Business Functions – CS Foundation Business Environment Notes

Business Functions – CS Foundation Business Environment Notes

Introduction:

  • A Process or operation that is performed routinely to carry out a part of the mission of an organisation.
  • “Business has only two functions – Marketing and Innovation”
  • It is also known as business process or operation.
  • It refers to the routine activities carried out in an organisation in order to produce a product or to provide a service, thereby helping an organisation to achieve its mission.
  • It involves division of labour among persons or departments.
  • While carrying out the various business functions, the following points need to be considered.
  • It represents what work has been done by the organisation. This concept is used in organisation architecture domain.

(i) Strategy:

  • This term ordinarily means something that has to do with war and deception of an enemy.
  • It is derived from Greek word ‘Strategos’ meaning ‘the act of the general.
  • A company’s strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully and achieve organisational objectives.
  • “Strategy is the direction and scope of an organisation over the long term which achieves advantages for the organisation through its configuration of resources within a challenging environment to meet the need of markets and to fulfill shareholder’s expectations.”
  • It represents the managerial response to changes in business environment

It possess the following features:

  • Their formulation is done by top management.
  • Their execution is done by middle and lower management.
  • Explains managers the way to respond to the changing business environment.
  • Effective mobilisation of resources.
  • Helps in achieving objectives.
  • It is specialized planning to retaliate competitors.
  • It redefines direction toward common effort.

Various types of strategies include:
(a) Corporate Strategy: It is concerned with overall business scope and purpose. It is stated in a Mission Statement.

(b) Business Unit Strategy: It is concerned with a particular business unit competing in a specific business environment. It considers decisions regarding choice of product,
competitive advantage, new opportunities, etc.

(c) Operational Strategy: It involves organising each part of business to deliver the above two strategies. It focuses on resources, people, process etc.

(ii) Business Location:

  • It relates to the decision about locating a new business.
  • ‘Virtual business’ is the business done from home without setting it up anywhere else.

Various factors affecting it are:
(a) Communication: It involves various forms of communication media as well as the transport facilities.

(b) Suppliers: Business supplier of any raw material must be closely related in order to reduce the cost.

(c) Labour: Business which is labour intensive is preferred to be situated in area of low wages labours.

(d) Government Assistance: Government provides various loans and subsidies for setting up new business in some backward areas.

(e) Market, Customer & Population: A start-up may need to be located near particular centers of population.
Example : If the product is for an old aged people then it is important to be located where there is a sufficient population of such people.

“Some poorer areas of UK are known as ‘Assisted areas’
Example : Wales, North-East England etc.”

(f) Type of Population: Business should be located in the market where the population is of the kind for which its product is meant.

(iii) Decision Making:

  • It might be regarded as a problem solving activity which is terminated, when a satisfactory solution is reached.
  • It refers to an emotional, mental or reasoning process which involves selection of best course of action among the available alternatives.
  • It can be rational or irrational.
  • It can be based on explicit or tacit assumptions.

This is extended form of planning Hence, it is only efficient when it is supported by process of planning.

(iv) Government Policy:

  • Some models of business ignore government.
  • Various government policies in form of legislative restrictions, and regulations must be adhered to while carrying out various business functions.
  • Various business functions are discussed here after.

Planning:
“The process of planning covers a wider range of activities, all the way from initially sensing that something needs doing to firmly deciding who does what when…. It is more than logic or imagination of judgement. It is a combination of all these that culminates in a decision – a decision about what should be done.

The decision phase of planning is so important that we shall use the expression ‘decision-making’ as a synonym of planning.” “The planning function determines organisational objectives and the policies, programmes, schedules, procedures, and methods for achieving them. Planning is essentially decision-making since it involves choosing among alternatives and it also encompasses innovation. Thus, planning is the process of making decisions on any phase of organised activity.”

  • “Chance favors the prepared mind.”
  • It refers to mapping out exactly various steps that are required to achieve a.particular goal of an enterprise.
  • It is a primary function of Management.
  • It is an intellectual process that involves determination of a particular course of action.
  • The main principle of planning is that adequate planning or mental effort must take place.

Budgetary Control:
1. Budget: A Budget is a device used for managerial control. Mathematical and quantitative presentation of your goals in a tabular manner.

2. Budgeting: This process initiates with the establishment of specific targets of performance and is followed by executing plans to achieve such desired goals and comparing actual results with the targets of performance/goals from time to time. Budgeting is the formulation of plans for a given future period in numerical terms.

3. “Budgetary control: Budgets are quantitative statements that prescribe standards, set in advance.
“The establishment of budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy, or to provide a basis for its revision.”

Institute of Cost & Management Accountant (ICMA)
It has following features:

  • Prepared for a future time period.
  • Prepared for attaining some pre-determined objectives.
  • Financial and for quantitative statement.
  • Its components are- Income, Expenditure and Capital Employment.
  • It is goal oriented.

Types of Budget
(I) Based on time:

Long-term budget: The budget designed by management for a long-term (i.e. 3 to 10 years)
Short-term budget: Budget which is prepared for a period ranging from 1 to 3 years.

(II) Based on capacity:

Fixed budget: The budget remains constant regardless of the level of activity, is called as fixed budget.
Flexible budget: The budget which changes with the change in level of activities is a flexible budget. It identifies the fixed cost, semi-variable cost and variable cost, to show the expected results at different volumes.

(III) Based on scope:
(i) Functional Budget:

  • Sales Budget : Budget used to determine, quantity of anticipated sales and expected selling price per unit.
  • Production Budget : It is prepared to indicate the production for the specified period and is expressed in the units of output produced.
  • Materials Budget : The budget prepared ‘to show the quantities of direct material’ and ‘raw material required to manufacture the finished product.
  • Purchase Budget : Budget is designed to estimate the quantity and value of different items to be bought at different points of time, considering the production schedule and inventory required.
  • Cash Budget : It highlights the cash needed by the business in a specified period.

(ii) Master Budget: It is an integrated budget that reflects the estimated profit and loss and financial position. It is created after functional budget by financial officer.

(IV) Based on receipts and expenditure:

  • Capital budget: Budget takes into account the estimated capital receipts and expenditure for a specific period.
  • Revenue budget: The budget that covers all the revenue receipts and expenses of a particular financial year.

It provides following advantages to a business enterprise:

  • Helps in attainment of pre-determined organisational goals.
  • Optimum allocation and utilisation of resources.
  • Facilitates management by exception.
  • Source of motivation to employees.
  • Helps in achieving co-ordination among various departments.
  • It focuses on specific and time bound targets.

Research and Development:

  • Popularly referred as ‘R & D’
  • Research is required in order to develop and/or improve products and methods.
  • R & D plays a vital role in maintaining the business.
  • Research may either be pure research or applied research.
  • Pure/Basic/Fundamental Research increases knowledge and have no immediate or direct commercial value.
  • Applied Research aims at producing definite results.

Finance:

  • It is the lifeblood of an organisation.
  • It can be simply stated as money.
  • It represents short-terms and long-term requirements of any organisation.
  • Business Finance: refers to the money required for carrying out the business activities.

Financial management:
Definition of finance : “Finance may be defined as that administrations area or set of administrative functions in an organisation may have the means of carrying out its objectives as satisfactorily as possible.”

Definition of Business Finance : “Business finance include those business activities which are concerned with the acquisition and conversion Of capital funds in meeting the financial needs and overall objectives of business enterprise.” “Financial management is the activity concerned with planning raising, controlling and administering of funds used in the business.”

“Financial management is that area of business management devoted to a judicious use of capital and a careful selection of source of capital in order to enable a spending unit to more in the direction of reaching its goals.”

“Financial management is the operational activity of a business that is responsible for obtaining and effectively utilising the funds necessary for efficient operations.”

  • Financial Management : refers to the management of limited financial resources that the organisation has to its utmost advantage.
  • Financial Management aims at reducing the cost of finance.
  • It does not involves only fund raising but involves as to how these funds are most effectively utilised.

Nature Significance and Scope of Financial Management : Generally it should be seen that finance is arranged at the lowest possible cost for the business. Then we can say that more economically the finances is availed, better it will be for the business.
Business Functions – CS Foundation Business Environment Notes IMG 1
Such decision are required to be taken in the interests of the shareholders.

Financing Decisions:

  • It refers to raising of finance from long term and short term sources.
  • Capital Structure Decisions relates to raising finance from long term sources.
  • Working Capital Decisions relates to raising finance from short term sources.
  • Funds can be raised from external sources like shares, debentures etc.
  • It can also be raised from internal sources like retained earning.
  • Cost of raising finance has to be opted for before selecting any source.

Investment Decisions:

  • It refers to deciding the amount of investment out of the available finance on long term or short term basis.
  • Capital Budgeting refers to investing funds for long term i.e. in fixed assets.
  • Working Capital Management refers to investing funds for short term i.e. current assets.
  • Reversal of capital budgeting decisions is riot possible since it involve huge capital outflow.

Dividend Decisions:

  • A decision determining the division of earning between payment of dividend to shareholders and retained earning.
  • It refers to deciding the part of profits to be distributed as dividend to the shareholders.
  • Shareholders demand higher dividend.
  • Management wants to retain higher profit for business needs.
  • Thus, management is required to make an appropriate dividend policy.
  • Financial Planning: Refers to pre-estimation of financial needs of an organisation to ensure the availability of right amount of finance at right time.
  • Excess funds add to cost of financing.
  • Deficit funds does not allows the firm to honor its commitments timely.

Supply Chain Management (SCM):

  • By sharing data upstream (with a company’s suppliers) and downstream (with a company’s client) SCM application have potential to improve time to market, reduce costs, and allow all parties in supply chain to better manage current resource and plan for future needs.
  • It refers to the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible.
  • It spans movement and storage of raw materials, work in progress inventory and finished goods from point of origin to point of consumption.
  • It integrates flow within and among the companies.
  • Its aim is to reduce the inventory in order to lower the holding cost.
  • Web based Application Service Providers (ASP) provides all the SCM services to companies.

It involves 3 flows:

  • Product Flow : It means movement of goods from supplier to customer or vice-versa.
  • Information flow : It means transmission of orders and updating of delivery status.
  • Finance Flow : It means various payment schedules, terms of payment, credit terms etc.

It involves use of 2 software

  • Planning Application : It involves uses of advanced algorithms to determine the best way to fill and order.
  • Execution Application : It involves track of physical status of goods, material management and other financial information.

It has the following objectives:

  • Increasing efficiency
  • Low cost
  • Enhanced flexibility
  • Improved customer service
  • Optimization of value chain.

SCM includes managing supply and demand, sourcing raw materials, order management, delivery, etc..

It performs the following function:

  • Managing demand and supply
  • Sourcing raw materials
  • Manufacturing
  • Assembly
  • Warehousing
  • Inventory tracking
  • Order entry
  • Order Management
  • Distribution
  • Delivery to the customer.

Transformation Process refers to the process of business activities required to convert the organisation’s resources into products and services demanded by the customers.

  • Production and Operations management (POM) refers to various methods of handling the conversion or production process.
  • It involves the following methods:

(i) Job Method:

  • Whole work is handled by a worker or group of workers firm production and large construction projects
  • Low technology job enables the company to include customer’s specific requirements as job processes.
  • Example : hairdressers etc.
  • High technology job requires proper project management or control which involves (a) clear objectives to be defined, and (b) Proper decision making process.
  • Example : Films production, large construction projects, etc.

(ii) Batch Method:

  • Each work is divided into specific parts or operations.
  • it helps in achieving:
  • Labour specialisation
  • High equipment utilisation
  • Low capital expenditure
  • It causes following problems:
  • Poor work flow
  • Build up of “work in progress” or stocks.
  • Example : Production of electronic components

(iii) Flow Method:
1. It refers to the method in which the task is performed on continuos basis i.e. the material processing is continuous and progressive.

2. It aims at:

  • Improving material & work flow
  • Reducing the need for skilled labour
  • Completing the work faster

3. Following requirements are to be met for its proper working:

  • Constant demand of company’s product
  • Standardized product and/or production
  • Specific materials should be used
  • Materials used must be delivered timely
  • Each operation must be carefully defined and recorded in detail
  • Output of each operation must be of standard quality.
  • Example : Production of motor cars, televisions etc.

Information and Communication Technology function

  • It’s objective is to gain advantage from modern technology.
  • Focuses on improving business processes and making them cost effective.
  • Also aims at reaching new customers and launching new products or services.

Market:
Definitions:
(i) Traditional Concept:
“Marketing may be defined as the performance of business activities that directs the flow of goods and services through producers to customers.”

(ii) Modern Concept:
“Marketing is the process of discovering and translating consumer needs and wants into products arid services and in turn making It possible for more and more of these products and services.”

  • Market refers to a mechanism through which buyers and sellers actually meet to effect purchase and sales of goods and services.
  • Marketing refers to identifying the customers, determining their needs and wants, delivering them products to satisfy those needs and wants and keeping the customers.

It involves two concepts:

  1. Traditional
  2. Modern

Marketing process starts with marketing research and ends with the customer buying the company’s product.

  • Marketing is different from selling.
  • Marketing Mix:

Definitions:
Culliton conceived of marketeer as the ‘mixer of ingredients.’
4P’s of Marketing ‘E. Jerome McCarthy’ was the first person to suggest the four P’s of marketing:

  • Product
  • Price
  • Place (distribution)
  • Promotion

“Marketing mix is the term that is used to described the combination of the four inputs that constitute the core of an organisation’s marketing system. These four elements are the product offering, the price structure, the promotion activities and the distribution system.”

