inattentive receiver, faulty decoding (attaching wrong meanings to message), prejudices obstructing the poor understanding of the message, gestures, and postures that may distort the message, etc. 3. Option (B) is correct.

Explanation: A leader is defined as a person who can influence other people and inspires them to follow the instructions provided.

Explanation: Directing is not a mere issue of communication but encompasses many elements like motivation and leadership. It is one of the key managerial functions performed by every manager. Directing is a managerial process that takes place throughout the life of an organisation. A manager has to perform this function along with planning, organizing, staffing, and controlling while discharging his duties in the organisation. While other functions prepare a setting for action, directing initiates action in the organisation.

19. Option (B) is correct.

4. Option (B) is correct.

Explanation: Leadership is the process of influencing the behaviour of people by making them strive voluntarily toward the achievement of organisational goals. Leadership indicates the ability of an individual to maintain good interpersonal relations with followers and motivate them to contribute to achieving organisational objectives.

Explanation: Directing facilitates the introduction of needed changes in the organisation.

20. Option (B) is correct.

5. Option (D) is correct.

Explanation: The preoccupied mind of the receiver and the resultant non-listening of the message act as a major psychological barrier. For instance, an employee explains his problems to the boss who is preoccupied with an important file before him. The boss does not grasp the message and the employee is disappointed.

Explanation: Motivation is a complex process as individuals are heterogeneous in their expectations, perceptions, and reactions. Any type of motivation may not have a uniform effect on all the members. Motivation is an internal feeling. The urges, drives, desires, aspirations, striving, or needs of human beings, which are internal, influence human behaviour. For example, people may have the urge or desire to possess a motorbike, comfortable house, or reputation in society. These urges are internal to an individual.

17. Option (D) is correct. Explanation: Directing is an aspect of management that deals directly with influencing, guiding, supervising, and motivating staff for the achievement of organisational goals. 18. Option (C) is correct.

[B] ASSERTION & REASON 1. Option (D) is correct. Explanation: Communication plays a key role in the success of a manager. How much professional knowledge and intelligence a manager possess becomes immaterial if he is not able to communicate effectively with his subordinates and create understanding in them. The directing abilities of a manager mainly depend upon his communication skills. That is why organisations always emphasize improving the communication skills of managers as well as employees. The effectiveness of a manager depends significantly on his ability to communicate effectively

Generally, people tend to resist changes in the organisation. Effective directing through motivation, communication, and leadership helps to reduce such resistance and develop the required cooperation in introducing changes in the organisation.

6. Option (B) is correct. Explanation: Leaders always play a key role in the success and excellence of any organisation. Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards the achievement of organisational goals. Leadership indicates the ability of an individual to maintain good interpersonal relations with followers and motivate them to contribute to achieving organisational objectives.

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7. Option (B) is correct.

3. Option (C) is correct.

Explanation: A democratic leader will develop action plans and make decisions in consultation with his subordinates. He will encourage them to participate in decision-making. This kind of leadership style is more common nowadays since leaders also recognize that people perform best if they have set their objectives. They also need to respect other’s opinions and support subordinates to perform their duties and accomplish organisational objectives. They exercise more control by using forces within the group.

Explanation: Esteem needs include the desire for self-esteem, autonomy, and attention, such as status and recognition at work.

8. Option (C) is correct. Explanation: Laissez-faire or free rein is a leader who does not believe in the use of power unless it is essential. The followers are given a high degree of independence to formulate their objectives and ways to achieve them. The group members work on their tasks resolving issues themselves. The manager is there only to support them and supply them with the required information to complete the task assigned. At the same time, the subordinate assumes responsibility for the work to be performed. 9. Option (B) is correct. Explanation: There are many theories of leadership behaviour and styles. Research studies have revealed certain traits and qualities that a leader might possess. However, these are not conclusive since many people may possess these qualities but may not be leaders. There are several bases for classifying leadership styles. The most popular classification of leadership styles is based on the use of authority. Depending on the use of authority, there are three basic styles of leadership: (i) Autocratic (ii) Democratic, and (iii) Laissez-faire

4. Option (D) is correct. Explanation: Formal communication flows through official channels which are there in the organisational chart. 5. Option (B) is correct. Explanation: Organisational climate refers to the characteristics that describes an organisation and distinguishes one organisation from the other. These characteristics influence the behaviour of individuals in the organisation. 6. Option (B) is correct. Explanation: Decentralisation is much more than a mere transfer of authority to the lower levels of the management hierarchy. It is a philosophy that implies the selective dispersal of authority because it propagates the belief that people are competent, capable, and resourceful. They can assume the responsibility for the effective implementation of their decisions. Thus, this philosophy recognizes the decision-maker’s need for autonomy. The management, however, needs to carefully select those decisions that will be pushed down to lower levels and those that will be retained for higher levels. 7. Option (B) is correct. Explanation: Decentralisation should be applied with caution as it can lead to organisational disintegration if the departments start to operate on their guidelines which may be contrary to the interest of the organisation. Decentralization must always be balanced with centralization in areas of major policy decisions.

10. Option (B) is correct.

8. Option (B) is correct.

Explanation: Under Co-partnership/ Stock option incentive schemes, employees are offered company shares at a set price that is lower than the market price. Sometimes, management may allot shares in line with various incentives payable in cash. The allotment of shares creates a feeling of ownership in the employees and makes them to contribute the growth of the organisation. In Infosys, the scheme of stock options has been implemented as a part of managerial compensation. In many companies’ perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education to the children, etc., over and above the salary. These measures help to motivate the employees/ managers.

Explanation: Decentralization allows the organisation to retain quick lines of contact with customers and staff while also accelerating talent development. Because it propagates the concept that individuals are competent, capable, and resourceful, it is a philosophy that suggests selective distribution of power. They may accept responsibility for the successful execution of their decisions. As a result, this worldview acknowledges the decision-maker’s desire for autonomy. However, management must carefully determine which choices will be delegated to lower levels and which will be preserved for higher levels.

[C] CASE BASED QUESTIONS 1. Option (D) is correct. Explanation: Feedback is the process of knowing the effectiveness of the communication process. 2. Option (B) is correct. Explanation: Under the co-partnership scheme, employees are offered business shares at a specified price that is lower than the market price under these incentive programs.

9. Option (A) is correct. Explanation: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and fosters a sense of competition among the departments. Consequently, with each department doing its best in a bid to outdo the other, the productivity levels increase and the organisation can generate more returns which can be used for expansion purposes. 10. Option (B) is correct. Explanation: Formal training plays an important part in equip-

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ping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently. Decentralization gives them a chance to prove their abilities and creates a reservoir of qualified manpower who can be considered to fill up more challeng-

73 ing positions through promotions. It also helps to identify those who may not be successful in assuming greater responsibility. Thus, it is a means of management education as well as an opportunity for trained manpower to use their talent in real-life situations.

CHAPTER

8

CONTROLLING

  Revision Notes

¾ Meaning: One of the most crucial tasks of a manager is controlling. To get the desired outcomes from subordinates, a manager must maintain effective control over their operations. In other words, controlling entails ensuring that actions in an organisation are carried out as planned. Controlling also guarantees that an organisation’s resources are utilised effectively and efficiently to meet defined objectives. Thus, controlling is a goal-oriented function. The controlling function of a manager is pervasive. It is a major responsibility of any management. To maintain control over operations in their regions, managers at all levels of management—top, medium, and lower—must undertake controlling duties. Scan to know ¾ Importance of Controlling: Management cannot operate without control. Without control, even the best-laid plans may go astray. A good control system benefits a company in the following ways:

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Importance of Controlling

(i) Achieving organisational objectives: The managing function assesses progress toward organisational goals, identifies deviations, and recommends remedial action. It therefore directs and keeps the organisation on track to meet organisational goals. (ii) Assessing standard accuracy: A solid control system enables management to determine if the standards set are accurate and objective. An effective control system maintains a close eye on changes in the organisation and the environment and assists in reviewing and revising standards in light of such changes. (iii) Making effective use of resources: A manager strives to eliminate waste and spoiling of resources by exerting control. Each action is carried out in compliance with established standards and rules. This guarantees that resources are utilized as effectively and efficiently as possible. (iv) Increasing employee motivation: A solid control system ensures that staff understand what they are expected to do and the performance criteria that will be used to evaluate them. As a result, it stimulates them and helps them perform better.

(v) Maintaining order and discipline: Controlling fosters an atmosphere of order and discipline in the workplace. It aids in reducing dishonest behaviour on the part of employees by keeping a tight eye on their actions. (vi) Facilitating action coordination: Controlling directs all actions and efforts aimed at accomplishing organisational goals. Each department and staff is managed by predetermined criteria that are tightly coordinated. This guarantees that the overarching organisational goals are Scan to know more about met. ¾ Limitations of Controlling:

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(i) Difficulty in establishing quantitative standards: When standards canLimitations of not be specified quantitatively, the control Controlling system loses some of its effectiveness. This makes measuring performance and comparing it to standards challenging. Employee morale, work happiness, and human behavior are examples of places where this issue may develop. (ii) Limited control over external elements: In general, a company has little influence over external factors such as government policies, technological advances, competition, and so on. (iii) Employee resistance: Employees frequently oppose control. They regard it as a limitation on their liberty. Employees, for example, may oppose if they are kept under rigorous surveillance using Closed Circuit Televisions (CCTVs). (iv) Costly affair: Control is an expensive affair since it requires a lot of money, time, and effort. A tiny business cannot afford to install a costly control system. It cannot justify the associated costs. Managers must ensure that the expenses of building and managing a control system do not outweigh the advantages obtained. ¾ Planning and Controlling Relationship: Planning and controlling are management’s inseparable twins. A control system assumes the existence of specific criteria. Planning establishes the performance criteria that serve as the foundation for regulation. Once a plan is operational, controlling

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Relationship between Planning and Controlling

First Level

Second Level

Third Level





Trace the Mind Map

Measurement of accomplishment against standards and correcting the deviation

Accomplishing organizational goals Judging accuracy of standards Making efficient use of resources Improving employee motivation Ensuring order and discipline Facilitating coordination in action



Meaning

Importance

trolling Con

Controlling Process

Taking Corrective Action: (e.g., if project is running behind schedule, then additional workers and equipment should be assigned.)

Limitations

Techniques

Traditional 1. Personal observation 2. Statistical reports 3. Breakeven analysis 4. Budgetary control Modern 1. Return on investment 2. Ratio analysis 3. Responsibility accounting 4. Management audit 5. PERT and CPM 6. Management and information system

Planning based on facts that makes controlling easier and effective. Controlling improves future planning from information based on past experience.

Difficulty in setting qualitative standards, e.g., human behavior, job satisfaction Little/ no control on external factors, e.g., government policy, technological changes Resistance from employees Costly

Relationship between Planning & Controlling

Analyzing Deviation :  Critical Point Control – Control system should focus on key result areas KRAs, e.g., 7% increase in labour cost needs immediate attention as compared to 18% increase in stationery charges.  Management by exception – Manager should give attention to significant deviations, e.g., 3% increase in labour cost can be ignored if it is in permissible limit.

Comparison of Actual Performance with standards: (Compare with standards, e.g., comparison of performance of salesman in terms of units sold in a week against standard output for the week.)

Measurement of Actual Performance: (Can be measured through various ways like financial ratios, personal observation, sample checking, etc.)

Setting Performance Standards: (Yardsticks against which actual performance is measured)

CONTROLLING

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is required to monitor progress, measure it, identify deviations, and implement corrective steps to ensure that occurrences follow the plan. Thus, planning without control is pointless. Similarly, without a strategy, controlling is blind. Managers have little control if the criteria are not established in advance.

and it should be quantified in the same units as the set criteria. Evaluating quantitative and qualitative factors is critical, as relying just on quantitative factors might be detrimental to the company. Performance can be measured differently in different divisions, such as production, sales, or customer satisfaction.

Controlling certainly necessitates planning. It is absurd to believe that controlling can be performed without preparation.

(iii) Comparing actual performance to standards: The third phase in the controlling process is to compare the organisation’s actual performance to the defined standards (in the first step). An organisation can assess the divergence between them by comparing actual performance to standards. When standards are represented quantitatively, it is easier for the organisation to draw comparisons because no subjective judgment is necessary. For example, an organisation may easily compare the number of units sold in a month to the stated benchmark. However, comparing the defined criteria for employee motivation to its actual performance is problematic.

There is no preset notion of the expected performance without planning. Controlling strives to compel occurrences to conform to plans, whereas planning seeks consistent, integrated, and defined programs. Planning is essentially an intellectual activity that includes thinking, articulation, and analysis to uncover and prescribe an effective path of action for accomplishing goals. Controlling, on the other hand, ensures that choices are turned into intended actions. Thus, planning is prescriptive, whereas regulating is evaluative. It is sometimes stated that planning is forward-looking, whereas controlling is backward-looking. The assertion, however, is only half accurate.. Plans are made for the future and are based on projections of future situations. As a result, planning is referred to be a forward-thinking function. On the contrary, controlling is a post-mortem of previous operations to identify deviations from norms. Controlling is, in that sense, a backward-looking function. It should be noted, however, that planning is influenced by previous experiences, and corrective action launched by the control function tries to enhance future performance. Thus, planning and controlling are both backward and forward-looking functions. Planning and controlling are interconnected and strengthen each other in the following ways: 1. Planning based on facts makes regulating easier and more successful; 2. Controlling enhances future planning by supplying data generated from previous experience.

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¾ Steps in the process of Controlling: (i) Setting performance standards: The first step in controlling an organisation. Process of Controlling These standards should be clear, attainable, and realistic, and can be set in both quantitative and qualitative terms. Quantitative standards should be precise and easy to compare with actual performance. Qualitative standards should be easy to measure and adapt to the dynamic business environment. The established standards should be flexible to accommodate changes in the business environment. (ii) Actual performance measurement: The second stage in controlling an organisation is accurately and objectively monitoring real performance. This can be accomplished via procedures such as sample checking or personal observation,

(iv) Analyzing deviations: Organisations frequently confront discrepancies between expected and actual performance, making it critical to assess discrepancies. To do this, a company should establish an acceptable range of deviations and focus on substantial deviations. This is possible using Critical Point Control and Management by Exception. Critical Point Control focuses on key performance indicators (KPIs) such as production cost. Management by Exception, on the other hand, concentrates on substantial deviations above the established limit, creating a range of deviations, and dealing with any deviations that exceed the defined range. (v) Taking corrective action: If deviations surpass acceptable limits, the final stage in managing is to take remedial action. If deviations are caused by resource or employee difficulties, managers can resolve the problem through corrective actions. The rule, technique, or method of corrective action changes depending on the need for the deviation, guaranteeing that the organisation’s performance is efficiently satisfied. ¾ Techniques of Controlling: Controlling techniques are the instruments used to create control over company’s operations, monitor them, and take remedial action. For effective company control, numerous traditional and modern strategies are accessible. ¾ Traditional Techniques: Managers, as the name implies, have long devised and employed these strategies. These approaches are still effective and are employed by businesses today. The following are the most often utilized conventional control techniques: (i) Personal Observation: It is the most ancient conventional way of managing available. The management directly monitors the employees/workers in the workplace in this case. Simply said, it is On-the-Spot or direct observation. Direct observation puts employees under pressure and drives them to perform as efficiently as possible. This strategy, however, requires

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a significant amount of time during monitoring.

By increasing sales volume compared to overall investment.

The advantage of employing it is that it provides first-hand and authentic information for study. In addition, managers can correct operations at the moment if they are underperforming. Aside from the benefits listed above, staff may communicate challenges or problems at the same time. Furthermore, it improves employee morale.

Reducing overall investment while maintaining sales volume.

(ii) Break-even point analysis: This control approach displays the cost-volume relationship at various production levels. It’s also referred to as the Cost, Volume, and Profit analysis. It forecasts earnings and losses based on changes in output levels. The break-even point is the moment at which the cost price equals the selling price. (iii) Statistical reports: The manager collects data to assess performance in functional areas. Furthermore, the information gathered is used for comparative reasons. It entails the examination of numerical data in the form of: ƒ Averages ƒ Percentages ƒ Co-relation ƒ Ratios, etc. The aforesaid information is presented by the organisation in the form of charts, graphs, tables, and so on. These reports aid in visualizing data and identifying areas that require attention. As a result, it is the most often utilized and beneficial approach for data analysis. (iv) Budgetary Control: Budgetary control is a traditional management approach that is utilized in planning and regulating operations. It encompasses the planning of important activities, as well as comparisons to actual performance. Budgeting is comparing and assessing actual and budgeted performance. Budgeting steps often include the following: ƒ Developing standards by dividing broad corporate objectives into departmental aims. ƒ Predefined Budget/Standards are compared to actual performance. ƒ Determine the logical deviations from the plan and implement corrective actions. Control over day-to-day activity is facilitated by budgetary control. It also evaluates the requirement for resources and labour to meet corporate objectives. ¾ Modern Techniques: ROI (Return on Investment) The profit earned by invested capital is referred to as the return on investment (ROI). It is examined to get financial control over the firm. It is also known as the Du-Pont financial analysis system. The rate of ROI is used to determine the produced return. This rate aids in determining the company’s financial status. We may boost ROI in two ways, according to the technique:

As a result, we may define it as the use of invested money to generate profits. Furthermore, firms must strive to produce a decent ROI. ¾ Financial Statement and Ratio Analysis: It aids in the organisation’s financial management by computing various ratios. Data from the businesses’ financial statements is gathered for this purpose. ¾ The following are the most often utilized ratios: { Profitability { Liquidity

ratios

ratios

{ Solvency

ratios

{ Turnover

ratios

¾ Responsibility accounting: It is an accounting method that is based on the employee’s responsibilities. In this technique, organisations assess an employee’s capacity to carry out the assigned duty by established criteria. This control method is appropriate for large enterprises with several departments. ¾ Responsibility centres are classified into four types: { Revenue { Cost

Centre

Centre

{ Profit

Centre

{ Investment

Centre

¾ Management Audit: Management audit, often known as internal auditing, is the investigation of how a company’s resources are used. It is initiated at the highest level to guarantee that management performs efficiently. Internal auditing begins as soon as the financial audit is completed. The whole management process is rigorously scrutinized during the audit. ¾ PERT and CPM: PERT is an acronym for Program Evaluation and Review Technique, whereas CPM is an acronym for Critical Path Method. These control methods are specifically utilized for project management and assessment. The time required and the actions involved have a big impact on the success of the activity or project. As a result, managers try to reduce the overall time and cost associated with executing the activity. It focuses on project execution efficiency. However, the implementation must take place within the schedule and budget constraints. ¾ Management Information System: The purpose of a management information system (MIS) is to offer information for optimal decision-making. Managers may access any data at any time. It is one of the most cost-effective management approaches accessible. Furthermore, it gives information at the correct moment and aids in the management of a large amount of data. The data collected via MIS is accurate and aids in decision-making. MIS is made up of two key components: (i) Data Collection (ii) Data Management

78 Oswaal CUET (UG) Chapterwise Question Bank

BUSINESS STUDIES

OBJECTIVE TYPE QUESTIONS permissible limit of defect is to be brought to the notice of supervisor.’

[A] MULTIPLE CHOICE QUESTIONS 1. A company has replaced their obsolete machinery with a Hi-Tech machine as it could not achieve its target in the previous month due to slow production process. Which step in the process of controlling is executed by the company? [CUET 2023] (A) Measurement of actual performance (B) Comparing actual performance with standards (C) Analysing deviations (D) Taking Corrective action 2. Arrange the steps of Controlling process in a logical sequence. [CUET 2023] A. Measurement of actual performance B. Setting performance standards C. Taking corrective action D. Comparison of actual performance with stan¬dards E. Analysing deviations

Choose the correct answer from the options given below: (A) B, A, D, E, C (B) C, D, A, B, E (C) A, B, C, D, E (D) C, E, D, B, A

3. What should be the ‘focus point’ for a manager while controlling, as controlling at every step is not possible?  [CUET 2022] (A) Special area (B) Key result area (C) Normal area (D) None of these 4. Identify from the following which is NOT an important aspect of controlling function. [CUET 2022] (A) It improves employee motivation. (B) It helps in judging the accuracy of standards. (C) It restricts coordination in actions. (D) It ensures order and discipline. 5. __________ is the managerial function that monitors organisational performance towards the attainment of organisational goals. [CUET 2022] (A) Planning (B) Controlling (C) Organising (D) Directing 6. Use of personal observation, sample checking, etc. relates to which step of the controlling process? (A) Setting performance standards [CUET 2022] (B) Measurement of actual performance (C) Analysing deviation (D) Taking corrective action 7. Controlling function of an organisation is __________. (A) Forward looking [CUET 2022] (B) Backward looking (C) Both forward and backward looking (D) Neither forward nor backward looking 8. ‘In a bulb manufacturing unit, the range of defective bulb is decided at 5%. Any deviation that goes beyond the



Identify the concept of one of the functions of management highlighted here. [CUET 2022] (A) Control by Exception (B) Critical Point Control (C) Controlling (D) Key Result Areas

9. Which of the following is not a limitation of controlling?  [CUET 2022] (A) Difficulty in setting qualitative standards (B) Resistance from employees (C) Ensuring order and discipline (D) Costly affair 10. Quantitative standards should be set so that it is easier to match the actual performance with the desired (planned) performance. [CUET 2022]

Identify the function of management discussed above. (A) Planning (B) Controlling (C) Staffing (D) Directing

11. Match List-I with List-II

[CUET 2022]

List-I A

Setting performance standards

List-II I

Management by Exception

B

Analysing deviations

II

Sample checking

C

Measurement of actual performance

III

Reveals the deviation

D

Comparison of actual performance with standards

IV

Serves as benchmark

(A) A-I, B-III, C-II, D-IV (B) A-II, B-I, C-IV, D-III (C) A-IV, B-I, C-II, D-III (D) A-III, B-II, C-I, D-IV 12. Identify an important principle of management control in which only significant deviations that go beyond the permissible limit should be brought to the notice of management. (A) Management by control (B) Control by Exception (C) Critical point control (D) Both (A) & (B) 13. An important project at AMB Consultants is running behind schedule by a month. This has upset their clients and might affect the reputation of the company in the long run. No managerial action like assigning more workers, or equipment or giving overtime has been able to solve the problem. What managerial action may now be taken by the company to avoid such a situation from arising in the future? (A) Revise the schedule (B) Assigning additional workers and equipment to the project (C) Get permission for further overtime work (D) Both (B) and (C)

79

CONTROLLING

14. Controlling is _________aspect of management. (A) Mental (B) Practical (C) Theoretical (D) Physical 15. Which of the following statements establishes a relationship between planning and controlling: (A) Planning and controlling are inseparable twins of management. (B) Planning is a prerequisite for controlling. (C) Planning is looking ahead while controlling is looking backward. (D) All of the above 16. Performance should be measured in an : (A) Objective manner (B) Reliable Manner (C) Both (A) and (B) (D) None of these 17. What will be the corrective action for defective material? (A) Change in Quantity (B) Change in Quality Specifications of the material used (C) Change in Price (D) None of these 18. Controlling means ensuring that activities in an organisation are performed as per the _____. (A) Plans (B) Goals (C) Resources (D) None of these 19. Name the function of management which helps in the formulation of plans, in light of the problems that were identified and thus, helps in better planning in the future period. (A) Planning (B) Organising (C) Directing (D) Controlling 20. Which of the following steps in the Controlling process state that comparison becomes easier when standards are set in quantitative terms? (A) Analyzing deviations (B) Measurement of actual performance (C) Comparing actual performance with standards (D) Setting performance standards (B) ASSERTION & REASON Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): Controlling is like a post-mortem of past activities to find out deviations from the standards. Reason (R): Plans are prepared for the future and are based on forecasts about future conditions.

2. Assertion (A): Controlling creates an atmosphere of order and discipline in the organisation. Reason (R): By exercising control, a manager seeks to reduce wastage and spoilage of resources. 3. Assertion (A): Managers of only top-level need to perform the controlling function of management. Reason (R): Controlling is a function that brings the management cycle back to the planning function. 4. Assertion (A): Standards can be set in both quantitative as well as qualitative terms. Reason (R): Standards are the criteria against which actual performance would be measured. 5. Assertion (A): Controlling helps in facilitating coordination in action. Reason (R): Controlling provides direction to all activities and efforts for achieving organisational goals. 6. Assertion (A): Controlling helps in improving employee motivation. Reason (R): Controlling ensures that resources are used most effectively and efficiently. 7. Assertion (A): Controlling is a primary function of every manager. Reason (R): The planning function finds out how far actual performance deviates from standards. 8. Assertion (A): Deviations may have multiple causes for their origin. Reason (R): Deviations in key areas of business need to be attended more urgently as compared to deviations in certain insignificant areas. 9. Assertion (A): Controlling ensures that resources are used most effectively and efficiently. Reason (R): In controlling, each activity is performed by predetermined standards and norms. 10. Assertion (A): Control is required at all levels of management. Reason (R): Controlling is a pervasive function of management.

[C] CASE BASED QUESTIONS

I. Read the following text and answer the questions that follow: (Q1-Q5) Rahul started a takeaway eating joint in a nearby market. He ensured that the food was properly cooked, a standard taste was maintained, the packing of food was done effectively and the orders were executed on time. But unfortunately, his business suffered losses and he had to shut down his business. A few months later, he joined the popular food joint “Burger Point”. A critical point control (CPC) approach is followed in“Burger Point” in the cooking and handling process so that any food safety threat can be prevented, eliminated, or reduced to an acceptable level. Hence, continuous monitoring of activities is undertaken to ensure that the process is right at each critical point of control. It is, therefore, important to determine the acceptable range of deviations. The main principle followed for cooking at “Burger Point” is “less amount many times” which can

80 Oswaal CUET (UG) Chapterwise Question Bank

1.

2.

3.

4.

