UCIT04

SECTION A
Q2: DESCRIBE THE QUALITY OF GOOD BUSINESS MAN
ANS:
Quality # 1. Knowledge of Business:

The businessman should have a thorough understanding of his

business. He should be clear about the aims and objectives of the
business. The knowledge of business should be supplemented by
knowledge of finance, marketing and mercantile laws. The knowledge
of all these aspects is essential to tackle the problems of complex
business.

Quality # 2. Accuracy:

The next main quality is that he realises what he is talking about and
what he means. Precision in regard to the orders and their execution is
imperative. It is essential that he should be a man of right thinking. He
must be able to grasp his problems by treating them quantitatively.

Quality # 3. Time Sense and Foresight:

It is imperative for a modem business to appreciate the time and think

in terms of time. There is a chain of action which must conform to the
rapidly changing needs of the ultimate consumer. He must be able to
forecast with foresight and look into the future. Having detected the
wants, he must be capable enough to proceed intelligently to meet
those wants.

Quality # 4. Alertness:

The businessman is required to keep in touch with the developments

taking place in his own country and the world. He cannot be successful
if isolated. He must be alert in not only meeting the wants but in
creation of the wants.

Quality # 5. Honesty and Morality:

It is of utmost importance that the businessman should adequately

satisfy consumer demands most honestly. He must use his ability to
provide precisely what is demanded from him. He must maintain
quality standard most honestly. The honesty and optimism which goes
with it are attributes of the businessman at his best. Honesty with him
should not only be the policy but actual practice.

Quality # 6. Initiative and Capacity to Make Decisions:

The success of businessman largely depends upon his ability to make

decisions promptly and boldly. Indecision very often results in missing
profitable business opportunities. Decision-making is the basic
ingredient of executing any task. Accordingly, it is necessary that
businessman should be in position to take correct and prompt
decision.

Quality # 7. Ability to Co-Operate:

He must be soft-spoken and adopt co-operative and accommodating

attitude towards all those with whom he comes in contact with. He
must be able to compromise, adjust, adopt and be willing to admit that
his judgement on occasions was wrong. He must also be
temperamentally fitted to exercise divided authority. Understanding
others is viewed as a pre-requisite-par- excellence as a most expedient
stepping-stone for success.

Quality # 8. Consistency and Dependability:

The businessman must be of consistent mind so as to be able to

exercise his firmness in the right direction in dealing with others. He
should hold the organisation constant and hence dependable. A
dependable businessman satisfies co-workers who are loyal to him and
the unit directed by him. Therefore a businessman who wants results
should avoid inconsistency, and its inevitable result, unfairness, etc.

Quality # 9. Energy:

A bountiful endowment of physical and nervous energy is another

essential without which other qualities are hardly of any value. In
addition to energy, he should be capable of putting up forcefully his
suggestions and points of view which he considers to be in the right
direction.

Quality # 10. Personal Qualities:

The businessman in addition to the above should also possess qualities

common to a leader. He should be kind-hearted and have human
approach to problems. He should be intelligent, mentally alert, of
constructive imagination, self-confident, self-restraint, honest and
sincere. Above all, he should be social and be a man of high character.

Q3: define partnership explain its features

ANS :
The Indian Partnership Act, 1932 governs partnership forms of business
in India. Section 4 of this Act defines a partnership as the relationship
between partners who have agreed to share the firm’s profits carried on
by all or any one of them acting for all.

A bare reading of this definition shows that a partnership requires

partners who share their firm’s profits amongst each other. Further, the
firm’s business must be carried on either by all of them together or by
one of them acting on behalf of others. The members of such a business
are individually called partners and collectively, a firm.

Considering the definition of partnership we just learned, let us now

take a look at some features of partnerships.
Features of Partnerships
A typical partnership form of business will always have the following
basic features.

1. Agreement
The definition of the partnership itself makes it clear that there must
exist an agreement between partners to work together and share profits
amongst them. Partners may make such an agreement either orally or in
writing. If it exists in written form, we refer to such an agreement as a
partnership deed.

Such written or oral agreement between partners must ensure that they
are clear on their status as partners of their firm. This includes details
pertaining to their work as partners, the firm’s businesses, their profit
and loss sharing ratio, etc.

2. Business
The existence of a business is an essential feature of partnerships. There
can be no formal partnership under the Partnership Act if the partners
carry out charitable activities. Section 2 says that business includes any
trade, profession or occupation. What is essential is that the firm must
work with the intention of earning profits.

3. Profit sharing
A partnership does not exist unless partners share the profits of their
firm. A person who works for the partnership business without having a
share in its profits may be an employee, but not a partner. It is
noteworthy to point out that the law only requires the sharing of profits
amongst partners. Consequently, all partners need not share losses as
well.
4. Principal-agency relationship
A partnership firm’s business may be conducted either by all partners
together or by one partner acting on behalf of all others. We commonly
refer to such a peculiar relationship between partners as the principle
of agency.

This principle means that all partners are agents for each other. The
decisions of one partner taken in the ordinary course of business will
bind other partners as well. All partners are liable for acts of the firm
individually and severally.

Q4: MENTION THE FACTOR AFFECTING OPTIMUM SIZE OF

BUSINESSMAN
ANS :
The following are the factors that influence the optimum size of a firm:

a. Technical forces
b. Managerial forces
c. Financial forces
d. Marketing forces
e. Forces of risk and fluctuations
1. Technical forces influence size of a firm
Technical forces which influence the optimum size of firm are degree
of specialization (division of labour), mechanization and integration of
work processes.