Difference between Selling and Marketing

Basis Selling Marketing
Focus On producer On customers
Demand Assumes demand for products Generates demand for products
Supremacy Producer is supreme Customer is supreme
Process Involves exchange of goods and services Involves satisfying customer needs
Law Follows the law of Caveat Emptor Follows the law of Caveat Vendor
Perspective Short perspective with profit maximisation Long perspective emphasising growth and stability

Marketing Mix : refers to the ingredients or the tools or the variables which the marketeer mixes in order to interact with a particular market.

“Marketing mix are the set of marketing tools that first uses to purchase its marketing objectives in the target market.”

A planned mix of the controllable elements of a products marketing commonly terms.

  • Product
  • Price
  • Place
  • Promotion

Nell H. Borden: Borden’s marketing mix includes the following elements:

  • Product Planning
  • Branding
  • Advertising
  • Packaging
  • Servicing
  • Pricing
  • Distribution Channels
  • Promotion
  • Displays
  • Physical Handling

Various marketing functions are classified into 2 categories:

  • General Functions
  • Specific Functions

General functions includes the following –

Marker and Consumer Research Obtaining information about the current market situation and future perspectives
Permanent Adaptation Employment of all the available resources in order to satisfy the market demands.
Full satisfaction of demand By meeting the market requirements, it surpasses its competitors.
Maximization of economic efficiency Optimization of ail economic processes like production, transportation, etc.

Specific Functions varies from industry to industry

Various Marketing Principles Include:

  • Market knowledge
  • Producing what it can sell, not to sell what it produces
  • Studying consumer preferences
  • Marketing should be done for the company, not company for marketing

Human Resource Management (HRM):

  • It refers to getting things done through people.
  • Market requirement for skilled and talented people is competitive and expensive.
  • The aim is:
  • To ensure that at all the times the business is correctly staffed by the right number of people with the skills relevant to the business needs.”

It possess the following features

  • Pervasive nature as it is present in all enterprises
  • Concerned with people
  • Focus on results rather than rules
  • Enables employees to develop their potential
  • Provide competent and well-motivated employees.
  • Maintains cordial relations
  • Encourages the employees
  • Assigns jobs to people
  • Multi-disciplinary activity
  • People at work, individual and groups

Its objectives are as follows:

  • Achieving goals of both people and the organisation
  • Effective utilisation of people
  • Maintain high moral of employees
  • Identity and satisfy the human needs
  • Well-trained employees
  • Job satisfaction to employees
  • Maintain quality of work life
  • Enhances employee’s capabilities ,
  • Overall personality development of each employee –
  • Ensure ethical and social responsibility of business toward society..
  • Employers with precision and clarity

Scope:
HRM needs to be integrated with the overall strategy to ensure effective utilization of people and gaining better results for the organisation.

Services –
Legal Department – in any organization plays following roles:

  1. Legal advisor
  2. Discuss the potential legal issues.
  3. Offer training and help to employees for keeping them up to date regarding workplace laws.
  4. Solving customer’s complaints and grievances.
  5. Represents company in the law suit filed against it.
  6. Handles filing of patents and other legal documents with the official agencies.

Company Secretary performs various secretarial functions as follows:

  1. Conducting Board Meetings
  2. Conducting General Meetings of Shareholders
  3. Representing organisation in various registration and legal matters
  4. Managing procedural formalities

Various accounting functions to be performed by business are as follows:

  1. Record keeping
  2. Fulfilling various legal requirements
  3. Protecting the business properly.
  4. Communicating the business results to interested parties.

Accounting: Accounting is the function of business that gathers data and information from all the different aspects of the business. List of accounting functions are:

  1. Record keeping
  2. Protect business property
  3. Legal requirement
  4. Communicating the Results

Administration Department is set up to ensure that all office work is completed timely. It performs the following functions :

  1. Foster regional economic development
  2. Controls external communications
  3. Supply of security for the premises
  4. Creation of more effective plans
  5. dewing of governmental affairs
  6. Enhancing regions renewable/reusable resources

Information and Communication Technology Department helps in implementing the modern technology in business. A good ICT department will increase the efficiency of a business and there by profits also.

Social Functions:
Business was only concerned with profit maximisation as its primary aim with little or no attention to social responsibility. Some businessmen discharged their religious duty by giving grants in charity mainly for education, welfare of the poor, etc. Charity transformed into small but valuable acts of philanthropy by businessmen on socio-economic issues of concern to them. These philanthropic acts were generally beyond the scope of the business operations and qualified as individual act towards the welfare of the society.

Evolution:
Social function of Business was not an alien concept but existed in different forms such as charity, sponsorship or philanthropy. The development of CSR is divided into four phases in India based on country’s political and economic environment. Different CSR practices moved parallel with India’s historical development. Since social responsibility was made a mandate in 2013 a fifth phase is added to the CSR evolution phases in India.

Phases of CSR practice in India:

  1. Phase – Key Thrust
  2. Phase 1 (Till 1914) – CSR motivated by charity & philanthropy
  3. Phase II (1914-1960) – CSR for India’s social development
  4. Phase III (1960-1980) – CSR under paradigm of mixed economy.
  5. Phase IV (1980-2013) – CSR as interface between philanthropic and business approach
  6. Phase V (2013 onwards) – Government made CSR spending mandatory for sizable firms

Social responsibility of business was professed internationally and linked to sustainable development. In this context it is stated that something that comes from people should go back to the people. This is necessary to complete the cycle which is perhaps the only way to. sustainable development. To achieve the goal of sustainability Elkington in 1994 coined the term Triple Bottom Line in an effort to expand the People. Planet and Profit agenda by more fully integrating it into business practices.

1. People (human capital) signify fair and beneficial business practices towards labour and the community and region in which business is conducted. Company conceives a reciprocal social structure in which the well-being of corporate, labour and other stakeholder interests are independent.

2. Planet refers to sustainable environmental practices. A TBL company endeavours to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. It endeavours to reduce its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as disposing it in a safe and legal manner. A triple bottom line company does not produce harmful or destructive ‘ products such as weapons, toxic chemicals or batteries containing dangerous heavy metals for example.

3. Profit on the other hand refers to the economic value created by the organisation for the immediate economic environment. It differs from the traditional accounting definition of profit. In the original concept, within a sustainability framework, the ‘profit’ aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organisation has on its economic environment.

Meaning and Understanding:
CSR is also defined as the obligation of businessmen to pursue those policies, to make those decsions, or to follow those lines of action which are desirable in terms of the objectives and values of our society. A socially responsible firm is one whose managerial staff balances a multiplicity of interests. Instead of striving only for larger profits for its stakeholders, a responsible enterprise also takes into account its employees, suppliers, dealers, local communities and the nation”.

Benefits of Social Responsibility:
The following are some of the implications of discharge of social responsibility:

  • Research has been instrumental in providing evidence to the fact that companies who discharge social responsibility have positive impact on their performance.
  • Firms discharging socially responsible behaviour are able to build a good social image of their brand and sell more.
  • Socially responsible behaviour provides legitimacy to the existence of the firm.
  • Companies recognising and integrating social functions enhance their reputation/goodwill and position themselves as responsible corporate citizens.

Regulatory Framework in India:
Section 135, for the first time made social responsibility a mandate for all corporations having net worth of rupees five hundred crore or more, or turnover 6f rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year.

Such stated companies are required to constitute a corporate social responsibility committee consisting of three or more directors of which at least one should be an independent director. This committee is entrusted with the task of formulating a social responsibility policy which spells out the activities to be undertaken as part of CSR. Schedule VII provides a list of activities which may be included by companies in their CSR policies. These activities include:
1. Eradication of hunger, poverty, malnutrition, promoting health care including preventive health care and sanitation and making available safe drinking water.

2. Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and differently able and livelihood enhancement project.

3. Promoting gender equality, empowering women, setting up.homes and hostels, for women and orphans, setting up old age homes, day care centres, and such other facilities for senior citizens and measures for reducing inequality faced by socially and economically backward groups.

4. Ensuring environmental sustainability, ecologicai balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining the quality cf Soil, air, water.

5. Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art, setting up of public libraries, promotion and development of traditional arts and handicrafts.

6. Measures for the benefit of armed forces veterans, war widows, and their dependents.

7. Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports.

8. Contribution to Prime Minister’s National Relief Fund or any other fund set by Central Government for socio-economic development and relief and welfare of Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women.

9. Contributions or funds provided to technology incubators located within academic institutions which are af proved by the Central Government.

10. Rural Development projects.

The Board of such Companies are required to ensure that the company spends in every financial year, at least 2% of the average net profit of the company made during the three immediately preceding financial years, in pursuance of the Corporate Social Responsibility Policy. If the company fails to spend such amount, the Board is required to furnish reason for the same in its report.

Corporate Social Responsibility activities can be discharged through any of the methods:

  • Directly on its own.
  • Through its own non-profit foundation set up so as to facilitate this initiative.
  • Through independently registered non-profit organisations that have a record of at least three years in similar such related activities.
  • Collaborating or pooling their resources with other companies.

Multiple Choice Questions

Question 1.
_________ involves division of labour among multiple persons and/or technologies
(a) Business function
(b) Business process
(c) Business operation
(d) All of the above
Answer:
(d) All of the above

Question 2.
‘Strategos’ is _________.
(a) ‘the science of the general’
(b) the act of the general
(c) a Greek word
(d) Both (b) and (c) above.
Answer:
(d) Both (b) and (c) above.

Question 3.
Formulating strategies is a job of:
(a) Top Management
(b) Middle Management
(c) Lower Management
(d) None of these
Answer:
(a) Top Management

Question 4.
_________ strategy is stated in the company’s mission statement.
(a) Business unit
(b) Operational
(c) Business level
(d) Corpo-ate
Answer:
(d) Corpo-ate

Question 5.
Business done from home is known as:
(a) Real Business
(b) Artificial Business
(c) Virtual Business
(d) Transparent Business
Answer:
(c) Virtual Business

Question 6.
Factors affecting business location does not include the following:
(a) Labor
(b) Advertisement facilities
(c) Suppliers
(d) Communication facilities
Answer:
(b) Advertisement facilities

Question 7.
Some areas of UK like whales, North-east England etc. are known as:
(a) Underdeveloped areas
(b) Developing areas
(c) Poor areas
(d) Assisted areas.
Answer:
(d) Assisted areas.

Question 8.
Decision making is a process _________.
(a) Emotional
(b) Rational
(c) Mental
(d) All of the above
Answer:
(d) All of the above

Question 9.
_________ is a primary function of management
(a) Planning
(b) Budgeting
(c) Research & Development
(d) Organising
Answer:
(a) Planning

Question 10.
_________ is a device used for managerial control.
(a) Planning
(b) Decision – making
(c) Financial Management
(d) Budget
Answer:
(d) Budget

Question 11.
Budget is prepared for the past work period.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(b) False

Question 12.
Following is not a component of Budget:
(a) Saving
(b) Income
(c) Expenditure
(d) Capital employment.
Answer:
(a) Saving

Question 13.
_________ research has no immediate or direct commercial value.
(a) Basic
(b) Fundamental
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 14.
Resources are always, _________ and wants are always _________
(a) Limited, Unlimited
(b) Unlimited, Limited
(c) Limited, Limited
(d) Unlimited, Unlimited
Answer:
(a) Limited, Unlimited

Question 15.
Financial Management comprises of:
(a) Financing decisions
(b) Investment decisions
(c) Dividend decision
(d) All of the above.
Answer:
(d) All of the above.

