BSEB Bihar Board 12th Business Studies Important Questions Long Answer Type Part 2 are the best resource for students which helps in revision.

Bihar Board 12th Business Studies Important Questions Long Answer Type Part 2

Question 1.
What meant by ‘Recruitment’? Explain any five sources of recruitment of employees.
Recruitment: Recruitment refers to identification of the souces of manpower availability and making of efforts to source applicants for the various job position in the organization. According to Dalton E. Me. Farland, ‘It is the process of attracting potential employees to the company.’

External sources of Recruitment: External sources of recruitment of employees means inviting application, for filling up the vacancies from candidates outside the organization. Some external sources of recruitment are as follows:
(i) Advertising: The vacancies are advertised in newspapers or journals by mentioning job requirement such as qualification, age, experience, salary etc. It gives a wider choice of selection but it is time consuming and costly.

(ii) Employment agencies: information regarding prospective employees can also be obatined from employment agencies. These are of two types:

  • Public Employment Agencies, and
  • Private Employment agencies. The job-seekers get themselves registered at these employment exchanges. The organisation needing worker of specific nature may get names from these exchange and interview and select the employees.

(iii) Recruitment from colleges and technical institutes: Highly qualified senior executive with specialized education can be recruited by contacting, meritorious candidates from colleges, universities, industrial and technical institutes.

(iv) Recruitment through recommendation of existing employees candidates may be recruited on the recommendation of existing employees, such candidates are, either relative or well-known to the existing employees.

(v) Recruitment at factory gate: A notice is posted on the gate of the factory mentioning the number and type of workers needed, date of selection, etc. The prospective candidate line up at the gate and some supervisor selects the required person by interviewing them.

Question 2.
A newly appointed personnel manager is of the view that there is no benefit of training the workers. Do you agree with his view? Give reasons in support of your answer.
Or, What is the meaning of training? Explain any four needs of training.
Or, State any four benefits of training.
Or, Why is the employee’s training necessary in an organization? Explain, in brief, any six reasons.
Training means a process of increasing knowledge and skills to perform specific jobs. Following are the benefits of training which highlight the need or necessity of training for an organization:

(i) Essential for new employees: Training is a follow-up of selection procedure, Training helps in curing defects in the selection process. Training is required to make new employees learn the required job knowledge, skill and methods to quickly achieve the needed performance level.

(ii) Improved performance of existing employees draining is required not only for new employees but for existing employees also. Training makes existing employees more skilled and accurate in performance of their work.

(iii) Coping with changes in techniques: The fast rate of scientific and technological developments has made it necessary to have continuous training facilities. In the absence of proper training facilities, workers may face the danger of getting out of touch with the latest techniques.

(iv) Aid to employee development: As employees acquire new knowledge and job-skills, they increase their market value and wage-earning power. The possession of useful skill enhances their value to their employer. Thus, training increases their job security and chances of promotion and career prospects.

(v) Improvement of quality of working life: Traning enriches the quality of working life of employees. It broadens their outlook and improves their attitudes towards job. Training gives an employee utmost confidence in handling the job assigned to him.

(vi) Cordial Relations: Training creates a feeling among the workers that they are being properly cared for and the employer is sincere to them. This will improve relations between employees and employer.

Question 3.
Explain the following money market instruments:
(a) Cell Money (b) Treasury Bill (c) Commercial Paper (d) Certificate of Deposit.
Money market is a market for short-term funds which deal in monetary assets whose period of maturity is upto one year. These assets are close substitutes for money. This market enables raising of short-term funds for meeting temporary shortages of cash or temporary deployment of excess funds for earning returns.

Instruments of money market are:

1. Cell Money: It is used for inter-bank transactions. Cell money is short-term finance repayable on demand with a maturity period of 1 to 15 days. Commercial banks have to maintain minimum balance with the Reserve Bank known as the Cash Reserve Ratio. As RBI keeps varying the CRR to control the amount of credit in circulation, banks have to borrow from each other to maintain CRR. The interest paid on cell money loans is called the cell rate. This rate is highly volatile and keeps on changing.

2. Treasury Hills: It is an instrument of short-term borrowing of Govt, of India maturing in less than one year. They are also called zero coupon bonds as they are issued at a price lower than face value and repaid at par. The difference between issue price and redemption value is the interest receivable on them. They are issued by Reserve Bank on behalf of Govt, of India to meet short-term requirement of funds. They are highly liquid and have assured yield and have negligible risk of default.