5.

ensure the high quality and high fresh level of the food. Here, workers should be given training if the production target cannot be met. For instance, if four hamburgers have to be made, a worker cannot cook all four hamburgers at one time. The time figured out for making one hamburger is one hundred and forty-five seconds. Moreover, nearly all foods in the “Burger Point” have a specific holding time, the holding time for hamburgers is ten minutes, and for French fries is seven minutes. If it is not sold within that time it is thrown away. Also, the temperature of the milk sent by the supplier must be under 5° C, otherwise, it will be returned. He has also set standards in terms of costs to be incurred and revenue to be earned. From time to time, he has to verify whether the standards set are accurate and objective. He also ensures that the resources should be used most effectively and efficiently so that there is no wastage. Which of the following steps in the controlling process is described in the below- mentioned line? “It is, therefore, important to determine the acceptable range of deviations.” (A) Analysing Deviations (B) Comparing Actual Performance with Standards (C) Measurement of Actual Performance (D) Setting Performance Standards Which of the following steps in the controlling process is described in the below-mentioned line? “Here, workers should be given training if the production target cannot be met.” (A) Analysing Deviations (B) Comparing Actual Performance with Standards (C) Measurement of Actual Performance (D) Taking Corrective Action Which of the following importance of controlling is described in the below-mentioned line? “He also ensures that the resources should be used most effectively and efficiently so that there is no wastage.” (A) Improving employee motivation (B) Facilitating coordination in action (C) Making efficient use of resources (D) Ensuring order and discipline Which of the following importance of controlling is described in the below-mentioned line? “From time to time, he has to verify whether the standards set are accurate and objective.” (A) Judging accuracy of standards (B) Facilitating coordination in action (C) Making efficient use of resources (D) Ensuring order and discipline Which of the following steps in the controlling process is described in the below-mentioned line? “He has also set standards in terms of cost to be incurred and revenue to be earned.” (A) Analysing Deviations (B) Comparing Actual Performance with Standards (C) Measurement of Actual Performance (D) Setting Performance Standards

BUSINESS STUDIES

II. Read the following text and answer questions that follow: (Q6-Q10) Sameer Sweets, a renowned name for quality sweets since 1950 has maintained its standards ever since then. It is an ancestral sweet shop and Sana, the present owner of Sameer Sweets, is the third-generation entrepreneur who has taken charge of the sweet shop from her father. Sana has been handling her responsibilities exceptionally well except that she was worried as the sales had declined during the last three months despite her best efforts and involvement in business. When she enquired from the Sales Manager, Ajay, he reported that there were some complaints about the quality of sweets from many customers recently. Therefore, Sana ordered sample checking of sweets by her quality control team. The team investigated and reported to Sana. She realized that during peak demand, quality was being compromised by her team to satisfy the customers. She decided to invest more capital to increase production to be able to meet the increasing demand, especially during peak seasons like festivals and marriage catering. 6. ‘______ a renowned name for quality sweets since 1950 had maintained its standards ever since then.’ Which step does this represent in the controlling process? (A) Setting performance standards (B) Measurement of actual performance (C) Comparison of actual performance with standards. (D) Analysis of deviations 7. ‘______ sales had declined during the last three months.’ Which step does this represent in the controlling process? (A) Measurement of actual performance (B) Comparison of actual performance with standards (C) Analysis of deviations (D) Taking corrective action 8. Which of the following steps in the controlling process is not applied in this case? (A) Measurement of actual performance (B) Comparison of actual performance with standards (C) Analysis of deviations (D) Taking corrective action 9. ‘_____ Sana ordered for sample checking of sweets by her quality control team.’ Which step does this represent in the controlling process? (A) Measurement of actual performance (B) Comparison of actual performance with standards (C) Analysis of deviations (D) Taking corrective action 10. ‘She decided to invest more money to increase production to be able to meet the increasing demand ____’ Which step does this represent in the controlling process? (A) Measurement of actual performance (B) Comparison of actual performance with standards (C) Analysis of deviations (D) Taking corrective action

81

CONTROLLING

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (D)

2. (A)

3. (B)

4. (C)

5. (B)

6. (B)

7. (C)

8. (A)

9. (C)

10. (B)

11. (C)

12. (B)

13. (A)

14. (B)

15. (D)

16. (C)

17. (B)

18. (A)

19. (D)

20. (C)

8. (B)

9. (A)

10. (A)

8. (B)

9. (C)

10. (D)

[B] ASSERTION & REASON 1. (B)

2. (B)

3. (D)

4. (B)

5. (A)

6. (B)

7. (C)

[C] CASE BASED QUESTIONS 1. (A)

2. (D)

3. (C)

4. (A)

5. (D)

6. (A)

7. (A)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

6. Option (B) is correct.

1. Option (D) is correct. Explanation: During the process of controlling, if the deviations are noted upon comparing the actual performance with the planned performance, the corrective actions are taken and, in this case, replacement of obsolete machinery with Hi-tech machinery is a corrective action to meet the performance standards. 2. Option (A) is correct. Explanation: Steps in the process of controlling: Setting performance benchmarks and goals.

standards

(B):

Establish

Measurement of actual performance (A): Gather data on how the task is performing. Comparison of actual performance with standards (D): Compare measured performance to established standards. Analyzing deviations (E): Identify reasons for discrepancies. Taking corrective action (C): Implement changes to address issues and maintain performance. 3. Option (B) is correct. Explanation: Control should focus on key result areas (KRAs) that are critical to the success of an organisation. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organisation suffers. For instance, in a manufacturing organisation, an increase of 5 percent in labour costs may be more trouble some than a 15 percent increase in postal charges. 4. Option (C) is correct. Explanation: Controlling is about ensuring that activities are in line with established standards and goals, and it typically encourages coordination and alignment of actions. 5. Option (B) is correct. Explanation: Controlling is the process of monitoring the activities of the business enterprise.

Explanation: In the controlling process, this step involves gathering data and information to assess how a task or process is actually performing, and personal observation and sample checking are common methods used to measure actual performance against established standards. 7. Option (C) is correct. Explanation: Controlling is like a postmortem of past activities to find out deviations from the standards which makes it a backward-looking activity. Controlling also involves future planning to rectify the deviations which makes it a forward-looking activity. 8. Option (A) is correct. Explanation: Under control by exception, only significant deviations which go beyond the permissible limit are brought to the notice of management. 9. Option (C) is correct. Explanation: Maintaining the order and discipline is an advantage of controlling. Through the control measures, managers try to maintain the order and discipline in the organisation. It is not a limitation. 10. Option (B) is correct. Explanation: Controlling process involves setting the quantitative standards and matching the actual performance with the desired performance. 11. Option (C) is correct. Explanation: The performance standards serve as the benchmark for comparison of actual performance. Analysis of the deviations is indicative of management by exception. Measurement of actual performance is done for sample checking. Comparison of actual performance with standards reveals the deviations. 12. Option (B) is correct.

82 Oswaal CUET (UG) Chapterwise Question Bank Explanation: Management by exception, which is often referred to as control by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management. 13. Option (A) is correct. Explanation: A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and the environment and helps to review and revise the standards in light of such changes. 14. Option (B) is correct. Explanation: Controlling is a function of management that helps to check errors to take corrective actions. This is done to minimize deviations from standards and ensure that the stated goals of the organisation are achieved in the desired manner. It is a practical process as actual work is done to identify and rectify the errors. 15. Option (D) is correct. Explanation: A system of control pre-supposes the existence of certain standards.. Once a plan becomes operational, controlling is necessary to monitor the progress, measure it, discover deviations, and initiate corrective measures to ensure that events conform to plans. Without planning there is no predetermined understanding of the desired performance. Planning seeks consistent, integrated, and articulated programs while controlling seeks to compel events to conform to plans. Plans are prepared for the future and are based on forecasts about future conditions. Therefore, planning involves looking ahead and is called a forwardlooking function. On the contrary, controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backwardlooking function. 16. Option (C) is correct. Explanation: Performance should be measured objectively and reliably. There are several techniques for the measurement of performance. These include personal observation, sample checking, performance reports, etc. As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier. 17. Option (B) is correct. Explanation: When defective material is identified, the most common corrective action is to address and improve the quality specifications of the material to meet the required standards and prevent further defects.

BUSINESS STUDIES

18. Option (A) is correct. Explanation: Controlling is one of the important functions of a manager. To seek planned results from the subordinates, a manager needs to exercise effective control over the activities of the subordinates. In other words, controlling means ensuring that activities in an organisation are performed as per the plans. 19. Option (D) is correct. Explanation: The controlling function finds out how far actual performance deviates from standards, analyses the causes of such deviations, and attempts to take corrective actions based on the same. This process helps in the formulation of plans in the light of the problems that were identified and, thus, helps in better planning for future periods. Thus, controlling only completes one cycle of the management process and improves planning in the next cycle. 20. Option (C) is correct. Explanation: This step involves a comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results. Comparison becomes easier when standards are set in quantitative terms. For instance, the performance of a worker in terms of units produced in a week can be easily measured against the standard output for the week.

[B] ASSERTION & REASON 1. Option (B) is correct. Explanation: Plans are prepared for the future and are based on forecasts about future conditions. Therefore, planning involves looking ahead and is called a forwardlooking function. On the contrary, controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backwardlooking function. However, it should be understood that planning is guided by past experiences and the corrective action initiated by the control function aims to improve future performance. Thus, planning and controlling are both backwardlooking as well as a forward-looking function. 2. Option (B) is correct. Explanation: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimize dishonest behaviour on the part of the employees by keeping a close check on their activities. By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed by predetermined standards and norms. This ensures that resources are used most effectively and efficiently. 3. Option (D) is correct. Explanation: The controlling function of a manager is a pervasive function. Managers at all levels of

83

CONTROLLING

management— top, middle, and lower- need to perform controlling functions to keep control over activities in their areas. The controlling function finds out how far actual performance deviates from standards, analyses the causes of such deviations, and attempts to take corrective actions based on the same. This process helps in the formulation of plans in the light of the problems that were identified and, thus, helps in better planning for future periods., management 4. Option (B) is correct. Explanation: Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organisation strives to work. Standards can be set in both quantitative as well as qualitative terms. For instance, standards set in terms of cost to be incurred, revenue to be earned, product units to be produced and sold, and time to be spent in performing a task, all represent quantitative standards. Sometimes standards may also be set in qualitative terms. Improving goodwill and motivation level of employees are examples of qualitative standards. 5. Option (A) is correct. Explanation: Controlling provides direction to all activities and efforts for achieving organisational goals. Each department and employee are governed by predetermined standards which are well coordinated with one another. 6. Option (B) is correct. Explanation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance based on which they will be appraised. It, thus, motivates them and helps them to give better performance. By exercising control, a manager seeks to reduce wastage and spoilage of resources. 7. Option (C) is correct. Explanation: Managers at all levels of management— top, middle, and lower- need to perform controlling functions to keep control over activities in their areas. Controlling is a function that brings the management cycle back to the planning function. The controlling function finds out how far the actual performance deviates from standards, analyses the causes of such deviations, and attempts to take corrective actions based on the same. 8. Option (B) is correct. Explanation: Deviations may have multiple causes for their origin. These include unrealistic standards, defective processes, inadequacy of resources, structural drawbacks, organisational constraints, and environmental factors

beyond the control of the organisation. Deviations in key areas of business need to be attended to more urgently as compared to deviations in certain insignificant areas. Critical point control and management by exception should be used by a manager in this regard. 9. Option (A) is correct. Explanation: Management can check whether the standards set are accurate and objective using a competent control system. By exercising control, a manager aims to decrease resource waste and spoilage. 10. Option (A) is correct. Explanation: The controlling function of a manager is pervasive. It is a major responsibility of any management. To maintain control over operations in their regions, managers at all levels of management—top, medium, and lower—must undertake controlling duties. Furthermore, controlling is as important in an educational institution, military, hospital, or club as it is in any economic organisation.

[C] CASE BASED QUESTIONS 1. Option (A) is correct. Explanation: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations. Also, deviations in key areas of business need to be attended to more urgently as compared to deviations in certain insignificant areas. 2. Option (D) is correct. Explanation: When the deviations go beyond the acceptable range, especially in important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished. 3. Option (C) is correct. Explanation: By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed by predetermined standards and norms. This ensuresthat resources are used most effectively and efficiently. 4. Option (A) is correct. Explanation: A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and the environment and helps to review and revise the standards in light of such changes. 5. Option (D) is correct. Explanation: Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organisation strives to work.

84 Oswaal CUET (UG) Chapterwise Question Bank 6. Option (A) is correct. Explanation: Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organisation strives to work. 7. Option (A) is correct. Explanation: Performance should be measured objectively and reliably. There are several techniques for the measurement of performance. These include personal observation, sample checking, performance reports, etc. As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier. 8. Option (B) is correct. Explanation: Comparing actual performance with standards means actual performance and standard performance are compared to reveal deviations between

BUSINESS STUDIES

actual and desired results which is not applicable in this case. 9. Option (C) is correct. Explanation: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations. Also, deviations in key areas of business need to be attended to more urgently as compared to deviations in certain insignificant areas. Critical point control and management by exception should be used by a manager in this regard. 10. Option (D) is correct. Explanation: When the deviations go beyond the acceptable range, especially in important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished. In case the deviation cannot be corrected through managerial action, the standards may have to be revised.

CHAPTER

9

BUSINESS FINANCE

  Revision Notes ¾ Business Finance: Business finance is the money required to carry out business operations such as starting, operating, upgrading, growing, or diversifying a company. It is required for the acquisition of both tangible and intangible assets, as well as for day-to-day activities such as material purchases, bill payments, and client cash collection. Adequate financing is critical for a business’s existence and growth since it is required at all stages of its life, including purchasing goods, paying bills, and collecting cash from clients. ¾ Financial Management: Financial management is essential for firms to maximize procurement and finance utilisation. It entails finding and analysing various sources of money based on costs and risks. The financing obtained should be invested in such a way that the returns surpass the cost of acquisition. The goal of financial management is to lower the cost of finances while maintaining control and achieving successful deployment. It also guarantees that adequate funds are available and that idle finance is avoided. A company’s future is significantly reliant on the quality of its financial manageScan to know ment, which eliminates risk and guarantees more about this topic financial stability. ¾ Objectives of Financial Management: (i) Profit Maximisation: A finance manager should procure funds at a reasonable cost and invest them in the most profitable channels.

Objectives of Financial Management

(ii) Wealth Maximisation: A company’s funds belong to shareholders and the return earned by them determines their market value or price. The market price of a share increases if the benefits from a financial decision exceed the cost involved. (iii) Maintenance of Liquidity: The sources of cash and its application should be properly planned to keep a proper balance between inflows and outflows and maintain liquidity. ¾ Role of Financial Management: The role of financial management cannot be over-emphasized, since it has a direct bearing on the financial health of a business. The importance of financial management can be judged by the fact that almost all items in the financial statements of a business are affected directly or indirectly by some financial management decisions. Some of the examples are: (i) Size and composition of assets ofthe business.

(ii) Quantum of current assets and its break-up into cash, inventory, and receivables. (iii) Amount of long-term and short-term funds to be used. (iv) Breakup of long-term financing into debt, equity, etc. (v) All items in the Profit and Loss Account. ¾ Financial Decision: Financial management is concerned with the resolution of three primary concerns connected to a firm’s financial operations, namely investment, financing, and dividend determination. In a financial context, it refers to the choosing of the optimum financing or investment opportunity. As a result, the financial function is concerned with three major decisions, which are detailed below: (i) Investment Decision: It is concerned with the investment of a firm’s funds in different assets. (a) A long-term investment decision in fixed assets is called a capital budgeting decision. (b) A short-term investment decision in cash, inventory, and debtors is called working capital decision. ¾ Factors affecting capital budgeting decisions are: (a) Cash flows of the project: A project that is likely to give higher and more stable cash inflows is preferred over the others. (b) Rate of return: A project with less risk and higher returns is preferable over other projects. (c) Investment criteria: Various capital budgeting techniques like Net Present Value, Payback Period, are used to assess the viability of a project. (ii) Financing Decision: It deals with the quantum of finance to be raised from various long-term sources viz. debt and equity. It involves the identification of various available sources. The main sources of funds for a firm are shareholders’ funds and borrowed funds. The amount raised from long-term and short-term sources influence a firm’s financing decision. The primary sources of funding are shareholder funds and borrowed money. Based on their core qualities, a company must determine the proportion of cash raised. Borrowed funds must be paid interest and reimbursed at a certain period, with financial risk taken into account. Shareholder funds do not need capital payback. A company’s debt, equity, preference preferred share capital and retained earnings should be balanced.

To ensure availability of funds whenever required To see that the firm does not raise finance unnecessarily

Prepares for future challenges. Helps in avoiding business shocks and surprises. Helps in coordination. Helps to eliminate wasteful efforts. Facilitates financial control.

Capital structure (Composition of debt and equity)

Second Level

Trace the Mind Map Third Level

in

ess Fina

Meaning

Importance

Objectives Dividend Decisions (deciding amount of profits to be paid as dividend)

Financing Decisions (how the funds are raised from different sources)

Factors Affecting: Cash flow of the project Rate of return Investment criteria involved (on the basis of budgeting techniques)

g ti n ge e d u Capital B inv m r e t (long-

Factors affecting: Amount of earnings Stability of earnings Growth opportunities Cash flow position Shareholders' preference Taxation policy, etc.

Factors Affecting: Cost of funds Risk Flotation cost (cost of raising funds) Cash flow position of the company Fixed operating costs (like rent, insurance, salaries, etc.) Control considerations (more the debt, less control over company) State of capital market (whether boom or depression)

Investment Decisions (deciding investment of funds in long-term and short-term assets)

Factors Affecting: • Nature of the business • Credit policy • Price level change • Market competition, etc.

Factors Affecting: Nature of business (manufacturing firm needs more) Scale of operations (higher scale needs more) Business cycle (during boom, needs more) Seasonal factors(during season, needs more) Production cycle (longer cycle needs more) Credit allowed (liberal credit policy needs more) Credit availed (liberal credit availed needs less) Operating efficiency (efficient firm needs less) Availability of raw material (in case of scarce resources, needs more) Growth prospects (more growth potential needs more) Level of competition (more competition needs more) Inflation (during inflation needs more)

Profit maximization (maximize returns to shareholders) Wealth maximization (maximize market price of the shares)

Financial Decisions

Working capital (required for holding Current Assets)

It is concerned with optimal procurement as well as the usage of finance.

Fixed capital (investment in long-term assets like building, machinery, etc.)

Financial Planning (ensuring smooth operations by focusing on funds and their availability in the light of financial decision requirements)

First Level



Factors Affecting choice of Capital Structure: Cash flow position Interest coverage ratio : (high ratio, low risk) Debt service coverage ratio : (high ratio, more debt) Return on Investment (high return, more equity) Cost of debt (low cost, more debt) Tax rate (high tax rate, more debt) Cost of equity (as debt and risk increases, cost increases) Floatation costs (less in case of debt) Risk consideration (low risk, more debt) Flexibility (if already high debt, more debt not possible) Control (more equity, less control over management) Regulatory framework (legal requirements) Stock market conditions Capital structure of other companies



Helps in mobilization of financial resources at a lower cost and development of these in the most profitable activities.

Bu s

cis

De

i on s t)

en st m

Factors Affecting: Nature of business (manufacture needs more) Scale of operations (larger organization needs more) Choice of technique (capital intensive needs more) Technology upgradation (industry with upgrading technology needs more) Growth prospects (higher growth prospects need more) Diversification (diversified firm needs more) Financing alternatives (if market has leasing options, then needed less) Level of collaboration (collaborated firm needs less)



86 Oswaal CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

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¾ Factors affecting financing decisions are: (i) Cost of Funds: A compaScan to know more about ny chooses a source that proves to be the this topic cheapest. (ii) Risk: Debt is riskier than equity, so the company should analyse its financial risk-bearing capacity and choose a source accordingly.

(vii) Taxation policy: If the dividend tax is higher, the companies would prefer to pay fewer dividends. (viii) Stock market reaction: The possible impact of dividend policy on share prices should be considered while declaring dividends. (ix) Access to capital market: Companies having easy access to the capital market may depend less on retained earnings and declare more dividends.

Factors affecting financing decisions

(iii) Floatation Cost: The higher the floatation cost of a source, the less attractive it appears to the management.

(x)  Legal constraints: Certain provisions of the Companies Act have to be followed while declaring dividends.

(iv) Cash Flow Position: A stronger cash flow position makes debt financing more viable.

(xi) Contractual constraints: Lenders may impose certain restrictions on the payment of dividends in the future.

(v) L  evel of Fixed Operating Cost: If a business has high fixed operating costs, it should opt for less fixed financing cost (interest) by using less debt financing. (vi) Control Consideration: The issue of more equity may lead to the dilution of management control over the companies. (vii) State of Capital Market: A depressed capital market makes the issue of equity shares difficult and less attractive source of finance in comparison to debt. (viii) Return on Investment (ROI): If the ROI for a company is higher, it will use more debt to take advantage of equity trading. (ix) Tax Rate: Since interest is a tax-deductible expense, a higher tax rate makes debt relatively cheaper. (x) F  lexibility: If a firm uses its debt potential to its full capacity, it losesthe flexibility to issue further debt. (xi) Regulatory Framework: Different sources of finance have different regulatoryframeworks provided by the law. The relative ease with which these norms can be met has a good effect on the choice of the source of finance. (iii) Dividend Decision: It determines how much of the profits are to be distributed as dividends and how much is to be retained for the investment requirement. ¾ Factors affecting dividend decisions are: (i)  Amount of Earnings: A greater amount of total profit will ensure greater dividends. (ii)  Stability of Earnings: A company having stable earnings is in a position to declare more dividends. (iii) Stability of Dividend: Generally, companies follow a policy of stable dividend per share. (iv) Growth opportunities: Companies having high growth opportunities retain more earnings to capitalizeon these opportunities while companies with no growth plans can declare more dividends. (v)  Cash flow position: The better the cash flow position of the company, the better will be the capacity of the company to pay dividends. (vi) Shareholders’ preference: Generally, it is observed that retired and middle-class shareholders prefer regular and stable amounts of dividends whereas young and wealthy shareholders prefer capital gain.

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¾ Financial Planning: Financial planning is the creation of a financial blueprint Financial for an organisation’s future activities, to enPlanning sure that enough money is available at the appropriate moment to meet obligations and carry out plans. Excess finances may incur additional expenditures and encourage reckless spending. Financial planning is neither the same as nor a substitute for financial management, which is concerned with selecting the optimal investment and financing options and enhancing shareholder’s value. Its goal is to make operations run more smoothly by concentrating on fund requirements and availability in the light of financial decisions ¾ Objectives of financial planning: (i) Financial planning estimates the funds required and ensures the availability of funds whenever required. (ii) It also ensures that the firm does not raise resources unnecessarily. ¾ Importance of Financial Planning : (i) It prepares the business for future challenges.

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Importance of Financial Planning

(ii) It helps the business in avoiding shocks and surprises. ties.

(iii) It coordinates various business functions and activi(iv) Proper financial planning eliminates wasteful efforts. (v) It links the present with the future.

(vi) It also links investment decisions with financing decisions. (vii) It also establishes and facilitates financial control. ¾ Capital Structure: Financial management involves making decisions about the financing pattern and the proportion of sources used to raise funds. Business finance can be classified into two categories: owners’ funds and borrowed funds. Owners’ funds include equity share capital, preference share capital, and reserves and surpluses. Borrowed funds can be loans, debentures, and public deposits. Capital structure refers to the mix between owners and borrowed funds, referred to as equity and debt.

88 Oswaal CUET (UG) Chapterwise Question Bank Debt and equity differ significantly in cost and riskiness for a firm. Debt is cheaper but riskier, as the business must meet payment obligations. Higher use of debt increases fixed financial charges, increasing financial risk. A capital structure affects both profitability and financial risk. An optimal capital structure is when the proportion of debt and equity results in an increase in the value of the equity share. All decisions related to capital structure should focus on increasing shareholders’ wealth. ¾ Trading on Equity: It refers to an increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest. When the rate of earning or Return on Investment (ROI) of a company is higher than the rate of interest on borrowed funds, only then a company should opt for equity trading. ¾ Factors affecting the choice of capital structure: (i) Cash Flow Position: In case of enough cash flow, the company may have more debt securities whereas if there is a shortage of cash, it may go for equity. (ii) Interest Coverage Ratio (ICR): It shows how many times the earnings before interest and tax are available for the payment of interest. A higher ICR means the company has less borrowed funds. (iii) Debt Service Coverage Ratio (DSCR): DSCR takes care of the return of interest as well as principal repayment. A higher DSCR means the company can have more debt. (iv) Return on Investment: If the return on investment is more than the rate of interest, then the company can prefer debt in its capital structure. (v) Cost of Debt: If the rate of interest is less, i.e., cost of debt, more debt can be utilized in the capital structure. (vi) Tax Rate: Interest on debt is tax-deductible, so highend tax means the company should prefer equity in capital structure. (vii) Cost of equity: Debt should be used to a limited level as the increased cost of equity adversely affects the market value of shares. (viii) Floatation Costs: These costs are involved in issuing securities. Generally, the cost of issuing debt capital is less than the share capital. So, the company may prefer debt in its capital structure. (ix) Risk Consideration: If a firm’s risk is low, capital can be raised by issuing debt securities and vice versa. (x) Flexibility: Excess of debt may restrict the firm’s capacity to borrow further. So, the company should act accordingly. ¾ Fixed Capital: Fixed assets, such as equipment, machinery, furniture, and cars, can last for more than a year, making capital budgeting considerations critical. Except in the case of a large loss, these investments are irreversible. Current assets, such as inventory, debtors, and bills receivable, are transformed into cash within a year, making them critical to the running of the organisation.

BUSINESS STUDIES

¾ The management of fixed capital is important because of the following reasons: (i) Long-term Growth: These decisions have longterm implications on growth as investment in capital assets (long-term assets) yields return in the future. (ii) Large amount of funds involved: Large sum of funds are invested in fixed capital for a a longer period. (iii) Risk involved: The return on fixed assets is uncertain and therefore poses a risk to the company, thereby increasing the risk. (iv) Irreversible decisions: Investment committed in the projects is difficult to withdraw as it would lead to huge losses making this decision irreversible. ¾ Factors affecting the requirement of fixed capital: (i) Nature of business: A trading concern needs a lower investment in fixed assets as compared to a manufacturing concern. (ii) Scale of operations: A larger organisation operating at a higher scale needs a bigger plant. (iii) Choice of technique: A capital-intensive organisation requires higher investment in plant and machinery. (iv) Technology upgradation: An industry where assets become obsolete sooner requires higher fixed capital. (v) Growth prospects: Higher growth prospects require higher investment in fixed assets to meet anticipated demand quicker. (vi) Diversification: Diversification will increase the fixed capital requirements as the investment in fixed capital will increase (vii) Financing alternatives: Alternatives like leasing require lower investment in fixed assets and hence requires less fixed capital. (viii) Level of Collaboration: The availability of business collaboration reduces the level of investment in fixed assets. ¾ Working Capital: Working Capital is the amount of funds available for day-to-day management and operations of a business. Working Capital = Current Assets (stock, cash, etc.) – Current Liabilities (current liabilities, outstanding salaries, etc.). ¾ Factors affecting the requirement of working capital: (i) Nature of business: A Manufacturing firm requires a higher amount of working capital as compared to a trading organisation. (ii) Scale of operations: A large amount of working capital is required by firms operating on a large scale of operations. (iii) Business cycle: In the case of the boom, larger working capital is required as the sales and production are more. (iv) Seasonal factors: Peak season requires higher working capital than lean season due to higher level of activity. (v) Production Cycle: Working capital requirement is higher in firms with longer processing cycles.

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(vi) Credit availed: If it is difficult to avail credit by the firm (on its purchases) from suppliers, then a higher amount of working capital is required. (vii) Credit allowed: If credit is allowed to customers for a longer period, more would be the amount of debtors which will lead to an increase in the working capital requirement. (viii) Operating efficiency: Firms managing their raw materials efficiently require lesser working capital. (ix) Availability of raw materials: Continuous avail-

ability enables the firms to keep lesser stock and hence work with smaller working capital. (x) Growth prospects: Higher prospects will require larger amounts of working capital. (xi) Level of competition: Higher competition requires larger stocks to meet urgent orders from customers and thus higher working capital. (xii) Inflation: Inflation increases the working capital requirements as a larger amount of money is required to maintain a constant volume of production and sales.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Capital structure should emphasize on: [CUET 2023] (A) Increasing the turnover of the firm (B) Increasing the assets and liabilities of the firm (C) Increasing the shareholder’s wealth (D) Increasing voting rights of shareholders 2. The primary aim of financial management is : (A) Maximise the profit of the firm [CUET 2023] (B) Maximise sales of the firm (C) Maximise shareholders’ wealth (D) Maximise the number of customers of the firm 3. The cost in the process of raising funds through equity is known as: [CUET 2022] (A) Financial risk (B) Cost of debt (C) Floatation cost (D) Cost of capital 4. Rajat is planning the break up of his finance to know the amount of capital that he will utilize to purchase fixed assets and current assets. Identify the financial decision taken by Rajat. [CUET 2022] (A) Investment decision (B) Financial decision (C) Dividend decision (D) Capital structure 5. A trading organisation comparatively needs ________ investment in fixed assets as compared to a manufacturing organisation. [CUET 2022] (A) Lesser (B) Larger (C) Moderate (D) Negligible 6. Detailed plans of action are prepared under financial planning. What benefits does this result in? (A) Reducing waste (B) Reducing duplication of efforts (C) Reducing gaps in planning (D) All of the above 7. For optimal procurement of funds, a finance manager identifies different available sources and compares those items in terms of cost and associated risks. Identify the concept highlighted in the above lines. (A) Financial management (B) Financial decisions (C) Working capital (D) None of these 8. A decision to acquire a new and modern plant to upgrade an old one is known as _______________decision. (A) Financing (B) Working capital (C) Investment (D) Dividend 9. Which of the following statements is false regarding financial management? (A) The money required for carrying out business activities is called business finance.