Question 16.
Reversal of _________ decision is not possible.
(a) Capital Budgeting Decision
(b) Capital Structure Decision
(c) Working Capital Decision
(d) Dividend Payment Decision.
Answer:
(a) Capital Budgeting Decision

Question 17.
Excess funds lessens the financing cost.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(b) False

Question 18.
Selling is a _________ concept while marketing is a concept.
(a) wide, narrow
(b) narrow, wide
(c) small, big
(d) big, small
Answer:
(b) narrow, wide

Question 19.
Law of caveat emptor applies to :
(a) Marketing
(b) Selling
(c) Both (a) arid (b)
(d) None of the above.
Answer:
(b) Selling

Question 20.
Marketing mix does not include the following P:
(a) Planning
(b) Product
(c) Price
(d) Place
Answer:
(a) Planning

Question 21.
_________ refers to getting the things done through others.
(a) Scientific Management
(b) Personnel Management
(c) Financial Management
(d) Marketing Management.
Answer:
(b) Personnel Management

Question 22.
SCM Stands for:
(a) Supply Chain Material
(b) Source Concept Management
(c) Supply Choice Material
(d) Supply Chain Management
Answer:
(d) Supply Chain Management

Question 23.
Marketing mix involves:
(a) Consumers
(c) Retailers
(b) Financing
(d) Products/Service
Answer:
(d) Products/Service

Question 24.
ASP stands for:
(a) Application service provider
(b) Application source provider
(c) All service provider
(d) Application service planning.
Answer:
(a) Application service provider

Question 25.
_________ flow refers to order transmission and updation of delivery status.
(a) Product flow
(b) Service flow
(c) Information flow
(d) Finance flow
Answer:
(c) Information flow

Question 26.
POM stands for:
(a) Product and Operations Manager
(b) Product and Operational Management
(c) Production and Operations Management
(d) Production and Operational Management.
Answer:
(c) Production and Operations Management

Question 27.
Production of chocolates is an example of:
(a) Flow Method
(b) Job Method
(c) Batch Method
(d) Group Method
Answer:
(a) Flow Method

Question 28.
Which one of the following is not a feature of a strategy.
(a) It is a specialized planning to retaliate competitors
(b) It is the job of middle level and lower level management
(c) It redefines directions towards common efforts
(d) It explains manager response to changing business environment
Answer:
(b) It is the job of middle level and lower level management

Question 29.
Decisions regarding choice of product, gaining competitive advantage etc. are a part of _________.
(a) Corporate strategy
(b) Business unit strategy
(c) Operational strategy
(d) All of the above
Answer:
(b) Business unit strategy

Question 30.
Which of the following strategy focuses on issues of resources, process, people etc?
(a) Corporate strategy
(b) Business unit strategy
(c) Operational strategy
(d) All of the above
Answer:
(c) Operational strategy

Question 31.
Planning is an _________.
(a) Intellectual process
(b) Mechanical Process
(c) One time activity
(d) All of the above
Answer:
(a) Intellectual process

Question 32.
Which one of the following statements is not true regarding a Budget?
(a) It is a financial statement
(b) It is a quantitative statement
(c) It may include income expenditure and employment of capital
(d) None of the Above
Answer:
(d) None of the Above

Question 33.
A Budget includes _________.
(a) Income
(b) Expenditure
(c) Employment of Capital
(d) All of the Above
Answer:
(d) All of the Above

Question 34.
In determining a business location which of the following factors should be considered _________.
(a) Communication facility
(b) Government Assistance
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 35.
Which one of the following is not a flow of SCM?
(a) Entrepreneurship Flow
(b) Product Flow
(c) Information Flow
(d) Finance Flow
Answer:
(a) Entrepreneurship Flow

Question 36.
The activity of turning the resources into products and services is called as:
(a) Supply Chain Management
(b) Planning
(c) Directing
(d) Transformation Process
Answer:
(d) Transformation Process

Question 37.
Which of the following is not a feature of Batch Method?
(a) It requires the division of work into parts or operations
(b) It does not result in building up significant work in process
(c) It results in specialisation
(d) It focuses on achieving high utilization of resources
Answer:
(b) It does not result in building up significant work in process

Question 38.
Which of the following is not a requirement of Flow Method _________.
(a) There must be substantially constant demand
(b) The product must be standardised
(c) Division of work into parts or operations
(d) All the operations must be carefully defined
Answer:
(c) Division of work into parts or operations

Question 39.
Job Method includes:
(a) Low Technology jobs
(b) High Technology jobs
(c) Neither (a) nor (b)
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

Question 40.
Which one of the following is not a feature of selling?
(a) It has a long-term perspective
(b) It considers profit as a sole motive
(c) It is based on the law of Caveat Emptor
(d) It focuses’on producers
Answer:
(a) It has a long-term perspective

Question 41.
Which one of the following is not a feature of marketing _________.
(a) It focuses on customers
(b) It considers product identification and customer satisfaction
(c) It follows the law of Caveat Vendor
(d) It has a short term perspective
Answer:
(d) It has a short term perspective

Question 42.
Which of the following is not a general function of Marketing
(a) Market and consumer research
(b) Temporary Adoption
(c) Full Satisfaction of demand
(d) Maximising of economic efficiency
Answer:
(b) Temporary Adoption

Question 43.
Which one of the following is not a feature of HRM _________.
(a) It is pervasive in nature
(b) Helps in motivating the employees
(c) It is a multidisciplinary activity
(d) It focuses on rules
Answer:
(d) It focuses on rules

Question 44.
Which of the following is not a function of a Company Secretary?
(a) Conducting the Statutory meetings of the company
(b) Liaisoning and managing procedural formalities
(c) Communicating the results to the interested parties
(d) Representing the organisation for registration of company, change of name etc.
Answer:
(c) Communicating the results to the interested parties

Question 45.
The Accounting function includes _________.
(a) Communicating results
(b) Protecting the business property
(c) Liaisoning and managery procedural formalities
(d) Both (a) & (b)
Answer:
(d) Both (a) & (b)

Question 46.
The term ICT stands for _________.
(a) Internet Communication Tapping
(b) Initial Corporate Tax
(c) Insurance, Cartage and Transportation
(d) Information and Communication Technology
Answer:
(d) Information and Communication Technology

Question 47.
Borden’s Marketing Mix does not include _________.
(a) Product Planning
(b) Penetrating
(c) Promotion
(d) Advertising
Answer:
(b) Penetrating

Question 48.
CSR stands for _________.
(a) Customer Satisfaction Ratios
(b) Corporate Sales Returns
(c) Customer Sales Ratios
(d) Corporate Social responsibility
Answer:
(d) Corporate Social responsibility

Question 49.
CSR is based on Theory _________.
(a) Stakeholder
(b) Involvement
(c) Ethical
(d) Marketing
Answer:
(a) Stakeholder

Question 50.
In which dimension of CSR responsibility would you classify the issue of recycling and non wasteful packaging?
(a) Consumer
(b) Social and community involvements
(c) Physical environment
(d) Employee relations
Answer:
(c) Physical environment

Question 51.
Which of the following is not a criticism of CSR _________.
(a) CSR is too costly
(b) CSR encourages cynicism
(c) CSR leads to enhanced brand reputation
(d) CSR is misguided
Answer:
(c) CSR leads to enhanced brand reputation

Question 52.
Which of the following statements best describes Corporate Social Responsibility?
(a) A corporation’s requirement to make as much profit as possible.
(b) A corporation’s obligation to society that goes beyond the requirements of the law and economics to take into account the social and environmental impact of its decisions.
(c) A corporation’s obligation to consider the impact of its decisions on the environment.
(d) The duty of care a corporation has to its employees and customers.
Answer:
(b) A corporation’s obligation to society that goes beyond the requirements of the law and economics to take into account the social and environmental impact of its decisions.

Question 53.
Which of the following form part of the business case for CSR?
(a) Better motivated staff reduce operating costs.
(b) Increased brand value and reputation.
(c) The maintenance of the ‘licence to operate’.
(d) All of the options given.
Answer:
(d) All of the options given.

Question 54.
The moral case for CSR, i.e. that it is the right thing to dc, is justified by which of the following arguments?
(a) That the corporation is a creation of society and should therefore serve its needs.
(b) That the corporation is a legal creation and therefore cannot be a moral agent.
(c) Large corporations do not have the power or resources to address society’s problems.
(d) Business decisions will have social and environmental consequences which will be addressed by governments.
Answer:
(a) That the corporation is a creation of society and should therefore serve its needs.

Question 55.
The most influential theory of corporate responsibility of the past century is:
(a) The moral minimum model
(b) The classical model.
(c) The social contract theory
(d) The stakeholder theory.
Answer:
(b) The classical model.

Question 56.
Which concerns does CSR address?
(a) Moral & Ethical
(b) Social & Environmental
(c) Legal & Regulatory
(d) Monetary & Profit
Answer:
(b) Social & Environmental

Question 57.
Which of following stakeholders are interested in CSR?
(a) customers
(b) investors
(c) employees
(d) all of the above
Answer:
(d) all of the above

Question 58.
What is the primary purpose of budgeting?
(a) Planning
(b) Control
(c) Organizing
(d) Direction
Answer:
(b) A widely used device for managerial control is the budget. Moreover, it has sometimes been assumed that budgeting is the device for accomplishing control. Thus, the primary purpose of budgeting is control.

Question 59.
These influences the choice of location of business:
(a) Labour
(b) Government Assistance
(c) Population
(d) All of the above
Answer:
(d) Various factors affecting the business locations are:

  • Communication and transport facilities.
  • Location of business suppliers.
  • Labour requirement.
  • Government assistance.
  • Type of population.

Thus, all the given options influences the choice of location of business.

Question 60.
Car manufacturing is a :
(a) Line production process
(b) Flow production
(c) Batch production
(d) None of the above.
Answer:
(b) Flow method of production refers to the method in which the task is performed on continuous basis i.e. the material processing is continuous and progressive.
Example : production of motor cars, televisions etc.

Question 61.
What is the chief work done by top authorities in structure of management?
(a) Decision-Making
(b) Recruiting Manpower
(c) Holding Meeting
(d) Selling Products
Answer:
(a) Decision making is regarded as the mental processes resulting in the selection of action among alternative scenarios. Thus, it is a reasoning or emotional process which is the chief work done by the top authorities.

Question 62.
Which one of the following strategy deals with day-to-day activities of a business?
(a) Corporate strategy
(b) Operational strategy
(c) Business unit strategy
(d) None of the above.
Answer:
(b) Corporate Strategy is concerned with the overall business scope and purpose. Business unit strategy is concerned with a particular business unit competing in a specific business environment. Operational strategy involves organising each part of the business to deliver the above two strategies. It focuses on people, processes, etc. Thus, the strategy which deals with the day to day activities of a business is the operational strategy.

Question 63.
Which level of management is responsible for strategic planning in an organisation?
(a) Lower level management
(b) Middle level management
(c) Top level management
(d) All of the above.
Answer:
(c) Strategy is the direction and scope of an organisation over the long term. It reflects managerial response to changes in business environment. Since it involves various aspects relating to planning and decision-making, top level management is responsible for strategic planning of an organisation.

Questions 64.
Which one of the following is the responsibility of human resource management?
(a) To ensure respect for individual employer
(b) To ensure reconciliation of individual goals with those of the organisation
(c) To achieve and maintain high morals among the employees
(d) All of the above.
Answer:
(d) Various objectives of human resource management are as follows:

  • Achieving goals of both people and the organisation.
  • Effective utilisation of people.
  • Maintaining high moral of employees.
  • Identify and satisfy the human need.
  • Well trained employees.
  • Job satisfaction to employee’s.
  • Maintain quality of work life.
  • Enhances employee’s capabilities.
  • Overall personality development of each employee.
  • Ensure ethical and social responsibility of business towards society.

Question 65.
Marketing is a concept than selling.
(a) Narrow
(b) Older
(c) Broader
(d) None of the above
Answer:
(c) Marketing and selling are not synonymous. Selling is a narrow concept which involves transfer of goods or services from producers to consumers. Whereas marketing is a wide concept which emphasizes on identifying consumer needs and providing want satisfying products or services.

Question 66.
Which one of the following is not a part of ‘marketing mix’?
(a) Planning
(b) Product
(c) Price
(d) Place.
Answer:
(a) [Marketing mix is the combination of four inputs which constitute the core of a company’s marketing system, i.e. the product, the price structure, the promotional activities and distribution system.]
Thus, Planning is not a part of marketing mix.

Question 67.
In marketing, a distinctive group of consumers is known as:
(a) A class
(b) A segment
(c) An emerging market
(d) None of the above.
Answer:
(b) Marketing is the process of discouraging and translating consumer needs and wants into products and services and in twin making its possible for more and more of these products and services. A distinctive group of consumer in marketing process is known as a -segment. Market segmentation divides the consumers into distinct groups or segments.

Question 68.
Car servicing is an example of _________
(a) Batch processing
(b) Job processing
(c) Flow processing
(d) Contract processing.
Answer:
(b) Job method is a method of handling low as well as high technology jobs where whole work is handled by a worker or group of workers. Low technology jobs enables the company to include customers specific requirements as job processes. Thus, car servicing is an example of job processing as it is concerned with specific requirements/problems of the customer.

Question 69.
Which of the following type of budget is prepared to assess the level of inventories, receivables etc.?
(a) Material Budget
(b) Profitability Budget
(c) Cash Budget
(d) Working Capital Budget.
Answer:
(d) Working Capital Budget specifies the available .working capital i.e. investment in current assets like inventory, debtors, receivables etc. at different points of time

Question 70.
Which of the following strategy focuses on issues of production processes, material, etc.?
(a) Operation Strategy
(b) Business Unit Strategy
(c) Corporate Strategy
(d) Marketing Strategy.
Answer:
(a) Operational strategy is concerned with how each part of the business is organised to deliver the corporate and business – unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people, material etc.

Question 71.
Generally is responsible for complying procedural formalities relating to corporate restructuring in a company _________.
(a) Finance function
(b) Marketing function
(c) Secretarial function
(d) Administration function.
Answer:
(c) Various secretarial functions involves:

  • Conducting Board meetings
  • Conducting General meetings of shareholders
  • Representing organisation in various registration and legal matters.
  • Liaising and managing procedural formalities pertaining to re – structuring, change of name, shifting of registered office, etc.

Therefore, Secretarial Function is responsible for complying procedural formalities relating to corporate restructuring in a company.

Question 72.
Which of the following is not an accounting function:
(a) Maintaining accounts in compliance with Accounting Standards
(b) Arranging for finance
(c) Journalisation and preparation of final accounts
(d) Attrition monitoring.
Answer:
(b) Accounting is- the function of business that gathers data and information from ail the different aspects of the business. The list of accounting functions include:

  • Recording Keeping function.
  • Protect Business Property.
  • Legal Requirement Function.
  • Communicating the Results.

But the arranging for finance is related with financial services.

Question 73.
A means of obtaining financial resources that involves the sale of part of the ownership of the business is called:
(a) Bankruptcy
(b) Equity financing
(c) Commercial loans
(d) Debt financing.
Answer:
(b) Equity financing is the source of means of obtaining financial resources that involves the sale of part of the ownership of the business.

Question 74.
Film production is done by which method of production?
(a) Job method
(b) Batch method
(c) Flow method
(d) Group method
Answer:
(a) With Job production, the complete task is handled by a single worker or group of workers. High-technology jobs involve much greater complexity.