3. Commercial Paper: These are short-term unsecured promissory notes issued by large credit-worthy companies to raise short-term funds at rates of interest lower than market rates. Such instruments are negotiable transferable by endorsement and delivery with a fixed maturity period.

4. Certificates of Deposit: These are unsecured negotiable instruments in bearer form. They are issued by commercial banks and development financial institutions. They are issued to individuals, corporations or companies during periods of tight liquidity, i.e. when deposit growth of banks is slow but demand for credit is high. They help to mobilise large amount of money for short period.

Question 4.
Explain the principles of Directing.
Following are the principles of directing:
(i) Maximum individual contribution: This principle emphasises that directing techniques must help every individual in the organisation to contribute to his maximum potential for achievement of organizational objectives. It should bring out untapped energies of employees for the efficiency of an organization.

(ii) Harmony of objectives: There should be complete harmony between the objectives of employees and the organizational objective. Employees should be made to understand that employee rewards and work efficiency are complementary to each other.

(iii) Unity of command: This principle insists that a person in the organization should receive instructions from one superior only. If instructions are received from more than one, it creates confusion, conflict and disorder in the organization. Adherence to this principle ensures effective direction.

(iv) Appopriatencss of techniques: An organization should use appropriate motivational and leadership techniques, based on situational variables.

(v) Managerial communication: Effective managerial communication across all the levels in the organization makes direction effective, Directing should convey clear instructions to create total understanding to sub-ordinates.

(vi) Use of informal organization: A manager should realise that informal groups or organizations exist within every formal organization. He should spot and make use of such organization for effecting directing.

(vii) Leadership: While directing subordinates, managers should exercise good leadership as it can influence the sub-ordinates positively without causing dissatisfaction among them.

Question 5.
Describe briefly any six barriers to effective communication.
Or, What are the barriers to communication? Explain.
Following are the barriers to effective communication:
(i) Organisational barriers: To many levels in the management hierarchy cause delay in transmission of information, distortion in the message, and deliberate, ‘filtering’ of the message.

(ii) Status or position barriers: The person enjoying higher status or position in the organization does not carefully listen to persons occupying lower status or position. Besides, persons on lower positions may feel reluctant to transmit correct information to the superiors.

(iii) Language barriers: Language barriers result in semantic problems, i.e., different meanings being given to the same word by different persons. The listener interprets language in terms of his own education, knowledge, experience and behaviour.

(iv) Socio-psychological barriers: Different people come from different social and cultural backgrounds. There comes a difference in their incomes, education, living standards, behavioural attitude and experiences. The comunication of ideas and viewpoints is affected by such social and psychological differences.

(v) Mechanical barriers: lnadequade arrangements for transmission of facts and information, poor office layout, defective procedures and practices, use of wrong media lead to poor communication and ‘noise’.

(vi) Information overload: Managers are flooded with facts and information from various sources. The overload of information may compel them to ignore some messages and to misinterpret some others.

Question 6.
Describe briefly any six functions of a supervisor.
Or, “A supervisor is not at all required in an organisation.” Do you agree? Give reasons in support of your answer.
Or, “Supervision is an important clement of directing function.” Explain any four reasons in support of the above statement.
Supervision is an important element of directing function due to following reasons:
(i) Communication of orders and instructions: A supervisor issues a number of orders to his subordinates everyday. Orders are issued to require them to act or not to act in a particular way and to eliminate confusion among sub-ordinates.

(ii) Introduction of new work methods: Another function of a supervisor is to examine constantly how the existing work methpds could be improved to secure maximum productivity. He introduces new methods and techniques in his departments.

(iii) Scheduling activity: The supervisor prepares the schedule of activities of the work group under his supervision. He lays down the time for different operations as also the total time for the work to be completed. Thus, he ensures that each work is completed according to schedule.

(iv) Controlling: Supervisory control includes checking on the methods in use and progress of work against the planned schedule, recording actual performance at regular intervals and reporting deviations to the manager concerned.

(v) Motivation: A supervisor inspires and motivates his sub-ordinates through proper incentives towards better work performance.

(vi) Linking pin: The supervisor acts as a linking pin between management and the operatives. He communicates management’s decision to the workers. As a representative of the workers, he conveys their viewpoints, suggestions, grievances and complaints to higher-level management.

Question 7.
Distinguish between centralization and decentralization.