In the case of division of labor, a job is split into small functions and
each function is assigned to a specific workman. When a workman
performs a specific operation over a long period of time, the skill of the
workman, speed of performance, quality of work etc improve.

Division of labor facilitates mechanization. A firm has to be fairly large

enough to go in for mechanization. A large firm producing
standardized products can go for assembly line manufacturing which
increases output and results in lower cost of output.

2. Managerial forces influence size of business units

Managing an organization today is a complex task. The services of
qualified, experienced, professionals are required to run the
organization in an efficient manner. Therefore businesses which desire
to maximize their sales and profitability need to appoint a competent
management team.

To appoint such personnel, high amounts of remuneration and

benefits have to be paid. Only large organizations would be able to
offer such high remuneration levels. The expert managers using their
ability and skills can ensure the growth of the business in various
spheres. But there is a limit to which expert management can grow the
organization.

3. Financial forces influence size of a business unit

Investors have more confidence in large and established firms. They
prefer to invest their money in large firms because of the possibility of
earning high returns. Investors generally do not prefer to invest in new
or small firms because they feel that such investment is risky and the
possibility of earning high returns is also less. Therefore large firms
are able to raise required financial resources easily. Banks also come
forward to lend loans at cheaper rates of interest and therefore cost of
funds is also less for large firms.

4. Marketing forces influence size of business

A large firm can enjoy economies of buying and selling. Since it buys
raw materials in bulk quantities it can enjoy the benefits of quantity
discounts. It can employ experts for purchase. They would be able to
source quality raw materials at cheaper prices. Similarly experts can
be employed for marketing their products. In case a large firm has
multiple products the sales force can market the entire range of
products.
Advertisement time in media can be bought in bulk at cheaper rates.
The organization can employ reputed market research agencies to
know the changing needs and preference of consumers and produce
products accordingly. But the large firm cannot have close contact
with the customers and understand their requirements whereas a
small firm can do so. Any mistake done by a large firm would result in
huge losses.

5. Forces of risks and fluctuations influence size of

business
Business enterprises face risks from different sources. Risks may arise
due to the following reasons:

 changes in customers preferences (textiles to ready-made,

typewriters to computers etc.)
 changes in fashions (jeans to cotton casuals etc.)
 increased competition (in all industries)
 changes in government policies (reservation to De-reservation in
SSI’s, ban on lottery sales in Tamil Nadu, from protection to local
industry to liberalization, globalization and privatization etc.)
 fluctuations in currency rates (1$ = Rs.30 in 1980’s to 1$ = 68 in
2016)

Q5: what are the duties of company directors

ANS :
Your company’s constitution
The first of these duties is that a director must act within their powers under
the company’s constitution. The most important part of the company’s
constitution is the articles of association. These are an important set of
rules for your company and for your board.
When you registered the company, you may have used the model articles
available for private or public companies. Alternatively, you may have
created your own tailored articles, normally with the help of a legal advisor.

Promoting the success of the company

The second major duty of a company director is to promote the success of
the company. This is probably the most well-known of the 7 duties.

From the beginning of 2019, a new reporting requirement means that larger
companies (with more than 250 employees) will have to explain how they
have fulfilled this duty in their annual report.

The duty states a director must act in a way that they consider, in good
faith, would be most likely to promote the success of the company for the
benefit of its members (shareholders) as a whole. When making decisions,
directors must also consider the likely consequences for various
stakeholders, including employees, suppliers, customers and communities.
They should also consider the impact on the environment, the reputation of
the company, company success in the longer term and all of the
shareholders (including minority shareholders).

Independent judgement
The third major duty requires directors to exercise independent judgement.
Directors are meant to develop their own informed view on the company’s
activities.

Directors should not be delegates who simply implement the commands of

other parties (such as major shareholders). Nor should they avoid their
responsibility to make independent decisions by relying on the knowledge
or judgement of other directors or experts.

Exercise reasonable care, skill and diligence

There was a time when directors could be appointed purely for their name
or reputation, without the expectation that they would actually do any work
as a board member. Those days are now over due to the duty for directors
to exercise reasonable skill, care and diligence in their role.
The benchmark is that of a reasonably diligent person with the general
knowledge, skill and experience that could reasonably be expected from a
person carrying out the director’s functions. Also, directors with specific
professional training or skills (such as a lawyer or accountant) are held to a
higher standard in related issues than less qualified colleagues.

Conflicts of interest and personal benefits

The remaining 3 legal duties relate to the need for directors to avoid or
manage conflicts of interest which may affect their objectivity.

If situations arise which impose multiple claims on a director’s attention or

loyalty, it is essential that they disclose them to fellow board members. It
will then be up to the other non-conflicted board members (or the
shareholders, in some cases) to decide how to manage or approve the
conflict and maintain the integrity of the board’s decision-making process.

Gifts or benefits from third parties are also a potential threat to a director’s
objectivity. Most importantly, directors have a statutory duty to disclose any
direct or indirect interest in proposed or existing transactions or
arrangements with the company.

Keeping a record
One of the important purposes of the minutes of board meetings is to
provide a record of the board’s decision-making process.