Example of high technology/complex jobs : Film production, large constructions projects (example: the Millennium Dome)

Question 75.
Selling is a _________ concept while marketing is a _________ concept.
(a) Wide, narrow
(b) Big, small
(c) Narrow, wide
(d) Small, big
Answer:
(c) Selling is a narrow concept which involves transfer of goods or services from producers to consumers and marketing is a wide concept which emphasizes identifying consumers needs and providing want satisfying products or services.

Question 76.
Film production is the example of which method _________.
(a) Batch Method
(b) Job Method
(c) Flow Method
(d) Contract Method
Answer:
(b) With Job production, the complete task is handled by a single worker or group of workers, high-technology jobs involves much greater complexity. Example of high technology Jobs:- film production etc.

Question 77.
The objective of Human Resource Management does not include:
(a) To increase employees job satisfaction and self actualization
(b) To develop and maintain a quality of work life
(c) To provide well trained and well motivated employees
(d) To get the manufacturing/servicing done.
Answer:
(d) Human Resource Management, in the sense of getting things done through people. It includes a process of bringing people and organisation together so that goals of each are met. Therefore, manufacturing/servicing are excluded from its purview.

Question 78.
Selling and marketing are the same. This statement is:
(a) Depends on customers philosophy
(b) Depends on the organisation philosophy
(c) False
(d) True.
Answer:
(c) Because selling is a narrow concept which involves transfer of goods or services from producer to customers whereas marketing is a wide concept which emphasizes identifying consumers needs and providing want satisfying products or services.

Question 79.
The Section of the balance sheet that include all the debts of the company is called:
(a) Asset
(b) Cash flow
(c) Liabililies
(d) Equity
Answer:
(c) The section of the balance sheet that includes all the debts of the company is called liabilities is short term or long term which thereby is significant in taking any financial decision.

Question 80.
Budgeting is an activity of:
(a) Environmental Scanning
(b) Strategic planning
(c) Strategy formulation
(d) Strategy implementation
Answer:
(d) Budgeting is an activity of strategy implementation which is a process of conducting programs (activities needed to accomplish plan), budgets (cost of programs) and procedures (sequence of steps needed to do the job).

Question 81.
There is _________ which can be applied to decide the most important factors in choosing a location.
(a) No magic formula
(b) Prescribed formula
(c) A common formula
(d) A Scientific formula
Answer:
(a) There is no magic formula which can be applied to decide the most important factors in choosing a location.

Question 82.
In C.I.F. contracts, C.I.F. stands for:
(a) Cost, Insurance and Freight
(b) Calculated Insurance and Freight
(c) Cost, Identity and Freight
(d) Customs, Insurance and Freight
Answer:
(a) C.I.F stand for Cost, Insurance and Freight.

Question 83.
Market place for talented and skilled people is:
(a) Remunerative and approachable
(b) Not reasonably priced
(c) Competitive and expensive
(d) Competitive and approachable
Answer:
(c) The market place for talented and skilled people is competitive and expensive.

Question 84.
Which of the following production process is suitable for film production _________.
(a) Line Method
(b) Job Method
(c) Batch Method
(d) Flow Method
Answer:
(b) With job production, the complete task is handled by a single worker or a group of worker. Job can be of scale / low technology as well as high technology / complex.
Example: of high technology/complex are film production or large construction project.

Question 85.
Which of the following is not included in the marketing mix as defined b; William J. Stanton?
(a) Convergence
(b) Promotional activities
(c) Price structure
(d) Distribution system
Answer:
(a) William J. Stanton defined Marketing mix as combination of 4 inputs which constitute core of marketing mix element i.e the product, price structure, the promotional activities and the distribution system.

Question 86.
Production budget is not influenced by:
(a) Sales Budget
(b) Available Technology
(c) Production Capacity
(d) Available Cash
Answer:
(a) Production Budget is influenced by:

  • Available technology
  • Production capacity
  • Available cash

Question 87.
Which of the following production process is suitable for film production?
(a) Batch method
(b) Line method
(c) Job method
(d) Flow method
Answer:
(c) Job method is the method where whole work is handled by a worker or group of workers firm production. It requires proper project management which involves clear objectives and proper decision process. Thus, Film production and large construction projects falls under jot method.

Question 88.
Human Resource Management is a part of:
(a) Every managers role
(b) Only human resource managers role
(c) Only human resource departments role
(d) Only marketing managers role
Answer:
(c) The purpose of Human Resource Management (HRM) is to hire, train and develop staff and where necessary to discipline or dismiss them. Through effective training and development, employees at Enterprise achieve promotion within the company and reach their full potential. Human Resources (HR) is concerned with the issues of managing people in the organisation. The Human Resources department is responsible for many people related issues in an organisation.

Question 89.
Selling and marketing are the same. This statement is:
(a) Depends on the customer’s philosophy
(b) False
(c) True
(d) Depends on the organization’s philosophy
Answer:
(b) Statement is False. Because they are different. Selling is transfer of ownership for consideration marketing is promotion of goods or services.

Question 90.
_________ require that the work for any task is divided into parts or operations.
(a) Job method
(b) Batch method
(c) Group method
(d) Flow method
Answer:
(b) In Batch method, work is divided into parts or operation different.

Question 91.
Which one of the following is not a part of marketing mix?
(a) Planing
(b) Product
(c) Price
Answer:
(a) Marketing Mix included followings ingredients or elements. These are:

  • Product planning
  • Pricing
  • Branding
  • Advertising
  • Promotion
  • Displays
  • Physical handling.

It does not include planning.

Question 92.
In marketing a distinctive group of consumers is known as:
(a) A class
(b) A segment
(c) An emerging market
(d) None of the above
Answer:
(b) ‘Segment’ is a word which is used in marketing for a distinctive (separate) group of consumers.

Question 93.
In this each work is divided into batches/team.
(a) Job Method
(b) Flow Method
(c) Batch Method
(d) Group Method
Answer:
(c) Batch method of production is divided each work into batchs and in terms.

Question 94.
Which of the following deals with day-to-day operations of business:
(a) Corporate Strategy
(b) Operating Strategy
(c) Business Unit Strategy
(d) Executive and directory Planning
Answer:
(b) Operational Strategy is formulate to ensure smooth functioning of day to day operation.

Question 95.
Contribution of ILO to business function:
(a) Set Inter-nation labour standards
(b) Binding with labour standards
(c) either (a) or (b)
(d) neither (a) nor (b)
Answer:
(a) ILO- provide set of instruction for labour standards.

Question 96.
In _________ this, each work is divided into branches and terms:
(a) Job method
(b) Batch method
(c) Flow method
(d) Group method
Answer:
(b) Batch method: Each work is divided into specific parts or operations.

Question 97.
UNDP stands for:
(a) Urban and National Development Programme
(b) United Nations Development Programme
(c) Unique Nationality Designed Programme
(d) None of the above
Answer:
(b) UNDP: United Nations Development Programme.

Question 98.
Car Servicing is an example of:
(a) Batch processing
(b) Job processing
(c) Flow processing
(d) Contract processing
Answer:
(b) Job method is a way of handling low as well as high technology jobs where whole work is handled by worker or group of workers. Low technology jobs enables the company to include customer specific requirements as job processes. Thus car servicing is an example of job processing as it is concerned with specific requirements/problems of the customers.

Question 99.
Which of the following type of budget is prepared to assess the level of inventories, receivable etc.?
(a) Material Budget
(b) Profitability Budget
(c) Cash Budget
(d) Working Capital Budget
Answer:
(d) Working Capital Budget specifies the available working capital i.e. investment in current assets like inventory, debtors/receivables, etc. at different point of time.
Therefore it can be said that working capital budget is prepared to assess the level of inventories, receivables, etc.

Question 100.
Which of the following strategy focuses on issues of production processes, material, etc.?
(a) Operation Strategy
(b) Business Unit Strategy
(c) Corporate Strategy
(d) Marketing Strategy
Answer:
(a) Operational Strategy is concerned with how each part of the business is organised to deliver the corporate business-unit level strategic direction. Operational Strategy therefore focuses on issue of resources, processes, people, material, etc.

Question 101.
Generally _________ is responsible for complying procedural formalities relating to corporate restructuring in a company:
(a) Finance Function
(b) Marketing Function
(c) Secretarial Function
(d) Administration Function
Answer:
(c) Generally Secretarial function department is responsible for complying procedural formalities relating to corporate restructuring in a company.

Question 102.
Environment scanning is for:
(a) Internal
(b) External
(c) Both ‘A’ and ‘B’
(d) Can’t say
Answer:
(a) Environment scanning is a process of gathering information about events and their relationships within an organisation’s internal and external environment. The basic purpose of environment scanning is to help management determine the future direction of the organisation.

Question 103.
Which type of scanning requires unconscious mind.
(a) Passive
(b) Active
(c) Direct
(d) Indirect
Answer:
(a) Everyone scans continually. Ongoing scanning at an almost unconscious level is passive scanning. No effort is made to select a particulars information resource to scan. The criteria of passive scanning are obscure, unspecified, and often continuously changing.

Question 104.
To reduce inventory in objective of _________.
(a) POM
(b) SCM
(c) Both ‘A’ and ‘B’
(d) None of the above
Answer:
(b) Supply Chain Management (SCM) is the oversight of materials, information and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. It is said that the ultimate goal of any effective supply chain management system is to reduce inventory.

Question 105.
Mixer of ingredients:
(a) Ketter
(b) Culliton
(c) Peter F Drucker
(d) Henry Fajel
Answer:
(b) Culliton conceived of marketeer as “the Mixer of ingredients”.

Question 106.
Investment decision comprises _________.
(a) Financial planning
(b) Fixed capital management
(c) Working capital management
(d) Both ‘b’ and ‘c’
Answer:
(a) Investment decision means deicing the quantum of investment out of available finance on long term basis as well as on short-term basis. Hence it is a financial planning.

Question 107.
Two function of Business are _________.
(a) Marketing and Profit Maximization
(b) Marketing and innovation
(c) None of the above
(d) Both ‘A’ and ‘B’
Answer:
(b) Business has only two function-

  • Marketing
  • and innovation coined by Peter F. Drucker.

Question 108.
Services involve:
(a) Legal
(b) Accounting
(c) Secretarial
(d) All of the above
Answer:
(d) Services involves.

  • Legal
  • Secretarial functions
  • Accounting
  • Administration
  • Information and communication Technology function.

CS Foundation Business Environment and Law Notes

Emerging Trends in Business – CS Foundation Business Environment Notes

Emerging Trends in Business – CS Foundation Business Environment Notes

Franchising:

  • It refers to a business relationship between two organisations where a franchiser allows a franchisee to use his product, brand or process in return of fees, (royalty)
  • In this, one firm allows the other to use its technical know-how & trade marks.
  • Franchiser is an individual or firm granting rights.
  • Franchisee is an individual or firm to whom the right is granted.
  • Franchise refers to the special right given by a franchiser to franchisee to sell franchiser’s product/service in a specified area.
  • Right is granted under special agreement called the Franchise Agreement.
  • Derived from Anglo French word ‘franc’ meaning ‘free’
  • Intellectual/property rights include-designs, brands, know-how, patents, trademarks, trade secrets.
  • It is the practice of using another firm’s successful business model
  • The Franchisee is an alternative to building chain stores to distribute goods and services, and to avoid investment and liability over a chain.

It has the following characteristics:

  • Right is granted under a license.
  • Franchisee gets marketing support and technology from franchiser.
  • Personnel training may be provided by franchiser.
  • Business must be operated as per the franchiser’s policy.
  • Franchisee is required to pay royalty – an agreed sum of money to franchiser.
  • Franchise agreement is for a limited period which can be renewed.

It provides the following advantages both to the Franchiser and Franchisee :

Franchiser Franchisee
  • Quick expansion of distribution system.
  • Business expansion with less capital.
  • Instant feedback from customer.
  • Increased goodwill.
  • Protected rights.
  • Get to know about specific needs and preference of local customers.
  • Wider acceptance of brand name.
  • Exclusive rights within his territory.
  • Branded product, thus well- known.
  • High degree of quality control.
  • Assistance in training his staff, product promotion etc.
  • Based on proven ideas so franchisee can check out success before committing himself.

However, it suffers from following disadvantages :

Franchiser Franchisee
  1. Risk of franchisee starting same business.
  2. Has to provide initial financial assistance and support.
  3. Ongoing cost of supporting the franchisee and national advertising.
  4. Risk of leakage of trade secrets.
  5. Risk of brand name being destroyed.
  1. Lack of freedom in business operations.
  2. Possibility of conflicts.
  3. Payment of royalty on regular basis.
  4. Restriction on selling his business.

Aggregator:

  • It is derived from the word “Aggregate”.
  • Aggregate means to combine, to accumulate or amalgamate.
  • In Digital world the term refers to that computer software or that website which collects or combines homogenous information from all around the online world and presents it to the viewer or the visitors.

The various types of aggregators are:

  • Service Aggregator
  • Search Aggregator
  • Social Aggregator
  • News Aggregator
  • Video Aggregator
  • Poll Aggregator
  • Shopping Aggregator
Aggregator Function Example
Service Aggregator

Search Aggregator

Social Aggregator

News Aggregator

Video  Aggregator

Poll Aggregator

Shopping Aggregator

Providing services to the customers combines the result

is a type of meta search engine (a tool that uses another search engine’s data to produce its own result). It combines user specified search feeds

Collects content from multiple social network

Is a software/web app., contain online newspaper, blogs etc.

