Answers to Business Administration

8/6/2019 Answers to Business Administration

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ANSWERS TO BUSINESS ADMINISTRATION

questions

Short questions

1)What is business?

The regular production or purchase and sale of goods undertaken withan

objective of earning profitand acquiring wealththroughthe satisfaction of

human wants.

2. What do you understand by entrepreneurship?

Entrepreneurship is the practice of starting a new business or reviving an

existing business, in order to capitalize on new found opportunities . It

involves being resourceful and finding ways to obtain the resources required

to achieve the set objectives.

3. Explain justice approach of business ethics?

The JUSTICE approach of business ethics stands for J for Justice, U for

Utilitarian, S for Spiritual Values, T for TV Rule, I for Influence, C for Core

Values, and E for Emergency. This approach teaches Favoritism gives

benefits to some people without a justifia ble reason for singling them out;

discrimination imposes burdens on people who are no different from those


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on whom burdens are not imposed. Both favoritism and discrimination are

unjustand wrong.

4.What

is meant

by Equity s

hares?

An instrument that signifies an ownership position, or equity, in a

corporation, and represents a claim on its proportionate share in the

corporation's assets and profits.

5. What is single window scheme of Rajasthan Finance Corporation?

The single window scheme of Rajasthan Finance Corporation provides the

scheme especially for small borrowers to ensure adequate finance by

providing single window facility foravailing of Term Loan for fixed assets

and working capital finance from one institution only.

6. What is meant by stocking exchange?

'Stock Exchange' can be defined as any body of individuals, whether

incorporated or not, constituted for the purpose of assisting, regulating or

controlling the business of buying, selling or dealing in securities. For

example NSE and BSE.

7. Define business combination?


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Alliance of a company and one or more incorporated or unincorporated

businesses into a single accounting entity thatthen carries on the activities of

separate entities.

8. State five disadvantages of economic liberalization?

The main disadvantages of economic liberalization are:

1. Income inequality

2. Brain drain

3. Adverse health effect on poor undeveloped countries

4. Financial interdependency

5. Adverse effect on ecosystem of the world due to indifference in the

economy among countries.

9. What is meant by industrial policy?

Industrial policy can be defined as the policy which can help the country to

maintain its economic growth , help in industrialization and better living

condition forthe people along withthe rise of GDP ofthe country.

Part 2 objective part (4 marks each)

10. Whatare the chiefactivities to be performed atthe time of promotion of

an enterprise?


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Marketing ofan enterprise is considered to be the majoractivity during its

promotion. The promotional activities should be done in the following

manneras follows:

a. Advertising - Involves non-personal, mostly paid promotions often

using mass media outlets to deliverthe marketers message.

b. Sales promotion- Involves the use of special short-term techniques,

often in the form of incentives, to encourage customers to respond or

undertake some activity.

c. Public relations- This type of promotion uses third-party sources, and

particularly the news media, to offer a favoura ble mention of the

marketers company or product .

d. Personal selling- This form of promotion involves personal contact between

company representatives and those who have a role in purchase decisio ns.

11. Business and environmentaffect each other. Explain

. A business an economic activity that results in transaction of units in

exchange of money always takes in an environment and how it affects the

environment by its activities are to be discussed. Business environment

encompasses all those factors thataffecta company's operations, and includes

customers, competitors, stakeholders, suppliers, industry trends, regulations,


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other government activities, social and economic factors and technological

developments. All these components of business environment can affect the

environment positively or negatively for exampl e a marketers product if

hazardous, then its effect on the ecosystem is hazardous manner ora business

product is working forthe upliftment ofthe society then its favoura ble. In this

mannera business and environmentaffect each other.

12. What is the difference between primary and secondary market?

Primary market provides opportunity to issuers of securities; Government as

well as corporates, to raise resources to meet their requirements of investment

and/or discharge some obligation. They may issue t he securities at face value, or

ata discount/premium and these securities may take a variety of forms suchas

equity, debt etc. They may issue the securities in domestic market and/or

international market. Whereas the Secondary market refers to a market where

securities are traded after being initially offered to the public in the primary

marketand/or listed on the StockExchange. Majority ofthe trading is done in

the secondary market. Secondary market comprises of equity markets and the

debt markets. So these are the differences between the primary and secondary

market.

Or

In the primary market, securities are offered to public for subscription for the

purpose of raising capital or fund. Secondary market is an equity trading venue


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in which already existing/pre-issued securities are traded among investors.

Secondary market could be either auction or dealer market. While stock

exchange is the part ofan auction market, Over -the-Counter (OTC) is a part of

the dealer market.

13. What is the main objective of OTC exchange?

The phrase "over-the-counter" can be used to refer to stocks that trade via a

dealer networkas opposed to on a centralized exchange. Italso refers to debt

securities and other financial instruments suchas derivatives, whichare traded

througha dealer network. Instruments suchas bonds do not trade on a formal

exchange and are, therefore, also considered OTC securities.