By law, these minutes must be kept for 10 years. Years from now, it may
be difficult for you to remember if you fulfilled your directors’ duties in
respect of some key decision. The minutes can provide vital evidence that
you did – something that you may well have cause to be grateful for.

Q6: write a short note on quorum

ANS:
The minimum number of voting members that must be in attendance at a
meeting of an organization for that meeting to be regularly constituted.
A quorum is the number or proportion of the members of an organization
that must be present in order to transact any business.

A meeting cannot start or transact business until there is a minimum

number of voting members, a quorum. Without a quorum, the meeting is
never properly constituted; it cannot transact business validly.
Any business transacted where a quorum is not present is null and void
except for one item and that is a motion to adjourn.
The quorum requirements for organizations varies greatly and is usually set
proportionate to the average number of members. Organizations want to
avoid having business transacted in the absence of a minimum numbers of
members but at the same time, do not want to prevent or delay work by
setting too high a quorum.
Almost all organizations and government bodies specify the quorum of their
organizations within the statute that creates the body.

Q7: EXPLAIN THE OBJECTIVE OF NEW INDUSTRIAL

POLICY
ANS :
The major objectives of industrial policy are:

(i) Rapid Industrial Development:

The industrial policy of the Government of India is aimed at increasing
the tempo of industrial development. It seeks to create a favourable
investment climate for the private sector as well as mobilise resources
for the investment in public sector. In its way the government seeks to
promote rapid industrial development in the country.

(ii) Balanced industrial Structure:

The industrial policy is designed to correct the prevailing lopsided
industrial structure. Thus, for example, before independence, India
had some fairly developed consumer goods industries. But the capital
goods sector was not developed at all and basic and heavy industries
were by and large absent.

So the industrial policy had to be framed in such a manner that these

imbalances in the industrial structure are corrected. Thus by laying
emphasis on heavy industries and development of capital goods
sector, industrial policy seeks to bring a balance in industrial
structure.

(iii) Prevention of Concentration of Economic Power:

The industrial policy seeks to provide a framework of rules,
regulations and reservation of spheres of activity for the public and the
private sectors. This is aimed at reducing the monopolistic tendencies
and preventing concentration of economic power in the hands of a few
big industrial houses.

(iv) Balanced Regional Growth:

Industrial policy also aims at correcting regional imbalances in
industrial development. It is quite well-known that some regions in
the country are industrially quite advanced e.g., Maharashtra and
Gujarat while others are industrially backward, like Bihar, Orissa. It is
the task of industrial policy to work out programmes and policies
which lead to industrial development or industrial growth.

The Industrial policy of 1948, which was the first industrial policy
statement of the Government of India, was changed in 1956 in a public
sector dominated industrial development policy that remained in force
till 1991 with some minor modifications and amendments in 1977 and
1980. In 1991, far reaching changes were made in the 1956 industrial
policy. The new Industrial Policy of July 1991 heralded the framework
for industrial development at present.

Q8: mention the pricing policy of public enterprise

ANS :

The following are some of the important principles of

pricing which are suggested in the case of public enterprise

1. Marginal Cost Basis:

Marginal cost is the cost of producing an additional unit of a product.
The reasoning behind the ‘marginal cost basis’ of pricing policy, is
that, if a consumer is willing to pay for an extra unit of a product,
welfare of the community gets maximised when that extra or
additional unit of product is made available to him.

It is argued that if a consumer is not willing to pay the cost of the

additional unit (i.e. marginal cost), that additional unit should not be
produced in the interest of maximising welfare of the community. It is
also argued that if marginal cost basis is followed in pricing policy of
PEs, resources of the community will automatically be allocated to the
production of different goods that will lead to maximisation of the
welfare of the community.

2. Pricing on the Basis of Average Cost:

‘Average cost pricing principle’ refers to fixing the price of a
commodity on the basis of the average cost of population of the
commodity. In the case of average cost pricing, total revenue obtained
by selling a certain amount of commodity will be equal to its total cost
of production. Thus, average cost pricing principle ensures that the
entire cost of production is absorbed in to the price of the commodity.

It may be noticed that while calculating total cost of production, along

with various other costs, normal profits is also included. On account of
this, the price of a commodity is a little higher than the price based on
the principle of ‘No profit, No loss’.

3. ‘No Profit, No Loss’ or ‘Break-Even’ Principle:

‘No profit. No loss’ or ‘Break-even’ principle of pricing of products or
services of PEs maintains that the price should be fixed in such a way
that there will be neither any profit, nor any loss for the concerned PE.
In simple terms, price should just-cover all costs of production.

4. Profit-Making Principle of Pricing:

Profit-making principle of pricing of the products or services of PEs
maintains that the price charged should be such as to get for the
concerned PE some surplus after absorbing all the cost elements,
including normal profit. It is maintained that in developing countries
like India, PEs are expected to generate as much surplus as possible so
that these surplus funds can be further invested in developmental
projects.