Combines various videos from diff. sites

Combines data for an

upcoming election and predict the result.

Combine data from

various online shopping sites.

Uber and Ola

Rich Site Summary (RSS) feed helps the subscriber to a website get automatically news about any update on the website, as the RSS feed constantly monitors the site.

Twine social

Feedly, flip board, comma feed Daily Tube

Electoral-vote.com, votamatic.org etc.

Google Shopping, Nextdg, Shopzilla etc.

Key Factors Driving the Rise of Web Aggregators
1. An aggregator is a software or website that gathers Web content and/or applications from different online sources for reuse or sale.

2. There are two types of aggregators:

  • Aggregator that simply gather the material and show them
  • Aggregator that gather and distribute contents as per their customers needs

3. Key factors which are responsible for the rise of web aggregators are:

  • Increasing demand for business content
  • Web content aggregators are in huge demand
  • Content aggregator is the new name for journalist
  • Syndication
  • Huge variety of content formats
  • Rich media content
  • New Business Models

Key Challenges for the aggregators in the future?

  • The main challenge is that it promotes various brands under one roof.
  • The competition to look better than the competitor is high.
  • As this technology collects data using APIs and XML, so sometimes it miss out with a good updated feed coming in the database.
  • High cash burn rate – Needs huge investment
  • Competition – To compete various brands under one roof
  • Standardisation – To develop technical standards continuously
  • The Unregulated market
  • APIs and XIVIL – Are markup language, it is totally dependent on who is writing it, so sometimes it miss out with good updated feed or contain verbose language.

BPO : (Business Process Outsourcing)
1. It refers to the contracting of a specific business tasks, such as payroll, to a third party service provider.

2. It is implemented as a cost saving measure for tasks that a company requires but does not depends upon, to maintain their position in the market place.

3. It has following two sub-segments:

  • KPO : Knowledge Process Outsourcing
  • LPO : Legal Process Outsourcing

4. It is of two types:

  • Back office outsourcing: Outsourcing of internal business functions like finance, accounting etc.
  • Front office outsourcing: Outsourcing of customer related services. Example: Customer Care Centre

5. It was originated by soft drink manufacturing drink – Coca Cola.

6. It is generally associated with IT enabled services (ITES)

7. Off-shore outsourcing: Outsourcing is done by contracting outside the company’s country.

8. Near-shore outsourcing: Outsourcing is done by contracting to country’s neighboring or nearby country.

9. India is the hottest spot of IT outsourcing due to following reasons:

  • supportive government policy
  • huge skilled man power
  • advanced technology
  • reliable communication facilities

BPO is required due to the following reasons –

  • Smooth working : By outsourcing its routine activities, business can operate smoothly.
  • Economical : Outsourcing of certain activities is much more economical to do rather than creating separate department for each activity.
  • Specialization : It enables work to be done by specialized people.
  • Achieving Better Results : Specialization ensures achieving of better results.
  • Business Expansion : Business can ensure its expansion by focusing on its growth strategies while outsourcing the rest.

It has following advantages –

  • Cost Advantages : It saves 30% of company’s overall expenditure.
  • Flexibility : By outsourcing its various functions company converts its fixed cost into variable, thereby ensuring flexibility in its operations.
  • Speed : Speed of various business processes and operations increases, thus increasing the flexibility.
  • Focus on core areas : Company can save its time and energy by outsourcing its non-core activities, thereby it self focusing on company’s core areas of operations.
  • Availability of Skilled Manpower : Large pool of technically skilled manpower with proficiency in english enables the company to grow with faster pace.
  • Growth : By ensuring speed and flexibility in its operations, it helps the business in growth and expansion.

It suffers from following disadvantages (B.P.O)

  • Communication problems : It requires proper communication in order to be effective. Telephonic communication is an obstacle for this business.
  • Loss of control : By outsourcing, the company lose control over its various operations.
  • Time Zone Double Edged Sword : Due to difference in countries of both customers and vendors, time differences occurs which has to be considered.
  • Service Provider’s want of diversifying : Service providers takes up project of various companies simultaneously, thereby creating problems in providing services.
  • Customer is novice.
  • Unclear contractual issues between company and service provider.
  • Changing business requirements
  • Excessive dependance on BPO reduces flexibility.

Knowledge Process Outsourcing Meaning
1. Knowledge Process Outsourcing is at a higher position in intellectual value chain.

2. Knowledge processes can be some specific activity which requires a deep level of domain knowledge (IT, Management, Law etc.) and/or requires thinking of analytical nature.

3. It uses skilled experts in a particular field or domain and handled by experienced people.
BPO = Reduce Cost + Increase Productivity
KPO = Reduce Cost + Increase productivity + Greater Business Insight + Experienced Workforce
Hence,
KPO = BPO + Greater Business Insight + Experienced Workforce

Scope and Future of KPO –

  • KPO is the evolution and maturity of the Indian BPO sector.
  • KPO business units provide distinctive domain-based processes, progressive analytical services and business proficiency, rather than just process proficiency.
  • The future of KPO is bright and has a high potential.
  • The reason for this is that KPO is not just restricted to Information Technology (IT) or Information
  • Technology Enabled Services Sectors (ITES).

Types of KPO:
There are four categories of KPO vendors:

  • Off-shore : vendors are located abroad (developing countries)
  • Near-shore : located hearer to the client company
  • Captive : Operational plants in foreign countries
  • On-shore : Operations in the same country.

Benefits of KPO:
1. KPO providers use the latest tech, and if info, so you can be assured of error-face work
Speedy deliveries

2. KPO is indeed an extension to the BPO services. The top benefits of Knowledge Process Outsourcing which makes it so important for businesses all around the globe now:

  • Cost-effective price
  • Access to best human resource pool
  • Concentration or Focus on Prime business activity
  • Best Service Delivery

India is the one of the favorite KPO (off-shore) destination for developed Countries i.e. USA, UK & Australia, examples of some major KPO”s are :

  • Genepact
  • WNS Global Services
  • WIPRO (BPO)
  • First Source Solutions
  • TCS (BPO)
  • IBM Daksh
  • Aditya Birla Minacs

Electronic Commerce

  • Popularly known as E-Commerce.
  • It refers to the use of computer networks for buying and selling goods, information and services.

It refers to the use of electronic mediums (tele communication) to engage in the exchange, including buying and selling of products and services requiring transportation either physically or digitally, from one location to another.

It involves various technologies like –

  • EDI – Electronic Data Interchange
  • BB’s – Bulletin Boards
  • EFT – Electronic Fund Transfer
  • Digital Cash
  • Web forecasting
  • Extranet
  • Internet
  • WWW – World Wide Web
  • Imaging , etc.

Data includes text, sound and visual images

It takes place between –

  • Companies
  • Companies and their customers
  • Companies and government departments.

It involves following of categories

  • B2B – Business to Business
  • B2C – Business to Customer
  • C2B – Customer to Business
  • C2C – Customer to Customer

It includes buying and selling of Goods example – Digital Cameras, Cloths etc.
Information example – Subscription to some law site.
Services example – Placement services through naukri.com

  • Business to Business – It involves one business enterprise selling to another.
  • Business to Customer – It is used to refer to sale by a business enterprise to a direct customer.
  • Customer to Business – In it the consumers can offer products and services to companies and the companies pay them. It is a complete reversal of B2C.
  • Customer to Customer – It involves the electronically facilitated transactions between consumers through some third party. Example – online auction etc.

It is becoming popular due to following advantages:

  • Global Market : World becomes a global market for the business firms through internet.
  • Time and Effort Savings : It involves less of paper and clerical work which saves both time and money
  • Quick Supplies : Capital does not gets block in inventories as huge stock of material need not be maintained by business.
  • Quick Delivery : It ensures quick delivery of goods to consumers and timely redressal of complaints.
  • Low Transaction cost and High Margins : Cost of business transactions can be reduced greatly, thereby enabling it to earn higher profits.
  • Wider choice : Consumers get wide variety of goods and services before purchasing them.
  • Working 24 x 7
  • Direct contact between business and consumer
  • Customer convenience
  • Ease in launching of new products.

It suffers from following disadvantages:

  • High Initial Cost: Various start-up cost like net connection, hardware/software, setting up etc involves huge investment.
  • Fulfillment Problems: Many a times, it becomes difficult for business to fulfill their commitments made to the customers due to shipping delays, website crashing, etc.
  • Training and Maintenance: Continuous training and maintenance of staff, net etc. is required to be done by the business.
  • Security: Customers feel lack of security relating to their personal details like credit card number etc. via online business.
  • Corporate Vulnerability: Competitors are able to access the business information through internet. This can be harmful for the business.
  • Web Farming: It refers to the idea of extracting business intelligence from the competitors web pages
  • Lack of Personal Touch: It is not suitable for customers requiring personalised service as e-commerce does not allows personal touch between buyer and seller.
  • High Risk associated with it
  • System and Data Integrity
  • People’s Resistance

Digital Economy

  • The digital economy refers to an economy in which major business transaction takes place using digital media or internet or world wide web.
  • Consumers all around the globe are greatly influenced by digital platforms.
  • The various new ways of information dissemination are – Facebook, Twitter, Youtube, Linked in etc.
  • It is found 5-6 hours is the time an average Vs. consumer spends per day with digital media, 51% of which is via mobile.

Consumer in Digital Economy:

  • Consumer in digital economy is still a king.
  • Consumers are easily accessing huge amount of data due to digitization of content and thus sharing information has become much easier.
  • Most recently Facebook and Twitter are the direct benefit of the Digital economy to the customer centric organization.

Merits of Digital Economy are:

  • Growing use of Internet
  • Rise in E-Commerce
  • Digital delivery of goods and services
  • Greater Transparency

Demerits of Digital Economy Demerits are as follows:

  • Loss of Job
  • Less Digital Experts
  • Strong Infrastructure Requirement

Concept of incubators, asset lite models – These days, some new concepts are also emerging in business such as incubators and Asset Lite Models.

Incubator:

  • An incubator is an organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections.
  • Incubators provide numerous benefits to owners of startup businesses.
  • Incubators are critical for driving the growth of startups at all stages of their entrepreneurial journey.
    They help provide mentorship and handholding support and above all foster a culture of innovation.

Asset Light Model:

  • Asset light model is a business model where businesses now instead of purchasing the land enter into a contract with the land owner, where they share a certain percentage or profit arising out of the business done on the land.
  • This helps in saving a huge cost of land to the business.
  • Example: Outsourcing, asset sharing, licensing in and licensing out.
  • Asset-light models can deliver a better return on assets, lower profit volatility, greater flexibility, and higher scale-driven cost savings than asset-heavy models.

Multiple Choose Questions

Question 1.
Parent organisation grants the permission to other individuals to use their brand, trademark etc. for specified period. Such rights are known as _______.
(a) Franchising
(b) Franchise
(c) Franclisee
(d) Franchiser
Answer:
(b) Franchise

Question 2.
Period for which right is transferred, under an agreement is to be renewed from time to time. This statement is _______.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) True

Question 3.
Agreed sum paid by franchisee to franchiser is known as _______.
(a) Fees
(b) Commission
(c) Changes
(d) Royalty
Answer:
(d) Royalty

Question 4.
Intellectual Property rights does not include _______.
(a) Trademarks
(b) Patents
(c) Goodwill
(d) Know how
Answer:
(c) Goodwill

Question 5.
BPO stands for _______.
(a) Business Public Organisation
(b) Business Process Outsourcing
(c) Business Private Organisation
(d) Business People Organisation
Answer:
(b) Business Process Outsourcing

Question 6.
LPO stands for _______.
(a) Legal Product Outsourcing
(b) Lawful Process Outsourcing
(c) Legal Process Outsourcing
(d) None of these.
Answer:
(c) Legal Process Outsourcing

Question 7.
_______ is a type of BPO.
(a) Back office outsourcing
(b) Left office outsourcing
(c) Right office outsourcing
(d) None of the above
Answer:
(a) Back office outsourcing

Question 8.
BPO was originally originated by _______.
(a) Reliance
(b) Tata
(c) Coca-Dola
(d) Pepsi
Answer:
(c) Coca-Dola

Question 9.
_______ is the hottest spot of IT – outsourcing.
(a) India
(b) USA
(c) Africa
(d) Pakistan
Answer:
(a) India

Question 10.
Reason for the acceptance of BPO is _______
(a) Smooth working
(b) Specialisation
(c) Economical
(d) All of the above
Answer:
(d) All of the above

Question 11.
E- commerce means _______.
(a) Commerce of electronic goods
(b) Commerce based on transactions using Computers connected by telecommunication network
(c) Commerce dependent on electronics
(d) Commerce by using internet
Answer:
(b) Commerce based on transactions using Computers connected by telecommunication network

Question 12.
E- commerce means buying and selling of _______.
(a) Goods
(b) Services
(c) Information
(d) All of the above
Answer:
(d) All of the above

Question 13.
EDI means _______.
(a) Electrical Data Information
(b) Electrical Data Interchange
(c) Electronic Data Interchange
(d) Electronic Document Information.
Answer:
(c) Electronic Data Interchange

Question 14.
B2B, B2C, C2B, C2B, C2C are types of _______.
(a) Network marketing
(b) M-Commerce
(c) E-Commerce
(d) Marketing.
Answer:
(c) E-Commerce

Question 15.
Following is not an advantage of E-Commerce _______.
(a) Quick Supply
(b) Prompt Delivery
(c) Increased Cost
(d) Wider Choice
Answer:
(c) Increased Cost