14. Whatare the main objectives of state assistance to industries?

The main objectives of state assistance to industries are:

(i) initiating steps fortechnological upgradation and modernisation of existingunits;

(ii) expanding the channels for marketing the prod ucts ofthe small scale sector

(iii) promotion of employment-oriented industries, especially in semi- urban

areas to create more employment opportunities and thereby checking migration

of population to urban areas.

DESCRIPTIVE PART II


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1.Most ofthe ethical problems rise due to lackof individual dignity. Prove

and describe the main principles of business e thics.

One of the most important attributes for small business success , is thedistinguishing quality of practicing admira ble business ethics. Businessethics, practiced throughout the deepest layers of a company, become the

heartand soul ofthe company's culture and can mean the difference betweensuccess and failure."If you have integrity, nothing else matters. If you don'thave integrity, nothing else matters." This proves that business ethicsprinciples should be adhered and followed to provide digni ty to the entity aswell as the individuals working for that entity. These include provideadequate wages according to the government laws, commitment for workershealth and safety, regard for la bor policies , following transparent

compensation system and other policies fortheir benfitand also having dueregard and respect for labor unions. These will not only improve the dignityofthe workers working in that entity butalso ofthe company . Moreover theworkers will help to improve the productivity of the company. Hence itproves most ofthe ethical problems rise due to lackof individual dignity.

The main principles of business ethics are:

1. Be Trustful: Recognize customers wantto do business witha company theycan trust; when trust is atthe core ofa company, it's easy to recognize. Trust

defined, is assured reliance on the character, ability, strength, and truth ofabusiness.

2. Keep An Open Mind: For continuous improvement ofa company, the leaderofan organization must be open to new ideas. Askfor opinions and feedbackfrom both customers and team members and your company will continue togrow.

3. Meet Obligations: Regardless ofthe circumstances, do everything in yourpowerto gain the trust of past customer's and clients, particularly if something

has gone awry. Reclaim any lost business by honoring all commitments andobligations.

4. Have Clear Documents: Re-evaluate all print materials including smallbusiness advertising, brochures, and other business documents making sure theyare clear, precise and professional.Most important, make sure they do notmisrepresent or misinterpret.


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5. Become Community Involved: Remain involved in community-relatedissues and activities, thereby demonstrating that your business is a responsiblecommunity contributor. In other words, stay involved.

6. Maintain Accounting Control: Take ahands-on approachto accounting and

record keeping, not only as a means of gaining a better feel forthe progress ofyour company, butas a resource forany "questionable " acti vities. Gainingcontrol ofaccounting and record keeping allows you to end any dubious

activities promptly.

7. Be Respectful: Treat others withthe utmost of respect. Regardless ofdifferences, positions, titles, ages, or othertypes of distinctions, alway s treatothers with professional respectand courtesy.

2. Write an essay on district industrial centres.

The 'District Industries Centre' (DICs) programme was started by the

central government in 1978 withthe objective of providing a focal point

for promoting small, tiny, cottage and village industries in a particular

areaand to make available to them all necessary services and facilities at

one place. The finances for setting up DICs in a state are contributed

equally by the particular state governmentand the central government. To

facilitate the process of small enterprise development, DICs have been

entrusted with most of the administrative and financial powers. For

purpose ofallotment of land, work sheds, raw materials etc., DICs

functions under the 'Directorate of Industries'. Each DIC is headed by a

General Manager who is assisted by four functional managers and three

project managers to lookafterthe following activities :Activities of District Industries Centre (DIC):

i. Economic Investigation

ii. PlantandMachinery

iii. Research, education and training


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iv. Raw materials

v. Credit facilities

vi.Marketing assistance

vii. Cottage industries

3. Objectives of District Industries Centre (DIC):

The important objectives of DICs are as follow :

i. Accelerate the overall efforts for industrialisation ofthe district.

ii. Rural industrialisation and development of rural industries and

handicrafts.

iii. Attainment of economic equality in various regions ofthe district.iv. Providing the benefit of the government schemes to the new

entrepreneurs.

v. Centralisation of procedures required to start a new industrial unit and

minimisation- ofthe efforts and time required to obtain various permissions,

licenses, registrations, subsidies etc.

4. Functions of District Industries Centre (DIC):

i. Acts as the focal point ofthe industrialisation ofthe district.

ii. Prepares the industrial profile ofthe district with respectto :

iii. Statistics and information about existing industrial units in the district

in the large,Medium, small as well as co-operative sectors.

iv. Opportunity guidance to entrepreneurs.

v. Compilation of information about local sources of raw materials and

theiravailability.

vi.Manpowerassessment with respectto skilled, semi-skilled workers.

vii. Assessment of availability of infrastructure facilities like quality

testing, research and development, transport, prototype development,

warehouse etc.