(B) For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. (C) The objective of financial management is to minimize the current price of equity shares. (D) All the above 10. Debt normally does not cause: [CUET 2022] (A) A dilution of control (B) A dilution of flexibility (C) A dilution of cost (D) A dilution of equity 11. Which of the following statement is false regarding financial management? (A) Aims at ensuring availability of enough funds whenever required. (B) Aims at reducing the cost of funds procured. (C) Is concerned with optimal procurement as well as usage of finance. (D) Facilitates price discovery for securities of company. 12. Vikrant joined his father’s business of Organic masalas, near Kotgarh in Himachal after completing his MBA. To capture a major share of the market, he decided to sell the product in small attractive packages by using the latest packaging technology. His father suggested that they hire financial consultants to estimate the amount of funds that would be required for the purpose and the timings when it would be required. The concept being discussed by Vikrant’s father, links which financial decision with the investment decision? (A) Dividend decision (B) Financial planning (C) Capital structure decision (D) Financing decision 13. What are the factors that affect capital budgeting decisions? A. Cash flows of the project B. Rate of return of the project C. Choice of techniques D. Cash flow position Choose the correct answer from the options given below: (A) A and B only (B) B and D only (C) C and D only (D) A and D only 14. Of the following sources of funds, ____________ are not Borrowed Funds. (A) Loans (B) Retained earnings (C) Public deposits (D) Debentures 15. Which of the following statements is incorrect? (A) A low Debt Service Coverage Ratio indicates a better ability to meet cash commitments and consequently, the company’s potential to increase debt component in its capital structure.

90 Oswaal CUET (UG) Chapterwise Question Bank (B) Use of higher debt increases the cost of equity. (C) Low-interest rates increase a firm’s capacity to employ higher debt. (D) All are correct  16. DSCR stands for: (A) Debt Service Coverage Ratio (B) Debt Service Coverage Risk (C) Debt Structure Coverage Ratio (D) None of these 17. ICR = ________________ (A) EBIT/Interest (B) EBIT × Interest (C) EBIT – Interest (D) Interest/EBIT 18. ___________ is the period between the receipt of raw materials and their conversion into finished goods. (A) Production cycle (B) Business cycle (C) Both (A) and (B) (D) None of these 19. Which of the following statements is true? (A) Higher competition requires larger stocks to meet urgent orders from customers which results in the requirement of more working capital. (B) The companies having growth prospects require a lesser amount of working capital. (C) If the rate of inflation is high, an organisation is required to invest less in working capital. (D) All of the above 20. There is a boom in the demand for i-pods. How does it affect the requirement of working capital for companies manufacturing i-pods? (A) More working capital will be needed (B) Less working capital will be needed (C) No change in working capital needed (D) None of the above (B) ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): Financial management involves decisions about the proportion of long-term and short-term funds. Reason (R): Good financial management aims at the mobilization of financial resources at a lower cost and deployment of these in the most lucrative activities. 2. Assertion (A): Financial Management is concerned with optimal procurement as well as the usage of finance. Reason (R): For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. 3. Assertion (A): A labour-intensive organisation requires higher investment in plant and machinery. Reason (R): Those manufacturing enterprises which make use of modern and automatic machines need a large amount of fixed capital.

BUSINESS STUDIES

4. Assertion (A): The higher the floatation cost, the less attractive the source. Reason (R): The choice between the payment of dividends and retaining the earnings are, to some extent, affected by the difference in the tax treatment of dividends and capital gains. 5. Assertion (A): In peak season, because of a higher level of activity, a larger amount of working capital is required. Reason (R): Most business have some seasonality in their operations. In peak reason business have higher level of activity due to increased demand.  6. Assertion (A): Financial planning ensures that the firm does not raise resources unnecessarily. Reason (R): Excess funding is almost as bad as inadequate funding. 7. Assertion (A): Financial planning includes both shortterm as well as long-term planning. Reason (R): Short-term planning focuses on capital expenditure programs. 8. Assertion (A): Financial planning includes determining the objectives, policies, procedures, and programs to deal with financial activities. Reason (R): Financial planning facilitates in development of a sound capital structure that gives maximum returns to shareholders. 9. Assertion (A): Higher use of debt increases the fixed financial charges of a business. Reason (R): Increased use of debt increases the financial risk of a company.  10. Assertion (A): The higher the ICR, the lower the risk of the company failing to meet its interest payment obligations. Reason (R): If the RoI of the company is higher, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater. [C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Rahul and Rohit were two brothers. Rahul wanted to start a big trading business of toys. His idea is to take his business to great heights. Though he doesn’t have experience in this business yet he wants to give this business a try. He feels that if he gives the best quality services then his business will reach great heights. He has to make investments in plant and machinery, furniture and fixtures, land and buildings, vehicles, etc. He needs a bigger plant and more space and therefore, requires higher investment in fixed assets. To deal with different trading businessmen quickly and to make his business online, he decided to make use of good and advanced speedy computers.



Rohit started a thermometer manufacturing business. He too like his brother wants to take his business towards great success. He is new to this business and is busy getting to know about the technical side of the business as much as possible. He wants to make the best quality thermometers which are ultrasensitive to temperature

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changes and can resist shocks. For making thermometers, he ordered raw materials which were taking some time to be delivered due to which he faced some difficulty in making thermometers on time. However, he decided to follow a liberal credit policy to sell thermometers.

Despite all these good ambitions in mind a sudden shock takes place for both the brothers. The economy shows signs of depression and within a few months is engulfed by it.



A critical point control (CPC) approach is followed in“Burger Point” in the cooking and handling process so that any food safety threat can be prevented, eliminated, or reduced to an acceptable level. Hence, continuous monitoring of activities is undertaken to ensure that the process is right at each critical point of control. It is, therefore, important to determine the acceptable range of deviations. The main principle followed for cooking at “Burger Point” is “less amount many times” which can ensure the high quality and high fresh level of the food. Which concept of financial management is highlighted in the below-mentioned line: “He has to make investments in plant and machinery, furniture and fixtures, land and building, vehicles, etc.” (A) Fixed Assets (B) Current Assets (C) Financial planning (D) Financial decisions Which of the following factors affecting the fixed capital requirement of a business is described in the belowmentioned line: “He needs a bigger plant and more space and therefore, requires higher investment in fixed assets.” (A) Level of collaboration (B) Financing alternatives (C) Scale of operations (D) Choice of technique Which of the following factors affecting the fixed capital requirement of a business is described in the belowmentioned line: “To deal with different trading businessmen quickly and to make his business online, he decided to make use of good and advanced speedy computers.” (A) Technology upgradation (B) Financing alternatives (C) Scale of operations (D) Choice of technique Which of the following factors affecting the working capital requirement of a business is described in the below-mentioned line: “The economy shows signs of depression and within a few months is engulfed by it.” (A) Seasonal Factors (B) Production Cycle (C) Business Cycle (D) Scale of Operations Which of the following factors affecting the working capital requirement of a business is described in the below-mentioned line: “For making thermometers, he ordered raw materials which were taking some time to be delivered due to

1.

2.



3.



4.



5.



which he faced some difficulty in making thermometers on time.” (A) Credit allowed (B) Production Cycle (C) Business cycle (D) Scale of Operations II. Read the following text and answer questions that follow: (Q6-Q10) The company M Ltd. manufactures mobile phones both for domestic market as well as for export. It had enjoyed a substantial share and also had a loyal customer following. The company has decided to start a new plant in Gujarat because of increasing demand. To start a new plant, the company required additional funds of `200 crores. To make a sound capital structure, the Management of M Ltd. scheduled a meeting and called the Finance Manager to make a blueprint for arranging the sources of funds either debt or equity. The company also required funds to upgrade the technology of the existing plant. The finance manager of M Ltd. suggested that they can make its capital structure sound by a judicious mix of debt and equity. 6. “M Ltd. is manufacturing (industry) producing mobile phones.”

Which factor of fixed capital requirement is highlighted in the above Statement? [CUET 2022] (A) Nature of business (B) Growth Prospects (C) Scale of Operation (D) Choice of Technique

7. “M Ltd. intends to upgrade the technology of its existing plant.” Which factor of requirement of fixed capital is highlighted in the above statement? (A) Choice of Techniques (B) T e c h n o l o g y Upgradation (C) Diversification (D) Scale of operation 8. The Finance Manager of M Ltd. had prepared a Blueprint for the smooth operation of the business. Which concept of financial management is highlighted in the above lines? (A) Financial Management (B) Planning (C) Financial Planning (D) Business Operation Planning 9. M Ltd. requires additional funds. If the company opt for both debt and equity, identify which source has a higher floatation cost. (A) Debentures (B) Equity Shares (C) Both debt and equity (D) Bank Loan 10. “To maintain flexibility, the company must maintain some borrowing power to take care of unforeseen circumstances.”

This statement indicates one of the long-term instruments of the capital market. Name it. (A) Equity Share (B) Performance Share (C) Public Share (D) Debentures

92 Oswaal CUET (UG) Chapterwise Question Bank

BUSINESS STUDIES

ANSWER KEY

[A] MULTIPLE CHOICE QUESTIONS 1. (C)

2. (C)

3. (C)

4. (A)

5. (A)

6. (D)

7. (A)

8. (C)

9. (C)

10. (A)

11. (D)

12. (B)

13. (A)

14. (B)

15. (A)

16. (A)

17. (A)

18. (A)

19. (A)

20. (A)

8. (B)

9. (B)

10. (B)

8. (C)

9. (B)

10. (D)

[B] ASSERTION & REASON 1. (B)

2. (B)

3. (D)

4. (B)

5. (A)

6. (B)

7. (C)

[C] CASE BASED QUESTIONS 1. (A)

2. (C)

3. (A)

4. (C)

5. (B)

6. (A)

7. (B)

ANSWERS WITH EXPLANATION

[A] MULTIPLE CHOICE QUESTIONS 1. Option (C) is correct.

Explanation: Debt and equity combined form the capital structure of any company. Optimally, the mix of both should focus on wealth maximization, which rises the company’s market value and also, focuses on minimizing the cost borne to raise the capital. It works optimally when the Return on Investment (ROI) is more than the Rate of Interest. 2. Option (C) is correct. Explanation: Financial management is primarily concerned with maximizing the wealth and value of the shareholders or owners of the firm. This is typically achieved by making decisions that optimize the longterm financial health and value of the company, which often goes beyond simply maximizing short-term profit or sales. 3. Option (C) is correct. Explanation: Floatation cost is the cost which is incurred by the company when it issues new stock. It increases the cost of equity. 4. Option (A) is correct. Explanation: The investment decision relates to how the firm’s funds are invested in different assets. 5. Option (A) is correct. Explanation: In a trading firm, there is no requirement of machines for manufacturing which decreases their fixed capital requirement. 6. Option (D) is correct. Explanation: Financial planning helps in coordinating various business functions, e.g., sales and production functions, by providing clear policies and procedures and making detailed plans of action which reduces waste, duplication of efforts, and gaps in planning. 7. Option (A) is correct. Explanation: Financial Management aims at reducing the cost of funds procured, keeping the risk under

control, and achieving effective deployment of such funds. It also aims at ensuring the availability of enough funds whenever required as well as avoiding idle finance. 8. Option (C) is correct. Explanation: The investment decision relates to how the firm’s funds are invested in different assets. These decisions are very crucial for any business since they affect its earning capacity in the long run. These decisions normally involve huge amounts of investment and are irreversible except at a huge cost. 9. Option (C) is correct. Explanation: The primary aim of financial management is to maximize shareholders’ wealth, which is referred to as the wealth maximization concept. Thus, the objective of financial management is to maximize the current price of equity shares of the company or to maximize the wealth of owners of the company, that is, the shareholders. 10. Option (A) is correct. Explanation: Debt does not cause dilution of control. In case of debt, the interest has to be paid. No voting rights are given in the company. 11. Option (D) is correct. Explanation: The main objective of financial management is to maximize the wealth of shareholders. This includes a proper estimation of the funds required for different purposes such as for the purchase of long term assets or to meet day-to-day expenses of business, etc. 12. Option (B) is correct. Explanation: (A) Cash flows of the project: The expected cash flows, both inflows and outflows, associated with a project are crucial in capital budgeting. Decision-makers need to analyze the timing and magnitude of these cash flows to determine if the project is financially viable. (B) Rate of return of the project: The rate of return, such as the project’s internal rate of return (IRR) or the

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cost of capital, is used to assess the potential return on investment. If the project’s expected return exceeds the cost of capital, it may be considered a favorable investment. 13. Option (A) is correct. Explanation: Investment/Capital budgeting decision involves deciding how the funds are invested in different assets so that they can earn the highest possible return for their investors. Factors that affect capital budgeting decisions are: (a) the Cash flows of the project (b) the Rate of return of the project (c) Investment criteria. 14. Option (B) is correct. Explanation: Borrowed funds can be in the form of loans, debentures, public deposits, etc. These may be borrowed from banks, other financial institutions, debenture holders, and the public. 15. Option (A) is correct. Explanation: A higher DSCR indicates a better ability to meet cash commitments and consequently, the company’s potential to increase debt component in its capital structure. 16. Option (A) is correct. Explanation: DSCR is a financial ratio that measures a company’s ability to cover its debt service obligations, including interest and principal repayments, with its operating income. It is an important metric in assessing the financial health and risk associated with a company’s debt obligations. 17. Option (A) is correct. Explanation: The interest coverage ratio refers to the number of times earnings before interest and taxes of a company cover the interest obligation. 18. Option (A) is correct. Explanation: The production cycle is the period between the receipt of raw materials and their conversion into finished goods. Some businesses have a longer production cycle while some have a shorter one. Duration and the length of the production cycle, affect the amount of funds required for raw materials and expenses. 19. Option (A) is correct. Explanation: A higher level of competitiveness may necessitate larger stocks of finished goods to meet urgent orders from customers. This increases the working capital requirement. Competition may also force the firm to extend liberal credit terms. 20. Option (A) is correct.

Explanation: The basic nature of a business influences the amount of working capital required. A trading organisation usually needs a smaller amount of working capital compared to a manufacturing organisation. This is because there is usually no processing.

[B] ASSERTION & REASON 1. Option (B) is correct. Explanation: Financial management involves decisions about the proportion of long-term and short-term funds. An organisation wanting to have more liquid assets would raise relatively more amount on a long-term basis. There is a choice between liquidity and profitability. The underlying assumption here is that current liabilities cost less than long-term liabilities. 2. Option (B) is correct. Explanation: Financial Management is concerned with optimal procurement as well as the usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Similarly, the finance so procured needs to be invested in a manner that the returns from the investment exceed the cost at which procurement has taken place. Financial Management aims at reducing the cost of funds procured, keeping the risk under control, and achieving effective deployment of such funds. It also aims at ensuring the availability of enough funds whenever required as well as avoiding idle finance. 3. Option (D) is correct. Explanation: Some organisations are capital-intensive whereas others are labour-intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organisations would be higher. Labour-intensive organisations on the other hand require less investment in fixed assets. Hence, their fixed capital requirement is lower. 4. Option (B) is correct. Explanation: The financing decisions are affected by various factors. One of the factors is floatation cost. The higher the floatation cost, the less attractive the source. The choice between the payment of dividends and retaining the earnings is, to some extent, affected by the difference in the tax treatment of dividends and capital gains. If the dividend tax is higher, it is better to pay less by way of dividends. As compared to this, higher dividends may be declared if tax rates are relatively lower. Though the dividends are free of tax in the hands of shareholders, a dividend distribution tax is levied on companies. 5. Option (A) is correct. Explanation: Most businesses have some seasonality in their operations. In peak season, because of a higher level of activity, a larger amount of working capital is required. As against this, the level of activity as well as

94 Oswaal CUET (UG) Chapterwise Question Bank the requirement for working capital will be lower during the lean season. 6. Option (B) is correct. Explanation: Excess funding is almost as bad as inadequate funding. Even if there is some surplus money, good financial planning would put it to the best possible use so that the financial resources are not left idle and don’t unnecessarily add to the cost. 7. Option (C) is correct. Explanation: Financial planning includes both shortterm and long-term planning because it is essential to address a variety of financial goals, needs, and challenges that individuals and businesses face. 8. Option (B) is correct. Explanation: Financial planning involves estimating the amount of capital to be raised; determining the pattern of financing i.e., deciding on the form and proportion of capital to be raised; and formulating the financial policies and procedures for procurement, allocation, and effective utilization of funds. 9. Option (B) is correct. Explanation: Debt is cheaper but is riskier for a business because the payment of interest and the return of principal is obligatory for the business. Any default in meeting these commitments may force the business to go into liquidation. There is no such compulsion in the case of equity, which is, therefore, considered riskless for the business. Higher use of debt increases the fixed financial charges of a business. As a result, increased use of debt increases the financial risk of a company 10. Option (B) is correct. Explanation: The interest coverage ratio refers to the number of times earnings before interest and taxes of a company cover the interest obligation. The higher the ratio, the lower the risk of the company failing to meet its interest payment obligations. If the RoI of the company is higher, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater. RoI is an important determinant of the company’s ability to use equity trading and thus the capital structure.

[C] CASE BASED QUESTIONS 1. Option (A) is correct. Explanation: Every company needs funds tofinance its assets and activities. Investment isrequired to be made in fixed assets and currentassets. Fixed assets are those thatremain in thebusiness for more than one year, usually for muchlonger, e.g., plant and machinery, furniture and fixtures, land and building, vehicles, etc. The decision toinvest in fixed assets must be taken very carefully asthe investment is usually quite large. 2. Option (C) is correct. Explanation: A larger organisation operating at a higher scale needs a bigger plant, more space, etc., and therefore,

BUSINESS STUDIES

requires higher investment in fixed assets when compared with a small organisation. 3. Option (A) is correct. Explanation: In certain industries, assets becomeobsolete sooner. Consequently, their replacementsbecome due faster. Higher investment in fixedassets may, therefore, be required in such cases. Forexample, computers become obsolete faster and arereplaced much sooner than say, furniture. Thus,such organisationsthat use assets that areprone to obsolescence require higher fixed capitalto purchase such assets. 4. Option (C) is correct. Explanation: Different phases of the business cycleaffect the requirement of working capital by a firm.In the case of the boom, the sales, as well as production, arelikely to be larger and, therefore, a larger amountof working capital is required. As against this,the requirement for working capital will be lowerduring the period of depression as the sales as wellas production will be small. 5. Option (B) is correct. Explanation: The production cycle is the period between the receipt of raw materials and theirconversion into finished goods. Some businesses have a longer production cycle while some have ashorter one. Duration and the length of the production cycle affect the amount of funds required for raw−materials and expenses. Consequently, the working capital requirement is higher in firms with longer processing cycles and lower in firms with shorter processing cycles. 6. Option (A) is correct. Explanation: The needfor fixed capital depends upon the nature of the business. In the case of a manufacturing business, a large investment is made in land, buildings, machinery, etc. 7. Option (B) is correct. Explanation: Due to changes in technology or it becoming obsolete over time, companies require a large amount of investment in fixed capital. 8. Option (C) is correct. Explanation: Finance Manager prepared a blueprint, which is a financial plan, to ensure the smooth operation of the business. Financial planning is a core element of financial management, as it involves creating a strategic plan for managing the company’s financial resources, including budgeting, forecasting, and setting financial goals. This plan helps the business make informed financial decisions and allocate resources efficiently, which is essential for the smooth operation of the business. 9. Option (B) is correct. Explanation: Flotation costs are costs a company incurs when it issues new stock. Flotation costs make new equity cost more than existing equity. Analysts argue that flotation costs are a one-time expense that should be

BUSINESS FINANCE

adjusted out of future cash flows to not overstate the cost of capital forever. 10 Option (D) is correct. Explanation: Debentures are the most common form of long-term debt instruments issued by

95 corporations. A company will issue these to raise capital for its growth and operations, and investors can enjoy regular interest payments that are relatively safer investments than a company’s equity shares of stock.

CHAPTER

10

FINANCIAL MARKETS

  Revision Notes: ¾ Financial Market: A financial market is a market for the creation and exchange of financial assets. A financial market helps to link the savers and the investors by mobilising funds between them. In doing so, it performs what is known as an allocative function. It allocates or directs funds available for investment into their most productive investment opportunity.

(iii) It has no physical location.

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(iv) Trade is conducted over the phone and internet. uid.

Financial Market

¾ Functions of Financial Market: (i) Mobilisation of savings and channelling them into the most productive use: A financial market facilitates the transfer of savings from savers to investors. It gives savers the choice of different investments and thus helps to channel surplus funds into the most productive use (ii) Facilitating Price Discovery: The forces of demand and supply help to establish a price for a commodity or service in the market. In the financial market, the households are suppliers of funds and business firms represent the demand. The interaction between them helps to establish a price for the financial asset that is being traded in that particular market. (iii) Providing Liquidity to Financial Assets: Financial markets facilitate the easy purchase and sale of financial assets. In doing so, they provide liquidity to financial assets so that they can be easily converted into cash whenever required. Holders of assets can readily sell their financial assets through the mechanism of the financial market. (iv) Reducing the Cost of Transactions: Financial markets provide valuable information about securities being traded in the market. It helps to save time, effort, and money that both buyers and sellers of a financial asset would have to otherwise spend to try and find each other. The financial market is thus, a common platform where buyers and sellers can meet for fulfilment of their individual needs. ¾ Money Market: The market for short-term funds and securities having a maturity of up to one year is known as the money market. It is a market where low-risk, unsecured, and short-term highly liquid debt instruments are issued and actively traded every day. ¾ Nature of Money Market: (i) In this market, low-risk, unsecured and short-term debt instruments are issued and traded. (ii) It helps in raising short-term funds for meeting cash shortages.

(v) The instruments of the money market are highly liq-

(vi) The major participants are RBI, commercial banks, non-banking finance companies, state governments etc. ¾ Money Market Instruments: (i) Treasury Bill: A Treasury Bill Scan to know more about is a short-term borrowing instrument this topic issued by the Reserve Bank of India to fulfil the short-term finance needs of the Central Government. These zero coupon bonds, also known as Treasury Bills, are issued as Money Market promissory notes and are extremely liquid, Instrument with a guaranteed yield and low default risk. They are sold for less than their face value and reimbursed at par. The discount represents the interest due on these debts. (ii) Commercial Paper: Commercial paper is a shortterm unsecured promissory note issued by large, credit worthy firms to raise short-term money at lower-than-market interest rates. It is sold at a discount and redeemed at par over a maturity period of 15 days to one year. It was originally utilised for seasonal and working capital requirements, but it is currently used for bridge financing. For financially solid businesses, it is an alternative to bank borrowing. (iii) Call Money: Call money is a type of short-term finance that has a maturity period ranging from one day to fifteen days and is used for inter-banking transactions. The cash reserve ratio is a measure used by commercial banks to maintain a minimum cash balance. This ratio is updated by the Reserve Bank of India, which affects the amount of cash available for lending. Banks utilise call money borrowing to keep this ratio stable. The interest rate on call money loans, known as the call rate, is very unpredictable and swings from day to day. When call money rates rise, alternative short-term money market products such as certificates of deposit and commercial paper become less expensive for banks to raise funds. (iv) Certificate of Deposit: Certificates of Deposit (CD) are unsecured, negotiable, short-term securities issued by commercial banks and development financial institutions in bearer form. They can be extended to people, corporations, and businesses during times of restricted liquidity when bank deposit

First Level

Second Level





Stock Exchange

Functions

Concept

A market for creation and exchange of financial assets

• National Stock Exchange of India (NSEI) • Over-the-counter Exchange of India OTCEI

Third Level



Types

Trace the Mind Map

Trading Procedure: 1. Selecting Broker 2. Opening Demats Account with depository 3. Placing order 4. Executing order 5. Settlement

Providing liquidity and marketability to existing securities Pricing of securities Safety of transaction Contributes to economic growth Spreading of equity cult Providing scope for speculation Economic barometer

Institution or body of individuals (incorporated or not) which is constituted for the purpose of facilitating buying and selling of securities.

Reducing the cost of transactions Providing liquidity to financial assets Facilitating price discovery Mobilization of savings and channelising them into the most productive uses

Financial Markets

SEBI Capital Market

o

Money Market: (a) Participants are RBI, banks and financial institutions (b) Instruments are T–bills, CP, CD, etc. (c) Huge sums of money are transacted (d) Maximum tenure–1 year (e) High liquidity instruments (f) Safer market (g) Low returns

y

Capital Market: (a) Participants are companies, individuals, banks, etc (b) Instruments are shares, debentures, bonds, etc (c) Low value instruments (d) Medium or long term instrument (e) Not perfectly liquid (f) Risky market (g) High returns

Market for sale and purchase of previously issued securities.

Where securities are sold for the first time. Methods of floatation : Offer through prospects Offer for sale Private placement Rights issue e– IPOs (Electronic Initial Public Offers)

Instruments: Treasury Bill Commercial Paper Certificate of Deposit Call Money

Regulates stock exchanges Protects rights of investors Prevents trading malpractices Regulates and develops code of conduct

rit atu f m r) o s a et ye ass ne ry to o a t p ne u

Money Market Vs. Capital Market

Types

m

Regulatory Functions : To regulate functioning of securities market. Development Functions : To promote the development of securities market. Protective Functions : To protect interests of the investors.

FINANCIAL MARKETS

97

98 Oswaal CUET (UG) Chapterwise Question Bank growth is weak but credit demand is strong. They aid in the mobilisation of enormous sums of money for short periods. (v) Commercial Bill: A commercial bill is a short-term, negotiable, self-liquidating instrument used to fund the working capital needs of businesses. It is a self-liquidating instrument that permits customers to pay on a predetermined date. The vendor writes the bill, which the buyer accepts. When a bill is approved, it becomes a marketable instrument known as a trade bill. If the seller needs payments before the bill matures, they can negotiate it at a discount with a commercial bank. ¾ Capital Market: The capital market includes all those organisations, institutions, and instruments that provide long-term and medium-term funds through shares, bonds, debentures, etc. The capital market consists of development banks, commercial banks, and stock exchanges. ¾ Nature of capital market: (i) It channelises the savings from households to productive uses. (ii) The major participants are corporate entities, stock exchanges, development banks, commercial banks, financial institutions and retail investors. (iii) In an ideal capital market, finance is available at the reasonable cost. (iv) Development of the financial system leads to economic growth. (v) The capital market must be efficient in respect to the information that it provides, minimise the transaction cost and allocate the capital in a productive way. ¾ Components of Capital Market: Capital market is of two types- Primary market and secondary market. (i) Primary Market: It refers to the market wherein securities (shares, debentures) are sold for the first time. It is also known as the new issue market. The essential function of a primary market is to facilitate the transfer of investable funds from savers to entrepreneurs seeking to establish new enterprises or to expand existing ones through the issue of securities for the first time.