Basis Centralization Decentralization
1. Meaning It refers to concentration of authority at the top level. It refers to the systematic dispersal of authority at all rule levels of management and in all departments of the organization.
2. Authority of top management Top management retains absolute authority for decisions on the functioning of the organization. Top management retains authority for forming major policies and for overall control and coordination of the organization.
3. Authority or middle and lower level management Middle and lower level management is not entrusted with operational authority for taking decisions on the tasks assigened to them. Middle and lower level management is entrusted with operational authority for taking decisions on the tasks assigned to them.
4. Freedom of Managers have less freedom of action since they are kept action under close supervision by their supervisors. Managers have more freedom of action since they are not kept under close supervision by their supervisors.
5. Flexibility It does not provide greater flexibility to tackle problem quickly and competently. It provides greater flexibility to tackle problems quickly and competently.
6. Diversification With growth and expansion of business, centralization becomes infective. Decentralization effectively meets the challenges of diversification, growth and expansion of the company.
7. Suitability It is more suitable to small businesses where activities are carried out on a small scale. It is more suitable to large companies which is characterized by multiple tasks and departments.
8. Uniformity of decisions There is uniformity in decision making power vested at the top level only. There is no uniformity of decision making power vested at all levels and each one is free to take decisions.
9. Workload of executives Workload of executive increases. Workload of executives decreases.
10. Dependence Under centralization, there is less dependence on the subordinates. Under this, dependence on the sub-ordinates increases.

Question 8.
State the characteristics of motivation.
Or, Describe the nature of motivation as an element of directing.
Following are the characteristics of motivation which describe its nature:

  • Motivation is a psychological concept.
  • Motivation is an internal feeling. It is related to energetic forces with in individuals that derive them to behave in a particular fashion.
  • Motivation always produces a goal-directed behaviour.
  • Motivation can be positive or negative. Positive motivation may be in term of additional pay incentive, reward for hardwork, praise, etc. For satisfactory performance, Negative motivation may be in terms of reprimands, threat of demotion, cut in increment, wage cut for poor performance.
  • It is very difficult to measure motivation. Individual employees may have a host of needs that are changing and sometimes in conflict too with each other.

Question 9.
State any six objectives of communication.
Or, Explain how communication is an important function of management.
Or, Explain the importance of the communication process.
Communication is an important function of management. Following points high light, the importance of the communication.
(i) Better co-ordination: Communication serves as a tool for coordinating activity. Coordination without communication is a remote possibility. Through communication employees come to know what is going on in other departments.

(ii) Good industrial relations: Communication aims at good industrial relations, communication gives information from both side and it pays more attention on understanding, i.e., employees and management understand each other’s view point.

(iii) Development of managerial skill: Facts, ideas, information, etc. enrich the knowledge of the executives. They try to make use of the acquired knowledge which result into an increase in their wisdom and skill. It ultimately benefits the organisation.

(iv) Quick decision and its enforcement: Effective communication is needful for the quick decision. Effective communication translates the policies into effective instrument of seeing through the organisation on the veil of its progress.

(v) High morale of the employees: The effective medium of the communication develops the feeling of mutual trust. Hence, workers offer their proposals suggestions and ideas.

(vi) Effective Leadership: For effective leadership and-supervision, it is necessary that manager should win over the subordinate and this is only possible through, proper communication.

Question 10.
What is supervision? State the functions of a supervisor.
Or, “The post of supervisor should be abolished in the hierarch of managers.” React.
Or, Explain in brief the various functions of a supervisor.
Supervision: It means expert watching, directing and guiding of employees at work and ensuring tasks are according to the plans.
Functions of Supervision arc as follows:

(i) Planning and organizing: Planning is essential for successful and efficient working. The supervisor plans for the works related to his section to the extent of the authority, delegated to him.

(ii) Provision for working condition: The supervisor also has to provide for working conditions like physical setting, lighting, ventilation and sitting facility. He is responsible to provide hygienic and proper conditions of work.

(iii) Guidance: He leads the workers of his section towards achieving the goals. He fixes production targets and provides necessary guidance to the worker.

(iv) Motivation: The supervisor motivates his sub-ordinates by providing non-financial incentives.

(v) Controlling: It is an important function of supervisor. It includes checking progress of work against the planned schedules, recording of actual performance, finance etc.

(vi) Linking pin: He serves as the linking pin between the management and the workers and communicates instructions of management to workers and problems of workers to management.

(vii) Grievance handling: He listens to the agonies of the workers and tries to find out the solution for that.

Question 11.
Explain the functions of financial management.
Three major functions of financial management are as under:
1. Functions regarding investment decisions: It refers to investment of firm’s funds in long-term and short term assets. In other words, it amounts to determination of the asset-mix or the amount of assets that should be held by the firm.