Q9: WHAT IS MEANT BY PARTNERSHIP DEED

Ans:

Partnership Deed
A Partnership Agreement is an agreement between two or more individuals who
would like to manage and operate a business together in order to make a
profit. It is a relatively common business structure in India, and can be contrasted
to other common business structures such as a sole proprietor, a company or a
trust.
In a partnership, several partners are able to work together (unlike a sole
proprietor). Each partner shares a portion of the partnership's profits and
losses and each partner is personally liable for the debts and obligations of the
partnership.
Compared to a company or a trust, a partnership can have lower set up and
administration costs. However, while companies and trusts offer some protections
against liability, a partnership does not. A partnership is not a separate entity
from the partners. If the partnership incurs a liability, the partners are
personally responsible for it. Furthermore, a partner can become liable for debts
that another partner has incurred on behalf of the partnership.
Nevertheless, a partnership is a cheap and convenient way for a several people to
go into business together, and is a popular business structure for many Indians.
And an important step in getting the partnership established, is to make a written
record of the agreement between the partners, by using this Partnership Deed.
This Partnership Deed describes the partner responsibilities, outlines
the ownership interest in the partnership, defines the profit and loss
distribution of each partner, prepares the partnership for common business
scenarios, and includes other important rules about how the partnership will be
managed and conduct business.
The document is a critical foundational document for running a new business and
sets the business up for success by ensuring clear communication and defined
responsibilities for all of the partners. This Agreement documents both
contingency plans for when things go wrong as well as descriptions of the
partnership's day-to-day operations. A Partnership Deed protects all of the partners
involved in the business and any individuals who plan to do business together
should complete a Partnership Deed.
Q11: explain the various types of trade
ANS:
Trade means the sale, transfer or exchange of goods and services for a
money or money’s worth.

Types of Trade-

1. Internal Trade :

Internal Trade is also known as Home Trade or Domestic Trade

Internal trade refers to buying and selling of goods and services within the
geographical boundaries of a country. For example, the trade happening
between traders of Mumbai and Delhi.

Both the buyer and seller belong to the same country in this type of trade.

Payments in this type of trade are made and received in the home currency.

Internal trade can further be divided into two categories-

(a) Wholesale Trade: Wholesale trade refers to buying of goods in large

quantities from manufacturers and selling them in relatively lesser
quantities to retailers. The people engaged in wholesale trade are called
‘wholesalers. They act as a link between producers and retailers.

(b) Retail Trade: Retail Trade refers to buying of goods from wholesalers
and/or manufacturers and selling them in small quantities to the ultimate
consumers. People engaged in retail trade are called ‘retailers’. They act as
a link between wholesalers and final consumers. Small scale retailers
include general shops, hawkers, pedlars, etc.

2. External Trade :

It is also known as Foreign Trade or International Trade or External Trade.

External Trade refers to buying and selling of goods and services between
different countries. In this trade, the seller and buyer belong to two
different countries. For example, the trade happening among traders of
India and China.

It may further be divided as follows:

(a) Import Trade: It means purchasing goods and services from other
countries. For example, India buying petroleum from Iran.

(b) Export Trade: It involves selling goods and services to other countries.
For example, India selling some product to Russia.

(c) Entrepot Trade:

Entrepot trade is also known as ‘Re-Export Trade’. Entrepot Trade means
importing goods from one or more countries with the purpose of exporting
them to some other country or countries. For example, India buying some
product from Israel to resell it to Bhutan.

Q12: what are the features of cooperative society

ANS:

1. Voluntary Association- The membership of cooperative societies is

voluntary. Anybody having a common interest is free to join a
cooperative society. The member can also leave the society any time
after giving a proper notice.

2. Equal Voting Rights- A cooperative society is based on the principle

of “one man one vote”. A member has only one vote irrespective of the
number of share(s) held by him. Thus, a co-operative society runs on
democratic principles.

3. Separate Legal Entity- A cooperative society is required to be

registered under the Co-operative Societies Act. Registration provides
it a separate legal entity. Its existence is quite different from its
members.

The death, insolvency or lunacy of a member does not affect its

existence. It can sue and be sued in its own name. It can make
agreements as well as purchase and sell property in its own name.

4. Service Motive- A cooperative society is based on the service motive

of its members. Its main objective is to provide service to the members
and not to maximize profits. Earning profits is the most important
objective of other forms of business organization. It is not so in the
case of co-operatives.
5. Distribution of Surplus- Members are paid dividend and bonus out
of the profits of the co-operative society. The bonus is given according
to the volume of business transacted by each member with the co-
operative society.

SECTION B
Q13: briefly explain the objectives of business
ANS :
Five most important objectives of business may be classified
are as follows: 1. economic objectives, 2. social objectives, 3.
human objectives, 4. national objectives, 5. global objectives.
Objectives represent the purpose for which an organisation has been
started. Objectives guide and govern the actions and behaviour of
businessmen. According to William F. Glueck, “Objectives are those
ends which the organisation seeks to achieve through its existence and
operations.”

Another term for objectives is goals. Logically, objectives ought to

specify ends or results sought that are derived from and congruent
with the mission the organization has set itself Attempts to set
objectives should always be guided by references to the mission they
are meant to fulfill.

Business objectives are something which a business organisation

wants to achieve or accomplish over a specified period of time. These
may be to earn profit for its growth and development, to provide
quality goods to its customers, to protect the environment, etc.
Classification of Objectives of Business:
It is generally believed that a business has a single objective. That is, to
make profit. But it cannot be the only objective of business. While
pursuing the objective of earning profit, business units do keep the
interest of their owners in view. However, any business unit cannot
ignore the interests of its employees, customers, the community, as
well as the interests of society as a whole.