BUSINESS STUDIES

(ii) Secondary Market: It refers to the market for the sale and purchase of previously issued securities. It is also known as the Stock Exchange. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities. • Methods of Floatation: (i) Offer through prospectus:- The prospectus offer is a common way for public firms to raise capital in the primary market. It entails soliciting subscriptions by the publication of a prospectus, which can be published in newspapers and magazines, underwritten, and listed on at least one stock exchange. The prospectus must adhere to the Companies Act as well as the SEBI’s disclosure and investor protection requirements. (ii) Offer for Sale:- Securities are not issued directly to the public under this technique but are instead offered for sale through intermediaries such as issuing houses or stock brokers. In this situation, a corporation sells the entire lot of securities to brokers, who then resell them to the investing public. (iii) Private Placement:- A private placement is when a corporation sells securities to institutional investors and a few select people. It aids in raising funds more quickly than a public offering. Access to the primary market can be costly due to a variety of obligatory and non-mandatory fees. As a result, some firms cannot afford a public offering and instead opt for a private placement. (iv) Rights issue:- This is a right granted to current shareholders to subscribe to a fresh issuance of shares according to the company’s terms and conditions. Shareholders are given the ‘right’ to purchase additional shares in proportion to the number of shares they currently own. (v) IPOs:- A firm that wishes to offer capital to the public using the stock exchange’s online system must first engage in an arrangement with the stock exchange. An IPO necessitates the use of SEBI-registered brokers and a registrar with an electronic connection. The securities of issuer businesses can be listed on any market, with the lead manager overseeing intermediary operations.

¾ Difference between money market and capital market: Basis

Capital market

Money market

Participants The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and retail investors.

The participants of the money market are institutional participants such as the RBI, banks, financial institutions and finance companies. Individual investors do not participate in the money market.

Instruments The main instruments are equity shares, preference shares, debentures, bonds etc.

The main instruments are short-term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit.

Investment

Individuals can easily subscribe to securities in a capital In the money market, the financial outlay is quite market as they do not require a huge financial outlay. The expensive. The minimum amount is ₹25,000 and value of units of securities is generally low, i.e., ₹ 10, multiples thereof in treasury bills. ₹100 and the minimum trading lot of shares is kept small, i.e., 5, 50, 100 or so.

Duration

It deals in medium and long-term securities.

Money market deals in short-term securities with a maturity period of up to 1 year.

99

FINANCIAL MARKETS

Basis

Capital market

Money market

Liquidity

The securities of the capital market are considered liquid Money market securities enjoy higher degree of because they are marketable in the stock exchanges. But liquidity. Discount Finance House of India (DFHI) they are less liquid than the money market securities. provides a ready market for them.

Safety

The securities of the capital market are riskier with respect to both the principal amount and the return.

The Money market is safer with a minimum risk of default.

Expected return

Investment in capital market generally yields a higher return. There is a chance of earning capital gain.

The expected returns are low as compared to the capital market.

¾ Meaning of Stock Exchange: According to the Securities Contracts (Regulation) Act, 1956, ‘Stock exchange means any body of an individuals, whether incorporated or not, constituted to assist, regulate or control the business of buying and selling or dealing in securities. A stock exchange is an institution that provides a platform for buying and selling existing securities. As a market, the stock exchange facilitates the exchange of a security into money and vice versa. Stock exchanges help companies raise finance, provide liquidity and safety of investment to Scan to know more about the investors, and enhance the creditworthis topic thiness of individual companies. ¾ Functions of a Stock Exchange: (i) Providing liquidity and marketability to existing securities: Stock exStock Exchange change gives investors the chance to disinvest and reinvest. This provides liquidity and marketability to existing securities. (ii) Pricing of securities: Stock exchange involves a mechanism of constant valuation. This determines the prices of securities. (iii) Safety of transactions: The transactions of the stock market are well-regulated and well-defined according to the legal framework, thereby ensuring the safety of transactions. (iv) Contributes to economic growth: Stock exchanges ensure disinvestment and reinvestment in productive uses contributing to economic growth. (v) Spread of equity cult: Stock exchange ensures wider share ownership by regulating new issues, better trading practices, and educating the public about investments. (vi) Provides scope for speculation: The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner. ¾ National Stock Exchange of India (NSEI): The National Stock Exchange Market (NSE) is a sophisticated and technologically advanced stock market that was founded in 1992. It started trading in the debt market sector in 1994 and eventually expanded to cover the capital market segment for stocks as well as futures and options for different derivative products. The NSE maintains a statewide completely automated screenbased trading system and is supervised by experts who do not trade on the exchange directly or indirectly. The trading rights are held by trading members who provide services to investors. The NSE’s board of directors is made up of top executives from promoter institutions and distinguished experts, with no trading members represented.

¾ Over-the-counter Exchange of India (OCTEI): The OTCEI is a firm established in 1990, under the Companies Act of 1956, to provide access to the capital market for small and medium-sized businesses seeking cost-effective finance. The over-the-counter (OTC) market is a negotiated location where buyers and sellers negotiate purchase or selling terms. It trades on stock exchanges, where buyers and sellers visit an OTCEI counter, discover quotations, and make a purchase or sale according to price-matching goals. The OTCEI’s goal is to give immediate liquidity to assets at a fixed price, liquidity for less traded securities or tiny firms, a streamlined purchasing and selling process, and a simpler and less expensive way to publicly sell new issues. The OTCEI, on the other hand, has been removed. ¾ Trading Procedure on a Stock Exchange: (i) Selecting a broker: Investor has to approach a registered broker/ sub-broker and enter into a broker-client agreement with him by providing certain details. (ii) Opening a demat account: The investor has to open a ‘Demat’ account or ‘beneficial owner’ (BO) account with a depository participant (DP) for holding and transferring securities in the demat form. (iii) Placing an order: The investor places an order with the broker to buy/sell shares with instructions about the number of shares and the price at which the shares should be bought/sold. (iv) Executing the order: When the shares can be bought/sold at the price mentioned, they will be communicated to the broker’s terminal and the order will be executed electronically. The broker will issue a trade confirmation slip to the investor. (v) Contract note: After the execution of a trade, the broker issues a contract note within 24 hours about the details of the share, prices, brokerage charges etc. A Unique Order Code assigned by the stock exchange is also published on the contract note. (vi) Settlement of transaction: Cash is paid or securities are delivered on the pay-in day, which is before the (T+2) day as the deal has to be settled and finalised on the (T+2) day. (vii) On the T+2 day, the exchange will deliver the share or make payment to the other broker. This is called the payout day. Within 24 hours, the broker is required to make payment to the investor. ¾ Securities and Exchange Board of India (SEBI) : It was established by the Indian Government in 1988 under the administrative control of the Ministry of Finance, Government of

100 Oswaal CUET (UG) Chapterwise Question Bank India. Later, it became a statutory body under the SEBI Act, of 1992. The capital market expanded dramatically in the 1980s due to increasing public engagement. This expansion resulted in securities market mis behaviour by businesses, brokers, merchant bankers, and investment advisors. Self-proclaimed private placements, price manipulation, unofficial premiums on new issues, non-compliance with the Companies Act, violation of stock market rules, and delayed share distribution are all examples. These actions have undermined investor trust and exacerbated discontent. Due to a lack of appropriate punitive sanctions in existing legislation, the Indian government and stock exchanges struggled to address these concerns. As a result, to address these concerns, the government formed the Securities and Exchange Board of India (SEBI). ¾ Objectives of SEBI: regulate (i) To changes and the industry.

stock exsecurities

(vii) Others as delegated by the Government of India.

(iv) To develop the code of conduct to be followed by intermediaries.

(ii) Conducting research and publishing information. (iii) Developing capital markets by adopting a flexible approach.

III. Protective Functions: (i) Prohibition of unfair trade practices (ii) Controlling insider trading (iii) Undertaking steps for investors’ protection (iv) Promotion of fair practices and code of conduct

¾ Depository Services: (i) Opening a demat account

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(ii) De-materialisation (iii) Re-materialisation (iv) Record of securities (v) Settlement of transactions

Introduction, Objectives, and Function of SEBI

¾ Functions of the SEBI:

II. Developmental Functions: (i) Training of intermediaries.

(ii) To protect investor’s rights and interests. (iii) To prevent trading malpractices.

BUSINESS STUDIES

I. Regulatory Functions:

(i) Registration of brokers/sub-brokers/ other players in the market. (ii) Registration of investment schemes. (iii) Regulation of intermediaries. (iv) Regulation of takeover bids by companies. (v) Calling for information by undertaking inspection and inquiries. (vi) Levying fees for carrying out purposes of the act.

(vi) Facilitating loan against the securities (vii) Freezing demat account ¾ Players in the Depository System: (i) Depository: A depository is like a bank and keeps securities in electronic form on behalf of the investor. (ii) Depository participant: The depository participant (DP) serves as an intermediary between the investor and the depository. (iii) Beneficial owner: A beneficial owner is the real owner of the securities who has lodged his securities with the depository in the form of a book entry. (iv) Issuer: The issuer is the company that issues the security.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS

3. Match List I with List II:

1. Identify the market that is known as the Stock Exchange  [CUET 2023] (A) Secondary Market

[CUET 2023]

List-I Regulatory Function of SEBI

I

Levying fees or other charges

B

Development Function of SEBI

II

Training of intermediaries

C

Protective Function of SEBI

III Controlling insider training

D

Objective of SEBI

IV

(B) Money Market

(D) Primary Market (C) Capital Market 2. Arrange the steps of the Trading and Settlement procedure in the Securities [CUET 2023] A. Open a demat account B. Place an order with the broker

List-II

A

C. Sign a broker-client agreement D. Broker matches the share price available



E. Broker issue a trade confirmation slip

(A) (A)-(I), (B)-(II), (C)-(IV), (D)-(III)



(B) (A)-(I), (B)-(II), (C)-(III), (D)-(IV)

Choose the correct answer from the options given below:

Regulate stock exchanges

Choose the correct answer from the options given below:

(1) A, B, C, D, E

(2) E, D, C, B, A

(C) (A)-(III), (B)-(II), (C)-(IV), (D)-(I)

(3) C, A, B, D, E

(4) C, A, D, B, E

(D) (A)-(III), (B)-(I), (C)-(II), (D)-(IV)

101

FINANCIAL MARKETS

4. Identify the following under whose overall administrative control, SEBI functions [CUET 2023] (A) Ministry of Corporate Affairs, GOI (B) Ministry of Home Affairs. GOI (C) Ministry of Finance, GOI (D) Ministry of External Affairs, GOI 5. Identify the trend in the stock market when equity shares are more easily sold even at a higher price [CUET 2023] (A) Bearish (B) Bullish (C) Horse trading (D) Badla 6. Match List I with List II: List-I

[CUET 2023] List-II

A

Treasury Bill

I

Mobilise large amounts of money

B

Commercial Paper

II

Maturity period of one day to fifteen days

C

Call Money

III

The maturity period of 15 days to one year

D

Certificate of Deposit

IV

Issued by RBI

Choose the correct answer from the options given below: (A) (A)-(III), (B)-(I), (C)-(II), (D)-(IV) (B) (A)-(II), (B)-(III), (C)-(IV), (D)-(I) (C) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (D) (A)-(IV), (B)-(III), (C)-(I), (D)-(II) 7. In which market the prices of securities are determined by demand and supply for the securities? [CUET 2022] (A) Primary Market (B) Secondary Market (C) Commodity Market (D) Operation Market 8. One of the important functions of a Stock Exchange is that the membership of a Stock Exchange is well-regulated and its dealings are well-informed according to the existing legal framework. Which function of the Stock Exchange is being discussed here? [CUET 2022] (A) Pricing of securities (B) Safety of transactions (C) Spreading of equity cult (D) Contributes to economic growth  9. In which year the National Stock Exchange of India was incorporated? [CUET 2022] (A) 1995 (B) 1994 (C) 1992 (D) 1997 10. Identify the depository set up by the National Stock Exchange in Collaboration with IDBI and UTI.[CUET 2022] (A) National Securities Department Limited (B) Central Depository Services Limited (C) National Securities Depositories Limited (D) Central Department Services Limited  11. The capital market consists of [CUET 2022] A. Development Bank B. Financial Institutions C. Stock Exchange D. Treasury Bills E. Call Money

Choose the correct answer from the options given below:

(A) A, C, E only (C) A, D, E only

(B) A, B, C only (D) C, D, E only

12. SEBI is an interim administrative body to promote orderly and healthy growth of the securities market.[CUET 2022] Find out the correct statement about SEBI. A. SEBI was established on 12 April 1988 as an administrative body to promote the orderly growth of the stock market. B. The act of government that governs SEBI is the SEBI Act, 1994. C. The basic purpose of SEBI is to form new enterprises. D. SEBI doesn’t protect the rights and interests of the investors. E. SEBI is a separate regulatory body. Choose the correct answer from the options given below: (A) A,C,E only (B) A,B,D only (C) A and E only (D) B,C,D only 13. Match List-I with List-II List-I

[CUET 2022] List-II

A

Capital market

I

It facilitates the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprise

B

Money market

II

It consists of development banks, commercial banks and a stock exchange and facilitate economic development

C

Primary market

III Market with low-risk, unsecured instruments where the assets are close substitutes for cash.

D

Secondary IV market

It helps existing investors to disinvest and fresh investors to enter the market.

Choose the correct answer from the options given below: (A) A-II, B-IV, C-III, D-I (B) A-IV, B-III, C-II, D-I (C) A-II, B-III, C-I, D-IV (D) A-III, B-IV, C-I, D-II 14. Aman had 55 shares in Vani Ltd. He wanted to sell 30 shares, so he went for a specific market to sell them through an online portal. He went for which of the following markets? (A) Money Market (B) Secondary Market (C) Primary Market (D) None of these 15. Beneficial owner account with a depository participant for holding and transfer of securities is also known as ___________. (A) Securities Account (B) Demat Account (C) Share owner Account (D) Securities owner Account 16. When the allocative function is performed well in a financial market, then the rate of return offered to the investors would be ___________ . (A) Higher (B) Lower (C) Nil (D) Occasionally higher or lower

102 Oswaal CUET (UG) Chapterwise Question Bank 17. Match List I with List II: List-I

List-II

A

Commercial Paper

I

Also known as a ZeroCoupon Bonds

B

Treasury Bill

II

Also termed as Bill of Exchange

C

Call Rate

III Also called Bridge Finance

D

Commercial Bill IV

Changes every day or every hour

BUSINESS STUDIES

Reason (R): The capital market deals in short-term securities. 

3. Assertion (A): The primary market is also known as the new issues market.

Reason (R): It deals with new securities being issued for the first time.

4. Assertion (A): The secondary market helps existing investors to disinvest and fresh investors to enter the market.

Reason (R): A secondary market is a market for the purchase and sale of existing securities.

Choose the correct answer from the options given below: (A) A - III, B - I, C - IV, D - II (B) A - III, B - II, C - IV, D - I (C) A - II, B - III, C - IV, D - I (D) A - I, B - III, C - II, D - IV

5. Assertion (A): The stock exchange is an unorganised market.

18. Which of the following is not a Protective Function performed by SEBI? (A) Prohibition of fraudulent and unfair trade practices. (B) Conducting research and publishing information useful to all market participants. (C) Undertaking steps for investor protection. (D) Promoting fair practices and code of conduct in the securities market.

6. Assertion (A): A Demat account refers to an account that an Indian citizen must open with the DPs to trade in listed securities in electronic form.

19. Rishu’s friend Devina works as a Finance Manager at Perfect Solutions Ltd. Devina in a meeting with the directors of the company came to know that the firm would soon be declaring a bonus issue that would lead to an increase in the price of shares. On this basis, Devina advised Rishu to purchase the shares of Perfect Solutions Ltd., which she bought. SEBI can control malpractices like these through the following functions : (A) Protective functions (B) Regulatory functions (C) Development functions (D) All of the above 20. Rohit has 500 shares of Ruchi Soya Ltd. Ruchi Soya further issued 1,00,000 equity shares and offered Rohit to buy 1 more equity share for every 5 shares held by him. Identify the method of floatation. (A) Right issue (B) Private placement (C) Offer through prospectus (D) Offer for sale





1. Assertion (A): Activities in the money market are conducted over the telephone and through the Internet.

Reason (R): The major participants in the market are the Reserve Bank of India (RBI), Commercial Banks etc.

2. Assertion (A): The capital market consists of a series of channels through which savings of the community are made available for industrial and commercial enterprises.

Reason (R): A depository is like a bank in which an investor can deposit and withdraw his shares. 

7. Assertion (A): Controlling insider trading and imposing penalties for such practices is a protective function of a SEBI.

Reason (R): Registration of collective investment schemes and Mutual Funds is a development function of SEBI. 

8. Assertion (A): SEBI was to function under the overall administrative control of the Ministry of Education of the Government of India.

Reason (R): The overall objective of SEBI is to protect the interests of investors and to promote the development of, and regulate the securities market.

9. Assertion (A): The Government of India decided to set up a separate regulatory body known as the Securities and Exchange Board of India.

[B] ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true.

Reason (R): Stock exchange makes complete information available to the public regarding prices and volume of transactions taking place every day.

Reason (R): SEBI was set up to prevent trading malpractices and achieve a balance between self-regulation by the securities industry and its statutory regulation.

10. Assertion (A): The functions of SEBI can be categorised into development, registration, and protective functions.

Reason (R): Promotion of fair practices and code of conduct in the securities market is a function of SEBI. [C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Atul Agarwal is one of the directors of Malto Ltd. The company is engaged in the real estate sector, which has recently witnessed a steady fall in its revenue and the value of its assets due to a downward trend persisting in the market in specific and the economy in general. The periodical financial results of the company were to be declared in a fortnight. Atul Agarwal, being an insider, had access to unpublished price-sensitive information related to it. Consequently, he sells a major portion of his holdings in

103

FINANCIAL MARKETS

anticipation of a fall in the market price of the shares of the Company after the announcement of periodical financial results of the company. Moreover, he doesn’t inform The Securities and Exchange Commission (SEC) about the dealings. In conducting a probe, the Securities and Exchange Board of India (SEBI) found Atul Agarwal guilty of insider trading. As per law, company directors, officials, or any individual with a stake of 10% or more in the company are considered to be insiders, and they are required to report their insider transactions within two business days of the date the transaction occurred. 1. The Securities and Exchange Board of India was established by the Government of India on 12 April 1988 as an ________________. (A) Administrative body (B) Private body (C) Regulatory body (D) None of these 2. The SEBI was given a ______ status on 30 January 1992 through an ordinance. (A) Developmental (B) Statutory (C) Regulatory (D) Administrative 3. Identify the type of function performed by SEBI in the below-mentioned line:

“On conducting a probe Securities and Exchange Board of India (SEBI) finds Atul Agarwal guilty of insider trading.” (A) Development (B) Regulatory (C) Protective (D) None of these 4. Which of the following is the development function of SEBI? (A) Training of intermediaries of the securities market. (B) Conducting research and publishing information (C) Undertaking measures to develop the capital markets (D) All of the above 5. The overall objective of SEBI is to protect the interests of: (A) Suppliers (B) Investors (C) Debtors (D) Creditors II. Read the following text and answer questions that follow: (Q6-Q10)

“Unicon Securities Pvt. Ltd.” was established to deal in securities. It was registered as a stockbroker with the National Stock Exchange (NSE) and Bombay Stock Exchange

(BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that, the composition of the Board of Directors changed. Some customers complained to the customer care centreof the company that shares purchased by them and for which the payment has been duly made, were not transferred to their Demat Accounts by “Unicon Securities Pvt. Ltd.”. The executive of the customer care centre promised the aggrieved customers that their shares wouldbe transferred to their respective Demat Accounts very soon. However, the company delayed the matter and didn’t transfer the shares of the customers to their Demat Accounts. This eroded investors’ confidence and multiplied their grievances. On regular inspection and by conducting inquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity. 6. Identify the step of the trading procedure in a stock exchange that has not been followed by “Unicon Securities Pvt. Ltd.”. (A) Opening a Demat Account (B) Placing the order (C) Executing the order (D) Settlement 7. Which apex statutory body of the capital market inspected and conducted inquiriesto detect irregularities? (A) Stock Exchange (B) Primary market (C) Secondary market (D) SEBI 8. Write two values not followed by Unicon Securities Pvt. Ltd. (A) Honesty & Commitment (B) Settlement and placing order (C) Legacy & Settlement (D) Execution & Placing Order 9. By not converting and transferring the shares to the investors’ Demat Account, i.e., electronic form, which process was not followed? (A) Dematerialisation (B) Settlement (C) Registration (D) Rematerialisation 10. Identify the function of SEBI being stated in the paragraph. (A) Development (B) Protective (C) Regulatory (D) None of these

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (A)

2. (C)

3. (B)

4. (C)

5. (B)

6. (C)

7. (B)

8. (B)

9. (C)

10. (C)

11. (B)

12. (C)

13. (C)

14. (B)

15. (B)

16. (A)

17. (A)

18. (B)

19. (A)

20. (A)

8. (D)

9. (A)

10. (D)

8. (A)

9. (A)

10. (C)

[B] ASSERTION & REASON 1. (B)

2. (C)

3. (A)

4. (A)

5. (D)

6. (B)

7. (C)

[C] CASE BASED QUESTIONS 1. (A)

2. (B)

3. (B)

4. (D)

5. (B)

6. (D)

7. (D)

104 Oswaal CUET (UG) Chapterwise Question Bank

BUSINESS STUDIES

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (A) is correct. Explanation: The money market deals in short-term instruments whereas the capital market deals in both medium and long-term instruments. The primary market and secondary market are part of the capital market. The primary market is also known as the new issues market whereas, the secondary market is also known as the stock exchange. 2. Option (C) is correct. Explanation: The steps in the process of trading and settlement procedure are as follows: Step 1 – Signing of a broker-client agreement Step 2 – Opening of Demat account Step 3 – Placing an order of shares with the broker Step 4 – Broker matching the share price available Step 5 – Broker issuing a trade confirmation slip 3. Option (B) is correct. Explanation: The main objective of SEBI is to regulate the stock exchanges. SEBI performs various functions– Regulatory which includes levying fees or other charges. Development, which consists of training the intermediaries involved. Protective which controls insider trading. 4. Option (C) is correct. Explanation: SEBI function under the overall administrative control of the Ministry of Finance, GOI, to regulate and oversee the securities and financial markets in the country, ensuring investors protection and market integrity. 5. Option (B) is correct. Explanation: The share market is said to be in a bullish phase when the prices of stocks are rising. In the bullish phase, the shares are sold easily even at these high prices. 6. Option (C) is correct. Explanation: The components of money market: Treasury bill – It is issued by RBI in multiples of ₹25,000 and thereon. Commercial paper – The maturity period is from 15 days to one year. Call money – The maturity period is from one day to fifteen days. Certificate of deposit – It helps to mobilise large amount of money. 7. Option (B) is correct. Explanation: In the secondary market, prices of securities are determined by the forces of demand and supply among investors trading existing securities, such as stocks and bonds. It is where these securities are bought and sold after their initial issuance in the Primary Market. 8. Option (B) is correct. Explanation: Safety of transactions is one of the important functions of the stock exchange which is why the membership of stock exchanges is well regulated. 9. Option (C) is correct.

Explanation: NSE was incorporated in the year 1992. The National Stock Exchange of India Limited (NSE) is the largest financial exchange in the Indian market. It was established on the recommendation of the High-Powered Study Group, which was founded by the Indian government to provide solutions to simplify participation in the stock market and make it more accessible to all interested parties. 10. Option (C) is correct. Explanation: NSE joined hands with the IDBI and the UTI to promote the dematerialisation of securities. Together, they set up the National Securities Depository Limited. 11. Option (C) is correct. Explanation: Treasury bills and call money are a part of the money market. 12. Option (C) is correct. Explanation: SEBI is governed by the SEBI Act, 1992. It does not form any new enterprise. SEBI’s objective is to protect the rights and interests of the investors. It is a separate regulatory body established on 12 April 1988. 13. Option (C) is correct. Explanation: Capital market consists of development banks, commercial banks and stock exchanges and helps in economic development. Money market instruments are highly liquid. Primary market is the fresh issue market. Secondary market helps in trading of stocks. 14. Option (B) is correct. Explanation: The secondary market is also known 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. 15. Option (B) is correct. Explanation: The Beneficial owner account or BO account is also known as the Demat or dematerialization account. This account electronically holds and facilitates the transfer of securities, eliminating the need for physical share certificate. 16. Option (A) is correct. Explanation: A business is a part of an economic system that consists of two main sectors – households, which save funds and business firms which invest these funds. A financial market helps to link the savers and the investors by mobilising funds between them. In doing so, it performs what is known as an allocative function. It allocates or directs funds available for investment into their most productive investment opportunity. When the allocative function is performed well the rate of return offered to households would be higher. 17. Option (A) is correct. Explanation: Commercial paper helps in Bridge Financing., Treasury Bill is also known as known as a Zero-Coupon Bond. Call Rate is the rate at which short-term funds are borrowed and lent in the money market. It changes every day or every hour. Commercial Bill is also termed as a Bill of Exchange.

105

FINANCIAL MARKETS

18. Option (B) is correct. Explanation: Conducting research and publishing information useful to all market participants is the development function of SEBI. Developmental function refers to the steps taken by SEBI to provide investors with knowledge of the trading and market function. 19. Option (A) is correct. Explanation: The protective function implies the role that SEBI plays in protecting the investor interest and also that of other financial participants. Prohibition of fraudulent and unfair trade practices like making misleading statements, insider trading, manipulations, price rigging, etc., is the function of SEBI. 20. Option (A) is correct. Explanation: Rights issue is a right granted to current shareholders to subscribe to a fresh issuance of shares according tothe company’s terms and conditions. Shareholders are given the ‘right’ to purchase additional shares in proportion to the number of shares they currently own. [B] ASSERTION & REASON 1. Option (B) is correct. Explanation: The money market 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 shortages of cash and obligations and 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. 2. Option (C) is correct. Explanation: 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 the public in general. It directs these savings to 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 3. Option (A) is correct. Explanation: The primary market is also known as the new issues market. It deals with new 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 seeking to establish new enterprises or to expand existing ones through the issue of securities for the first time. 4. Option (A) is correct. Explanation: The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It also provides liquidity and marketability to existing securities. It also contributes to economic growth by channelling funds towards the most productive investments through the process of disinvestment and reinvestment. 5. Option (D) is correct. Explanation: A stock exchange is organised as an association, a society, or a company with a limited number of members. It is open only to these members who act as brokers for the buyers and sellers. The Securities Contract (Regulation) Act has de-

fined a stock exchange as an “association, organisation or body of individuals, whether incorporated or not, established to assist, regulate and controlling the business of buying, selling and dealing in securities”. 6. Option (B) is correct. Explanation: Investors who want to get securities in electronic form open a Demat Account. Demat account is the abbreviation of dematerialised account. A Demat account refers to an account that an Indian citizen must open with the DPs to trade in listed securities in electronic form. From this account, one can hold shares of various companies in the dematerialised/electronic form. The depository is like a bank in which an investor can deposit and withdraw his shares. The Depository Participant (DP) is an agent of the depository. Investors interact only with DPs. Any financial institution can become a DP after registration with SEBI. The company whose shares are to be transacted in electronic form must be registered with a depository. 7. Option (C) is correct. Explanation: Registration of collective investment schemes and Mutual Funds is a regulatory function of SEBI. Regulatory functions involve the establishment of rules and regulations for the financial intermediaries along with corporates that help in the efficient management of the market. 8. Option (D) is correct. Explanation: The Securities and Exchange Board of India was established by the Government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of the securities market and for investor protection. It was to function under the overall administrative control of the Ministry of Finance of the Government of India. 9. Option (A) is correct. Explanation: Many malpractices started taking place such as rigging of prices, non-adherence to provisions of the Companies Act, violation of rules and regulations of stock exchanges, etc. Due to these malpractices, people started losing confidence in the stock market. The government felt a sudden need to set up an authority to regulate the working and reduce these malpractices. As a result, the Government came up with the establishment of SEBI. 10. Option (D) is correct. Explanation: The functions of SEBI can be categorised into development, regulatory, and protective functions. The promotion of fair practices and a code of conduct in the securities market is a protective function of SEBI. [C] CASE BASED QUESTIONS 1. Option (A) is correct. Explanation: The Securities and Exchange Board of India was established by the Government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of the securities market and for investor protection. 2. Option (B) is correct. Explanation: The SEBI was given a statutory status on 30 January 1992 through an ordinance. The ordinance was later replaced by an Act of Parliament known as the Securities and Exchange Board of India Act, 1992.