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viii. Organises entrepreneurship developmenttraining programs.

ix. Provides information about various government schemes, subsidies,

grants and assistance availa ble from the other corporations set up for

promotion of industries.

x. Gives SSI registration.

xi. Prepares techno-economic feasibility report.

xii. Advices the entrepreneurs on investment s.

xiii. Acts as a link between the entrepreneurs and the lead bank of the

district.

xiv. Implements government sponsored schemes for educated

unemployed people like PMRY scheme, Jawahar Rojgar Yojana, etc.xv. Helps entrepreneurs in obtaining licenses from the Electricity Board,

Water Supply Board, No Objection Certificates etc.

xvi. Assist the entrepreneur to procure imported machinery and raw

materials.

xvii. Organises marketing outlets in liaison with other government

agencies.

3. State main malpractices involved in stockexchange. Describe the role ofSEBI to protectthe investors interest.

The main malpractices involved in stockexchange areas follows:

Failure to execute client orders- This situation could arise eitheras a result ofnegligence on the part ofthe stock broker or investment bank, oras a result ofthe nature ofthe instruction issued by the client. Failure to execute client orderson time normally causes distress to the clientsince it could lead to financial lossespecially for a sale order when prices begin to fall or when the prices moveupwards in the case ofa buy order.

Unauthorized transactions- This refers to a situation whereby the stockbrokeror investment banker executes a transaction in a clients account without theauthority ofthe client. This is a criminal act which impinges on the integrity ofthe market if it is not checked. This is different from a situation where some


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investors give discretionary power to the stockbroker over their accounts andare thus enabling them to transact withoutnecessarily contacting them. This iscommon with those investors who are not readily available when called uponby the stockbroker for one reason orthe other. Unauthorized transaction is alsoknown as client front running.

Issuing of bounced cheques- This is an offence which can either be perpetrated

by the stockbroker/investment bank or the investorhimself. Depending on therelationship ofthe clientand the stockbroker, a client may run his account witha broker into debit. This is contrary to the provisions of the regulations whichrequire thata stockbroker should not execute a buy order fora client withoutensuring thatthere are adequate funds to coverthe trans action.

Forgery- There are a number of documents thatare used to transact business inthe capital markets whichare liable to abuse by the participants in the industry.

The level of technological development in the capital markets industry willdetermine the use of physical documents to facilitate transactions. Thesedocuments include share certificates, transfer deeds, letters of indemnity, dailytransaction schedule, statements of accounts, order entry sheets, letters ofdiscretionary authority, and any other authorization document. Fraudsterssometimes use these documents to perpetrate fraud. In the era of sharecertificates there were instances where certificates were forged.

Shareholders complaint against listed company- Complaints against listedcompanies which include; misleading, inaccurate, and/or insufficient disclosure

of information; failure to disclose material information in financial statementsor annual reports; actions or lack of actions detrimental to the interest ofshareholders; misconduct by the directors/ management/ share registrars of alisted companies.

Churning- Among unscrupulous brokers, churning is one ofthe oldesttricks inthe books.The broker simply keeps buying and selling stocks to create heftycommissionsforhimself.

The main duty of SEBI is to protectthe investors in securities. The function ofSEBI in monitoring the stockexchange:1. The business of StockExchange the regulated.

2. Prevents fraudulentand unfairtrade practises in stockexchange.

3. Regulates the acquisition of shares and takeover of companies.


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4. Undertakes the checking and inspection of stockexchanges.

5. Conducting enquires and inspection of stockexchange.

6. Protects the interest ofthe investors.

The various powers of stockexchange:1. Power relating to insidertrading.

2. Power relating to stockexchange and dealing in securities.

3. Power relating to violation of rules and regulation.

4. Powerto regulate business of stockexchange and control it unfairtrade.

5. Power under securities contractact.

5.Money spent on advertising is investment , it does not create the cost ofgoods. Prove and explain the importance ofadvertising.

Advertising is communicating a sales message to potential customers. Advertising

is one segment ofa well organized, continuous marketing plan. Effectiveadvertising is a cumulative process that maintains current customers, attracts new

customers and establishes a favorable position forthe business with competitors.Advertising will not cure slow business growth or low profits, nor will it create a

better business person ora well-organized business. Advertising offers specified

benefits to a specific ortargetaudience. As part ofa sound marketing plan,advertising becomes an investment in the future ofthe business, instead of one

more expense. An effective advertisement is based on a careful analysis ofthe

situation before money is spent. Hence money spent on advertising is investmentand notan expense.

The importance ofadvertising can be classified into three heads:

1. The importance ofadvertising can be classified into three differentheads:

2. Importance of Advertising to producers and Traders,

3. Importance of Advertising to customers,


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4. Importance of Advertising to society,

Producers and Traders: Meeting competition: Advertising is an important

means for facing competition. By creating brand loyalty, ithelps to maintain

sales and market share. It supplements personal selling and sales promotion.