For instance, no business can prosper in the long run unless fair wages
are paid to the employees and customer satisfaction is given due
importance. Again a business unit can prosper only if it enjoys the
support and goodwill of people in general. Business objectives also
need to be aimed at contributing to national goals and aspirations as
well as towards international well-being. Thus, the objectives of
business may be classified as;

A. Economic Objectives

B. Social Objectives

C. Human Objectives

D. National Objectives

E. Global Objectives

Now, we shall discuss all these objectives in detail.

A. Economic Objectives:
Economic objectives of business refer to the objective of earning profit
and also other objectives that are necessary to be pursued to achieve
the profit objective, which include, creation of customers, regular
innovations and best possible use of available resources.

(i) Profit Earning:

Profit is the lifeblood of business, without which no business can
survive in a competitive market. In fact profit making is the primary
objective for which a business unit is brought into existence. Profits
must be earned to ensure the survival of business, its growth and
expansion over time.

Profits help businessmen not only to earn their living but also to
expand their business activities by reinvesting a part of the profits. In
order to achieve this primary objective, certain other objectives are
also necessary to be pursued by business, which are as follows:

(a) Creation of customers:

A business unit cannot survive unless there are customers to buy the
products and services. Again a businessman can earn profits only
when he/she provides quality goods and services at a reasonable price.
For this it needs to attract more customers for its existing as well as
new products. This is achieved with the help of various marketing
activities.

(b) Regular innovations:

Innovation means changes, which bring about improvement in
products, process of production and distribution of goods. Business
units, through innovation, are able to reduce cost by adopting better
methods of production and also increase their sales by attracting more
customers because of improved products.

Reduction in cost and increase in sales gives more profit to the

businessmen. Use of power looms in place of handlooms, use of
tractors in place of hand implements in farms etc. are all the results of
innovation.

(c) Best possible use of resources:

As we all know, to run any business we must have sufficient capital or
funds. The amount of capital may be used to buy machinery, raw
materials, employ men and have cash to meet day-to-day expenses.
Thus, business activities require various resources like men, materials,
money and machines.

The availability of these resources is usually limited. Thus, every

business should try to make the best possible use of these resources.
Employing efficient workers. Making full use of machines and
minimizing wastage of raw materials, can achieve this objective.

B. Social Objectives:
Social objective are those objectives of business, which are desired to
be achieved for the benefit of the society. Since business operates in a
society by utilizing its scarce resources, the society expects something
in return for its welfare. No activity of the business should be aimed at
giving any kind of trouble to the society.
If business activities lead to socially harmful effects, there is bound to
be public reaction against the business sooner or later. Social
objectives of business include production and supply of quality goods
and services, adoption of fair trade practices and contribution to the
general welfare of society and provision of welfare amenities.

(i) Production and Supply of Quality Goods and Services:

Since the business utilizes the various resources of the society, the
society expects to get quality goods and services from the business he
objective of business should be to produce better quality goods and
supply them at the right time and at a right price It is not desirable on
the part of the businessman to supply adulterated or inferior goods
which cause injuries to the customers.

They should charge the price according to the quality of e goods and
services provided to the society. Again, the customers also expect
timely supply of all their requirements. So it is important for every
business to supply those goods and services on a regular basis.

(ii) Adoption of Fair Trade Practices:

In every society, activities such as hoarding, black- marketing and
over-charging are considered undesirable. Besides, misleading
advertisements often give a false impression about the quality of
products. Such advertisements deceive the customers and the
businessmen use them for the sake of making large profits.

This is an unfair trade practice. The business unit must not create
artificial scarcity of essential goods or raise prices for the sake of
earning more profits. All these activities earn a bad name and
sometimes make the businessmen liable for penalty and even
imprisonment under the law. Therefore, the objective of business
should be to adopt fair trade practices for the welfare of the consumers
as well as the society.

(iii) Contribution to the General Welfare of the Society:

Business units should work for the general welfare and upliftment of
the society. This is possible through running of schools and colleges
better education opening of vocational training centres to train the
people to earn their livelihood, establishing hospitals for medical
facilities and providing recreational facilities for the general public like
parks, sports complexes etc.

С. Human Objectives:
Human objectives refer to the objectives aimed at the well-being as
well as fulfillment of expectations of employees as also of people who
are disabled, handicapped and deprived of proper education and
training. The human objectives of business may thus include economic
well-being of the employees, social and psychological satisfaction of
employees and development of human resources.

(i) Economic Well-being of the Employees:

In business employees must be provided with tan remuneration and
incentive for performance benefits of provident fund, pension and
other amenities like medical facilities, housing facilities etc. By this
they feel more satisfied at work and contribute more for the business.
(ii) Social and Psychological Satisfaction of Employees:
It is the duty of business units to provide social and psychological
satisfaction to their employees. This is possible by making the job
interesting and challenging, putting the right person in the right job
and reducing the monotony of work Opportunities for promotion and
advancement in career should also be provided to the employees.

Further, grievances of employees should be given prompt attention

and their suggestions should be considered seriously when decisions
are made. If employees are happy and satisfied they can put then best
efforts in work.

(iii) Development of Human Resources:

Employees as human beings always want to grow. Their growth
requires proper training as well as development. Business can prosper
if the people employed can improve their skills and develop their
abilities and competencies in course of time. Thus, it is important that
business should arrange training and development programmes for its
employees.