106 Oswaal CUET (UG) Chapterwise Question Bank 3. Option (B) is correct. Explanation: Calling for information by undertaking inspections, conducting inquiries, and audits of stock exchanges and intermediaries is a regulatory function of SEBI. 4. Option (D) is correct. Explanation: The development Functions of SEBI include training of intermediaries of the securities market,conducting research and publishing information useful to all market participants, and undertaking measures to develop the capital markets by adopting a flexible approach. 5. Option (B) is correct. Explanation: The overall objective of SEBI is to protect the interests of investors and promote the development of, and regulate the securities market.SEBI regulates stock exchanges and the securities industry to promote their orderly functioning. SEBI protects the rights and interests of investors,particularly individual investors, and guides and educates them. 6. Option (D) is correct. Explanation: A T+2 rolling settlement cycle is followed in the Indian stock market which means that transactions in securities are to be settled within 2 days after the trade date. Delivery of shares is made in dematerialised form, and each exchange has its own clearing house which assumes all settlement risk. 7. Option (D) is correct. Explanation: A T+2 rolling settlement cycle is followed in the Indian stock market which means that transactions in securities are to be settled within 2 days after the trade date. Delivery of shares is made in dematerialised form and each exchange has its own clearing house which assumes all settlement risk. 8. Option (A) is correct.

BUSINESS STUDIES

Explanation: Two values are missing in this case that is honesty and commitment. The company faces issues. However, the Board of Directors of the firm changed, and consumers reported that their shares were not transferred to their Demat Accounts after payment was completed. The corporation pledged to transfer the shares shortly, but it took longer than expected, undermining investor trust and escalating discontent. Through frequent inspections and queries of the brokers implicated, the Securities and Exchange Board of India (SEBI) discovered the irregularity. 9. Option (A) is correct. Explanation: The process where securities held by the investor in the physical form are cancelled and the investor is given an electronic entry or number so that she/he can hold it as an electronic balance in an account. This process of holding securities in an electronic form is called dematerialisation. For this, the investor has to open a Demat account with an organisation called a depository 10. Option (C) is correct. Explanation: The regulatory Functions of SEBI include the Registration of brokers sub-brokers and other players in the market, the Registration of collective investment schemes and Mutual Funds, the Regulation of stock brokers, portfolio exchanges, underwriters, and merchant bankers, and the business in stock exchanges and any other securities market, Regulation of takeover bids by companies, Calling for information by undertaking inspection, conducting inquiries and audits of stock exchanges and intermediaries etc.

CHAPTER

11

MARKETING

  Revision Notes:

¾ Marketing: Marketing is ‘‘a human activity directed at satisfying needs and wants through exchange process.’’

Role of Marketing: Scan to know • a Identifying consumer needs. more about • Satisfying customer needs. this topic • Maintaining customer loyalty. • Building customer relationships. Functions of Marketing (i) Gathering and analysing market Role of Marketing information: ƒ Systematic accumulation of Scan to know facts and analysis of information. more about ƒ Analysing the strengths, this topic weaknesses, opportunities, and threats of a business environment. ƒ Identifying customer needs and wants, identifying buying motives, Functions of choice of a brand name, packaging and media Marketing used for promotion etc. ƒ Data is available from primary as well as secondary sources. (ii) Marketing planning: ƒ To develop an appropriate marketing plan so that the marketing objectives can be achieved. ƒ It should specify the action programs to achieve these objectives. ƒ E.g., if a marketer tries to achieve a bigger market share in the country in the next three years, then his marketing plan should include various important aspects like a plan for increasing is the level of production, promotion of products etc. (iii) Product designing and development: ƒ Involves decisions regarding the product to be manufactured and its attributes such as its quality considerations, packaging, models and variations to be introduced etc. ƒ A good design can improve the performance of a product and also give it a competitive advantage in the market. ƒ Anticipate customer needs and develop new products or improve existing products to satisfy their needs. (iv) Standardisation and grading: ƒ Standardisation refers to producing goods of predetermined specifications, which helps in achieving uniformity and consistency in the output E.g., ISI Mark etc. ƒ Grading is the process of classification of products into different groups, based on some of its important characteristics such as quality, size, etc. ¾ ¾

(v) Packaging and labelling: ƒ Packaging refers to designing and developing a package for a product. ƒ It protects the products from damage, risks of spoilage, breakage and leakage. It also makes buying convenient for customers and serves as a promotional tool. ƒ Labelling refers to designing a label to be put on the package. It may vary from a simple tag to complex graphics. For e.g.,Colgate, Lays etc. (vi) Branding: ƒ It helps in the differentiation of the product, builds customer loyalty and promotes its sales. ƒ An important decision area is branding strategy, whether each product will have a separate brand name or the same brand name to be used for all products. (vii) Customer Support Services: ƒ Customer support services are very effective in increasing sales from prospective customers and developing brand loyalty for a product. ƒ It aims at providing maximum satisfaction to the customers and building brand loyalty. ƒ E.g., sales services, handling customer complaints and adjustments, procuring credit services, maintenance services, technical services and consumer information. (viii) Pricing of Product: ƒ Price of product refers to the amount of money customers have to pay to obtain a product. ƒ It is an important factor in the success/ failure of a product. ƒ Demand for a product/ service is related to its price, so, the price should be fixed after analysing all the factors determining the price of the product. (ix) Promotion: ƒ Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to buy the products. ƒ Methods of promotion are advertising, Personal Selling, Publicity and Sales Promotion. (x) Physical Distribution: ƒ The two major decision areas under this function are (a) Decisions regarding channels of distribution or the marketing intermediaries to be used e.g., wholesalers, retailers (b) Physical movement of the product from the place of production to the place of consumption.

Product (Anything of value offered to mar ket for

First Level

Second Level

Third Level

Elem

(4PS ents

)

Marketing

Process of attaching or putting labels on the product, e.g., date of expiry, manufacturing date, how to use product, etc.

sale)

Act of designing and producing the container or wrapper of product. Levels of packaging– Primary packaging : e.g., Toothpaste tube. Secondary packaging : e.g., Cardboard box for toothpaste tube. Transportation packaging : e.g., Corrugated box to keep 50 or 100 toothpaste boxes.

Trace the Mind Map

Brand– e.g., Timex, Rolex, etc. Brand Name– e.g., Maggie, Nike, etc. Brand Mark– e.g., Nike ( ), Audi ( ), etc. Trade Mark– e.g., A brand or part of a brand that is given legal protection.

The process of giving a name, sign of symbol to a product is called branding.

Branding of product

Impersonal form of paid communication : Features: Paid form, impersonal, identified sponsor Merits: Mass reach, enhances customer satisfaction and confidence, expressive, economical Limitations : Less forceful, lack of feedback, inflexible, less effective Objections to advertising : Adds to cost, undermines social values, confuses buyers, encourages sale of inferior goods, some advertisements are in bad taste.

Features : Personal form, Development of relationship Merits : Flexible, Direct feedback, Minimum wastage

Merits : Attracts attention, Useful in new product launch, Synergy in total efforts Limitations : Reflects crisis, Spoils product image Commonly used techniques : Rebate, Discount, Refunds, Product combinations, Quality gifts, Contests, etc.

ns

Fe

Marketing Management Philosophies

at ur es

Meaning

tio nc

1. Zero level producer → consumer 2. One level producer →Retailer→consumer 3. Two level producer Wholesaler→Retalet → Consumer 4. Three level producer Wholesaler→Retalet → Consumer

Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept

Refers to planning, organising, directing and controlling of activities which facilitate exchange of goods

Exchange mechanism for goods/services. Addition of customer value to product. Creation of market offering. Identification and satisfaction of needs.

Consists of all those activities, which satisfy needs and wants of present and potenital customers better than the competitors.

Gathering and Analysing Market Information, Marketing Planning, Product Designing and Development, Standardisation and Grading, Packaging and Labelling, Branding, Pricing and Promotion, Physical Distribution and Transportation, Storage, Customer Support Services.

Making goods and service available at the right place and right time

Factors affecting price determination: Cost of the product Utility and demand Extent of competition Government and legal regulations Pricing objectives Marketing methods

Marketing Management

Marketing

Fu

Role: Develop goodwill Affect public opinion Improve reputation

aging of product Pack



f product ng o elli



b La



108 Oswaal CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

109

MARKETING

(xi) Transportation: ƒ Transportation means the physical movement of goods from one place to the other. ƒ Various factors like the nature of the product, cost, location of target market etc. should be considered in choosing the mode of transport. (xii) Storage or Warehousing: ƒ To maintain a smooth flow of products in the market, there is a need for proper storage of the products. ƒ Storage and warehousing are used to protect against unavoidable delays in delivery or to meet contingencies in the demand. ¾ Difference between Marketing and Selling: { Marketing: It refers to a large set of activities of which selling is just one part. A marketer before making the sale does a lot of other activities such as planning the type, design of the product, fixing the price, selecting the distribution channels and choosing the right promotional mix for the target market. { Selling: It refers to the sale of goods or services through publicity, promotion and salesmanship. The title of the product is transferred from the seller to the buyer. The main purpose of selling is to convert products into cash. { Marketing Mix: A large number of factors affect the marketing decisions, they are non-controllable factors and Controllable factors. Controllable factors are those factors, which can be influenced at the level of the firm.Certain factors which affect the decision but are not controllable at the firm’s level are called environmental variables. To be successful, a firm needs to make sound decisions after analysing controllable factors while keeping the environmental factors in mind.The set of marketing tools that a firm uses to pursue its marketing objectives in the target market is described as Marketing Mix. Success of a market often depends upon how well these ingredients are mixed to create superior value for customers while achieving the sales and profit objective.

¾ Elements of Marketing Mix: The marketing mix consists of four main elements A. Product B. Price C. Place/Physical Distribution D. Promotion. These elements are more popularly known 4 P’s of marketing. ¾ Product and its nature: A product is something that is made with the purpose of being sold in the marketplace. The use of products satisfies the needs of customers. All marketing operations centre around the product, which is one of the most important aspects of marketing. Classification of the Product Products can be classified as – a) Consumer products and b) Industrial products. Products which are purchased by the ultimate consumers or users for the satisfaction of personal needs and desires are referred to as consumer products. For E.g., soap, fans, eatables etc. Consumer products can be classified into three broad categories

(a) Convenience products: These are the consumer products, which are purchased frequently, immediately and with the least time and effort. For E.g., pencil, icecream, bread etc. (b) Shopping products: The products where buyers spend considerable time to compare the quality, price, style, suitability, etc., at several stores, before making a final purchase are shopping products. (c) Speciality products: The products which have certain special features because of which people make special efforts in their purchase are speciality products. For e.g., art and artefacts. ¾ On the basis of durability: On the basis of durability, consumer products can be classified as- Durable, non-durable and services. (a) Durable: The tangible products which survive many years like T.V., Refrigerator etc. (b) Non-Durable: The consumer products which are consumed in one or few uses like soap, detergent, toothpaste etc. (c) Services: These are the intangible benefits offered for sale like dry cleaning, hair cutting etc. ¾ Industrial Products: The products which are used in the production of other goods are industrial products. These can be classified into the following categories: (i) Material and parts: These are the goods that enter the manufacturer’s products completely like raw materials, manufactured materials etc. (ii) Capital items: These are the goods that are used in the production of the finished goods like computers, elevators etc. (iii) Supplies and business services: These are the short-lasting goods and services that facilitate developing or managing the finished products like nails, lubricants, stationery items etc. Product Mix: All the features of the product or service to be offered for sale. Branding: Creates a picture of a company’s products in customers’ minds by associating items with specific distinctive traits or characteristics that appeal to the target audience when done successfully. Packaging: Is “an activity concerned with protection, economy, convenience, and promotional consideration.” Packaging may be described as “the broad set of operations in product planning that includes designing and manufacturing the product’s container or wrapper.” A label is a product component that conveys linguistic information about the product or seller. It may be a tiny scrap of paper or a written statement.” ¾ Price Mix ¾ Physical Distribution: It refers to a set of decisions taken to make the product available to customers for purchase and consumption. The marketer needs to make sure that the product is available in the right quantity, at the right time and in the right place. Channels of Distribution are set of firms and individuals that take title or assist in transferring title to particular goods or services as they moves from the producers to the consumers.

110 Oswaal CUET (UG) Chapterwise Question Bank ¾ Role of Physical Distribution: One of the most crucial marketing functions is physical distribution. This refers to the activities involved in moving raw materials from suppliers to manufacturers and finished goods from a distribution centre to the consumer. ¾ Channels of Distribution: It includes Scan to know more about a series of firms, individuals, merchants and this topic functionaries who form a network which helps in the transfer of the title of a product from the producer to the end consumer. The intermediaries help to cover a large Channels of geographical area and bring efficiency in Distribution distribution, including transportation, storage and negotiation. They also bring convenience to customers as they make various items available at one store and also serve as an authentic source of market information as they are in direct contact with the customers. ¾ Types of Channels: Direct Channel (Zero Level) A direct relationship is established between the manufacturer and the customer. Manufacturer-Customer. E.g., mail order, internet, door-to-door selling. Indirect Channel: When a producer employs one or more intermediaries to move goods from the point of production to the point of sale, the distribution network is called indirect. (i) Manufacturer-Retailer-Customer (One Level Channel): In this one intermediary i.e., retailers are used between the manufacturers and the customers. Usually used for speciality goods like expensive watches, appliances, Cars( Maruti Udyog) etc. (ii) Manufacture-wholesaler-Retailer-customer (Two Level Channel): This channel is mainly used for the distribution of consumer goods. Usually used for consumer goods like soaps, salt etc. (iii) Manufacture → Agent → Wholesaler → Retailer → Customer (Three Level Channel): In this case, manufacturersuse their own selling agents or brokers who connect them with wholesalers and then the retailer and the consumers. ¾ Factors Determining Choice of Channels of Distribution: The Choice of an appropriate channel of distribution is a very important marketing decision. (i) Product Related Factors: The nature of the product, whether it’s an industrial good or consumer good, perishable or a non-perishable product etc. determines the channel used in the distribution. (ii) Company Characteristics: The financial strength of the company and the degree of control it wants to hold on other channel members. Short channels are used to have greater control over intermediaries and vice versa. (iii) Competitive Factors: Companies may imitate the channels used by their competitors. (iv) Market Factors: The size of the market and the geographical concentration of potential buyers affect the channel selection.

BUSINESS STUDIES

(v) Environmental Factors: Legal constraints and the economic condition of a country affect the channel of distribution. In a depressed economy, marketers use shorter channels for distribution. ¾ Promotion: Promotion refers to the use of communication with the twin objective of informing potential customers about a product/service and persuading them to buy it. Promotion is an important element of the marketing mix where marketers use various tools of communication to encourage the exchange of goods and services in the market. ¾ Promotion Mix: Promotion mix refers to the combination of promotional tools used by an organisation to achieve its communication objectives. Promotion mix tools are: (i) Advertising, (ii) Personal Selling, (iii) Sales Promotion and (iv) Publicity. ¾ Role of Advertising and Personal Selling: Advertising plays the role of broadcasting a product or service to a large audience, creating awareness, generating interest, and building a brand image. It paves the way for personal selling by educating the potential customers about the product or service. ¾ Objections to Advertisement: (i) Adds to Cost: Advertising unnecessarily adds to the cost of a product which is passed on to the buyer in the form of high prices. (ii) Undermines Social Values: It undermines social values and promotes materialism. (iii) Confuses the Buyers:A product of a similar nature/ quality confuses the buyer. (iv) Encourages Sale of Inferior Products: It does not distinguish between superior and inferior products. (v) Some Advertisements are in Bad Taste: They show something which is not approved by some people. ¾ Meaning of Price: Sum of the values that consumers exchange for the benefit of having or using the product. It is the amount of money paid by a buyer (or received by a seller) in consideration of the purchase of a product or a service. ¾ Factors Influencing Pricing: (i) Pricing Objectives: The objective of the marketing firm is to maximise profits. Pricing objectives can be determined in the short- run and in the long-run. If the firm decides to maximise profits in the short-run, it will charge maximum price for its products. But if it is to maximise its total profit in the long-run, it will opt for a lower per unit price so that it can capture a larger share of the market and earn greater profits through increased sales. (ii) Product cost: Price covers all costs and aims to earn a fair return over and above cost. It includes the costs of producing, distributing and selling the product. Cost sets the floor price which is the minimum price at which the product may be sold. Price should recover Total costs (Fixed costs/overheads + Variable costs+ Semi-variable costs) in the long run, but in certain circumstances (introduction of a new product or due to entry into a new market) product price may not cover all the costs for a short while.

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(iii) Utility and demand: Utility provided by the product and the demand for the product set the upper limit of the price that a buyer would be willing to pay for a product. Buyers would be ready to pay to till the point, where the utility of the product is more than or equal to the utility derived from it. The law of demand states that consumers purchase more at a lesser price. Elasticity of demand is the responsiveness of demand to changes in the prices of a product. Demand is elastic if a small change in price results in a large change in quantity demanded. If demand is inelastic, firms can fix higher prices.

(iv) The extent of Competition in the market: Prices of competitors and their anticipated actions need to be considered before fixing prices. (v) Government Policies: In the public interest, the government can intervene to regulate the price of the products. (vi) Marketing Methods Used: The price fixation process is also affected by other elements of marketing such as the distribution system, sales promotion efforts, the type of packaging, product differentiation, credit facility, etc.

OBJECTIVE TYPE QUESTIONS over charged by its competitors

[A] MULTIPLE CHOICE QUESTIONS 1. Which Marketing Management philosophy has a main focus on existing products? [CUET 2023] (A) Selling concept (B) Production concept (C) Product concept (D) Marketing concept 2. Which element of Marketing Mix refers to activities that make a firm’s product available to the target customers? (A) Promotion (B) Place [CUET 2023] (C) Price (D) Product 3. Match List-I with List-II 

[CUET 2023]

List-I



List-II

A Convenience I products

Consumed in one or few uses

B

Shopping products

II

Brand loyalty of the highest order

C

Speciality products

III Purchased frequently

D

Non-durable products

IV

Buyers devote considerable time

Choose the correct answer from the options given below:

(A) (A)-(III), (B)-(IV), (C)-(II), (D)-(I) (B) (A)-(III), (B)-(II), (C)-(IV), (D)-(I) (C) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (D) (A)-(I), (B)-(II), (C)-(III), (D)-(IV) 4. Arrange the Channels of Distribution in order for a consumer product  [CUET 2023] A. Consumer

B. Retailer

C. Wholesaler

D. Producer



Choose the correct answer from the option given below:

(A) A, B, C, D

(B) D, C, B, A

(C) C, A, B, D

(D) A, D, C, B

5. Which of the following are the advantages of branding to a marketer?  [CUET 2022] A. Enables making product differentiation B. Helps in protecting the product C. Helps in advertising and displaying programmes D. To pay different prices for its products different from the

E. Help in product identification

Choose the correct answer from the options given below:

(A) A and D only

(B) A and B only

(C) B and E only

(D) A and C only

6. Fill in the blank:

The earlier approach of caveat emptor, which means “Let the buyer beware”, has now been changed to ________, which means, “Let the seller beware”.  [CUET 2022]

(A) Caveat venditor

(B) Caveat viewer

(C) Caveat vendor

(D) Caveat retailer

7. Offering products at special prices to clear off the excess inventory is an example of ________ type of Sales Promotion activity. [CUET 2022] (A) Unable Benefit

(B) Discount

(C) Rebate

(D) Refund

8. Identify the concept of marketing which pays attention to the social, ethical and ecological aspects of marketing along with customer satisfaction. [CUET 2022] (A) Production Concept

(B) Product Concept

(C) Marketing Concept

(D) Societal Concept

9. As the volume of advertising is getting more and more expanded, it is becoming difficult to make advertising messages heard by the target prospects. This will affect the _____ of advertising. [CUET 2022] (A) Social values

(B) Preference

(C) Effectiveness

(D) Criticism

10. Zolo, a marketer of cars having 40 % of the current market share of the country aims at increasing the market share to 70% in the next few years. For achieving this objective, the manager of the company specified the action programme covering various aspects. Identify the function of marketing discussed above:  (A) Customer support services (B) Gathering and analysing market information (C) Product designing and development (D) Marketing Planning 11. That part of brand which can be recognised but is not utterable is called ______.  [CUET 2022]

112 Oswaal CUET (UG) Chapterwise Question Bank (A) Brand name

(B) Trade mark

(C) Brand mark

(D) Patent

12. Which one of the following is not true about objections to advertising? [CUET 2022] (A) Advertisements which make similar claims confuses the buyers. (B) Advertising is a very economical mode of communication. (C) Advertising does not distinguish between superior and inferior products. (D) Advertising undermines social value and promote materialism.

BUSINESS STUDIES

the medicine. Identify the tool of promotion used by ‘Safe Life Technologies Private Ltd.’ in the above case: (A) Advertising

(B) Sales promotion

(C) Personal selling

(D) Public relations

18. “A popular brand of Hair Conditioners comes in different categories for different hair, say for normal hair and for other categories”. Identify the function of labelling in the above example.  (A) Providing information required by law (B) Describe the product and specify its contents (C) Grading of products

13. The element of marketing mix by which marketers make use of various tools of communication to encourages and exchange of goods and services in the market is called:

(D) Promotion of products

(A) Branding

(B) Promotion

(A) Production tools

(B) Promotional tools

(C) Physical distribution

(D) Price

(C) Marketing tools

(D) Selling tools

14. The tool of promotion which involves making use of shortterm incentives designed to encourage the buyers to make immediate purchase of a product or a service is called: (A) Advertising

(B) Personal selling

(C) Sales promotion

(D) Public relations

15. Harshita Verma has set up a factory to manufacture herbal hand sanitisers in Meerut. The size and shape of the bottles in which the products are packed are specially designed so that it should be convenient to handle and use by the consumers. The bottles in which the sanitisers are packed are a part of: (A) Primary packaging (B) Secondary packaging

19. Marketing mix is a set of _____________ that the firm uses to pursue its marketing objectives in the target market.

20. A brand or part of the brand that is given legal protection is called _____________ . (A) Brand Mark

(B) Trademark

(C) Brand

(D) Brand name

[B] ASSERTION & REASON Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false.

(C) Tertiary packaging (D) Both secondary and tertiary packaging 16. Priya Seth, a fashion designer, has launched a new range of dresses by the name, ‘Sukriti’. To give her dresses a distinct image and to distinguish them from the competitor’s products, she has designed a unique symbol with a distinct colour scheme. This symbol is available on all the labels, packaging and advertising campaigns of this new range of dresses. She has also registered this symbol to give it a legal protection against its use by other firms. From the following, name the term used to denote the symbol designed by Priya Seth in the above case: (A) Brand mark

(B) Trademark

(C) Brand name

(D) Brand icon

17. ‘Safe Life Technologies Private Ltd.’ is a renowned pharmaceutical company in India. It has launched a new medicine to treat high blood pressure. To create awareness about the new medicine and to build a positive image about it, the company organised a seminar, which was attended by doctors from various hospitals and dealers in medicine. During the seminar, the representatives of the company discussed the chemical composition and the functioning of

(D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): The design of the product contributes to making the product attractive to the target customers. Reason (R): Customer support services are very effective in bringing repeat sales from customers and developing brand loyalty for a product. 2. Assertion (A): A marketer has to take several crucial decisions with respect to the promotion of the products and services. Reason (R): Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. 3. Assertion (A): Gathering and analysing market information is necessary to identify the needs of the customers. Reason (R): Marketing is concerned with the exchange of goods and services from producers to consumers. 4. Assertion (A): Marketing includes many activities that are performed even before goods are actually produced, and continue even after the goods have been sold.

Reason (R): In modern times, emphasis is placed on describing marketing as an economical process.

5. Assertion (A): Personal selling plays a very important role in the introduction stage of a new product.

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Reason (R): Personal selling helps in persuading customers about the merits of the product.

6. Assertion (A): That part of a brand, which can be spoken is called a brand name.

Reason (R): That part of a brand which can be recognised but which is not utterable is called trademark

7. Assertion (A): Advertising is a medium through which a large number of people can be reached.

Reason (R): Advertising is less flexible.

8. Assertion (A): In personal selling, a direct face-to-face dialogue takes place that involves an interactive relationship between the seller and the buyer.

Reason (R): Personal selling allows a salesperson to develop personal relationships with prospective customers, which may become important in making sale.

9. Assertion (A): Marketing orientation implies that focus on satisfaction of customer’s needs is the key to the success of any organisation in the market.

Reason (R): The marketing concept is based on the identification of the market or customer who is chosen as the target of the marketing effort

10. Assertion (A): The job of the marketer is to add to the value of the product so that the customer prefers it in relation to the competing products and decides to purchase it.

Reason (R): A product will be purchased only if it is perceived to be giving the greatest benefits for the money. [C] CASE BASED QUESTIONS

I. Read the following text and answer the questions that follow: (Q1-Q5)

‘Hayaram’ is a famous chain selling a large variety of products in the Indian market. Their products include chips, biscuits, sweets and squashes. It charges a comparatively higher price than its competitors as it sells quality products. Besides, it offers regular discounts to its customers and easy credit terms to its retailers. It has five of its own retail shops. It also sells its products through various grocery stores so that the products are made available to customers at the right place, in the right quantity and at the right time. It regularly uses different communication tools to increase its sales. But it is also concerned about the impact as the potential customers or the prospects can’t be delivered the message compulsively. So there is one scheme the company has decided to launch where chips will be provided with an additional cold drink for a particular time period. It not only satisfies its customers but also provides employment to handicapped people.

1. The above para describes the combination of variables used by Hayaram to prepare its market offering. The combination of variables used by ‘Hayaram’ to prepare its market offering is termed as ___________. (A) Promotion mix

(B) Sales Mix

(C) Price Mix

(D) Marketing Mix

2, “It also sells its products through various grocery stores so that the products are made available to customers at the

right place, in the right quantity and at the right time.”

Identify the element of the marketing mix stated above.