The importance of Advertising lies in the factthat it creates preference fora

particular product opens doors for salesmen and reinforces point of purchase

display, thereby reducing the costs of creating and maintaining demand. Dealers

preferto handle well advertised products.

Steady demand: Advertising creates regular demand by smoothening out

season

aland o

ther fluc

tuat

ions. For insta

nce,adver

tising is used

to emp

hasize

hotand cold uses of coffee to maint ain regular sales both during summerand

winter. By suggesting new and more frequent uses of product, advertising helps

to maintain demand, throughoutthe year. Steady demand enables regular

production.

Higher sales volume: Advertising helps to increase demand, expand markets

and enhance sales of existing products. Through repeated advertising, a

producer can create new customers and enter new markets. It creates new wants

and increases sales. Advertising is an essential technique of mass selling.

Introduction of new product: Advertising is helpful in introducing new

products by creating awareness and gaining theiracceptance. By informing

consumers aboutthe new product, advertising stimulates their interestand

persuades them to buy it. Effective advertising helps in overcoming consumers

resistance to new products.

Economies of scale: Advertising facilitates mass distribution of goods. It

reduces dependence on middlemen as dealers are more willing to stockand sell

well advertised goods. Direct distribution and rapid sales turnoverhelp to

reduce costs of distribution.Mass distribution and steady demand lead to large


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scale and regular production. As a result, several economies of scale become

available and cost of production per unit is reduced. Investment in inventories

can be reduced.

Goodwill : Advertising helps in creating a good image ofthe firm and

reputation for its products. A favorable image increases the capacity ofthe firm

to survive competition and depression. It is through effective advertising that

Tatas, Birlas, etc., have become household names. Ithas rightly been ob served

that "doing business withoutadvertising is like winking ata girl in the dark. We

know what we are doing butthe targets do notknow." By building goodwill

advertising enables business firms to obtain repeat orders.

Employee morale: By building reputation ofthe firm, advertising provides a

sense of security to employees and improves their morale. Salesmen feel happy

as theirtaskbecomes easier when the productand its producerare known to

customers. In a well reputed firm, executive have a feeli ng of pride and job

satisfaction which is necessary for better performance.

5. Globalisation is the necessity ofthe day. State the positive and negative

effects of globalisation.

Globalization refers to the increasing unification ofthe world's economic

order through reduction of such barriers to international trade as tariffs,

export fees, and import quotas. The goal is to increase material wealth,

goods, and services through an international division of la bor by

efficiencies catalyzed by international relat ions, specialization and

competition. It describes the process by which regional economies,

societies, and cultures have become integrated through communication,

transportation, and trade.


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The positive and negative effects of globalisation are as follows:

Positive Aspects ofGlobalization

y As more money is poured in to developing countries, there is a greater chance

forthe people in those countries to economically succeed and increase their

standard of living.

y Global competition encourages creativity and in novation and keeps prices for

commodities/services in check.

y Developing countries are able to reap the benefits of currenttechnology

without undergoing many ofthe growing pains associated with development

ofthese technologies.

y Governments are able to better worktogethertowards common goals now

thatthere is an advantage in cooperation, an improved ability to interactand

coordinate, and a global awareness of issues.

y There is a greateraccess to foreign culture in the form of movies, music,

food, clothing, and more. In short, the world has more choices.

Negative Aspects ofGlobalization

y Outsourcing, while it provides jobs to a population in one country, takes

away those jobs from another country, leaving many without opportunities.

y Although different cultures from around the world are able to interact, they

begin to meld, and the contours and individuality of each begin to fade.


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y There may be a greater chance of disease spreading worldwide, as well as

invasive species that could prove devastating in non -native ecosystems.

y There is little international regulation, an unfortunate factthat could have dire

consequences forthe safety of people and the environment.

y Large Western-driven organizations suchas the InternationalMonetary Fund

and the World Bankmake it easy fora developing country to obtain a loan.

However, aWestern-focus is often applied to a non-Western situation,

resulting in failed progress.

6. Define participation in management? Describe the various methods ofparticipation.

Participation management can be defined as Type of management in

which employees at all levels are encouraged to contribute ideas towards

identifying and setting organizational-goals, problem solving, and other

decisions that may directly affectthem. Also called consultative managment .

The differenttypes of participative programs are:

1. Works committees: The Industrial Disputes Act of 1947 provides for

establishing works committees in every establishment employing

hundred or more workers. This legislation thus makes it compulsory for

the organisation to ensure employee participation. The workcommittees

consist of equal number of members of workers and employer. The main

function ofthe workcommittees is to promote measures for securing and

preserving amity and good relations between the employers and the

workers. Their task is to smooth away any friction that may occur

between the managementand the workers.