(iv) Well-being of Socially and Economically Backward

People:
Business units being inseparable parts of society should help
backward classes and also people those are physically and mentally
challenged. This can be done in many ways. For instance, vocational
training programme may be arranged to improve the earning capacity
of backward people in the community. While recruiting its staff,
business should give preference to physically and mentally challenged
persons. Business units can also help and encourage meritorious
students by awarding scholarships for higher studies.

D. National Objectives:
Being an important part of the country, every business must have the
objective of fulfilling national goals and aspirations. The goal of the
country may be to provide employment opportunity to its citizen, earn
revenue for its exchequer, become self-sufficient in production of
goods and services, promote social justice, etc. Business activities
should be conducted keeping these goals of the country in mind, which
may be called national objectives of business.

The following are the national objectives of business.

(i)Creation of Employment:
One of the important national objectives of business is to create
opportunities for gainful employment of people. This can be achieved
by establishing new business units, expanding markets, widening
distribution channels, etc.

(ii) Promotion of Social Justice:

As a responsible citizen, a businessman is expected to provide equal
opportunities to all persons with whom he/she deals. He/ She is also
expected to provide equal opportunities to all the employees to work
and progress. Towards this objectives special attention must be paid to
weaker and backward sections of the society.

(iii) Production According to National Priority:

Business units should produce and supply goods in accordance with
the priorities laid down in the plans and policies of the government.
One of the national objectives of business in our country should be to
increase the production and supply of essential goods at reasonable
prices.

(iv) Contribute to the Revenue of the Country:

The business owners should pay their taxes and dues honestly and
regularly. This will increase the revenue of the government, which can
be used for the development of the nation.

(v) Self-sufficiency and Export Promotion:

To help the country to become self-reliant, business units have the
added responsibility of restricting import of goods. Besides, every
business units should aim at increasing exports and adding to the
foreign exchange reserves of the country.

E. Global Objectives:
Previously India had very restricted business relationship with other
nations. There was a very rigid policy for import and export of goods
and services. But, now-a-days due to liberal economic and export-
import policy, restrictions on foreign investments have been largely
abolished and duties on imported goods have been substantially
reduced.

This change has brought about increase in competition in the market.

Today because of globalisation the entire world has become a big
market. Goods produced in one country are readily available in other
countries. So, to face the competition in the global market every
business has certain objectives in mind, which may be called the global
objectives. Let us learn about them.

(i) Raise General Standard of Living:

Growth of business activities across national borders makes quality
goods available at reasonable prices all over the world. The people of
one country get to use similar types of goods that people in other
countries are using. This improves the standard of living of people.

(ii) Reduce Disparities among Nations:

Business should help to reduce disparities among the rich and poor
nations of the world by expanding its operation. By way of capital
investment in developing as well as underdeveloped countries it can
foster their industrial and economic growth.

(iii) Make Available Globally Competitive Goods and

Services:
Business should produce goods and services which are globally
competitive and have huge demand in foreign markets. This will
improve the image of the exporting country and also earn more
foreign exchange for the country.

Q14: explain the merits and demerits of joint stock company

ANS :
The company form of business ownership has become very popular in
modern business on account of its several advantages:

1. Limited liability:
Shareholders of a company are liable only to the extent of the face value of
shares held by them. Their private property cannot be attached to pay the
debts of the company. Thus, the risk is limited and known. This encourages
people to invest their money in corporate securities and, therefore,
contributes to the growth of the company form of ownership.

2. Large financial resources:

Company form of ownership enables the collection of huge .financial
resources. The capital of a company is divided into shares of small
denominations so that people with small means can also buy them.

Benefits of limited liability and transferability of shares attract investors.

Different types of securities may be issued to attract various types of
investors. There is no limit on the number of members in a public company.

3. Continuity:
A company enjoys uninterrupted business life. As a body corporate, it
continues to exist even if all its members die or desert it. On account of its
stable nature, a company is best suited for such types of business which
require long periods of time to mature and develop.

4. Transferability of shares:
A member of a public limited company can freely transfer his shares without
the consent of other members. Shares of public companies are generally
listed on a stock exchange so that people can easily buy and sell them.
Facility of transfer of shares makes investment in companies liquid and
encourages investment of public savings into the corporate sector.

5. Professional management:
Due to its large financial resources and continuity, a company can avail of the
services of expert professional managers. Employment of professional
managers having managerial skills and little financial stake results in higher
efficiency and more adventurous management benefits of specialisation and
bold management can be secured.

6. Scope for growth and expansion:

There is considerable scope for the expansion of business in a company. On
account of its vast financial and managerial resources and limited liability,
company form has immense potential for growth. With continuous expansion
and growth, a company can reap various economies of large scale operations,
which help to improve efficiency and reduce costs.

7. Public confidence:
A public company the confidence of public because its activities are
regulated by the government under the Companies Act. Its affairs are known
to public through publication of accounts and reports. It can always keep
itself in tune with the needs and aspirations of people through continuous
research and development.

8. Social benefits:
Company form of organisations has helped increase production and improves
living standards of people. It has generated employment for a large number of
persons.

It has improved quality of goods and reduced prices. Company organisation

has contributed tax revenues for the Government and has helped the growth
of professional management. In this way joint stock company has helped to
improve the quality of life all over the world.

Demerits:
A joint stock company suffers from the following weaknesses:

1. Legal formalities:
Formation of a company is a time-consuming and expensive process. Too
many legal formalities have to be observed and several legal documents have
to be prepared and filed. Delay in formation may deprive the business the
momentum of an early start.