(A) Product

(B) Price

(C) Place

(D) Promotion

3. Identify the sales promotion technique decided to be used by ‘Hayaram’. (A) Product combination (B) Rebate (C) Quantity plus (D) Usable benefits 4. “It charges a comparatively higher price than its competitors as it sells quality products.” Identify the element of the marketing mix stated above. (A) Product (B) Price (C) Place (D) Promotion 5. Identify the combination of variables used by Hayaram to prepare its market offering. (A) Product , Price and Place (B) Product, price, place and promotion (C) Product and place (D) Price II. Read the following text and answer questions that follow: (Q6-Q10)

Atul was a pen manufacturer. He used to make ballpoint pens in a small factory in the basement of his house. Daily he would go to the marketplace and distribute pens to the retailers. Some of the pens were sold by him of his own by meeting persons on the road. He had not kept any name for his pens. They were just blue, black and red pens. One of his friends suggested him to keep a good name for his pens. He kept his own name and started selling pens with the name of Atul Pens. Then, there were three categories of pens – Atul Red, Atul blue and Atul black. Gradually, his business started to pick up even more and he made good revenue. Moreover, he performs various activities like, market analysis, product designing or merchandising, packaging, warehousing, branding, pricing, promotion and selling in order to maintain good customer relations through various follow up activities. This helps him in procuring repeat sales orders.

6. Which function of marketing is highlighted in the above case? (A) Branding (B) Packaging (C) Labelling (D) None of these 7. Which element of the promotion mix has been highlighted in the above case? (A) Advertising (B) Personal selling (C) Publicity (D) Sales promotion 8. Initially, Atul had kept no name for the product. He used the _________ name. (A) Generic name (B) Brand name (C) Both A and B (D) None of these 9. Warehousing is a part of which element of marketing mix? (A) Product Mix (B) Place Mix (C) Promotion Mix (D) Price Mix

114 Oswaal CUET (UG) Chapterwise Question Bank 10. Atul made many new product related decisions later. Which product-related decision is concerned with providing detailed information about the product on its package? (A) Branding

BUSINESS STUDIES

(B) Packaging (C) Labelling (D) Both branding and packaging

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (A)

2. (B)

3. (A)

4. (B)

5. (B)

6. (A)

7. (B)

8. (D)

9. (C)

10. (D)

11. (C)

12. (B)

13. (B)

14. (C)

15. (A)

16. (B)

17. (D)

18. (C)

19. (C)

20. (B)

8. (A)

9. (B)

10. (A)

8. (A)

9. (B)

10. (C)

[B] ASSERTION & REASON 1. (B)

2. (A)

3. (B)

4. (C)

5. (A)

6. (C)

7. (B)

[C] CASE BASED QUESTIONS 1. (D)

2. (C)

3. (A)

4. (B)

5. (B)

6. (A)

7. (C)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS

sociated with the brand.

1. Option (A) is correct.

6. Option (A) is correct.

Explanation: The main focus in the production concept is on the quantity of product produced. In the product concept, it is on the quality of the product. Marketing concept, it is on the needs and wants of the consumers. However, selling concept focuses on the existing product only and works by using aggressive selling and promoting techniques, in order to gain profits.

Explanation: The shift from “caveat emptor” to “caveat venditor” signifies a change in responsibility from the buyer to the seller, emphasizing that sellers are now expected to take greater responsibility for the quality and accuracy of the products they offer, ensuring consumer protection.

2. Option (B) is correct. Explanation: The “Place” element of the Marketing Mix focuses on the distribution and availability of a firm’s product, determining where and how it is made accessible to the target customers. It involves decisions related to channels, locations, and logistics to ensure products reach their intended market. 3. Option (A) is correct. Explanation: There are different types of goods, namely: Convenience products, which are purchased frequently. Shopping products, which buyers devote considerable time for buying. Speciality products offer brand loyalty of the highest order. Non-durable products are to be consumed in one or few uses. 4. Option (B) is correct. Explanation: The channel of distribution often followed for consumer goods is as follows: Two-level channel: Producer → Wholesaler → Retailer → Consumer. 5. Option (B) is correct. Explanation: A. Enables making product differentiation: Branding allows marketers to create a unique identity for their products, making them stand out in the market and enabling differentiation from competitors. C. Helps in advertising and displaying programs: A strong brand can facilitate marketing and advertising efforts, as well as product display, by leveraging the recognition and trust as-

7. Option (B) is correct. Explanation: Offering products at special prices, to clear off excess inventory. Example, a car manufacturer’s offer to sell a particular brand of car at a discount of ` 10,000, for a limited period. 8. Option (D) is correct. Explanation: The Societal Concept in marketing focuses on not only meeting customer needs but also addressing social, ethical, and environmental concerns in marketing practices, emphasizing a broader responsibility to society beyond profit. It involves considering the well-being of all stakeholders and the impact of marketing on society. 9. Option (B) is correct. Explanation: The effectiveness of the advertising will be affected in case the messages are not seen by the people. 10. Option (D) is correct. Explanation: A marketer is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved. For example, a marketer of colour TV, having 10 per cent of the current market share in the country, aims at enhancing his market share to 20 per cent, in the next three years. He will have to develop a complete marketing plan covering various important aspects including the plan for increasing the level of production, promotion of the products, etc. and specify the action programmes to achieve these objectives.

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11. Option (C) is correct. Explanation: Brand mark is that part of the brand which is recognised in the form of symbol, colour, etc. but is non-utterable. 12. Option (B) is correct. Explanation: The objection about the advertising is advertisement of a product costs lot of money. But it helps to increase the demand for the product as large number of potential buyers come to know about the availability of the products, its features etc. and are persuaded to buy it. The increased demand leads to higher production, which brings with it the economies of scale. 13. Option (B) is correct. Explanation: Promotion refers to the use of communicatio with the twin objective of informing potential customers about a product and persuading them to buy it. Promotion is an important element of marketing mix by which marketers make use of various tools of communication to encourage exchange of goods and services in the market. Various tools of communication are used by the marketers to inform and persuade customers about their firm’s products. These include: (i) Advertising, (ii) Personal Selling, (iii) Sales Promotion, and (iv) Publicity. These tools are also called elements of promotion mix and can be used in different combinations to achieve the goals of promotion. 14. Option (C) is correct. Explanation: Sales promotion refers to short-term incentives, which are designed to encourage the buyers to make immediate purchase of a product or service. These include all promotional efforts other than advertising, personal selling and publicity, used by a company to boost its sales. Sales promotion activities include offering cash discounts, sales contests, free gift offers, and free sample distribution. Sales promotion is usually undertaken to supplement other promotional efforts such as advertising and personal selling. 15. Option (A) is correct. Explanation: It refers to the product’s immediate container. In some cases, the primary package is kept till the consumer is ready to use the product (e.g., plastic packet for socks); whereas in other cases, it is kept throughout the entire life of the product (e.g., a toothpaste tube, a matchbox, etc.) 16. Option (B) is correct. Explanation: A brand or part of a brand that is given legal protection is called a trademark. The protection is given against its use by other firms. Thus, the firm which got its brand registered gets the exclusive right for its use. In that case, no other firm can use such a name or mark in the country. 17. Option (D) is correct. Explanation: Public relations involve a variety of programmes designed to promote or protect a company’s image and its individual products in the eyes of the public. Speeches by the company’s executives at a meeting of trade associations or trade fairs can really boost the company’s image. Public relations

are especially useful when there is negative publicity about the company or its products. At that time, the situation had to be tackled like an emergency to improve the public image. The public relations department then hadto do something drastic so that damage to the company’s image is controlled and minimised. They also advise top management to adopt certain programmes which will add to their public image and ensure that negative publicity does not take place at all. 18. Option (C) is correct. Explanation: Grading is the process of classification of products into different groups, on the basis of some of its important characteristics such as quality, size, etc. 19. Option (C) is correct. Explanation: Marketing mix is described as the set of marketing tools that a firm uses to pursue its marketing objectives in a target market. The marketing manager concentrates on four major decision areas while planning the marketing activities, namely, (i) products, (ii) price, (iii) place (distribution) and (iv) promotion. These 4 ‘P’s are called elements of marketing and together they constitute the marketing mix. All these are interrelated because a decision in one area affects decisions in other areas. 20. Option (B) is correct. Explanation: A brand or part of a brand that is given legal protection is called a trademark. The protection is given against its use by other firms. Thus, the firm which got its brand registered, gets the exclusive right for its use. In that case, no other firm can use such a name or mark in the country. [B] ASSERTION & REASON 1. Option (B) is correct. Explanation: The design of the product contributes to making the product attractive to the target customers is true because an attractive and well-designed product can indeed appeal to customers. Customer support services are very effective in bringing repeat sales from customers and developing brand loyalty for a product is also true because good customer support services can enhance customer satisfaction and loyalty. 2. Option (A) is correct. Explanation: Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. The four important methods of promotion include advertising, personal selling, publicity and sales promotion. A marketer has to makeseveral crucial decisions with respect to the promotion of the products and services such as deciding the promotion budget, the promotion mix, i.e., the combination of the promotional tools that will be used, the promotion budget, etc. 3. Option (B) is correct. Explanation: One of the important functions of a marketer is to gather and analyse market information. This is necessary to

116 Oswaal CUET (UG) Chapterwise Question Bank identify the needs of the customers and take various decisions for the successful marketing of the products and services. This is important for making an analysis of the available opportunities and threats as well as strengths and weaknesses of the organisation and helps in deciding what opportunities can best be pursued by it. Marketing is concerned with the exchange of goods and services from producers to consumers or users in such a way that maximises the satisfaction of customers’ needs. 4. Option (C) is correct. Explanation: Marketing is not merely a post-production activity. It includes many activities that are performed even before goods are actually produced, and continue even after the goods have been sold. For example, activities such as identification of customer needs, collection of information for developing the product, designing suitable product package and giving it a brand name are performed before the commencement of the actual production. In modern times, emphasis is placed on describing marketing as a social process. It is a process whereby people exchange goods and services for money or for something of value to them. 5. Option (A) is correct. Explanation: Personal selling is a very effective promotional tool, which helps in influencing the prospects about the merits of a product and thereby increasing its sales. 6. Option (C) is correct. Explanation: That part of a brand which can be recognised but which is not utterable is called brand mark. It appears in the form of a symbol, design, distinct colour scheme or lettering. A brand or part of a brand that is given legal protection is called a trademark. 7. Option (B) is correct. Explanation: Advertising is a medium through which a large number of people can be reached over a vast geographical area. For example, an advertisement message placed in a national daily reaches lakhs of its subscribers. Advertising is less flexible as the message is standardised and is not tailor made to the requirements of the different customer groups. 8. Option (A) is correct. Explanation: Personal selling involves the oral presentation of a message in the form of a conversation with one or more prospective customers for the purpose of making sales. It is a personal form of communication. 9. Option (B) is correct. Explanation: The focus of the marketing concept is on customer needs and customer satisfaction becomes the means to achieving the firms’ objective of maximising profit. The purpose of marketing is to generate customer value at a profit. The marketing concept is based on the identification of the market or customer who is chosen as the target of the marketing effort, understanding needs and wants of customers in the target market, developing of products or services for satisfying the needs

BUSINESS STUDIES

of the target market and satisfying the needs of target market better than the competitors. 10. Option (A) is correct. Explanation: The marketing core function is to add value to the product. People look at the utility of the product while spending the money. [C] CASE BASED QUESTIONS 1. Option (D) is correct. Explanation: Marketing mix is described as the set of marketing tools that a firm uses to pursue its marketing objectives in a target market. 2. Option (C) is correct. Explanation: Place or Physical Distribution includes activities that make a firm’s products available to the target customers. 3. Option (A) is correct. Explanation: Offering another product as a gift along with the purchase of a product, say offer of a pack of ½ kg of rice with the purchase of a bag of Atta (wheat flour), or ‘Get 128 KB Memory Card Free with a Digicam’ or Buy a TV of 25+ and Get a Vac¬uum Cleaner Free’ or ‘100 Gm Bottle of Sauce Free With 1 kg Detergent.’ 4. Option (B) is correct. Explanation: Pricing is considered to be an effective competitive weapon. In the conditions of perfect competition, most of the firms compete with each other on the basis of this factor. It is also the single most important factor affecting the revenue and profits of a firm. Thus, most marketing firms give high importance to the fixation of price for their products and services. 5. Option (B) is correct. Explanation: The combination of variables used by Hayaram are: 1. Product: Product means goods or services or ‘anything of value’, which is offered to the market for exchange. Here, they sell products which include chips, biscuits, sweets and squashes. 2. Price: is the amount of money customers have to pay to obtain the product. In the case of most of the products, level of price affects the level of their demand. It is mentioned that it charges a comparatively higher price than its competitors as it sells quality products. 3. Place: Place or Physical Distribution includes activities that make the firm’s products available to the target customers. Here, it is said that they have five retail shops of their own and they sell their products through various grocery stores so that the products are made available to customers at the right place, in the right quantity and at the right time. 4. Promotion: Promotion of products and services includes activities that communicate the availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It is stated that they regularly use different communication tools to increase their sales.

117

MARKETING

6. Option (A) is correct.

with the type of product and not with a specific product.

Explanation: The function of marketing highlighted in the above case is Branding (One of his friends suggested him to keep a good name for his pens).

9. Option (B) is correct.

7. Option (C) is correct. Explanation: The element of promotion mixes which has been highlighted in the above case is Personal Selling (Daily he would go to the marketplace and distribute pens to the retailers. Some of the pens were sold by him on his own by meeting persons on road). 8. Option (A) is correct. Explanation: A generic name is a name which is associated

Explanation: Warehousing is the act of storing and assorting products in order to create time utility in them. It is a part of place mix. 10. Option (C) is correct. Explanation: Labelling refers to designing and developing the label to be put on the package. One of the most important functions of labels is to give detailed information about the product i.e., describe the product, its usage, cautions in use, etc. and specify its contents.

CHAPTER

12

CONSUMER PROTECTION

  Revision Notes: ¾ Introduction:

¾ Introduction to Consumer Protection: As per the Consumer Protection Act, 2019, a consumer is defined as a person who buys any good or avails a service for consideration. It does not include a person who obtains a good for resale or a good or service for commercial purposes. It covers transactions through all modes including offline, and online through electronic means, tele shopping, multi-level marketing or direct selling. ¾ Importance of Consumer Protection:

Scan to know more about this topic

(i) From the Point of View of Consumers: ƒ Consumers are ignorant about their rights and duties. So, they should be educated in order to remove their Importance of Consumer Proignorance and lack of knowledge. tection ƒ Consumers are unorganised as generally; they do not have the necessary qualities to fight in an organised manner against fraud and malpractices. ƒ Consumers are widely exploited by dishonest companies and business firms. They become victims of unfair trade practices, hoarding, black marketing etc. (ii) From the Point of View of Business: ƒ Long-term Interest in Business: If the business takes care of the long-term interests of consumers, then it grows. ƒ Moral Justification: It is the moral duty of the business to look after the interests of the consumers and avoid exploitation. These business ethics promote the welfare of consumers and in turn, helps business. ƒ Government intervention: In order to avoid legal intervention in the present and future, business firms adopt good practices for consumers. ƒ Business uses society’s resources. As business uses resources that belong to society as inputs to produce goods as output, it should fulfil its responsibilities towards consumers. ƒ Social responsibility. Businesses should take care of consumers as they are also important. ¾ Rights of a Consumer: Consumer Protection Act, 1986 has provided six rights to consumers, which are as follows: (i) Right to Safety: Consumer has the right to be protected against goods and services which are hazardous to health and life. For example: One should use electronics with ISI mark only.

(ii) Right to be Informed: Consumer has the right to have complete information about the product before buying it.

CALORIE INFORMATION Right up front

140

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CALORIES PER CAN

Consumer Right

12 FL 07

(iii) Right to choose: Consumer has a right to choose any product out of the available products as per his own decision-making. I want to buy a micro-wave of a good quality

Mam, you Maam you can can buy this one

Hmm, No give me, than one with ISI mark

(iv) Right to be heard: Consumer has the right to file a complaint to be heard in case of dissatisfaction with goods or services (use of grievance cell) (v) Right to Seek Redressal: Consumer has the right to get relief in case the product or service falls short of his expectations or is dangerous. He may be provided with replacement/removal of defect or compensation for any loss. Various redressal forums are set up by the Government at the National and State level. (vi) Right to consumer education: Consumer has the right to acquire knowledge and to be well informed throughout life. He should be made aware of his rights and reliefs available to him in case the product or service falls short of his expectations. The Government of India has included consumer education in the school curriculum and is making use of media to make consumers aware of their rights.

Importance

Vi ew

Concept

iew

Busines s' Po int of

Consumers' Point of V

Consumer Protection means to prevent consumers from being exploited from the sellers of goods and services.

Avoids widespread exploitation Protect and promote interests of unorganised consumers Educates consumers to avoid consumer ignorance

Helps in avoiding government intervention Moral justification Fulfills social responsibility Serves society as organisations use society's resources Consumer satisfaction for long-term interest

Be aware about goods and services Buy standardised goods Learn associated risks Read labels carefully Get a fair deal Obtain cash memo File complaint Form consumer societies Buy legal goods only Respect environment

Consumer Protection

Consumer Protection Act, 2019

A

nt lai

t On es

First Level

Second Level

Third Level

Consumer Coordination Council, Delhi Common Cause, Delhi VOICE, Delhi Consumer Protection Council, Ahmedabad Mumbai Grahak Panchayat, Mumbai CUTS, Jaipur

Educate public Publish periodicals Test consumer products Encourage consumers to protest Provide legal assistance File complaints

A Consumer is one that buys goods for the consumption and not for resale or commercial purpose. The consumer also hires service for a consideration.

Trace the Mind Map

tions/ Role Func

po rta n

Role of Consumer Organisations and NGOs

aC

Im

?

Any consumer One or more consumers on behalf of numerous consumers Any registered Consumer’s Association Government Legal heirs of a deceased consumer

Right to be protected Right to seek redressal (or relief) Right to be heard (to file a complaint) Right to choose Right to be informed (about the product) Right to consumer awareness

mer ? o ns u

p om

C

o is Wh

n Ca

Co ns u

ho W

le Fi

e

m

s

t gh

i rR



District Commission: A President and two other members (1 must be a woman) Value of goods/services < ` 1 crore State Commission: A President and four more members (1 must be a woman) ` 1 crore < value of goods/services < ` 10 crore National commission: A President and four other members (1 must be a woman) Value of goods/services > ` 10 crore



Remove defect/ deficiency Replace defective product Refund the price Pay compensation Pay damages Discontinue unfair trade practices Discontinue sale of hazardous product Withdraw hazardous product Pay 25% or more of value of goods to consumer welfare fund



CONSUMER PROTECTION

119

120 Oswaal CUET (UG) Chapterwise Question Bank Responsibilities/Duties of a Consumer ¾ Be aware about the goods and services which are available in the market to make an intelligent and wise choice. ¾ Buy standardised goods which can provide quality assurance like FPO for food products, HALLMARK for jewellery, ISI for electronics etc.

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BUSINESS STUDIES

Consumer Protection Act,1986. This act has provided three-tier redressal agencies, i.e., District Forum, National Commission and State Commission. Redressal Agencies Under the Consumer Protection Act, 2019 :

Consumer Responsibility

¾ Be aware about the risks associated with the products and read the manufacturer’s instructions carefully before using the product. ¾ Read the label to get information about the price, net weight, manufacturing and expiry date etc.

(i) District Commission : (a) Consists of one President and two other members (1 must be a woman). (b) Appointed by the concerned State Government. (c) For disputes up to ₹1 crore. (d) If unsatisfied with the decision of the District Commission, a consumer can approach the State Commission within 45 days of passing order.

(iv) Consumer Organisations: Consumer organisations play an important role in educating consumers regarding their rights and duties. These organisations also help consumers to get relief in case of exploitation.

(ii) State Commission : (a) Consists of one President and Scan to know more about a minimum of four other members (1 must this topic be a woman). (b) For disputes from ₹1 crore to ₹10 crores. (c) Appointed by the concerned Redressal State Government. agencies under consumer (d) If unsatisfied, appeal in the protection Act National Commission within 30 days of passing the order. (iii) National Commission : (a) Consists of one President and four other members (1 must be a woman). (b) For disputes exceeding ₹10 crores. (c) Appointed by the Central Government. (d) If unsatisfied with the decision of the National Commission, the consumer can appeal in the Supreme Court about a matter falling in its original jurisdiction within 30 days of passing of the order. (e) In all other cases, the order of the National Commission is final and cannot be challenged further. ¾ Reliefs available (i) To remove the defect or deficiency. (ii) Replace the defective product with new one. (iii) Refund the price paid for the product. (iv) Pay compensation for loss or injury. (v) Pay punitive damage in appropriate circumstances. (vi) Discontinue the unfair trade practice. (vii) Not to offer hazardous good for sale. (viii) Withdraw the hazardous goods from sale. (ix) Cease manufacture of hazardous goods. ¾ Role of consumer organisations and NGOs: These are non-profit organisations which aim at the protection and promotion of the interests of the consumers. Scan to know ¾ Several functions are as follows : more about this topic (i) Educating the general public about consumer rights by organising training programmes, seminars and workshops.

(v) Government: The Government of India has framed a set of laws and legislations to protect the interests of consumers and the most important act framed by government is the

(ii) Publishing periodicals and other publications to impart knowledge about consumer problems.

¾ Assert yourself to get a fair deal. ¾ Deal with products and services with honesty. Buy only legal goods and services and discourage unscrupulous practices. ¾ Take a cash memo as a proof of the purchase made. ¾ File a complaint if a product fails to meet the quality standards. ¾ Form consumer societies to safeguard the interests of consumers and educate them. ¾ Respect the environment and avoid waste, littering and reduce your contribution to pollution. ¾ Ways and means of consumer protection: In India, large numbers of consumers are living below the poverty line and a large number are illiterate and unaware of their rights. So, the consumer protection movement cannot be the same as followed by developed countries. In India, it has to be a social movement wherein people from all walks of life have to play their role. Following are some ways and means of consumer protection followed in India: (i) Self-Regulations by Business: Large business houses have realised that they can prosper and grow for a long period of time only by giving due importance to consumers. Socially responsible firms follow quality standards and have started customer grievances cells to attend to the complaints of consumers. (ii) Business Associations: Various business associations such as the Federation of Indian Chamber of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) have framed a set of codes of conduct which lays down guidelines for dealing with customers. (iii) Consumer Awareness: It is not easy to exploit an educated and well-aware consumer. Consumers must be well aware of their rights, responsibilities and reliefs available to them under Consumer Protection Act.

Role of consumer organizations and NGOs.

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CONSUMER PROTECTION

(iii) Carrying out comparative testing of consumer products in accredited laboratories. (iv) Encouraging consumers to strongly protest and take action against unfair trade practices. (v) Providing legal assistance to the consumers. (vi) Filing complaints in appropriate consumer courts on behalf of the consumers. (vii) Taking the initiative in filing cases in the interest of the general public.

Important Consumer Organisations and NGOs: (i) Consumer Coordination Council, Delhi (ii) Common Causes, Delhi (iii) Voluntary Organisation in Interest of Consumer Education (VOICE), Delhi (iv) Consumer Education and Research Centre (CERC), Ahmedabad (v) Consumer Protection Council (CPC), Ahmedabad (vi) Consumer Guidance Society of India (CGSI), Mumbai (vii) Mumbai Grahak Panchayat, Mumbai (viii) Karnataka Consumer Service Society, Bangalore (ix) Consumers Association, Kolkata (x) Consumer Unity and Trust Society (CUTS), Jaipur

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Mr. X purchased a car for `15 lakh but he is not satisfied with the quality and performance of the car. The company of the car did not provide any remedy to him. Under which authority of Consumer Protection Act, 2019 can he file an appeal? [CUET 2023] (A) District Commission (B) State Commission (C) National Commission (D) None of these 2. Identify the rights provided to consumers by the Consumer Protection Act, 2019: [CUET 2023] A. Right to Safety B. Right to be Informed C. Right to Choose D. Right to be Heard E. Right to be Assured Choose the correct answer from the options given below: (A) A, B, C and D only (B) A, B, C and E only (C) A, B, D and E only (D) A, B and C only 3. As per the Consumer Protection Act, 2019, the State commission has a jurisdiction to entertain complaints where value of goods and services paid as consideration: (A) Does not exceed one crore but more than 20 lakh rupees (B) Exceeds one crore but does not exceed ten crore rupees (C) Exceeds five crores but does not exceed ten crore rupees (D) Exceeds four crores but does not exceed five crores rupees 4. Under which consumer right does a business firm set up a consumer grievance cell? [CUET 2022] (A) Right to safety (B) Right to be informed (C) Right to be heard (D) Right to consumer education 5. Which of the following cannot file a complaint under the Consumer Protection Act?  [CUET 2022] (A) Legal representative of a deceased consumer (B) Registered consumer association (C) Registered Traders’ Association (D) Central or State Government 6. Under which consumer right a consumer can get relief in case the product or service falls short of his expectations?  [CUET 2022] (A) Right to Seek Redressal (B) Right be Informed (C) Right to Safety (D) Right to be Heard 7. Mr. Vivek opened the Geyser box and found a booklet containing information about the geyser. Identify the consumer right highlighted in the above statement. [CUET 2022]

(A) Right to consumer education (B) Right to safety (C) Right to be informed (D) Right to be heard 8. Which Act provides safeguards to consumers against defective goods, deficient services, unfair trade practices and other forms of exploitations: [CUET 2022] (A) Right to Information Act (B) Consumer Protection Act (C) Essential Commodities Act (D) Consumer Prevention Act 9. According to the Consumer Protection Act, 2019 , identify who among the following cannot file a complaint. (A) Any registered consumers’ association [CUET 2022] (B) Central Government or any State Government (C) One or more consumers on behalf of numerous consumers having the same interest. (D) A person who avails of any service for commercial purpose 10. Mohini went to a shopkeeper to buy hair oil. The shopkeeper forced her to buy a particular brand of oil out of the various brands available to him. Which right of Mohini has been violated? [CUET 2022] (A) Right to be informed (B) Right to be assured (C) Right to safety (D) Right to be heard 11. ISI Mark is found on: (A) Electric goods (C) Jewellery

[CUET 2022] (B) Spices (D) Woolen clothes

12. Your mother purchased a washing machine for ₹10,000 from an authorised dealer of the manufacturer with a verbal guarantee that the machine wouldbe replaced with a new one if any of its parts become defective within 3 months from the date of purchase. The motor of the machine was burnt within 15 days of its purchase. On complaining, the seller refused to replace the machine. Name the redressal agency under the Consumer Protection Act where your mother can file the complaint. (A) District Commission (B) State Commission (C) National Commission (D) None of these 13. Under the Consumer Protection Act, 2019, __________ can be approached to file a complaint by the legal heir of a deceased consumer if compensation claimed is for `3 crores? (A) District Commission

(B) State Commission

122 Oswaal CUET (UG) Chapterwise Question Bank (C) National Commission

(D) All of the these

14. Match List I with List II: List-I



List-II

A

District Commission

I

One crore to Ten crore rupees

B

State Commission

II

Appeal against National Commission in a matter of its original jurisdiction.