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Unions consider these committees as a threat to their existence as

employers preferto talkto these committees ratherthan the union. There is

lack of interest among workers in works committees as they concentrate

only on minor issues and not major issues

2. Co-partnership: in this method employees are paid the share of profit inthe form of shares and not cash. Thus workers become shareholders in

the company in which they are employed. Being shareholders of the

company in whichthey are entitled to participate in management. They

also receive dividend on their shares. The problem with this method is

that employees are not interested in co-partnership and want their share

of profit in cashand refuse to accept shares ofthe company.

3. Employee Directors: underthis method one ortwo representatives ofthe

worker are nominated on the board of directors of the company. They

enjoy the same privileges and have the same authority as other directors

have. The problem of this method of participation is that many worker

directors are ignorantabouttheir role on the board and get in to conflic t

with other board members.

4. Joint Management Councils: under this system joint management

councils are constituted. These councils consist of equal number ofrepresentatives of employer and workers. The councils discuss various

matters concerning the working of the company. The decision of these

councils is advisory in nature. The council generally discusses matters

relating to working conditions, prevention ofaccidents, indiscipline, and

training.

5. Suggestion schemes: as the name itself indicates suggest ion programs are

formal plans to invite individual employees to make suggestion for work

improvements. The suggestions are then sorted out as per theirapplicability and cost-benefit ratio. Employees whose suggestions result

in cost saving for the organisation are given monetary rewards thatare

proportionate to the companys savings.


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PAPER -2

SHORT ANSWER QUESTIONS-

1. State the four main considerations that are considered while

selecting a business.

The four main considerations thatare considered while selecting a

business are:

a. Ability to Raise Capitalb. Separation of Ownership & Management

c. Limited Liability Protectiond. Ease of Incorporation

2 . What is district industrial centre?

The District Industries Centre is functioning mainly withthe aim of promoting,

facilitating and developing industrial growth in the territory. The district

industry centre ma jor role is to promote industrialization and help small scale

and cottage industries.

3.Write the full form of RIICO?

The Rajasthan State Industrial Development & Industrial Corporation .

4. State two main objectives of RFC.

RFC main objectives are as follows:

a. Providing assistance foraquisation of fixed assets by small scale cottage

industries.


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Economic liberalization is a very broad term that usually refers to fewer

government regulations and restrictions in the economy in exchange for greater

participation of private entities.

10 .What is meant by industrial democracy?

Participation of employees' representatives from all or most levels of

an industrial organization in its decision making process. This is known

as industrial democracy.

DESCRIPTIVE PART I

1. Explain the utilities created by business.

The various forms of utility created by business are as follows:

1. Form - chemical composition ofa certain commodity transforming it

to another commodity, thus a change in shape or structure is made.

2. Place - occurs when a good or service is more useful in one location or

another.

3. Time - occurs when a good or service is more useful at one time than

another.

4. Possession - change of ownership/ transfers from one person to another

person.

6. Service - created when we are rendering personal services orhelp.


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2. State four distinctions between equity and preference shares.

The major differences are:

I. As faras dividend and refund of capital in case of winding up is

concerned it is the preference shareholders who get paid before

the equity shareholders.

II. In case of preference shares rate of dividend is fixed while equity

shareholders get dividend on the basis of performance of company,

sometimes when company make loss then they are not paid any

dividend.

III. While preference shares can be converted into equity shares after

some years, if the terms of issue provide so while equity share

cannot be converted.

IV. Equity shareholders have voting rights and also they have rightto

participate in the management of the company which is not the

case as faras preference shareholders are concerned .

3. Distinguish between publicity and advertising

Advertising is content you pay for (radio, tv, newspa per, banner

advertising, etc). Publicity on the otherhand, refers to free content

about you and your company thatappears in the media.. Publicity

has more credibility than advertising to the mass. Publicity cannot


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be controlled whereas advertising which is a paid form can be

controlled by the marketer.

4. State the bad implications of economic liberalisati on.

Repeat from first QP.

5. State the functions of Joint management Council .

y Settlement ofMatters

y Unit level matters having bearing in/or on other branches or on

enterprise

y Development of skills ,safety measures

y Improvement of general condition of work

y Proper recognition and recognitions of suggestions from workers

y Preparation of working hours and holidays

y All matters like wages ,bonus are matters of collective bargaining

excluded from the scope of JMC.

Descriptive part II

1. Describe the various steps to be taken forthe establishment ofa business

organisation.

2. What do you mean by Entrepreneur? Explain the functions ofan

industrial entrepreneur.

An entrepreneur searches for change, responds to itand exploits opportunities.

Innovation is a specific tool ofan entrepreneurhence an effective entrepreneur

converts a source into a resource. It can be also explained as an individual who

introduces something new in the economy - a method of production not yet

tested by experience in the branch of manufacture concerned, a product with


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which consumers are not yet familiar, a new source of raw material or of new

markets .