2. Lack of motivation:
The directors and other officers of a company have little personal
involvement in the efficient management of a company. Divorce between
ownership and control and absence of a direct link between effort and reward
lead to lack of personal interest and incentive it is difficult to keep personal
touch with customers and employees. As a result, efficiency of business
operations may be low.

3. Delay in decisions:
Red tape and bureaucracy do not permit quick decisions and prompt action.
There is little scope for personal initiative and a sense of responsibility. Paid
employees like to play safe and tend to shift responsibility. There is lack of
flexibility of operations in a company.

4. Economic oligarchy:
The management of company is supposed to be carried on according to the
collective will of its members. But in practice, there is rule by a few
(oligarchy). Often directors try to mislead the members and manipulate
voting power to maintain and perpetuate their control.

The shareholders become mere pawns in the game of a small clique or coterie
of directors. Shareholders are often ignorant and indifferent about the
working of a company. Therefore, they fail to exercise their voice in the
functioning of the company.

5. Corrupt management:
In a company, there is often danger of fraud and misuse of property by
dishonest management. Bogus companies may be formed to deprive the
investors of their hard-earned money.

Unscrupulous people may manipulate annual accounts to show artificial

profits or losses for their personal gain. The South Sea Bubble case is the
most famous example of how corrupt office-holders may exploit shareholders
for selfish gain.

6. Excessive government Control:

At every stage in the management of a company, there are legal rules and
regulations. Several legal provisions have to be followed and reports have to
be filed. Such legal interference in day-to-day operations results in lack of
secrecy. A lot of time and money are spent in complying with statutory
requirements.

7. Unhealthy speculation:
The shares of a public company are dealt in on a stock exchange. The prices
of these shares fluctuate depending upon the financial health, dividends,
future prospects and reputation of the company.
Directors of a company may indulge in speculation on the basis of inside
information for their private gain and at the cost of small investors. Company
organisation may also lead to concentration of economic power in a few
hands.

8. Conflict of interests:
Company is the only form of business wherein a permanent conflict of
interests may exist. In proprietorship there is no scope for conflict and in a
partnership continuous conflict results in dissolution of the firm. But in a
company conflicts may continue between shareholders and board of directors
or between shareholders and creditors or between management and workers.

9. Lack of secrecy:
Under the Companies Act, a company is required to disclose and publish a
variety of information on its working. Widespread publicity of affairs makes
it almost impossible for the company to retain its business secrets. The
accounts of a public company are open for inspection to public.

Q17: explain the special problems of public utilities

ANS :
public utility concerns have to face certain specific problems in connection
with the selection of site, size of the business, marketing of services, and
organisaiton and management. Some of these problems are described below:

1. Plant location:
Usually, a public utility has no choice as to the site for the location of its
plant. The choice of location is confined to the city or town for which the
concern has been granted franchise.
The plant has to be located at the site fixed by the Government. Public
utilities have to depend upon the government for the availability of space as
they require large areas for their operations.

2. Size of business:
In general the size of a public utility concern has to be quite large. It cannot
operate efficiently below a certain minimum size for three reasons.

First, huge amount of fixed capital required for such a concern can be
provided only by large-scale enterprises.

Secondly, a public utility concern has to start its operations at a full swing in
the very beginning. It is not possible to begin with a small size and to expand
gradually like other business concerns.

Thirdly, a single public utility concern is required to supply services to the

entire population of a particular area.

3. Marketing problem:
A public utility concern has to face little problem in selling its services
because it has not to face competition. The services are standardised and
essential. There is no need for advertising or salesmanship.

But, a public utility concern must provide efficient and courteous services. In
some cases like transport and postal services, the consumers come into
frequent contact with the operators.

Therefore, the employees of the concern must be courteous to the consumers.

In order to maintain harmonious relationship with the public and to keep the
consumers fully informed of time schedules, special services, etc., a public
relations department becomes necessary.

There are no middlemen and a public utility concern provides direct services.
In many cases, the service has to be provided at the premises of the
consumer, e.g., water, electricity, gas, etc. There are no problems of credit,
collection and bad debts as sales are made generally on cash basis.

4. Ownership and management:

Public utility concerns are generally owned and operated by the Government.
Private enterprise is not considered suitable for such concerns because of the
need for public regulation and control. Public ownership and control of
public utilities may be secured in the following forms:

(a) Departmental undertaking:

Some public utility concerns may be organised as departments of the Central
or State Government. Railways, Posts and telegraphs. U.P. Roadways and
Punjab Roadways are examples of such public utilities in India. Under this
form of organisation, a public utility concern works under the control of a
ministry.

The finances are provided by the Government through annual appropriations

from the treasury and all revenues are also paid into the treasury. The main
advantage of this form of organisation is that it ensures sufficient public
control by the Government officials and the Parliament.

But the departmental form lacks the flexibility necessary for the supply of
efficient and prompt services to the public.
(b) Municipal bodies:
In India, majority of the public utility concerns are operated by municipalities
or other local bodies. The local body consists of the elected representatives
from the local population.

It constitutes sub committees to look after the day-to-day administration of

the public utility concern. Permanent officials of the local body assist these
sub-committees.

For theoretically, municipal form of organisation appears to be fully

democratic because the elected representatives of the public exercise direct
control over the management of a public utility concern.