Question 16.
Idea of extracting business intelligence from competitor’s web pages is known as _______.
(a) Web Heating
(b) Web Theft
(c) Web Farming
(d) None of these.
Answer:
(c) Web Farming

Question 17.
PDA’s , Smart phones, Mobile phones are required in _______.
(a) M-Commerce
(b) Network Marketing
(c) E-Commerce
(d) Marketing
Answer:
(a) M-Commerce

Question 18.
Under network Marketing, with the help of whom does the product reach the customers from the manufactures?
(a) Wholesaler
(b) Distributors
(c) Retailer
(d) None.
Answer:
(b) Distributors

Question 19.
Under network marketing, lower overhead costs incur due to _______.
(a) Low infrastructural requirement
(b) Low advertisement cost
(c) Both (a) and (b)
(d) None.
Answer:
(a) Low infrastructural requirement

Question 20.
Under network marketing, there is some risk involved-in becoming?
(a) Capitalist
(b) Socialist
(c) Wholesaler
(d) Retailer
Answer:
(a) Capitalist

Question 21.
In network marketing, who becomes the largest customer and takes over the control of the company _______.
(a) Wholesaler
(b) Retailer
(c) Distributor
(d) No one.
Answer:
(c) Distributor

Question 22.
Whom does the franchiser allow to use his trademark under a license?
(a) Franchiser
(b) Licencer
(c) Franchisee
(d) Does not allow such a right.
Answer:
(c) Franchisee

Question 23.
The word “Franchise ” is derived from _______.
(a) Anglo French
(b) Latin American
(c) Indian
(d) Greek.
Answer:
(a) Anglo French

Question 24.
Who does not allow the principle to exert real control over distributor or agent _______.
(a) Agent
(b) Principle
(c) Agency
(d) Distributor
Answer:
(c) Agency

Question 25.
Which one of the following is not an advantage of network marketing?
(a) Continuous growth of the distribution network
(b) Low overhead cost
(c) Opportunity to earn unlimited income
(d) Accurate sales forecasting
Answer:
(d) Accurate sales forecasting

Question 26.
The practice of using another firm’s successful business model is called _______.
(a) Franchising
(b) Leasing
(c) Outsourcing
(d) Network marketing
Answer:
(a) Franchising

Question 27.
The Franchisee is required to pay to the Franchiser _______.
(a) Remuneration
(b) Fees
(c) Pre-determined sum
(d) Royalty
Answer:
(d) Royalty

Question 28.
A BPO contracted outside the companies country is called _______.
(a) Off shore outsourcing
(b) Near shore outsourcing
(c) Far shore outsourcing
(d) Foreign outsourcing
Answer:
(a) Off shore outsourcing

Question 29.
PDA stands for _______.
(a) Personal Data Account
(b) Permanent Direct Account
(c) Private Distributing Agency
(d) Personal Digital Assistance
Answer:
(d) Personal Digital Assistance

Question 30.
Which of the following is not a feature of Franchising?
(a) The franchiser allows the franchisee to use his trade mark
(b) the franchisee is required to follow the franchiser’s policy
(c) The franchiser does not make any arrangement for training the employees
(d) the franchisee agreement is for a limited period of time
Answer:
(c) The franchiser does not make any arrangement for training the employees

Question 31.
ITES stands for _______.
(a) Information Technology Energy System
(b) Information Technology Enabled Software
(c) Information Technology Enabled Services
(d) None of the above
Answer:
(c) Information Technology Enabled Services

Question 32.
Which of the following statement is True?
(a) Franchiser exercises more control as compared to distributor
(b) Franchiser exercises less control as compared to the distributor
(c) Franchiser and distributor have equal control
(d) None of the above
Answer:
(a) Franchiser exercises more control as compared to distributor

Question 33.
Which of the following is not an advantage of E-commerce?
(a) Low start up cost
(b) Quick delivery
(c) Saving of time and effort
(d) All of the above
Answer:
(a) Low start up cost

Question 34.
EDI stands for _______.
(a) Electronic Data Interchange
(b) Employee Data Interchange
(c) Electronic Device Interchange
(d) None of the above
Answer:
(a) Electronic Data Interchange

Question 35.
EFT stands for _______.
(a) Electronic Funds Transfer
(b) Electronic Financial Transfer
(c) Enterprise Financial Transfers
(d) Enterprise Funds Transfers
Answer:
(a) Electronic Funds Transfer

Question 36.
Which one of the following is a category in which Business Process Outsourcing can be categorised?
(a) Back office outsourcing
(b) Front office outsourcing
(c) Offshore outsourcing
(d) All of above.
Answer:
(d) BPO refers to the contracting of a specific business tasks, such as payroll, to a third party service provider. It is of following types:

Back office outsourcing
Front office outsourcing
Off shore outsourcing
Near shore outsourcing

Question 37.
Which among the following is one of the largest ‘Job providers’ in India?
(a) Network marketing
(b) Business process outsourcing
(c) Medical tourism
(d) Film industry.
Answer:
(b) The largest Job provider in India is Business Process Outsourcing. BPO is a subset of outsourcing that involves the contracting of the operation and responsibility specific business function to a third-party service provider.

Question 38.
Which one of the following is a great concern for E-COMMERCE?
(a) Speed
(b) Quality
(c) Security risk
(d) Maintenance cost.
Answer:
(c) The great concern for the E-commerce is the security risk. Security continues to be a problem for online business. Many people are reluctant to give out their credit card number via internet. Customers have to feel confident about the integrity of the process before they commit to purchase.

Question 39.
The online purchase of a book from flipkart.com is an example of—
(a) B2B e-commerce
(b) B2C e-commerce
(c) C2B e-commerce
(d) C2C e-commerce.
Answer:
(b) E-commerce refers to the use of computer networks for buying and selling goods, information and services. It involves various categories like –

  • B2B
  • B2C
  • C2B
  • C2C

B2C i.e. business to customer means the sale by a business enterprise to a direct customer. Thus, online purchase of a book from flipkart.com is an example of B2C as the book sellers are selling books to its customers.

Question 40.
For a car manufacturing firm, which of the following business process is most suitable for outsourcing?
(a) Production Management
(b) Quality Assurance
(c) Customer Relationship
(d) None of the above.
Answer:
(c) Outsourcing refers to the contracting of the operations and responsibilities of a specific function (process) to a third party service provider. It is initially associated with manufacturing firms which outsourced large segments of its supply chain. It includes front office outsourcing, i.e. customer related services such as contact centre services, so, for a car manufacturing firm, customer relationship is most suitable for outsourcing.

Question 41.
What is e-commerce?
(a) It refers to the use of computer network
(b) It refers to the idea of extracting business intelligence
(c) It refers to the buying and selling of goods and services
(d) Both (a) & (c)
Answer:
(b) Customer Care department account for the bulk of call center activities with 24×7 handling of inbound (customer queries and grievances) and out-bound activities (customer surveys, payment follow up and telemarketing). Thus, option B is the correct answer.

Question 42.
Franchiser helps franchisee on setting up business or not-
(a) Yes
(b) No
(c) Partly yes
(d) Can’t say
Answer:
(a) Franchiser helps a lot in setting up a business Hence, option (a) is correct as the franchiser grants a license to the franchisee to use the franchiser’s diverse intellectual property rights & trade secrets along with his proven name.
Besides franchiser provides marketing support & technology to the franchisee. He virtually sets up the business for a franchisee.

Question 43.
Which amongst the following is the disadvantage of E-commerce?
(a) Lower transaction cost
(b) Difficulty in training and maintenance
(c) Security problems
(d) Both (b) and (c)
Answer:
(d) Following are the disadvantages of E-Commerce:

  • High start-up Cost
  • High Risk
  • Training and Maintenance
  • Fulfillment Problems
  • Lack of Personal Touch
  • Security
  • System & Data Integrity
  • Corporate Vulnerability
  • People’s Resistance

Thus answer is both (b) and (c).

Question 44.
BPO not only gives specialised performance, but also provides _______.
(a) Same Cost
(b) Saving in Cost
(c) Different Cost
(c) None of the above
Answer:
(b) BPO provides following advantages:

  • Cost Saving
  • Flexibility in operations
  • Increase in speed
  • Focus on core areas
  • Availability of skilled manpower
  • Growth

Thus, BPO not only gives specialised performance, but also provides saving in Cost.

Question 45.
_______ refers to the idea of extracting business intelligence from the competitive web pages.
(a) Web farming
(b) Web theft
(c) Web heating
(d) None of these
Answer:
(a) Web farming refers to the idea of extracting business intelligence from the competitors web pages.

Question 46.
Write the expanded form of KPO _______.
(a) Knowledge process outsourcing
(b) Knowledgeable process outsourcing
(c) Knowledge product outsourcing
(d) Knowledge process outlets
Answer:
(a) KPO stands for Knowledge Process Outsourcing, it is the process by which the knowledge gaining process is outsourced to someone else. Hence, option (a) is correct.

Question 47.
Online auction comes under _______.
(a) B2B
(b) B2C
(c) C2B
(d) C2C
Answer:
(d) Online auction is nothing but the auction process done through the use of computer networks. It links the two customers. Hence we can say that online auction comes under C2C.

Question 48.
Customer care department in call centre handles:
(a) Does telemarketing only
(b) Inbound and outbound activities
(c) Inbound activities only
(d) Outbound activities only.
Answer:
(b) Customer Care department account for the bulk of call center activities with 24×7 handling of inbound (customer queries and grievances) and out-bound activities (customer surveys, payment follow up and telemarketing). Thus, option B is the correct answer.

Question 49.
E-Commerce results in _______ Transaction cost & _______ margin.
(a) Higher, lower
(b) Lower, lower
(c) Lower, higher
(d) Higher, higher.
Answer:
(c) E-commerce reduces the cost of business transaction substantially. For instance, the number and cost of customer service representatives in a bank can be reduced by using net banking. An e-commerce firm can earn higher margins as the transaction costs are reduced to a great extent.

Question 50.
Who amongst the following allows to use his trademark and provides assistance in business for a particular amount?
(a) Franchisee
(b) Government
(c) Partnership
(d) Company
Answer:
(a) The Franchisee pays to the franchiser a sum of money (called Royalty) for using his business know-how and trade mark.

Question 51.
BPO that is contracted to a company’s neighbouring (or nearby) country is called ________.
(a) off shore outsourcing
(b) near shore outsourcing
(c) on shore outsourcing
(d) None of the above
Answer:
(b) BPO that is contracted to a company’s neighboring (or nearby) country is called near shore outsourcing.

Question 52.
Full form of E-Commerce is ________.
(a) electric commerce
(b) electricity commerce
(c) electronic commerce
(d) None of the above
Answer:
(c) Full form of E-Commerce is ‘Electronic Commerce’.

Question 53.
Which of the following are example of B 2 C?
(a) Online shopping websites
(b) Heavy key industries
(c) Purchase by a wholesaler from manufacturer
(d) None of the above
Answer:
(a) Online shopping websites are the example of business to consumer transactions i.e. amazon, Flipkart etc.

Question 54.
If a person post an advertisement to sell his product on OLX website, it is an example of _______.
(a) B2C
(b) B2B
(c) C2C
(d) C2B
Answer:
(c) If a person posts an advertisement to sell his product on OLX website this is an example of consumer to consumer i.e. C 2 C.

Question 55.
Selling + customer satisfaction = _______.
(a) Network Marketing
(b) E-Commerce
(c) M Commerce
(d) Marketing
Answer:
(d) Selling + Customer satisfaction = Marketing

Question 56.
Automobile parts are being purchased from ABC company, by placing orders through its website. This is an example of ________.
(a) Viral marketing
(b) Network marketing
(c) BPO
(d) E-Commerce
Answer:
(d) Electronic commerce refers to all form of business transactions which are carried out through electronic processing and transmission of data including test sound and visual images. Hence, Automobile parts are being purchased from ABC company by placing orders through its website is an example of E-commerce.

Question 57.
Which one is odd one out?
(a) KPO
(b) LPO
(c) BPO
(d) ILO
Answer:
(d) Outsourcing is popularly associated with IT enabled services and is also known as Business Process Outsourcing (BPO). KPO and LPO are some of the sub-segments of BPO. Thus, ILO is not a part of BPO.

Question 58.
E-commerce relates to:
(a) Dealing in electronic goods
(b) Using internet facility for selling commodities
(c) Using hand bills devices like mobiles, PDA to conduct commerce
(d) All of the above.
Answer:
(b) E-Commerce refers to the use of computer networks for buying and selling goods, information and services.

Question 59.
In M-commerce, what does word ‘M’ indicates?
(a) Mobile
(b) Mobility
(c) Multilevel
(d) None of the above
Answer:
(a) In M-commerce, ‘M’ indicates ‘Mobile’. It refers to the buying and selling of goods and services through wireless hand held device such as mobile.

Question 60.
Customer Care Services presents which office in BPO:
(a) Front Office
(b) BackOffice
(c) Shore Sourcing
(d) Near Source Outsourcing
Answer:
(a) BPO is typically categorized into back office outsourcing which includes business functions such as human resources and front office outsourcing which includes customer related services such as contact centre services.

Question 61.
Outsourcing may allow an entrepreneurship to:
(a) Avoid the maturity stage in a business
(b) Avoid decline stage in a business
(c) Avoid bankruptcy
(d) Deploy capital and resources in more critical areas.
Answer:
(d) Outsourcing may allow an entrepreneurship to deploy capital & resources in more critical areas as focusing more on one of these driven may help a company create a competitive edge.