An entrepreneur frequently has to wear many hats. He has to perceive

opportunity, plan, organize resources, and oversee production, marketin g, and

liaison with officials. Most importantly he has to innovate and bear risk. The

main functions ofan entrepreneurare as follows:

1. Innovation: Innovation is one ofthe most important functions ofan

entrepreneuraccording to Schumpeter. An entrepre neur uses information,

knowledge and intuition to come up with new products, new methods of

reducing costs ofa product, improvement in design or function ofa product,

discovering new markets or new ways of organization of industry. Through

innovation, an entrepreneur converts a material into a resource or combines

existing resources into new and more productive configurations. It is the

creativity ofan entrepreneurthat results in invention [creation of new

knowledge] and innovation [application ofknowl edge to create new products,

services or processes.]

Systematic innovation means monitoring the following for innovative

opportunity

i. The unexpected success or failure orany unexpected outside event,

(e.g. when the IT bubble burstthe ITES sector started growing.)

ii. Innovation based on process need [e.g. plate based cameras, film based


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cameras, digital cameras]

iii. Changes in industry and market structure [e.g. video cassette VCD,

DVD, Blue ray disc]

iv. Demographics changes (e.g. increasing number o f working women and

nuclear families in most metropolitan cities)

v. New knowledge (e.g. Pentium chip)

2. Riskand uncertainty bearing: According to Hozelistan entrepreneur

performs the function of riskand uncertainty bearing. Every decision

pertaining to development of new products, adapting new technologies,

opening up new markets involves risk. Decision-making in an environment of

uncertainty requires anticipation of risk. Profit is said to be the reward for

anticipating and taking such risks. However it is pertinentto mention thatthe

entrepreneur is nota gambler, he only takes calculated risks. An entrepreneur

develops the art of decision-making under conditions of uncertainty as a

matter of survival.

3. Organization building: An entrepreneurhas to organize men, material and

other resources. He has to perform the functions of planning, co -ordination

and control. He has to use his leadership qualities to build ateam, generate

resources and solve problems. Withhis organizational skills an entrepreneur

builds an enterprise from scratch, nurtures itand makes it grow. His vision

sows the seeds fora sound and vibrant organization and synergies are built in

the enterprise.


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According to Kilby in a developing country even the imitator entrepreneurs are

very importantand the entrepreneurial role encompasses the following:

i. Perception of market opportunities

ii. Gaining command over scarce resources

iii. Purchasing inputs

iv.Marketing the products

v. Dealing with bureaucrats

vi.Managing human relations within the firm

vii. Managing customerand supplier relations

viii.Managing finance

ix.Managing production

x. Acquiring and overseeing assembly ofthe factory

xi. Industrial engineering

xii. Upgrading process and product

xiii. Introducing new production techniques and products

3. What do you mean by stockexchange? What functions are performed by

the stockexchange ?

A stock exchange is an entity that provides services for stock

brokers and traders to trade stocks, bonds, and other securities. Stock

exchanges also provide facilities for issue and redemption of securities and

other financial instruments, and capital events including the payment of


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income and dividends. Securities traded on a stock exchange

include shares issued by companies, unit trusts, derivatives, pooled

investment products and bonds.

To be able to trade a security on a certain stock exchange, it must be

listed there. Usually, there is a central location at least for record keeping,

but trade is increasingly less linked to sucha physical place, as modern

markets are electronic networks, which gives them advantages of

increased speed and reduced cost oftransactions. Trade on an exchange is

by members only.

The initial offering of stocks and bonds to investors is by definition done

in the primary marketand subsequent trading is done in the secondary

market. A stock exchange is often the most important component of

a stockmarket. Supply and demand in stockmarkets is driven b y various

factors that, as in all free markets, affectthe price of stocks .

Functions of stockexchange are as follows:

Raising capital for businesses

The StockExchange provide companies withthe facility to raise capital for

expansion through selling shares to the investing public.

Mobilizing savings for investment


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When people draw their savings and invest in shares (through a IPO or

the issuance of new company shares ofan already listed company), it usually

leads to rational allocation of resources because funds, which could have been

consumed, orkept in idle deposits with banks, are mobilized and redirected to

help companies' management boards finance their organizations. This may

promote business activity with benefits for several economic sectors such

as agriculture, commerce and industry, resulting in stronger economic

growthand higher productivity levels of firms. Sometimes it is very difficult for

the stockinvestorto determine whether or notthe allocation ofthose funds is in

good faith and will be able to generate long-term company growth, without

examination ofa company's internal auditing.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines,

increase distribution channels, hedge against volat ility, increase its market

share, or acquire other necessary business assets. A takeover bid or

a mergeragreement through the stock market is one of the simplest and most

common ways fora company to grow by acquisition or fusion.

Profit sharing

Both casual and professional stock investors, as large as institutional

investors or as small as an ordinary middle class family,

through dividends and stock price increases that may result in capital gains,


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share in the wealth of profita ble businesses. Unprofitable and troubled

businesses may result in capital losses for shareholders.