Two types of investment decisions are:

(i) Capital budgeting decisions: These decisions are related to investment in long-tern assets that is, assets, which yield returns for a long period of time. The major areas of capital budgeting are:

  • Composition of long terms assets: It deals with committing an enterprises funds in investment proposals and replacing existing assets when they become unproductive.
  • Expected risk and uncertainty: Benefits offered by fixed assets are spread over future time-periods. Future being uncertain, there is an element of risk associated with these decisions.
  • Cost of capital: This is the rate against which expected returns from the investment in fixed assets are compared. This is also called the required rate of return, cut-off rate or opportunity cost of capital.

(ii) Working capital decisions: These decision are related to investment in current assets, that is, assets which can be converted into cash usually within one year. It ensures short run survival of the firm which is a pre-requisite for its long-run survival. The amount to be invested in the current assets should result in trade off between profitability and liquidity

2. Function regarding financing decisions: It deals with determination of capital structure of financing mix of the firm. Once the asset compositions is decided, the financing decision concerns itself with the determination of sources from where funds will raised, the amount to be raised from each source and the cost of each source funds.

The capital structure primarily involves determination of that debt-equily ratio which maximises the market value of shares. Use of debt increases return on equity (leverage) along with risk. A proper balance, therefore, has to maintained between risk and return.

3. Function regarding dividend decisions: It deals with determination of dividend payout ratio. This ratio is equal to the percentage of dividend distributed as earnings available to shareholders. Firms have to decide whether to retain all the profits or distribute them and if distribute, what part of profit should be distributed. These decision must be taken in light of maximising the shareholders’ wealth and therefore, an optimum dividend policy should be arrival at.

Question 12.
What are the factors influencing the financial planning?
Factors influencing financial planning: Financial planning is preparation of a financial blueprint of an organisation’s future operations. It aims at smooth operations by focusing on fund requirements and their availability in the light of financial decisions. The following factors are noteworthy while deciding the financial plans:

1. Nature of business: Industries are two types:

  • Capital intensive industries: These need huge capital and their financial planning is very complicated.
  • Labour intensive industries: These industries need lesser capital and more manpower.

2. Amount of risk: Industries hewing a risky character depend upon their ownership capital whereas industries of lesser risk can work by taking loan. Thus these can work on “Trading on Equity.”

3. Status of an industrial unit: Here the characteristics of an enterprise such as its period since its existence, size, area of working, goodwill of promoters and management. Large scale enterprise do not face financial problems as an old reputed organisation attracts investors.

4. Appraisal of alternative sources of finance: While preparing plans this element should be kept in mind as to which source of finance is more popular, comparing its face value and issue cost. The comparative study should be made whether raising funds from their security will be optimum or not.

5. Attitude of the management: The attitude of management also affects the financial planning of a company. When the company wants that its management be in their hand, the company will not issue new equity shares for expansions, but borrow funds from financial institutions.

6. Magnitidcof external capital requirements: For expansion of the organisation, the finance should be raised from different sources of finance. When funds are needed for short periods, it should be raised from redeemable preference shares or debentures. As for as possible, an effort should be made not to far as possible, an effort should be made not to shares so frequently as it is harmful to company’s goodwill and the cost of capital will unnecessarily increase.

7. Government control: While making financial plans the management should see government policies, financial controls and such other statutory regulations, etc.

Question 13.
What factors determine the fixed capital requirement of a company?
Or, What do you mean by fixed capital? What factors influence the fixed capital requirements?
Fixed capital: Fixed capital is that portion of the capital which is invested in fixed assets like land, building, plant and machinery, furniture, patents, etc. Thus fixed capital is used for meeting the’ permanent needs of the company. It is the capital which will be used again and again to genetate revenue for the company.

1. Nature of business: Marketing enterprise requires a small amount of fixed capital as compared with the industrial enterprises in general.

2. Scale of operation: A large scale enterprise generally require more fixed capital than a small scale enterprise. For instance, public utility concerns like railways and electric supply companies require, a huge investment in a fixed assets.

3. Type of manufacturing: Service and assembly industries require a much smaller amount of fixed capital than what is required in analytical or synthetical processing industries. If an industry is highly mechanised, its investment in the form of fixed capital is very high as compared to the industries having less degree of mechanisation.

4. Mode of acquiring fixed assets: Fixed assets can be purchased outright or on the basis of installment payment. In the former case the requirement of fixed capital will be high.