The local body can readily take up the local problems to protect the public
interest. But the elected representatives may not be competent enough to
manage the concern efficiently.

They may think in terms of narrow interests of particular constituency.

Political rang- lings may interfere with the efficient supply of essential
services. This has been revealed clearly by the frequent breakdown of power
and water supply in Delhi.

(c) Public corporation:

A public utility concern may also be organised as public corporation which is
an autonomous body set up under a special Act or statute. The Act describes
its powers, functions and jurisdiction.

It is financially independent and is managed by separate Board of Directors.

Public corporation is a very useful form of organisation for public utility
concerns because it combines the merits of public accountability and
flexibility. It is a separate legal entity directly accountable to the Parliament
or State Legislature.

SECTION C

Q19: EXPLAIN THE REASON FOR SURVIAL OF SMALL BUSINESS

ANS:

Small scale production firms has the actual survival value side by side
with large scale production. The facts are that small scale firms have a firm
footing along with the large scale firms. The reasons are that small scale
firms concerns enjoy certain advantages which are peculiar to their own.
They are following:

Reasons for Survival of Small Scale Firms:

(i) Close supervision. When production is being carried on a small scale, the producer
can easily supervise each part of the work. The raw material is fully utilized by avoiding
the waste. As the workers are closely supervised they work efficiently. The machines
are carefully handled. All this results in lowering of cost production.

(ii) Economic independence. In a small firm, the producer is generally the sole
proprietor himself. When he clearly knows that the whole profit will go to him and not to
anybody else, he works untiringly.

(iii) Economy in management. A large firm has to spend a sizeable portion of the
income on maintaining administrative machinery but that is not the case with the small
firm. In a small firm, the proprietor himself is the manager. He does not need
superfluous account keeping. He just writes the income and expenditure of his business
on a small notebook and keeps that with himself.

(iv) Close contact with customers. As the, workers employed in a small firm are few
in number, the employer can have a close contact with them. He can listen to their
grievances personally and can redress them if he thinks them justified. Due to better
understanding between the and the employees, the chances of industrial disputes are
reduced.
(v) Greater adaptability to Changes. Another advantage claimed by a small firm is
that it can easily adjust its supply to the changed conditions in demand. As the small
firm has not to consult the various share-holders of the business, so it can easily arrive
at quick decisions and these decisions can be promptly executed.

Small Scale Firms VS Large Scale Firms:

In addition to the advantages discussed above, there are some special circumstances
where small scale production is most suitable and economical than large scale
production:

Advantages of Small Scale Production Firms:

(i) When the demand for a commodity is small and is expected to remain as such for
many years to come, then the production will not be carried out on a large scale.
Similarly, if the demand is of a fluctuating nature, the goods are produced on small
scale and not on large scale.

(ii) Production is also carried on small scale where the scope of division of labor is
limited. For example, in tailoring, repairing agricultural concerns, the division of labor
cannot be introduced on a large scale. In tailoring, the clothes are prepared according to
the individual tastes of the customers. So, is also the case in repairing. In agricultural
work cannot be divided into processes and sub-processes. So, it is generally organized
on a small scale.

(iii) Small scale production is also able to hold its own in that field where production is
carried on according to the individual tastes. For instance, in jewellery, embroidery
works and in other autistics wares, the demand is met locally and the work is done
strictly according to the wishes of the customers customers.

(iv) The goods are also produced on small scale where it is not possible to standardize
them.

Q18: what are the requisites for success in modern

business
ANS:
1. Establishment Of Clear-cut Objectives

Clearly defined objective helps to provide guidelines for future business

activities. Long-term and short-term objectives should be established in
order to achieve goals.
2. Proper Planning And Clear Policy

Proper planning helps the businessman to decide what to do and how to do

different business activities. Correct and clear policy helps to perform work
with minimum risk and maximum profit.

3. Sound Organization And Effective Management

This is another essential requisite for business success. Proper

organizational structure and quality management helps in planning,
coordinating, motivating, directing and decision making. It helps proper
utilization of resources and to achieve organizational goals.

4. Dynamic Leadership

Dynamic leadership is another key factor for business success. Leader or

manager with vision, courage, foresightedness, and motivating skills is
needed to operate business successfully.

5. Pleasant Personality

Manager should be physically and mentally sound to handle business

activities smoothly. Manager or businessman with good communication
skills, intelligence, experience, and good commanding is needed for
business success.

6. Adequate Capital/ Proper Financial Planning

A proper financial planning is needed to arrange adequate long-term and

short-term capital to operate business. Suitable source of capital should be
identified to run business smoothly.

7. Proper Location And Layout

Proper location and layout helps to reduce production and operation cost
and increase efficiency of the business. Suitable location and proper layout
helps to maximize profit.
8. Employees Morale

Encouraged and motivated employees play very important role in business.

Success or failure of business depends on the morale of employees.
Therefore, staffs should be motivated, encouraged, and properly trained to
achieve organizational goals and objectives.

9. Modern Technology

Successful business organizations use modern technology to provide new

and easy methods in production and distribution. It helps to boost business
and earn more profit.

10. Research And Innovation

It is another important requisite of business. Research and innovation helps

to satisfy customers by offering better products and services according to
their needs, taste, and preference.

11. Efficient Marketing

Customer oriented marketing is necessary in business. It helps to expand

business and grow customers.