Corporate governance

By having a wide and varied scope of owners, companies generally tend to

improve management standards and efficiency to satisfy the demands of these

shareholders, and the more stringent rules for public corporations imposed by

public stockexchanges and the government.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in

shares is open to boththe large and small stock investors because a person buys

the number of shares they can afford. Therefore the Stock Exchange provides

the opportunity for small investors to own shares of the same companies as

large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money to finance

infrastructure projects such as sewage and water treatment works or housing

estates by selling another category of securities known as bonds. These bonds

can be raised throughthe StockExchange whereby members of the public buy

them, thus loaning money to the government. The issuance of such bonds can

obviate the need, in the short term, to directly tax citizens to finance

development.


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Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely,

on market forces. Share prices tend to rise or remain stable when companies and

the economy in general show signs of stability and growth. An economic

recession, depression, or financial crisis could eventually lead to a stockmarket

crash. Therefore the movement of share prices and in general of the stock

indexes can be an indicator ofthe general trend in the economy.

4. What do you understand by business combination. Discuss i ts merits and

demerits.

Business combination is the process under which two or more business

organizations or their netassets are brought under common control in a

single business entity. Generally, companies doing similar type of

business or involved in similar line of activities may go for business

combination to get the economies of large scale production and to

minimize the possibility of cut-throat competition. Business combination

result the growth. Other terms applied to business combination are

mergerand acquisition. A 'merger' refers to a situation where two or more

than two companies of similar nature combine willingly while an

'acquisition' or 'take over' refers to the situation where a bigger company

takes overa smaller company. Business combination can take place either

throughamalgamation orthroughabsorption.


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The merits and demerits of business combination are:

1. Competition between and among the companies will be eliminated.

2. Amount of capital can be increased by combining business.

3. Establishmentand management cost can be reduced.

4. Benefits of large scale production can be secured.

5. Operating cost can be reduced by avoiding duplication.

6. Researchand development facilities are increased.

7.Monopoly in the market can be achieved.

8. Bulkpurchase of materials at reduced price is possible.

9. Stability ofthe price of goods is maintained.

Following are the disadvantages of business combination

1. Business combination brings monopoly in the market, which may

be harmful forthe society.

2. The identity ofthe old company finishes.

3. Goodwill ofthe old companies decrease.

4.Management ofthe company becomes difficult.

5. Business combination may result in over-capitalization.


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5. What do you mean by welfare state? Clearly explain the functions ofthe

welfare state.

A welfare state is a governmentthat provides forthe welfare, orthe well-

being, of its citizens completely. Such a government is involved in

citizens lives at every level. It provides for physical, material, and social

needs rather than the people providing for their own. The purpose of

the welfare state is to create economic equality or to assure equitable

standards of living forall.

The welfare state provides education, housing, sustenance, healthcare,

pensions, unemployment insurance, sick leave or time off due to injury,

supplemental income in some cases, and equal wages through price and

wage controls. Italso provides for public transportation, childcare, social

amenities suchas public parks and libraries, as well as many other goods

and services. Some of these items are paid for via government insurance

programs while others are paid for by taxes .

Functions of welfare state are:

The welfare state stands forthe welfare of, its citizens with welfare as itsprimary objective, the welfare state make provisions for free medical service,public healthand hygine and preventive measures against epidemics. Secondly,

ittakes care of old, invalid and sickpeople providing them financial assistancein the form of allowance, pension, relief etc. The unemployed receiveunemployment from the state. In the third, place it if the duty of the welfarestate to provide opportunities for education to all its citizens and to makeeducation free and compulsory upto a certain stand ard.

Furthermore, the state should establish and maintain a target number ofinstitutions for general and technical education..


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. The developmentactivities whicha welfare state must undertake include thedevelopment of agriculture and industry, irrigation facilities, co-operativefarming, the management of basic industry, Railways, Road Transport, PostandTelegraph, supply of electricity, gas water, the Civil Aviation, insurance andother public utility services.

The stress on nationalization of industries and enterprises is a recentdevelopment especially in India. The Railways, Civil Aviation, Insurance andfourteen ma jor banks have already been nationalized in India. Under theauspicious of the state a number of industries suchas fertilizer, Iron and steelplant etc. are established or expanded in India. While creating or expandingindustries la bor welfare service to those citizen who are engaged in theseindustries. One ofthe functions ofthe welfare state is to regulate the payment ofwages, compensation, duration, of workand conditions forthe benefit ofthosewho workin different industries and public concerns.

Another important responsibility of the welfare state is to create conditionscongenial for an increase in production and equita ble dist ribution of wealthamong people. This move is intended to reduce inequality and enhance thegeneral standard of living among them.

For economic security, the state takes upon itself the responsibility forproviding food, clothing and shelterto its citizen. The state achieves its primaryobjective and welfare of people, by adopting economic planning and othermeasures intended to provide the maximum happiness to the largest number ofpeople. It is said that in a welfare state, the individual has only to get himself

born the state will do the rest. The welfare state places equal emphasis onindividual and society. The best example ofa welfare state is Great Britain .