Question 14.
Discuss the functions of money market.
The money market is an organised and well developed market in India performing a very important role in economic development through performing various functions which are as under:

1. It provides sources to commercial hanks, non-bank financial concerns, business operations and other investors for their short term financial requirements. The excess short-term funds of commercial banks find their outlets through the call loan market or bill market. Through the activity of money market greater flexibility to the commercial banks in their funds management can be provided.

2. Money market offers an avenue to the commercial banks for investing short-term surpluses of funds and borrpwjng for short term need so as to meet statutory requirements of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) which vary every fortnight depending upon banks net demand and time liability.

3. The money market also provides short term funds to businessmen, industrialists traders, etc. to meet their day-to-day requirements of working capital.

4. By enabling short term investment of funds to businessmen to utilise their short term surpluses.

Question 15.
Give the classification of capital market.
Classification of capital market:
1. Primary Market: This is the market for new long term capital. The primary market is the market in which a security is sold for the first time. It deals with the issue of new for fresh capital and is therefore also referred to as the new issue market (NIM). The essential features of the primary market is that purchase buys newly issued securities. In a primary market, the securities are issued by the company directly to investors.

The company receives the money and issue new security certificates to the investors. Primary issues are used by companies for the purpose of a setting up new business or for expanding modernising the existing business. The primary market performs the crucial function of facilitating capital formation in the economy. It is through this market that the savings of surplus units are channeled to the difficult units which utilise these funds for investment in building, plants and machinery, purchase of technology.

2. Secondary Market: The stock exchanges represent the secondary market for securities. The secondary market is the market for the sale and purchase Of previously issued securities. lit this market, existing securities are traded. The secondary market derives its name from the fact that is not the place of origin of the security, but the place where subsequent transactions Of sale and purchase occur.

Securities in this market are not issued by the company directly to investors. Securities issued earlier are sold by an existing investor to another are sold by an existing investor to another. The company is not involved in the transaction at all. Any investor holding a security transaction at all. Any investor holding a security may choose to sell it. Linkwise, and intending investor may wish to buy the T security which had previosly been issued by the company (during the primary issue).

However, the intending buyer cannot buy the security from the company because it had already sold it at the time of the public issue. Similarly, an intending seller cannot approach the company for repayment until the date of redemption of the security.

Question 16.
Explain the role of stock exchange.
Stock exchange provides invaluable services which are as follows:
Services to the country:
1. Stock exchange helps in the process of economic development of the country, the rapid increase in the growth of corporate sector in the recent decades has been possible partly because of the facilities provided by the exchange.

2. Stock exchange serves as an agency of capital formation. By providing liquidity and price continuity of securities, it induces the public to save and invest in corporate enterprise. As a ready continuous market for securities, the stock exchange facilitates shifting of investement to more productive channels. Investors want that their funds should be invested into those securities which are safer and give higher yields.

3. In a developing country, the welfare state has to play an active role in the promotion of business enterprises. Stock exchange helps the Government in raising funds for the public enterprises. It provides a forum for raising public debt which is required for projects of national importance.

4. Stock exchange activities reflect the state of industrial developments in the country. Therefore, it has been described as the pulse of economy.

Services to Corporate Sector:
Stock exchange has a great value for business enterprises. The companies whose securities are listed and dealt in on the stock exchange enjoy the following benefits:
1. Such a company has better credit standing because investors know that stock exchanges exercise control over the management of such companies.

2. Market for the company’s securities is widened. Investors prefer those securities which can be purchased and sold an a stock exchange. Thus, stock exchange helps in the companies to raise capital from the public.

3. Stock exchange helps to minimise fluctuations in the prices of securities. The forces of demand and supply interact through stock exchange. It provides, facility for speculation.

Question 17.
Define the Stock Exchange.
The word ‘stock’ means fraction of the capital of a company and the word ‘exchange’ means a place for purchasing and selling something. That means stock exchange is a market where there is a trading in stock (or shares) of different companies. However, in actual practice, the term ’stock exchange’ is used in a wide sense. Modern stock exchanges provide facilities not only for trading in shares but also in other securities issued by companies or corporations or government. Thus, stock exchanges deal in securities like shares debentures or bonds issued by the companies or corporations in the private as well as public sector and bonds issued by the Central and State Governments.

Stock exchange is an important segment of the securities market of any country where private sector has a role to play. It is a place where dealings take place in the listed securities (security includes in the official list of stock exchange). These securities, are second hand securities in the sense that they are those securities which have already been issued to the public by the corporations or the government bodies. The Securities contract (Regulations) Act, 1956 has defined stock exchange as an association, organisation or body of individuals, where incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.