Question 62.
A _______ industry is an industry that is experiencing slow or no increase in demand.
(a) Global
(b) Declining
(c) Mature
(d) Emerging.
Answer:
(b) A declining industry is an industry that is experiencing slow or no increase in demand. This often is expected at the beginning or end stage of the product. There may be fall in both sale & profit, but still have opportunities for manufacturer to continue and making profit from their product.

Question 63.
Business Process Outsourcing (BPO) is near shore outsourcing when:
(a) That is contracted is a nearby country
(b) That is contracted outside a company’s country
(c) That is contracted in a specific country
(d) That is contracted in a company in the same country.
Answer:
(a) BPO that is contracted to a company’s neighbouring (or nearby) country is called near shore out sourcing involves the contracting of the operations and responsibility of specific business functions to, the third-party service provider.

Question 64.
E-commerce provides of goods.
(a) Defective delivery
(b) Denial of delivery
(c) Delayed delivery
(d) Quick delivery
Answer:
(d) Advantages of E-Commerce:

  • Global market
  • Lower cost and Higher margin
  • Quick Delivery
  • Saving of Time and Effort
  • 24 x 7 working
  • Quick supply
  • Wider choice
  • Customer convenience
  • Direct contract
  • Launching new product

Question 65.
BPO contracted outside a company’s country is technically called:
(a) Upshore outsourcing
(b) Nearshore outsourcing
(c) Outside outsourcing
(d) Offshore outsourcing
Answer:
(d) BPO that is contracted outside company’s country is called offshore outsourcing.

Question 66.
One of the reasons for India being hotspot for outsourcing is:
(a) Availability of huge skilled manpower with proficiency in English
(b) Because there are many persons of Indian origin abroad in IT sector
(c) Because Indians are friendly people
(d) Because in India there is unity in diversity.
Answer:
(a) India is the hottest spot of the IT outsourcing due to many reasons i.e. supportive government policy, huge skilled manpower, advanced technology, and reliable communication facilities. Thus option (a) is correct.

Question 67.
Outsourcing may allow an entrepreneur to _______.
(a) Avoid bankruptcy
(b) Deploy capital and resources in more critical areas
(c) Avoid the maturity stage in a business
(d) Avoid decline stage in a business
Answer:
(b) Outsourcing is a practice in which an individual or company performs tasks, provides services or manufactures products for another company- functions that could have been or is usually done in-house. Outsourcing is typically used by companies to save cost, smooth working for achieving better results and business expansion by deploying capital and resources in more efficient and critical areas.

Question 68.
Business to consumer commerce includes:
(a) Customers should approach only business to buy
(b) Business approaching only customers to sell
(c) Customers should approach only customers to sell
(d) Shopping for physical goods only
Answer:
(b) Electronic commerce has been classified into 4 parts.
B2B Business to Business
B2C Business to Consumer
C2B Consumer to Business
C2C Consumer to Consumer

Question 69.
Which of the sectors of the economy is likely to have maximum impact on environmental developments?
(a) Retailing
(b) Mining
(c) Banking
(d) Information Technology
Answer:
(d) Information Technology is likely to cause maximum impact on the environmental development.

Question 70.
Mark the incorrect option in relation of franchising:
(a) The franchiser has to provide initial financial assistance and support in the form of staff training, advertising etc.
(b) there is a risk of trade secrets getting leaked out in the foreign market. The leakage may cause serious losses.
(c) There is no impact on franchiser’s business out of franchisee’s activities
(d) There is a danger that the franchisee may start an identical business with slightly different brand name.
Answer:
(c) Statement (c) is incorrect because the franchiser business is also affected by franchisee activities because the trade name is one.

Questions 71.
The benefits of information and communication technology function improve:
(a) Improve business through the cost also increases
(b) Improving business process and reduce.cost
(c) Employees can talk highly of there employers
(d) Employer’s can talk highly of their employers
Answer:
(b) Information and communication technology improves the process of business and also reduces the cost.

Question 72.
In IT Enabled Services, which among the following is one of the largest ‘Job Providers’ in India?
(a) Network Marketing
(b) Business Process Outsourcing
(c) Medical Tourism
(d) Film Industry
Answer:
(b) Outsourcing is popularly associated with IT Enabled Services (ITES) and is also known as Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Legal Procsss Outsourcing (LPO) are the sub-agents of business process outsourcing industry.
BPO is also the iargest ‘Job Providers’ in India.

Question 73.
Which of the following is a great concern for E-commerce?
(a) Speed
(b) Quality
(c) Security Risk
(d) Maintenance Cost
Answer:
(c) E-commerce (Electronic Commerce) refers to all form of business transactions which are carried out through electronic processing and transmission of data including text, sound and visual images. E-commerce includes buying and selling of goods e.g. digital camera, music systems, clothes, accessories so, there is great concern of security risk in E-commerce.

Question 74.
KPO stands for:
(a) Knowledge Produce Outgoing,
(b) Knowledge Process Outsourcing
(c) Known Product Outsourcing
(d) None of these.
Answer:
(b) KPO: Knowledge Process Outsourcing.

Question 75.
E-commerce stands for:
(a) Entrepreneurial Commerce
(b) Enterprise Commerce
(c) Executive Commerce
(d) Electronic Commerce
Answer:
(d) E-commerce: Electronic Commerce

Question 76.
Which statement is True, in relation to franchisee ________.
(a) franchisee doesn’t affect by franchiser
(b) More franchisee locations, less will be the profit
(c) franchisee provide more profit and fame to franchiser
(d) None of these
Answer:
(c) More the franchisee more will be the profit and fame of franchiser.

Question 77.
BPO stands for:
(a) Business Product Outsourcing
(b) Business Privacy Outsourcing
(c) Body of Professional Outsourced
(d) Business Process Outsourcing
Answer:
(d) BPO: Business Process Outsourcing

Question 78.
Franchise is derived from Latin Word “ franci” means:
(a) Friends
(b) Chains
(c) Free
(d) None
Answer:
(c) Franchise is derived from the Latin Word “franc” which mean free.

Question 79.
In which of the following Personal Digital Assistants (PDAs) are used for buying and selling of goods and services?
(a) E-commerce
(b) M-commerce
(c) V-commerce
(d) All of the above
Answer:
(b) M-commerce refers to the buying and selling of goods and services through wireless hand held device such as mobile, Personal Digital Assistants (PDAs), etc Therefore in M-commerce PDAs are used for buying and selling of goods and services.

Question 80.
The online purchase of a book from filpkart com is an example of ________.
(a) B2B e-commerce
(b) B2C e-commerce
(c) C2B e-commerce
(d) C2C e-commerce
Answer:
(b) Online shopping websites are example of business to consumer transactions such as Flipkart, Amazon, Myntra etc. Therefore online purchase of a book from flipkart.com is an example of B2C e-commerce.

Question 81.
For a car manufacturing firm. Which of the following business process is most suitable for outsourcing ________.
(a) Production Management
(b) Quality Assurance
(c) Customer Relationship
(d) None of the above
Answer:
(c) Outsourcing refers to the contracting of the operatings and responsibilities of a specific function (process) to a third party services provider. It is initially associated with manufacturing firms which outsourced large segments to its supply chain. It includes front office outsourcing i.e. customer related services such as contact centre services.

Question 82.
India is the hottest spot of the IT outsourcing because:
(a) Supportive government policy
(b) Huge skilled man power is English
(c) Advanced Technology
(d) All of the above
Answer:
(d) India is the hottest spot of the IT outsourcing. The reasons are that India has supportive government policy, advanced technology, reliable communication facilities, huge skilled man power with proficiency in English language.

Question 83.
Customer has always been the key in:
(a) E-commerce
(b) Non E-commerce
(c) Both ‘A’ and ‘B’ .
(d) None of above.
Answer:
(c) Customer is considered to be a king in both e-commerce as well as non-e-commerce market because it is considered to be a business mantra accentuating the importance of customers in the business. A king does not want to be told what to do same as with customers, it is he who demands, not the other way around.

Question 84.
KPO = BPO + + _______.
(a) Greater Business insight + Experienced workforce
(b) Increased productivity + Experienced workforce
(c) Reduce Cost + Increase productivity
(d) None.
Answer:
(a) BPO = Reduce Cost + Increase Productivity
KPO = Reduce Cost + Increase Productivity + Greater business insight + Experienced Workforce
Hence,
KPO = BOP + Greater Business Insight + Experienced Workforce.

CS Foundation Business Environment and Law Notes

Scales of Business – CS Foundation Business Environment Notes

Scales of Business – CS Foundation Business Environment Notes

Introduction:
1. Scale of business refers to size of the business.

2. “Enterprise means an industrial undertaking or a business concern or any other establishment by whatever name called, engaged in the manufacturing or production of goods, in any manner, pertaining to any industry specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services.”

3. Enterprises can be classified into following forms on basis of size of Industry, choice of the business activity; etc.

Micro Enterprises :

  • It is an enterprise engaged in the manufacturing or production of goods pertaining to any industries specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951 where the investment in plant and machinery does not exceed 25 lakh rupees.
  • In case of enterprises engaged in providing or rendering of services, it is micro where investment in equipment does not exceeds 10 lakh rupees.
  • It is the most frequent form of business in developing countries.
  • It requires small amount of capital for its formation.
  • It is simple to operate.
  • It makes use of local product and skills.
  • It helps in creating jobs as it is labour intensive.
  • It uses micro loans or micro credit for its finance.
  • Owners of micro enterprises are known as entrepreneurs.
  • It is a catalyst for comprehensive community development.

It provides following advantages to the country’s economy :

  • Creates Jobs
  • Enhances income
  • Strengthens the purchasing power
  • Lower cost
  • Adds business convenience
  • Show most promise for sustainable development.

Small Scale Enterprises/Small Scale Industries (SSI)

  • Initially they were classified into those using power with less than 50 employees and those not using power with the employee strength being more than 50 but less than 100.
  • Plays a vital role in generating employment and increasing commercial activities.
  • These are organised on small scale, producing goods with the help of small machines, hired labour and power.
  • It is an enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951, where the investment in plant and machinery is more than 25 lakh rupees but does not exceed 5 crore rupees.
  • In case of the enterprises engaged in providing or rendering of services. It is a small enterprise, where the investment in equipment is more than 10 lakh rupees but does not exceed 2 crore rupees.

They are of two types:

  • Traditional Small Industries
  • Modern Small Industries

Capital source investment on plant and machinery to differentiate from small scale and large scale or medium scale.

Traditional Small Industries:

  1. Highly labour intensive
  2. Cannot provide full time employment to workers
  3. Provides part-time employment to agricultural labour and artisans
  4. Example – Khadi, handloom, handicrafts, village industries etc.
  5. In 1979-80, it provided 56% of total employment and 74% of output.
  6. Handicrafts possess highest labour productivity. It also makes a significant contribution towards foreign exchange earning.

Modern Small Industries:

  1. It makes use of highly sophisticated machinery and equipment.
  2. Example – industries producing rubber products, chemical products, – hardware, electrical items etc.
  3. In 1979 – 80, it provided only 33% of total employment.

It plays following role in Indian economy:
(i) Production: It helps in growth of country’s economy. It contributes almost 40% of the gross industrial value added in the economy.

(ii) Employment generation: After agriculture, it creates the largest employment opportunities for the Indian people.

(iii) Export: It plays a major role in Indian exports. It contributes 45%- 50% to Indian exports. Directly it accounts for nearly 35% of total exports and indirectly around 15%.

(iv) Opportunity: It provides enormous opportunities due to following reasons :

  • Less capital intensive
  • Government support and promotion
  • Manpower training
  • Export promotion
  • Machinery procurement
  • Raw Material procurement
  • Growth in demand in the domestic market
  • Funding & Financing and subsidies
  • Reservation for exclusive manufacturers by S.S.I
  • Tooling & testing support

(v) Increasing export potential for domestic products: It has played a major role in increasing the export potential of various Indian products.

(vi) Welfare: It improves the welfare position of people in following ways:

  • It can be started by people of lower income group
  • Increases the people’s income level and standard of living
  • Reduces poverty
  • Promotes equal income distribution
  • Large proportion of income generated by these enterprises is distributed among workers

Large Scale Enterprises:

  • It means those industries which require huge infrastructure, manpower and have influx of capital assets.
  • It refers to industries with a fixed asset of more than 10 crore or 100 million rupees.
  • Due to the IT Boom IT companies are also included in large scale industry.
  • It uses both indigenous and imported technologies.
  • They cater both the local and foreign markets.
  • Example : iron and steel industry, textile industry, telecom industry, natural gas, mining, IT company etc.

Public Enterprises:

  • it refers to business organisation owned, managed and controlled by local, central or state government. Whole or most of the investment is made by government itself.
  • “Public enterprises are autonomous or semi autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial undertakings.”
  • It is not only managed by government it’s also controlled by them.
  • It is also known as Public Sector Enterprises.
  • Example : HMT – Hindustan Machine Tools GAIL – Gas Authority of India, etc.

These were required due to following reasons :

  • Private sector do not take interests in areas where –
  • gestation period is long
  • heavy investment is required
  • profit margin is low
  • Private sector prefer to set up their business in areas having certain natural advantages, thus leading to regional imbalances.