6. Critically examine the present industrial policy of the government ofIndia?

Post 1990s have seen a sea of change in the Industrial Policy of India. The

overprotective Indian Market were opened to foreign

companiesand investors. Thus Indian Industry registered an impressive

growth during the last decade and half. The number of industries in Indiahave

increased manifold in the last fifteen years. Thoughthe main occupation has

been agriculture forthe bulkofthe Indian population, it was realized that India


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would become a prosperous and a modern state with industrialization. Therefore

different programs were formulated and initiated to build up an adequate

infrastructure for rapid industrialization and improve the industrial scenario in

India.

Industrial Policy revolves around the core parameters like -

y Industrial Licensing.

y Industrial Entrepreneurs Memorandum.

y

Locational Policy.

y Policy Relating to Small Scale Undertakings.

y Environmental issues.

The Industrial Policy of India fueled rapid increase in the various sectors in all

verticals. But the striking factor was observed in the IT, Telecommunication

and Pharmaceutical Industry. The Indian software industry has grown at a

massive rate from a mere US $ 150 million in 1991-92 to a staggering US $ 5.7

billion (including over $4 billion worth of software exports) in 1999-2000. No

other Indian industry has performed this well against the global competition.

The telecommunication industry also marked stupendous growth, so is the

pharmaceutical industry. The Industrial Policy of resurgent India has helped

Indian industry to grow in leaps and bounds.

The Government of India's liberalized Industrial Policyaims at rapid and


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substantial economic growth, and integration with the global econom y in a

harmonized manner. The Industrial Policy reforms have reduced the industrial

licensing requirements, removed restrictions on investmentand expansion, and

facilitated easy access to foreign technologyand foreign direct

investment. According to the current policy FDI can come into India in two

ways. Firstly FDI up to100% is allowed under the automatic route in all

activities/sectors except a small list that require approval of the Government.

FDI in sectors/activities under automatic route does not require any prior

approval either by the Government or RBI. The investors are required to notify

the Regional office concerned of RBI within 30 days of receipt of inward

remittances and file the required documents with that office within 30 days of

issue of shares to foreign investors. All proposals for foreign investment

requiring Government approval are considered by the Foreign Investment

Promotion Board (FIPB). The FIPB also grants composite approvals involving

foreign investment/foreign technical collaboration. As this clarity is useful for

future investors, it has to be seen if these bodies are effective. The Initial

research revealed four ma jor bodies that have been constituted and could

provide data pertaining to FDI. So in this way we have analysed the present

industrial policy of india.


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PAPER III

Objective part I

1. Business is a game of risk.

Business involves lots of uncertainity like growth, efficient use of resources, demand

of product in the market with proportionate supply of raw materials , natural perils ,

satisfying the customer needs and capital. Last no certainty of profit. Hence business

a game of risk.

2. What do you mean by system?

A set of detailed methods, procedures, and routines established or

formulated to carry outa specific activity, perform a duty, or solve

a problem.

3. What is business ethics?(repeat)

4. State four function ofan enterprenuer.

The functions are:

y An entrepreneur generates employment for others.

y An entrepreneur can make significant contributions to the development of

the country

y Entrepreneurhas an opportunity for self-expression and the realisation of

ones dream by doing something new and different.

y An entrepreneur is an independent person and has enough scope for

innovation.

5. When was RIICO established?


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Rajasthan State Industrial Development & Investment Corporation

Ltd was established in 1969.

6. What do you mean by working capital?

Working capital is the amount of money thata company has tied up in

funding its day to day operations. A company has to tie up money to

fund its stocks, credit sales and other currentassets, butthis is offset

by its ability to fund this from current liabilities suchas purchases on

credit

:KDWLVVHQVH["

6HQVH[LVDQLQGH[WRPHDVXUHWKHKHDOWKRIWKHVWRFNPDUNHWLQWHUPV RI

VKDUH YDOXHZKHWKHULWKDV JRQHGRZQRU XS If the Sensex goes up, itmeans thatthe prices ofthe stocks of most ofthe major companies on the

BSE have gone up. If the Sensex goes down, this tells us that the stock

price of most ofthe major stocks on the BSE have gone down.

8. In which year was SEBI constituted and the name of its present

chairman.

SEBI was established in april 12, 1992 and the the Chairman of SEBI

is U.K. Sinha.

9. What is cartel?

A cartel is a formal (explicit) agreementamong competing firms. It is

a formal organization of producers and manufacturers thatagree to fix

prices, marketing, and production. Cartels usually occur in


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an oligopolistic industry, where there is a small number of sellers and

usually involve homogeneous products.

10.What is meant by welfare state?

A social system whereby the state assumes primary responsibility for

the welfare of its citizens, as in matters ofhealth care, education,

employment, and social security.