C

National Commission

III Upto one crore rupees

D

Supreme Court

IV

Exceeds Ten crore rupees

Choose the correct answer from the options given below:

(A) (A)-(I), (B)-(II), (C)-(III), (D)-(IV)

A

It seeks to protect and I promote the interest of consumers

B

It aims to check the adulteration of food articles

II

C

It provides protection against under weight and under measures of the product

III The Consumer Protection Act 2019

D

It provides protection against fraudulent marks on products

IV

The Standards of Weight and Measures Act, 1976 The Trade Mark Act, 1999

The Prevention of Food Adulteration Act, 1954

Choose the correct answer from the options given below: (A) A-I, B-II, C-III.D-IV (B) A-II, B-I, -III, D-IV (C) A-III, B-IV, C-I, D-II (D) A-IV, B-III, C-II, D-I

(B) (A)-(IV), (B)-(III), (C)-(II), (D)-(I) (C) (A)-(III), (B)-(I), (C)-(IV), (D)-(II) (D) (A)-(III), (B)-(I), (C)-(II), (D)-(IV)  15. Ronit Raj, a marketing manager is a patient of diabetes for which he takes medicines regularly. One day, on his tour to Patna, he met with an accident and was hospitalised. Due to doctors’ negligence a delicate nerve in his right leg was cut rendering him crippled throughout his life. Identify the consumer right that has been violated by the doctors under the Consumer Protection Act, 2019 in the above situation. (A) Right to be Assured

(B) Right to be Informed

(C) Right to be Heard

(D) Right to be Protected 

16. “Bhuvan, who was a vegetarian went to a snack bar for having French fries and later found out that it had non-vegetarian content. Neither the advertisement nor the packing of the product displayed that the product has non-vegetarian content.” Which right of a consumer is violated ? (A) Right to Choose

(B) Right to be Informed

(C) Right to be Heard

(D) Right to Seek Redressal

17. ‘The consumer has the right to acquire knowledge and to be a well-informed consumer throughout life’. Identify the right stated in the above lines. (A) Right to Seek Redressal (B) Right to be Heard (C) Right of Consumer Awareness (D) Right to Choose 18. Pragya bought an iron from a reputed brand for ₹1,500 but it caused an electric shock while it was being used. Pragya wants to exercise her ‘Right’. Identify the right which she can exercise. (A) Right to be Assured

(B) Right to be Informed

(C) Right to be Heard

(D) Right to be Protected

19. Match List-I with List-II A List-I

BUSINESS STUDIES

List-II

20. Suman bought a box from cheese of a reputed brand from a local shopkeeper. On opening the box, she found a piece of stone in the cheese. She reported the matter to the shopkeeper who forwarded her complaint to the concerned company. Within a week, the representative of the company visited Suman’s residence with an apology and as a replacement offered her a new cheese pack with four other varieties of cheese as compensation for the inconvenience to her. State the consumer rights which Suman exercised. (A) Right to be heard (B) Right to be protected (C) Right to seek redressal (D) None of the above [B] ASSERTION & REASON Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true but Reason (R) is false. (D) Assertion (A) is false but Reason (R) is true. 1. Assertion (A): Consumer organisations play an important role in educating consumers about their rights and providing protection to them. Reason (R): A consumer should not ask for a cash memo on the purchase of goods or services. 2. Assertion (A): The Consumer Protection Act, 2019 has not defined the criteria of the Consumer Disputes Redressal Commission (CDRCs). Reason (R): Under the Consumer Protection Act, 2019, the National CDRC will hear complaints worth more than `10 crores. 3. Assertion (A): Many enlightened business firms have set up their own consumer service and grievance cells. Reason (R): The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or service. 4. Assertion (A): It is the responsibility of the consumer to buy only standardised goods as they provide quality assurance.

CONSUMER PROTECTION



Reason (R): The consumers have certain responsibilities to follow and should keep a few things in mind while purchasing goods and services.

5. Assertion (A): Markets work in a fair manner.

Reason (R): Consumer awareness is needed to avoid exploitation in the marketplace.

6. Assertion (A): The Consumer Protection Act provides required information related to the rights and remedies available to consumers.

Reason (R): The Consumer is treated as the ‘King’ of the market.

7. Assertion (A): In the event of a violation of any legal right (tort) the aggrieved party is entitled to recover unliquidated damages.

Reason (R): The object of awarding damages to the aggrieved party is to put him in the same position in which he would have been if the wrong had not been committed. Damages are therefore, assessed on that basis.

8. Assertion (A): Appeals against the State Commission can also be filed before the National Commission of the Consumer Protection.

Reason (R): Consumer protection institution is of three tier structure.

9. Assertion (A): A complaint can be filled against the seller, manufacturer or dealer of goods, whose goods are defective.

Reason (R): All complaints pertaining to those goods or services whose value is more than `10 crores can be filed before State Commission.

10. Assertion (A): Under the Consumer Protection Act 2019, a consumer has 8 rights.

Reason (R): In case of the aggrieved party is not satisfied with the order of the state commission, an appeal can be made before the national commission within 30 days. [C] CASE BASED QUESTIONS I. Read the following text and answer the questions that follow: (Q1-Q5)

Piyali purchased an ISI marked Heater from Bharti Appliances for `2,000. She made cash payment but failed to get a cash memo. While making use of the heater she observed that it was not working properly. She contacted the shopkeeper immediately and told him about the problem. The shopkeeper paid no heed to her complaint. Rather, he marked that the good in question was not bought from his shop. Piyali had no evidence to prove that the heater was purchased from his shop only. She discussed the problem with her friend Sohini who advised her to approach Consumer Forum and lodge the complaint. Piyali was convinced by the idea of lodging the complaint against the shopkeeper but due to lack of cash memo it was difficult for her to proceed. 1. Identify the right of the consumer as referred to in the above paragraph. (A) Right to be Informed (B) Right to be Protected

123 (C) Right of Consumer Awareness (D) Right to be Assured 2. Identify the responsibility of the consumer referred in the above case. (A) Quality conscious (B) Must obtain cash memo (C) Cautious consumer (D) Ready to lodga complaint 3. Piyali cannot lodge a complaint against the shopkeeper. Why? (A) She does not have the right (B) She was aware of the fact (C) She does not have the cash memo (D) She was happy with the product 4. Under which Act Piyali can seek to protect her rights being a consumer? (A) Consumer Protection Act, 2019 (B) Consumer Protection Act, 1986 (C) The Indian Contract Act, 1872 (D) The Competition Act, 2002 5. Where can Piyali complain regarding the same? (A) District Commission (B) State Commission (C) National Commission (D) None of these II. Read the following text and answer questions that follow: (Q6-Q10) In a colony, several people purchased mosquito killing rackets from a company. The majority of rackets turned useless within a period of two months. Rishank who was one of the residents of the colony decided to take the matter to the consumer court but the residents were not united and he felt himself alone on the issue. The price of the racket was `450. Meanwhile one of the friends of Rishank who was a journalist reported about the incident in a daily newspaper. When the company learnt about the situation it decided to take a milestone step. The company decided to take back or repair all the faulty rackets from the residents of the society. The whole story took an interesting twist when a technician from the company told the management that in the instruction book provided with the racket it was written to clean the racket with special care after every one month. When enquired, it was found that the residents with faulty rackets including Rishank didn’t clean their rackets after one month. 6. Which important aspect from the consumer point of view is highlighted in the above case? (A) Unorganised consumers (B) Unaware consumers (C) Organised consumers (D) Diverse consumers 7. At which level of consumer court could Rishank apply for the claim of his loss? (A) District Forum (B) State Commission (C) National Commission (D) None of these 8. What was the important aspect from the point of view of business which compelled the company to take such a milestone step? (A) Government intervention (B) Pressure from NGOs (C) Moral Justification (D) Consumer pressure 9. Which consumer responsibility was not followed by the residents of Rishank’s colony? (A) Take the cash memo (B) Following the manufacturer’s instructions

124 Oswaal CUET (UG) Chapterwise Question Bank (C) See the manufacturing and expiry date (D) All of the above 10. Which Consumer Right was followed by the company when they informed the consumers about the use of the

product? (A) Right to be Informed (C) Right to Seek Redressal

BUSINESS STUDIES

(B) Right to be Assured (D) Right to Consumer Awareness

ANSWER KEY

[A] MULTIPLE CHOICE QUESTIONS 1. (A)

2. (C)

3. (B)

4. (C)

5. (C)

6. (A)

7. (C)

8. (B)

9. (B)

10. (C)

11. (D)

12. (A)

13. (D)

14. (B)

15. (A)

16. (B)

17. (C)

18. (D)

19. (C)

20. (C)

8. (B)

9. (C)

10. (D)

8. (C)

9. (B)

10. (A)

[B] ASSERTION & REASON 1. (C)

2. (D)

3. (A)

4. (A)

5. (D)

6. (A)

7. (A)

[C] CASE BASED QUESTIONS 1. (B)

2. (B)

3. (C)

4. (A)

5. (A)

6. (A)

7. (A)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (A) is correct. Explanation: The District Commission consists of one President and two other members appointed by the concerned State Government for disputes up to ₹1 crore. If unsatisfied by the decision of the District Commission, a consumer can approach the State Commission within 45 days of passing of the order. 2. Option (c) is correct. Explanation: Under the Consumer Protection Act, 1986, the Right to Choose has been defined as the consumers’ right to exercise freedom in choosing a product from the variety available at a competitive prices. However, under the Consumer Protection Act, 2019, the right has been renamed as the Right to be Assured. Therefore, the correct answer includes A, B, D and E only. 3. Option (B) is correct. Explanation: As per Consumers Protection Act, 2019, the following is the jurisdiction: District commission – Amount of goods and services up to one crore. State commission – Amount of goods and services from one crore up to ten crores. National commission – Amount of goods and services exceeding ten crores. 4. Option (C) is correct. Explanation: A business firm sets up a consumer grievance cell under the “Right to be heard” aspect of consumer rights. This right ensures that consumers have the opportunity to voice their complaints and concerns about products and services and seek resolution from the company. 5. Option (C) is correct. Explanation: : Registered traders association cannot file a complaint under consumer protection act. 6. Option (A) is correct. Explanation: Under the right to seek redressal, the consumer can get relief in case the product or service falls short of his expectations. 7. Option (C) is correct. Explanation: The right to information is defined as ‘the right to be informed about the quality, quantity, potency, purity, stan-

dard and price of goods or services. 8. Option (B) is correct. Explanation: The Act that provides safeguards to consumers against defective goods, deficient services, unfair trade practices, and other forms of exploitation is the “Consumer Protection Act.” This legislation is designed to protect consumers’ rights and interests in the marketplace by addressing various consumer-related issues. 9. Option (D) is correct. Explanation: Consumer Protection Act is meant for consumers and not for businessman. So, a person availing the service for commercial purpose cannot file a complaint. 10. Option (B) is correct. Explanation: Consumers have the right to make an informed decision themselves. They can choose from the variety of products available without being forced. 11. Option (A) is correct. Explanation: ISI Mark is given to an electric goods to indicate its quality and safety. 12. Option (A) is correct. Explanation: The District Commission consists of one President and two other members appointed by the concerned State Government for disputes upto ₹1 crore. If unsatisfied by the decision of the District Commission, a consumer can approach the State Commission within 45 days of passing the order. 13. Option (B) is correct. Explanation: Under the Consumer Protection Act, 2019 the State CDRC will hear complaints when the value is more than `1 crore but less than `10 crores. 14. Option (C) is correct. Explanation: As per Consumers Protection Act, 2019, the following is the jurisdiction: District commission – Amount of goods and services up to one crore. State commission – Amount of goods and services from one crore up to ten crores. National commission – Amount of goods and services exceeding ten crores. If the complainant is not satisfied with the decision of national commission, he/she may appeal against it, in the Supreme Court.

CONSUMER PROTECTION

15. Option (D) is correct. Explanation: It is the right of the consumers to be protected against goods and services which are hazardous to health or life. For example, defective vehicles could lead to serious accidents. The same is true of electrical appliances with sub-standard material. 16. Option (B) is correct. Explanation: The Right to be Informed is an important component of consumer protection. The consumer must be provided with adequate and accurate information about quality, quantity, purity, standard and the price of the goods and services. Such information helps the consumers in their buying decisions and use of the product. 17. Option (C) is correct. Explanation: A consumer who is well informed about his rights and the relief available to him would be in a position to raise his voice against any unfair trade practices or unscrupulous exploitation. In addition to this, an understanding of his responsibilities would also enable a consumer to safeguard his interests. 18. Option (D) is correct. Explanation: : The Right to be Protected means the Right to Safety against the marketing of goods and services, which are hazardous to life and property. The purchased goods and services availed should fulfil long-term interest of the customers. . 19. Option (C) is correct. Explanation: The Standards of Weight and Measures Act, 1976 provides protection against wrong measurements of products. The Trade Mark Act, 1999 deals with the protection, registration and prevention of fraudulent use of trademarks. The Consumer Protection Act 2019 protects the rights of consumers. The Prevention of Food Adulteration Act, 1954 checks the adulteration of food articles. 20. Option (C) is correct. Explanation: Suman sought redressal for her complaint when the company provided her with a replacement cheese pack and compensation. [B] ASSERTION & REASON 1. Option (C) is correct. Explanation: The consumer should insist on a valid documentary evidence (cash memo/invoice) relating to the purchase of goods or availing of any services and preserve it carefully. Such proof of purchase is required for filing a complaint. 2. Option (D) is correct. Explanation: The Act has defined the criteria of the Consumer Disputes Redressal Commission (CDRCs). The National CDRC will hear complaints worth more than ₹10 crores. The State CDRC will hear complaints when the value is more than ₹1 crore but less than ₹10 crores. While the District CDRC will entertain complaints when the value of goods or services is up to ₹1 crore. 3. Option (A) is correct. Explanation: Many business firms, particularly those that prioritize customer satisfaction and ethical business practices, have established their own consumer service and grievance cells to effectively address customer complaints and concerns. These cells serve as a means for customers to seek assistance

125 and resolution for any issues they may encounter with the firm’s products or services. Consumers have the right to file a complaint and be heard when dissatisfied with a product or service, ensuring fair treatment and resolution of concerns. 4. Option (A) is correct. Explanation: To put a stop to adulteration and corrupt practices of the manufacturers and traders, it is the duty of every consumer to be conscious of the quality of the product they buy. They should look for standard quality certification marks like ISI, Agmark, FPO, Woolmark, Eco-mark, Hallmark, etc. while making the purchases. 5. Option (D) is correct. Explanation: Globalisation has increased the availability of a variety of products in the marketplace. Thus, unfair trade practices are bound to occur in the market. Consumers need to be well aware about consumer rights to avoid exploitation in the marketplace. 6. Option (A) is correct. Explanation: The Consumer Protection Act typically includes provisions that outline the rights and remedies available to consumers in the event of issues or disputes related to goods or services. This information is designed to protect consumers and ensure they have avenues for seeking redress and resolution when their rights are violated or when they are dissatisfied with a product or service. The Consumer Protection Act contains provisions to safeguard consumer rights and provide remedies, but the philosophical notion of consumers being the ‘King’ of the market is a broader concept that underlies consumer protection principles. 7. Option (A) is correct. Explanation: A tort is a wrongful act other than a breach of contract for which relief may be obtained in the form of damages or an injunction. The law of torts serves four objectives. First, it seeks to compensate victims for injuries suffered by the culpable action or inaction of others. Second, it seeks to shift the cost of such injuries to the person or persons who are legally responsible for inflicting them. Third, it seeks to discourage injurious careless and risky behaviour in the future. Fourth, it seeks to indicate legal rights and interests that have been compromised, diminished, or emasculated. Thus it can easily be concluded that the given assertion and reason stand individually true also reason is correct explanation of the assertion. 8. Option (B) is correct. Explanation: For the redressal of consumer grievances, the Consumer Protection Act 2019 provides for the setting up of a three-tier enforcement machinery at the district, state and national levels known as the district consumer disputes redressal commission, state consumer disputes redressal commission, and the national consumer disputes redressal commission. 9. Option (C) is correct. Explanation: Before formally filing a Consumer Complaint, it is desired that the Consumer gives notice to the opposite party of the fact of any deficiency in service or of unfair trade practice etc., to see if the trader is willing to make good the loss suf-

126 Oswaal CUET (UG) Chapterwise Question Bank fered by either replacing the commodity or returning the value of the purchase. If yes, the issue is resolved then and there. But if the trader refuses or neglects here that the consumers’ need to approach the Consumer Court. 10. Option (D) is correct. Explanation: Under Consumer Protection Act, 2019, a consumer has 6 rights. An appeal to the Supreme Court or the National Commission from an order of the National Commission or the State Commission respectively has to be filed within thirty (30) days from the date of the order. A revision Petition has to be filed within ninety (90) days from the date of receipt of a certified copy of the order. [C] CASE BASED QUESTIONS 1. Option (B) is correct. Explanation: The consumer has a right to be protected against goods and services which are hazardous to life and health. For instance, electrical appliances which are manufactured with substandard products or do not conform to the safety norms might cause serious injury. Thus, consumers are educated that they should use electrical appliances which are ISI marked as this would be an assurance of such products meeting quality specifications. 2. Option (B) is correct. Explanation: The consumer should insist on a cash memo/ invoice relating to the purchase of goods or availing of any services and preserve it carefully. Such proof of purchase is required for filing a complaint. In case of durable goods, the manufacturers generally provide the warrantee/ guarantee card along with the product. It is the duty of consumers to obtain they documents and ensure that they are duly signed, stamped and dated. The consumer must preserve them till the warranty/ guarantee period is over. 3. Option (C) is correct. Explanation: The consumer should insist on a cash memo/ invoice relating to the purchase of goods or availing of any services and preserve it carefully. Such proof of purchase is required for filing a complaint.

BUSINESS STUDIES

4. Option (A) is correct. Explanation: The Consumer Protection Act, 2019 is a law to protect the interests of consumers. This Act provides safety to consumers regarding defective products, dissatisfactory services, and unfair trade practices. The basic aim of the Consumer Protection Act, 2019 is to save the rights of the consumers by establishing authorities for timely and effective administration and settlement of consumers’ disputes. 5. Option (A) is correct. Explanation: Since the product cost is less than ₹1crore, it is a case of district forum. 6. Option (A) is correct. Explanation: The important aspect from the consumer point of view highlighted in the above case is ‘Unorganised Consumers’. Rishank who is one of the residents of the colony decided to take the matter to the consumer court but the residents were not united and he felt himself alone on the issue. 7. Option (A) is correct. Explanation: Since the compensation claimed by Rishank would have been less than ₹1 crore (as the price of racket is ₹450, he could have approached the District Forum. 8. Option (C) is correct. Explanation: The important aspect from the point of view of business which compelled the company to take such a milestone step was ‘Moral Justification’. The company took the product and repaired it. 9. Option (B) is correct. Explanation: The consumer responsibility not followed by the residents of Rishank’s colony was ‘Following manufacturer’s instructions’. In the instruction book provided with the racket, it was written to clean the racket with special care after every month. When enquired it was found that the residents with faulty rackets including Rishank didn’t clean their rackets after one month. 10. Option (A) is correct. Explanation: The consumers should be given all the necessary instructions about the use of the product.

CHAPTER

13

ENTREPRENEURSHIP DEVELOPMENT

  Revision Notes:

¾ Entrepreneurship: Entrepreneurship is the process of establishing one’s own business as opposed to engaging in any other economic activity, such as employment or practicing a profession. An entrepreneur is someone who starts their own business. ¾ Characteristics: Entrepreneurship entails establishing a firm, identifying market possibilities, and mobilizing resources. Entrepreneurial ambition can be larger than present resources, necessitating desire amplified by action. Here are some characteristics of the entrepreneur. (i) Systematic Activity: Entrepreneurship is a methodical, goal-oriented activity that necessitates the acquisition of information and skills via formal education, vocational training, observation, and job experience, eliminating the misconception that entrepreneurs are born rather than produced. (ii) Lawful and Purposeful Activity: The objective of entrepreneurship is to do lawful business. Despite the possible legitimisation of unlawful behaviour owing to the inherent risk involved, entrepreneurship aspires to produce value for personal profit and social gain. (iii) Innovation: Firms require innovation to either save cost, increase the revenue or both. Entrepreneurship is innovative in creating value by merging multiple forces of production and producing goods and services that suit the needs and desires of society. Even when old industries are destroyed, entrepreneurial activities generate money and wealth. Entrepreneurs in impoverished nations may not be the first to introduce new inventions, but their contributions are substantial. Entrepreneurship is creative as it involves innovation, which includes the introduction of new products, discovery of new markets and sources of supply of inputs, technological breakthroughs and introduction of newer organisational forms for doing things better, cheaper and faster while saving the environment. (iv) Organisation of Production: Production entails the use of resources such as land, labour, money, and technology. Entrepreneurs convert these resources into a profitable firm, which necessitates negotiating skills as well as knowledge of resource availability and optimal combination. This comprises product development, market development, and product input sourcing. (iv) Risk-taking: Entrepreneurs enter into contracts for guaranteed inputs for their initiatives, assuming the risk of re-

paying them if the company fails. Rent is paid to landowners, interest is paid to capital providers, and wages and salaries are paid to the workforce. However, profit is not guaranteed. Entrepreneurs might mitigate risk by engaging into preexisting arrangements with consumers or working as contract manufacturers or marketers. ¾ Entrepreneurial Competency: Entrepreneurial competency refers to the skills and behaviours required to create, develop, manage, and grow a business venture, inScan to know more about cluding handling risks. Business owners and this topic founders must possess most of these competencies, which can be technical, behavioural, attitude-based, or productivity-based. Some basic competencies in entrepreneurship inEntrepreneurial clude risk-taking abilities, creative thinking, Competencies problem-solving, initiative, persistence, persuasion, social skills, business management, critical thinking, networking, and effective communication. These competencies are essential for success in the entrepreneurship industry. ¾ Relationship between Entrepreneurship and Management: Entrepreneurship is a dynamic process that involves company start-ups and renewals, frequently emerging during the early phases of a venture and then disappearing after the enterprise has stabilised. Individuals must constantly innovate and adapt to changes in product, market, technology, and structure. The emphasis in industrialised nations is on start-ups, but in developing countries, the notion of owner-manager is more appropriate, as entrepreneurs remain involved in day-to-day operations. Business failures are frequently blamed on a lack of managerial competence. Entrepreneurs and managers must both display managerial qualities in order for their businesses to succeed. ¾ Need of Entrepreneurship: (i) Initiating the process of development: Entrepreneurship results in the establishment of new businesses. The establishment of more and more businesses reflects the development of the country. (ii) Sustaining development in developed countries: Entrepreneurship is required to maintain the rate of development. It is important to keep finding new ways of doing work which is possible only with the help of entrepreneurship. (iii) Providing employment opportunity: Entrepreneurship creates new employment opportunities for the people. New business provides self-employment to the entrepreneurs on the one hand and on the other hand provides employment to others

• • • • •

Systematic activity Lawful and purposeful activity Creative activity Organisation of production Risk-taking

• Entrepreneurship entails establishing a new business endeavor and guaranteeing its efficiency and success through management. • Entrepreneurs in emerging nations continue to be active in everyday operations and strategic divisions

• Initiating the process of development • Sustaining development in developed countries • Providing employment opportunity

Characteristics of Entrepreneurship

Relationship between Entrepreneurship and Management

Need of Entrepreneurship

Functions of Entrepreneurs in Economic Development

Contribution to gross domestic product Capital Formation Employment generation Generation of business opportunities for others Improves economic efficiency Increasing the scope of economic activities Growth of local communities Boosting the spirit of exploration, experimentation, and daring

e

urship Deve e n l

Role of Individuals in Entrepreneurship Development

Role of Environment in Entrepreneurship Development

Entrepreneurial Values

Entrepreneurial Motivation

Entrepreneurial Competencies

• Entrepreneurial competencies • Entrepreneurial motivation • Entrepreneurial values and attitudes

• Entrepreneurship is influenced by the environment. • Good infrastructure facilitates entrepreneurship development.

The Process of Entrepreneurship Development

Entre pr

• • • • • • • •

Discover ↓ Evaluation ↓ Developing a Plan ↓ Resources ↓ Harvesting

e nt



Second Level

Trace the Mind Map Third Level

Theoretical doctrinal values Social values Aesthetic values Political values Economic values Moral values

Need for achievement Need for power Need for affiliation Need for autonomy

First Level

• • • • • •

• • • •

• Initiative • Recognising and grabbing the opportunities • Persistence • Collecting information • High-quality work • Commitment • Efficiency • Planning • Problem-solving • Self-confidence • Assertiveness • Persuasion • Use of influence strategies • Monitoring • Concern for employees welfare



m op



128 Oswaal CUET (UG) Chapterwise Question Bank BUSINESS STUDIES

129

ENTREPRENEURSHIP DEVELOPMENT

and services a social purpose. ¾ Functions: Entrepreneurs organize the procedure for manufacturing and turning resources such as land, labour, and capital into productive and valuable assets. Without their contribution, resources such as plants and minerals would remain weeds and rocks. (i) Contribution to GDP: Economic development is defined as a growth in GDP generated by productive activities such as agriculture, industry, or services. Income is Scan to know dispersed across production elements, with more about this topic land receiving rent, labour receiving salaries, capital receiving interest, and entrepreneurs obtaining residual income in the form of profits. Functions of an

Entrepreneur (ii) Capital Formation: Entrepreneurial decisions boost the productive capacity of the economy, resulting in capital accumulation. The Capital Output Ratio (COR), which quantifies the percentage increase in capital production necessary to increase GDP, connects GDP and capital formation. Entrepreneurs contribute to capital development by investing their own money and mobilising the savings of their friends and family informally.

(iii) Generation Of Employment: Individuals with a variety of talents and credentials are employed by new enterprises, transforming entrepreneurship into a source of income for others without cash or land. Their wages not only offer nourishment but also a lifestyle for themselves and their families, supporting personal job satisfaction and having a direct and indirect impact on many lives. (iv) Generation of Business Opportunities for Others: Entrepreneurship generates opportunities for both input suppliers and output marketers, resulting in both backward and forward connections. A pen producer, for example, can open doors for refill makers, distributors, and retailers. These initial connectionslead to other connections, such as increased commerce for ink makers, transporters, and advertisements. Economic activity is stimulated by this chain reaction. (v) Improvement in Economic Efficiency: Efficiency involves increased output from the same input, and entrepreneurs improve it by improving processes, reducing waste, increasing yield, and adjusting labour-capital ratios for technical progress. (vi) Increasing the Spectrum and Scope of Economic Activities: Diversification of economic activity across regional, sectoral, and technical boundaries is required for development. Entrepreneurs overcome demand-side vicious cycles by structuring domestic production for exports, which frees up output from domestic demand constraints. India is on track to become a global manufacturing Centre. Entrepreneurs use domestic and international resources to enhance production capacity, resulting in Indian multinational conglomerates. Sectoral transition, such as divesting from agriculture and investing in green-field businesses, shifts the economy from developing to emerging and developed.

(vii) Impact on Local Communities: Small-scale entrepreneurship is a great leveler for marginalised groups, such as women, SC, ST, and OBC, as it allows them to pursue their economic dreams without educational qualification barriers. Agrobased rural industries and craft-based cottage industries can catapult local communities to socio-economic success. Local governments develop entrepreneurship clusters to encourage inter-firm collaboration and common facilities. Corporate-sector initiatives like ITC’s ‘e-Chaupal’ aim to mobilise native entrepreneurs to improve the economic pyramid. (viii) Fostering the Spirit of Exploration, Experimentation and Daring: Economic development necessitates breaking free from traditional beliefs and practices that hinder growth, as international trade and economic growth would not occur without the prohibition of crossing the seas. ¾ Process of Entrepreneurship Development: Entrepreneurship is not born automatically but is encouraged both by the environment and the individual himself. There are many factors that are inherently available in the environment and are in some way or the other connected with entrepreneurship. Similarly, an individual has many latent abilities which help in the development of entrepreneurship. (i) Role of Environmental factors in Entrepreneurship Development: Here environment simply refers to the economic environment of the country. It is related to the economic development of the country. Economic development and entrepreneurship are closely related to each other. For example, industries are established with the help of entrepreneurship which in turn ensures the economic development of the country. When the country gets economically developed, new industries get an impetus, as a result, entrepreneurship gets developed which brings in economic development. In this way, this process moves on. ¾ The following characteristics of economic development help in the development of entrepreneurship: (i) Economic system (ii) Strong infrastructure (iii) Reduce rate of interest (iv) Reduce taxation (v) Moderate inflation (vi) Capitalistic economy (vii) Availability of individuals opting for entrepreneurship careers. ¾ Role of the individual factor in Entrepreneurship Development: Two individual factors in the development of entrepreneurship are important: (a) Competency or Ability and (b) Willingness If a person possesses both competency and willingness, the development of entrepreneurship is almost certain. The relationship between willingness and competency can be understood by the following types: • Not ready Entrepreneur: This is a condition in

130 Oswaal CUET (UG) Chapterwise Question Bank which a person lacks both the competency and willingness to do something. There is no entrepreneurship in this case. • Potential Entrepreneur: In this condition a person has the competency or ability to work but he lacks willingness. If he develops the willingness, he can be a good entrepreneur. • Eager entrepreneur: In this condition, a person has the willingness to work but he lacks ability. If he can develop ability, he can be a good entrepreneur. • Ready entrepreneur: In this condition, a person has both the ability and willingness to work such a person is called a ready entrepreneur. In conclusion, it can be said that a person develops entrepreneurship when it comes to processing both the ability and willingness to do some work. ¾ Process of Entrepreneurship development: (i) Discover: Any new process begins with new ideas and objectives wherein the entrepreneur recognises and analyses business possibilities. (ii) Evaluation: The evaluation of an opportunity can be done by asking several questions to oneself. (iii) Developing a plan: After the identification of an opportunity, an entrepreneur has to build a complete business plan. (iv) Resource: Here, the entrepreneur recognises the source of finance and human resources from where they can be managed. (v) Managing the company: After the hiring process and funds are raised its time for an entrepreneur to start the operation to accomplish the desired goal. (vi) Harvesting: The last step in this process is harvesting where the entrepreneur determines the future growth and development of the business. ¾ Entrepreneur Motivation: Entrepreneur Motivation may be defined as the process that activates the entrepreneur to exert a high level of effort for the achievement of a goal. In order words, the entrepreneur motivation refers to the drive or forces within an entrepreneur that affect his/her direction, intensity and persistence of voluntary behaviour. { Need

for Achievement (N-Ach.): The need for

BUSINESS STUDIES

achievement involves mastering and Scan to know more about organising physical objects, people, or this topic ideas to overcome obstacles and achieve high standards. Entrepreneurship offers a unique opportunity to utilise talents, unlike traditional employment where strict rules Entrepreneur and regulations can stifle progress and selfMotivation development. A work environment tailored to individual abilities and interests is essential. { Need for Power (N-Pow): The need for power refers to the desire to influence others’ behaviour to achieve desired outcomes. It is often associated with politicians, social-religious leaders, and government officials. Business ownership also implies a need for power, as it requires gaining the commitment of capital providers. This perception is based on the person’s position in an organisational or societal context. { Need for Affiliation (N-Aff.): Parents often emphasise the importance of their actions for their children, indicating a concern for affiliation in interpersonal relationships. This implies conforming to the wishes and norms of those they value. Social activists, environmentalists, teachers, doctors and nurses may be driven by this need for affiliation. In countries with colonial pasts, the first generation of entrepreneurs in Independent India was driven by patriotic farvour and the desire to rebuild the economy left stagnant by alien rulers. { Need for Autonomy (N-Aut.): The need for autonomy is a desire for independence, responsibility, and accountability, rather than external authority. It is often seen in entrepreneurship as the determination not to work for someone else. In most job situations, employees are given limited discretion, leading them to start their own ventures. This desire for autonomy is more about preserving one’s ethos than freedom from the boss.

¾ Entrepreneurial Values and Attitudes: Entrepreneurial values and attitudes refer to the behavioural choices individuals make for success in entrepreneurship. The word ‘choice’ is important, as there are alternative ways of behaving too. In entrepreneurship, a host of behavioural tendencies or orientations have been reported as having a bearing on success.

OBJECTIVE TYPE QUESTIONS [A] MULTIPLE CHOICE QUESTIONS 1. Select from following who is considered as a Risk taker? (A) Manager (B) Customer  [CUET 2023] (C) Entrepreneur (D) Government 2. A. Salary is not a primary economic reward for an entrepreneur  [CUET 2023] B. A ‘never say die’ attitude of an entrepreneur is termed as self-confidence. C. Acting out of choice rather than compulsion is initiative. D. Entrepreneur’s concern for the conservation of time and money is termed as ‘assertiveness’. E. Executive summary and operation strategies are included in the Business Plan. Choose the correct answer from the option given below: (A) A, C, E only (B) A, B, E only

(C) A, D, C only

(D) A, B, C and D only

3. Identify the correct functions of an entrepreneur in relation to economic development.  [CUET 2022] A. Capital Formation B. Improvement in Economic Efficiency C. Identification of specific product offering D. Opportunity Scouting E. Generation of Employment Choose the correct answer from the options given below: (A) B, C and E only (B) A, B and E only (C) C, D and E only (D) A, B and D only 4. Entrepreneurship Development Program provides ______ (A) Unemployment (B) Employment (C) Dishonesty (D) Corruption 5. Chirag, Ravi, and Suresh were three friends at school time.

131

ENTREPRENEURSHIP DEVELOPMENT

They studied arts, commerce, and science streams respectively. When they passed from school, they pursued their higher education. Chirag became a chartered accountant, Ravi became an IPS officer and Suresh had started his own laundry business. Who among these is an entrepreneur? (A) Chirag (B) Ravi (C) Suresh (D) Both (A) and (C)  6. Match List-I with List-II List-I

List-II

A

Persuasion

I

Observing the symptoms, diagnosing and curing.

B

Monitoring

II

Eliciting support of others in the venture.

C

Use of influence strategies

III Providing leadership.

D

Problem-solving IV

Ensuring the progress of the venture as planned. Choose the correct answer from the options given below: (A) A-II, B-III, C-IV, D-I (B) A-II, B-IV, C-III, D-I (C) A-II, B-III, C-I, D-IV (D) A-III, B-II, C-IV, D-I 7. If a technology required to convert the idea of a product offering is available, it is known as ________ feasibility analysis. (A) Economic (B) Financial (C) Commercial (D) Technical 8. A. B. C. D.

What are the core competencies of entrepreneurship? Risk-taking abilities Out-of-the-box thinking and creativity Problem-solving abilities Opportunity Scouting

Choose the correct answer from the option given below: (A) A, C, D only (B) A, B, D only (C) A, D, C only (D) A, B, C only 9. Being ____________ helps an entrepreneur to take the first step of starting a new business and then trying new things to grow the business. (A) Confident (B) Values (C) Qualities (D) None of these 10. _____ type of entrepreneur utilises a chance to introduce a new technique or new product. (A) Innovative entrepreneur (B) Instigated entrepreneur (C) Initiative entrepreneur (D) Fabian entrepreneur 11. ______ can motivate the entrepreneurs at its best. (A) money (B) personal values (C) pull influences (D) All of these 12. “An entrepreneur alone determines the line of business to expand and capital to employ.” Which of the following entrepreneurial functions of an entrepreneur is highlighted in the above quoted lines? (A) Risk-taking (B) Organisation Building (C) Innovation (D) Creativity 13. “The entrepreneur selects the factory sites, decides about the plant and machinery, and contacts suppliers of raw material.”



Which of the following promotional functions of an entrepreneur is highlighted in the above-quoted lines? (A) Detailed Investigation (B) Assembling the requirements (C) Discovery of an idea (D) Financing the proposition 14. Which of the following is most suitable for the term ‘enterprise’? (A) Verb (B) Subject (C) Object (D) None of these 15. Hero Motor Corporation and Hyundai Corporation have _____ type of entrepreneurs. (A) Trading Entrepreneurs (B) First generation Entrepreneurs (C) Business Entrepreneurs (D) Industrial Entrepreneurs 16. The government has launched Startup India scheme for promoting startup culture in the country. Which of the following was not the objective of this scheme? A. Trigger an entrepreneurial culture, inculcate entrepreneurial values in the society at large and influence the mindset of people towards entrepreneurship. B. Create awareness about the charms of being an entrepreneur and the process of entrepreneurship, especially among the youth. C. Regular follow-up meetings are conducted with the participants, involving representatives from banks, financial institutions, and other relevant agencies to ensure continued assistance D. Encourage more dynamic startups by motivating educated youth, scientists and technologists to consider entrepreneurship as a lucrative, preferred and viable career. Choose the correct answer from the option given below: (A) A, C, D only (B) A, B, D only (C) A, D, C only (D) A, B, C only 17. In the roles and functions of the entrepreneur identified by Kilby, which of the following is not an aspect of ‘political administration’? (A) Dealing with public bureaucracy (B) Managing human relations within the firm (C) Introducing new production techniques and products (D) Managing customer and supplier relations 18. Which of the following is not a function of the entrepreneur? (A) Risk-taking (B) Provision of capital and organisation of production (C) Innovation (D) Day to day conduct of business 19. Which of the following attitudes is not generally associated with successful entrepreneurship? (A) Investing in R & D (B) Live your business day by day (C) Innovate and improvise continually (D) Produce as per customers’ requirements 20. Indian Entrepreneurship Development Institute is situated in _____

132 Oswaal CUET (UG) Chapterwise Question Bank (A) In Ahmedabad (C) In New Delhi

(B) In Mumbai (D) In Chennai

[B] ASSERTION/REASON Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as: (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true. 1. Assertion (A): It is quinte essential to enhance the entrepreneurial ability of the people and aid them in the preparation of financial, technical and professional reports. Reason (R): Entrepreneurial development has been considered necessary for generating self-employment opportunities. 2. Assertion (A): The basic test of a successful entrepreneur is the identification of business opportunities in the environment. Reason (R): In order to be successful an entrepreneur needs to initiate steps to produce and sell goods and services to make the best use of that opportunity. 3. Assertion (A): An entrepreneur must be creative, organised and risk taker. Reason (R): Entrepreneurship is the act of creating a new and innovative enterprise/ product or service. 4. Assertion (A):An entrepreneur takes risks. Reason (R): An entrepreneur is self-confident. 5. Assertion (A): Entrepreneurship has emerged as a focal point of policy in the majority of countries. Reason (R): Entrepreneurship contributes to job generation, innovation and promotes social cohesion. 6. Assertion (A): The function of entrepreneurs is to reform or revolutionise the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way. Reason (R): Lack of innovations will usually reduce the life span of a product and/or a service. 7. Assertion (A): Entrepreneurship development helps in the capital formation of the country. Reason (R): ) Entrepreneurs develop and produce substituted products of imported goods and prevent the over-dependence on other countries. 8. Assertion (A): Entrepreneurship development is considered as a continuous process. Reason (R): Entrepreneurship development involves learning, which is a never-ending process. 9. Assertion (A): Entrepreneurship development helps in generating employment opportunities. Reason (R): Entrepreneurship development enables the economy to utilise and explore the abundance of natural resources. 10. Assertion (A): Entrepreneurship development leads to the concentration of economic activities in a few area of the country.

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Reason (R): For start-ups, there will be government inspection regarding such compliance from the second year onwards. [C] CASE BASED QUESTIONS

I. Read the following text and answer the questions that follow: (Q1-Q5)

Bhavesh and Rahul were two students studying a hotel management course at a city college. They hailed from Delhi a metropolitan city and Pune respectively. They became good friends during the course of their education. Bhavesh hailed from an upper-class family with his parents in influential government jobs. Rahul hailed from a lower middle-class family with his single parent which mean his mother was dependent on farming for their livelihood. They both shared a long ambition to become successful in their life working independently. They both were intelligent and creative compared to others and both were intent on starting a restaurant in one of their respective places by the name Zordar Foods. Bhavesh was against the idea of Rahul starting his clinic in Pune. He felt that people of Pune already have so many options of restaurants that they won’t explore new ones. Bhavesh had a strong view that the people of Pune are more into fast food as the majority of the population of Pune are out-station students and the concept they have for their restaurant which is homemade food won’t be accepted by the population of Pune. But Rahul was strong in his view because the crowd is youth and most are away from home so they will love to have homemade food. 1. What are the characteristics of a good entrepreneur Bhavesh and Rahul are missing because of which it is taking time for them to come to a conclusion about the venture? (A) Work with Vision and Mission (B) Self-Confidence (C) Facilitating Character (D) All of the above 2. This business is an example of which type of entrepreneurs? (A) Trading Entrepreneurs (B) First generation Entrepreneur (C) Business Entrepreneurs (D) Industrial Entrepreneurs 3. What kind of resources they both use in this case? (A) Human resource (B) Production Resource (C) Marketing Resource (D) Both B and C 4. What is the most common factor as an entrepreneur which is needed in this case? (A) Ambitiou (B) Creative (C) Self-confidence (D) Both A and B 5. Who in this case is not a good risk-taker in an entrepreneurial role? (A) Bhavesh (B) Rahul (C) Both Bhavesh & Rahul (D) None of Bhavesh & Rahul II. Read the following text and answer questions that follow: (Q6-Q10) Ram and Shyam, friends with different career paths, dis-

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cussed entrepreneurship one day. Ram, an entrepreneur, highlighted key entrepreneurial characteristics and competencies.Ram, the creative entrepreneur, emphasized the importance of creativity and innovation in entrepreneurship. He explained how entrepreneurs find unique solutions to problems, thinking outside the box.Shyam, open to exploring entrepreneurship, questioned the role of risk-taking. Ram clarified that entrepreneurs embrace uncertainty and venture into the unknown, often leading to rewarding experiences.When Shyam inquired about adaptability, Ram stressed that entrepreneurs pivot and adjust to changing market conditions, showcasing flexibility.Shyam asked about leadership skills, and Ram agreed that they are vital. Effective leadership inspires and guides teams toward a shared vision, a significant aspect of entrepreneurship. 6. What is a key characteristic that Ram highlighted as essential for entrepreneurs? (A) Risk-taking (B) Creativity (C) Leadership (D) Adaptability 7. What did Ram explain about risk-taking in entrepreneurship? (A) Entrepreneurs avoid risks.

(B) Risk-taking leads to predictable outcomes. (C) Entrepreneurs embrace uncertainty and venture into the unknown. (D) Risk-taking is irrelevant. 8. According to Ram, why is adaptability important in entrepreneurship? (A) Adaptability restricts entrepreneurs’ decision-making. (B) Adaptability is not relevant in entrepreneurship. (C) Entrepreneurs pivot and adjust to changing market conditions, demonstrating flexibility. (D) Adaptability leads to a rigid business model. 9. What did Shyam inquire regarding entrepreneurship? (A) Leadership skills (B) Creativity and innovation (C) Risk-taking (D) Problem-solving abilities 10. What was Shyam’s role in the case study? (A) A successful entrepreneur (B) A risk-averse entrepreneur (C) A creative entrepreneur (D) Someone open to exploring entrepreneurship

ANSWER KEY [A] MULTIPLE CHOICE QUESTIONS 1. (C)

2. (A)

3. (B)

4. (B)

5. (C)

6. (A)

7. (D)

8. (D)

9. (A)

10. (A)

11. (D)

12. (B)

13. (B)

14. (C)

15. (D)

16. (B)

17. (C)

18. (D)

19. (A)

20. (A)

8. (A)

9. (B)

10. (D)

8. (C)

9. (A)

10. (D)

[B] ASSERTION & REASON 1. (A)

2. (A)

3. (A)

4. (B)

5. (A)

6. (B)

7. (B)

[C] CASE BASED QUESTIONS 1. (D)

2. (C)

3. (D)

4. (D)

5. (B)

6. (B)

7. (C)

ANSWERS WITH EXPLANATION [A] MULTIPLE CHOICE QUESTIONS 1. Option (C) is correct. Explanation: An entrepreneur is considered to be a risk taker, as by considering to set a business from scratch, an entrepreneur bears the risk in the hopes of making profits and expanding the business in the long run. 2. Option (A) is correct. Explanation: Profit is a primary economic reward for an entrepreneur. A ‘never say die’ attitude of an entrepreneur is termed as persistence. Acting out of choice rather than compulsion is initiative. Entrepreneur’s concern for the conservation of time and money is termed as ‘efficiency orientation’. Executive summary and operation strategies are included in the Business Plan. 3. Option (B) is correct. Explanation: A. Capital Formation: Entrepreneurs often contribute to capital formation by investing in new businesses

and projects, which can stimulate economic growth. B. Improvement in Economic Efficiency: Entrepreneurs are instrumental in increasing economic efficiency by introducing innovative processes and technologies that lead to better resource utilization. E. Generation of Employment: Entrepreneurs also play a crucial role in generating employment opportunities, which is a significant contribution to economic development by reducing unemployment rates and improving the standard of living in a region. 4. Option (B) is correct. Explanation: The Entrepreneurship Development Programme (EDP) is a structured training program designed to develop students’ entrepreneurial skills and abilities. It aims to polish and incubate skills, ensuring they can effectively run a business. This program is ideal for those who need to refine their skills before pursuing entrepreneurship. 5. Option (C) is correct. Explanation: Here Suresh is an entrepreneur. An entrepreneur

134 Oswaal CUET (UG) Chapterwise Question Bank is a person who sets up a business or businesses, taking on financial risk in the hope of profit. 6. Option (A) is correct. Explanation: ¾ Persuasion: Involves convincing and gaining support from others for the venture. ¾ Use of Influence Strategies: Utilizing strategies to provide effective leadership. ¾ Monitoring: Ensures that the venture progresses as intended and tracks its performance. ¾ Problem-solving: Involves identifying issues, diagnosing their causes, and finding solutions to address them. 7. Option (D) is correct. Explanation: Technical feasibility analysis studies the technical possibility of a proposed plan. 8. Option (D) is correct. Explanation: Entrepreneurial competency refers to the skills and behaviours required to create, develop, manage, and grow a business venture, including handling risks. Some basic competencies in entrepreneurship include risk-taking abilities, creative thinking, problem-solving, initiative, persistence, persuasion, social skills, business management, critical thinking, networking, and effective communication. These competencies are essential for success in the entrepreneurship industry. 9. Option (A) is correct. Explanation: Being “Confident” helps an entrepreneur to take the first step of starting a new business and trying new things to grow the business. Confidence is essential for decision-making, risk-taking, and pursuing opportunities in the entrepreneurial journey. 10. Option (A) is correct. Explanation: Innovative entrepreneurs are aggressive in gathering information and analysing results from novel production factors. They are creative and innovative, often originating in undeveloped countries. They identify opportunities for new techniques, products, or markets, raise funds, and select top executives. These entrepreneurs contribute to economic development and play a key role in the rise of modern capitalism. 11. Option (D) is correct. Explanation: Entrepreneurs aim for monetary gains, freedom, and authority in their business ventures. They value working for themselves and offering innovative solutions to the industry. Entrepreneurial systems provide more flexibility, allowing entrepreneurs to make long-term decisions. They also have more authority, making them self-accountable and involved in every aspect of their venture. Creative control motivates entrepreneurs to achieve their goals, aligning every creative decision with their vision. 12. Option (B) is correct. Explanation: The highlighted function in the quoted lines is “Organisation Building.” The entrepreneur determines the line of business to expand and the capital to employ, which is a fundamental aspect of organization building within the entrepreneurial process. 13. Option (B) is correct.

BUSINESS STUDIES

Explanation: The highlighted promotional function in the quoted lines is “Assembling the requirements.” The entrepreneur selects the factory sites, decides about plant and machinery, and contacts suppliers of raw material, which is part of assembling the necessary requirements for a business. 14. Option (C) is correct. Explanation: Enterprise” is the outcome or object, referring to the established business or organization. 15. Option (D) is correct. Explanation: Industrial entrepreneurs are also known as manufacturing entrepreneurs.Generally, they convert the raw material into finished products. They manufacture products and offer services, which have an effective demand in the market. They have the ability to convert economic resources and technology into a profitable venture. 16. Option (B) is correct. Explanation: The government has launched Startup India scheme for promoting startup culture in the country. The objectives of Startup India scheme are that it triggers an entrepreneurial culture, inculcates entrepreneurial values in the society at large and influences the mindset of people towards entrepreneurship. To create awareness about the charms of being an entrepreneur and the process of entrepreneurship, especially among the youth. It encourages more dynamic startups by motivating educated youth, scientists and technologists to consider entrepreneurship as a lucrative, preferred and viable career. It supports the early phase of entrepreneurship development, including the pre-startup, nascent, as well as, early post-startup phase and growth enterprises. 17. Option (C) is correct. Explanation: Peter Kilby identified certain roles and functions of an entrepreneur in relation to the enterprise. Under the aspect of political administration, he identified three functionsdealing with public bureaucracy, managing human relations within the firm and managing customer and supplier relations. The function of ‘Introducing new production techniques and products’ was given in the aspect of technology.. 18. Option (D) is correct. Explanation: The day-to-day conduct of business is typically not considered a primary function of the entrepreneur. While entrepreneurs are involved in the strategic and managerial aspects of a business, the day-to-day operations are often managed by various employees and managers. The primary functions of an entrepreneur typically include risk-taking, provision of capital, organization of production, and innovation. 19. Option (A) is correct. Explanation: For successful entrepreneurship, the three attitudes mentioned in the question that is, living the business day by day, innovating and improvising continuously and producing as per the customer’s requirement are essential. Although, investing in R &D also forms an important aspect, however, it comes only after the other three have been achieved and the enterprise has reached a certain appreciable level. For shortterm success, it is not essential for the entrepreneur to invest in R and D. This is because the investment in R&D requires a

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huge investment outlay and thereby, can impede the operations of the business. 20. Option (A) is correct. Explanation: Indian Institute for Development of entrepreneurship is located in Ahmedabad. [B] ASSERTION & REASON 1. Option (A) is correct. Explanation: Entrepreneurship is defined as the professional application of knowledge, skills, and competencies and/or the monetisation of a new idea, by an individual or a group of individuals through the launch of an enterprise from scratch or the diversification from an existing one (distinct from seeking self-employment as in a profession or trade), thus to pursue growth while generating wealth, employment, and social good. As it results in the creation of jobs, a contribution to national income, rural development, industrialisation, technical progress, export promotion, etc., entrepreneurship serves as a catalyst for a country’s economic growth. The Indian government periodically undertakes numerous programs to promote entrepreneurship throughout the nation. 2. Option (A) is correct. Explanation: The capacity to spot business possibilities in the surroundings is the fundamental indicator of a successful entrepreneur. This calls for the ability to scan and recognise the requirements and desires of clients before developing a good or service to satisfy those demands. 3. Option (A) is correct. Explanation: Entrepreneurship is when an individual who has an idea act on that idea, usually to disrupt the current market with a new product or service. Entrepreneurship usually starts as a small business but the long-term vision is much greater, to seek high profits and capture market share with an innovative new idea. 4. Option (B) is correct. Explanation: Every entrepreneur exhibits the character of risk-taking. Since all ideas and innovations have equal chances of success and failure, risks are inevitable. Entrepreneurs can make huge profits only if they take risks. However, entrepreneurs will not take such risks unless they have enormous self-confidence in their ideas and managerial abilities. 5. Option (A) is correct. Explanation: Entrepreneurship has indeed gained significant attention and importance in policy discussions and initiatives in many countries around the world. Governments recognise the potential of entrepreneurship to stimulate economic growth, create jobs, and foster innovation. They often implement policies and programs to encourage entrepreneurial activities, such as providing financial incentives, simplifying regulatory frameworks, offering support services, and promoting entrepreneurship education. 6. Option (B) is correct. Explanation: Entrepreneurs identify opportunities and create new ventures, taking risks and innovating to create value in the economy. They introduce new ways of producing goods and services through inventions or novel technologies, creating

new markets and disrupting existing ones, leading to economic growth. Lack of innovation can reduce product life spans, losing appeal to consumers, and causing sales decline. However, this does not necessarily explain why entrepreneurs are needed to introduce new ways of producing goods and services. 7. Option (B) is correct. Explanation: Entrepreneurship development encourages the establishment of new industries in an economy which increase the capital formation rate in the country. Entrepreneurs mobilise the idle savings of the public through the issues of industrial securities. Investment of public savings in industry results in productive utilisation of national resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth. 8. Option (A) is correct. Explanation: The stages of entrepreneurship development include pre-training, where candidates are chosen and the program is prepared, actual training, where skills and knowledge are imparted, and post-training, where ongoing support and follow-up are offered to ensure the program participants’ success in their entrepreneurial endeavours. 9. Option (B) is correct. Explanation: Entrepreneurship development enables entrepreneursto create more/additional employment opportunities foryouth by creating more businesses and workplaces. 10. Option (D) is correct. Explanation: Entrepreneurship development leads to scattering of economic activities in all areas of the country. There is no government inspection of such start-ups regarding such compliance for the first three years. [C] CASE BASED QUESTIONS 1. Option (D) is correct. Explanation: The characteristics of Entrepreneurare missing here as they both have differences of opinion and are not able to conclude about their venture. Some of missing characteristics missing in this case are Facilitating Character, Self-Confidence, Work with Vision and Mission, a High Degree of Endurance, Trouble Shooting Nature, Initiative and Enterprising Personality, Goal Setter, and Calculated Risk-Taking Ability. 2. Option (C) is correct. Explanation: The case study is a classic example of business entrepreneurs. Business entrepreneurs are people who have an idea for a brand-new good or service and then start a company to make that idea a reality. They use both marketing and production resources as they try to create a new business opportunity. Either a large establishment or a small business unit could be established. A trading entrepreneur is one who focuses solely on trading and has no interest in manufacturing. He locates potential markets, boosts the demand for his product line, and cultivates the desire and interest of consumers to purchase his goods. He trades on both the domestic and international markets. 3. Option (D) is correct. Explanation: They use both marketing and production resources as they try to create a new business opportunity. Either a large

136 Oswaal CUET (UG) Chapterwise Question Bank establishment or a small business unit could be established. A trading entrepreneur is one who focuses solely on trading and has no interest in manufacturing. He locates potential markets, boosts the demand for his product line, and cultivates the desire and interest of consumers to purchase his goods. He trades on both the domestic and international markets. 4. Option (D) is correct. Explanation: They both shared a long ambition,were intelligent and were creative about doing their restaurant business. Entrepreneurial systems provide more flexibility, allowing entrepreneurs to make long-term decisions. They also have more authority, making them self-accountable and involved in every aspect of their venture. Creative control motivates entrepreneurs to achieve their goals, aligning every creative decision with their vision. 5. Option (B) is correct. Explanation: Rahul does not seem like to be a risk taker as his point of view regarding opening a restaurant. He felt that people of Pune already have so many options of restaurants that they won’t explore new ones. Bhavesh had a strong view that the people of Pune are more into fast food as majority of the population of Pune are out-station students and the concept which they have for their restaurant which is homemade food won’t be accepted by the population of Pune. But Rahul was strong in his view that because the crowd is youth and most are away from

BUSINESS STUDIES

home so they will love to have homemade food. 6. Option (B) is correct. Explanation: Ram emphasized that creativity and innovation are fundamental for entrepreneurs, allowing them to find unique solutions to problems. 7. Option (C) is correct. Explanation: Ram clarified that risk-taking is a vital trait for entrepreneurs as they willingly explore unknown territories, despite the uncertainties. 8. Option (C) is correct. Explanation: Ram pointed out that adaptability is significant as it allows entrepreneurs to respond effectively to evolving market conditions. 9. Option (A) is correct. Explanation: Shyam asked about leadership skills, and Ram emphasized that they are vital for guiding and motivating teams toward a shared vision. 10. Option (D) is correct. Explanation: In the case study, Shyam was portrayed as someone open to exploring entrepreneurship, gaining insights into entrepreneurial traits.