They possess the following characteristics:

  • Government control: They are owned, controlled, managed and financed by State or Central government.
  • Useful to various sectors: It serves people of ail sections of the community.
  • Autonomous or semi – autonomous organisation: They may either be under the direct control of government or established under any statute or act.
  • Providing service: It provides the people with essential commodities at most reasonable prices.
  • Monopoly enterprises: It does not involve private participation, thus enjoy monopoly in its operations.
  • Public accountability: They are liable to general public for their activities.
  • Direct channel for use of foreign money.
  • Agent for implementing government plans.
  • Financial independence.

Following forms are prevalent in India for public enterprises:
(i) Departmental Undertaking: These are directly managed by different government departments. It is established for providing essential public utility services.
Example : Posts and Telegraph, Railways etc.

(ii) Government Company: These are companies registered as joint stock under Indian Companies Act, 2013. It refers to company in which 51% or companies under more of paid -up capital is held by Central or State Government.
Example : Hindustan Machine Tools Ltd (HMT), Bharat Electronics Ltd. etc.

(iii) Statutory/Public Corporation: These organisations are established under special act passed by Parliament or State Legislature.
Example : Life Insurance Corporation of India (LIC), Union Trust of India (UTI).etc.
a. In 1947, there were 3 departmental enterprises :

  • Railways
  • Post and telegraphs
  • Defense production

b. Foundation of strong public enterprises in Indian economy was laid by our first Prime Minister Jawahar Lai Nehru. Other renowned personalities associated with this are :

  • Josip Broz Tito
  • Abdel Gamal Nasser

c. Presently number fo PSU’s have increased to 300 enterprises with a total investment of about 130 billion euros.

d. PSU’s account for nearly 20% of India’s gross national product (GNP). PSE’s contribute nearly 4% of total national savings.

e. Presently, PSE’s employs 1.9 million persons as compared to private sector which employs about 0.9 million persons only.

f. It provides a low rate of return on capital invested.

g. Government’s industrial policy was announced on 24th July, 1991. Following central PSEs were identified by Government as ‘Navratnas’ in July, 1997 :

  • BHEL – Bharat Heavy Electronics Limited
  • BPCL – Bharat Petroleum Corporation Limited
  • GAIL – Gas Authority of India Limited
  • SAIL – Steel Authority of India Limited
  • MTNL – Mahanagar Telecom Nigam Limited
  • ONGC – Oil and Natural Gas Corporation .
  • HPCL – Hindustan Petroleum Corporation Limited
  • IOC – Indian Oil Corporation
  • NTPC – National Thermal Power Corporation

h. In October, 1997 some other PSE’s were included in Navratnas, thus giving them as ‘Miniratnas’

i. BIFR : Board for Industrial and Financial Reconstruction is set up by government for the revival of sick and loss making enterprise.

j. In 2010, the government established the higher Maharatna category, which raises a company’s investment ceiling from ₹ 1,000 crore to ₹ 5,000 crore. The Maharatna firms can now decided on investments of up to 15 per cent of their net worth in a project while the Navaratna companies could invest up to ₹ 1,000 crore without explicit government approval. Two categories of “Miniratnas” afford less extensive financial autonomy.

Guidelines for awarding ratna status are as follow:

Maharatna Navaratna Miniratna Category-1 Miniratna Category-ll
Eligibility

 

Three years with an average annual net profit of over ₹ 5,000 crore,
or
Average annual Net worth of ₹ 15,000 crore for 3 years. or Average annual Turnover of ₹ 25,000 crore for 3 years ₹ 1,000 crore ₹ 5,000 crore,
or
free to decide on investments up to 5% of their net worth in a project
A score of 60 (out of 100), based on six parameters which include net profit, net worth, total manpower cost, total cost of production, cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes), capital employed, etc., and A company must first be a Miniratna and have 4 independent directors on its board before it can be made a Navaratna. Have made profits continuously for the last three years or earned a net profit of ₹ 30 crore or more in one of the three years. Have made profits continuously for the last three years and should have a positive net worth.
Benefits for investment ₹ 1,000 crore ₹ 5,000 crore, or free to decide on investments up to 5% of their net worth in a project up to ₹ 1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year (not exceeding ₹ 1,000 crore). up to ₹ 500 crore or equal to their net worth, whichever is lower. up to ₹ 300 crore or up to 50% of their net worth, whichever is lower.

As on October, 2019 there are 10 Maharatnas, 14 Navaratas and Miniratnas in category 1 category 2

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Performance of Industry : 12th five year plan (2012-17) following schemes are:

  • National Automotive Testing and R&D Infrastructure Project (NATRIP).
  • Restructuring of PSEs under DHL
  • Jagdishpur; UP Paper Mill Project of Hindustan Paper Corporation Lmt. (H.P.C.)
  • Scheme for enhancement of competitiveness in Capital Goods Industry.
  • Schemes for North Eastern Region (HPC; NPPC; CCI & AXCL).

Multinational Corporation (MNC’s/Multinational Enterprise (MNE)

  • It refers to a corporation/enterprise which manages its production / delivers services in more than one country.
  • “MNC is a corporation that has its management headquarters in one country called home countries, and operates in several other countries, called host countries.”
  • These are large sized enterprises.
  • There world wide activities are centrally controlled by its parent company.
  • Example: MC Donalds, Honda, Toyota etc.
  • U.S.A. among the biggest MNCs country.

MNC’s can functions in three ways:

  • Headquarters is located in one nation while production facilities are located in one or more countries.
  • Parent company is situated in one nation while other operating subsidiaries in other countries
  • Headquarters is located in one country which looks after the wide conglomeration which stretch to several countries.

Reasons for growth of MNC’s can be as follows

  • Avoid trade barriers.
  • Low labour costs.
  • Reduce transport and distribution costs.
  • Securing supplies of raw material.

Following are the reasons why company extend into different country:

  • Reduce the transportation/distribution cost
  • Avoid custom duty/licensing
  • Meet different rules and regulation
  • Cost advantage- for example law labour cost
  • Secures supplies of raw material in market
  • Economic growth and Employment

Economy of any country receives following advantages from MNC:

  • Provides employment to people of host countries, thereby enabling economic growth.
    Generates new ideas and new technology which helps in improving the production quality, thereby improving the quality of human capital.
  • Provides the host country with availability of high quality goods and services at reasonable prices.
  • It contributes large amount to the government treasury of host country in form of huge taxes.
  • It invests in the infrastructure of host countries.

Advantages of MNC’s:

To Host Countries To Home Countries
  1. Raising the Investment Rate
  2. Accelerates Economic Growth
  3. Increases Exports and Reduces Imports
  4. Efficient Resource Utilisation.
  5. Support to enterprises of host countries
  6. Facilitates transfer of technology.
  7. Provides services of skilled professionals
  8. Benefits of Research & Development
  9. Increasing competition thus finishing monopolies
  1. Increased foreign exchange inflow
  2. International co-operation
  3. Promotion of Bilateral Trade Relations
  4. Optimum Resource Utilisatior

Disadvantages of MNC’s:

  • Provides costly, outdated and obsolete technologies
  • Charges heavy fees for their services.
  • Reckless utilisation of resources, leading to extinction of non – renewable resources.
  • Creates monopolies by acquiring control over markets of host countries.
  • Adverse effects on life style/culture of people.
  • They may avoid taxes by the way of transfer pricing.
  • Profit maximization being their main objective, harms the national interest of host country.
  • Interference in the economic and political systems of economy.
  • Causes brain drain in the developing countries
  • Develop monopolies which effect local market.

Multiple Choice Questions

Question 1.
Micro enterprises are the enterprises providing services, and where the investment in equipment exceeds 10 lakh rupees.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(b) False

Question 2.
Scale of business involves determination of:
(a) Capital Requirement
(b) Business size
(c) Business production
(d) All of the above
Answer:
(d) All of the above

Question 3.
Micro enterprises are:
(a) Labor intensive
(b) Capital intensive
(c) Machine intensive
(d) Both (b) and (C)
Answer:
(a) Labor intensive

Question 4.
Traditional small industries provide:
(a) Full time employment
(b) Part time employment
(c) No employment
(d) All of the above
Answer:
(b) Part time employment

Question 5.
Handloom is an example of:
(a) Small scale enterprise
(b) Modern small scale enterprise
(c) Micro enterprise
(d) Traditional small scale enterprise
Answer:
(d) Traditional small scale enterprise

Question 6.
The agreement entered into by two countries in order to facilitate trade and removing restrictions is called _______.
(a) Liberal agreement
(b) Mutual agreement
(c) Co-operative agreement
(d) Bateral agreement
Answer:
(d) Bateral agreement

Question 7.
For the goods having artistic features _______ enterprise is preferred.
(a) Large scale
(b) Small stale
(c) Micro
(d) Very large scale
Answer:
(b) Small stale

Question 8.
Large scale business provides _______ economies.
(a) Internal
(b) External
(c) Both internal and external
(d) None of the above
Answer:
(c) Both internal and external

Question 9.
“Public corporations are autonomous or semi- autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial undertaking.”
This definition is given by:
(a) N.N. Malaya
(b) A.H. Hansom
(c) O.L. Rehan
(d) LV. Starke
Answer:
(a) N.N. Malaya

Question 10.
Public accountability and Government control are features of which type of enterprise:
(a) Micro
(b) MNC
(c) Large scale
(d) None of these
Answer:
(d) None of these

Question 11.
Which of the following is not a type of public sector enterprise?
(a) Departmental undertaking
(b) Statutory corporation
(c) Subsidiary of public enterprise
(d) Government company
Answer:
(c) Subsidiary of public enterprise

Question 12.
The advantages of MNC’s to the Home country include.
(a) Inflow of foreign exchange
(b) Promoting bilateral trade relations
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

Question 13.
Foundation of public enterprises in India was laid down by:
(a) Indira Gandhi
(b) Jawaha, Lai Nehru
(c) Dr. Rajendra Prasad
(d) S. Radha Krishnan
Answer:
(b) Jawaha, Lai Nehru

Question 14.
PSLI’s account for _______ of India’s GNP.
(a) 10%
(b) 20%
(c) 30%
(d) 40%
Answer:
(b) 20%

Question 15.
Government’s Industrial Policy was announced on _______.
(a) 24th July, 1990
(b) 24th July, 1997
(c) 24th July, 1991
(d) None of these
Answer:
(c) 24th July, 1991

Question 16.
Which of the following is not a ‘Navratna’?
(a) GAIL
(b) NTPC
(c) LIC
(d) BHEL
Answer:
(c) LIC

Question 17.
BIFR Means:
(a) Board for Indian financial Reserves
(b) Board for Industrial and Financial Resources
(c) Board for Industrial and Financial Reconstruction
(d) Board for International Fund Reserves
Answer:
(c) Board for Industrial and Financial Reconstruction

Question 18.
Following is/are the main characteristics of MNC’s :
(a) Large size
(b) World wide activities centrally controlled by parent Company.
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 19.
Which of the following is not a reason for MNC’s growth :
(a) Avoid trade barriers
(b) Increased labour cost
(c) Reduced transport cost
(d) None of the above
Answer:
(b) Increased labour cost

Question 20.
Advantages of MNC’s include:
(a) Employment Generation
(b) Economic Growth
(c) Efficient Resource Utilisation
(d) All of the above
Answer:
(d) All of the above

Question 21.
Basis for classification of Industries are _______.
(a) Size of Industry
(b) Nature of Business
(c) Choice of Business
(d) Both (a) & (b).
Answer:
(d) Both (a) & (b).

Question 22.
Population engaged in Micro enterprises produces non-monetary wealth for ________.
(a) Advertising
(b) Serving society
(c) Self consumption
(d) Sale.
Answer:
(c) Self consumption

Question 23.
Source of finance for Micro sector are-
(a) Micro loan
(b) Financial institution
(c) Formal source
(d) Informal source.
Answer:
(a) Micro loan

Question 24.
Capital requirement for Micro Enterprise should be (Service Producing) ________.
(a) Equipment not exceeding 10 lakh.
(b) Equipment not exceeding 12 lakh.
(c) Equipment not exceeding 25 lakh.
(d) Equipment not exceeding 01 lakh.
Answer:
(a) Equipment not exceeding 10 lakh.

Question 25.
Micro enterprise are intensive therefore create _______.
(a) Capital, profit
(b) Labour, job
(c) Technological, capital
(d) Capital, job.
Answer:
(b) Labour, job

Question 26.
Initially, Small scale Industry were classified on basis of ________.
(a) Number of employees
(b) Amount of capital
(c) Profit generating ability
(d) Power of production.
Answer:
(a) Number of employees

Question 27.
Small Scale Industries are classified into ________.
(a) Traditional, Modern
(b) Traditional, Ancient
(c) Modern, Ancient
(d) None of above:
Answer:
(a) Traditional, Modern

Question 28.
S.S.I contributes ________ of the gross industrial value added in the Indian economy.
(a) 80%
(b) 20%
(c) 90%
(d) 40%.
Answer:
(d) 40%.

Question 29.
Which of these is not an opportunity for SSI ________.
(a) Less Capital Requirement
(b) Finance & Subsidies
(c) Export Promotion
(d) State Control.
Answer:
(d) State Control.

Question 30.
Increasing export potential for Indian products enabled our country to achieve _______.
(a) Fashion Technology
(b) Information Technology
(c) Design Technology
(d) All the above.
Answer:
(d) All the above.

Question 31.
Which of the following is not the role of SSI in Indian Economy
(a) Employment Generation
(b) Export Barrier
(c) Tooling & Testing Support
(d) Improved Welfare Position.
Answer:
(c) Tooling & Testing Support

Question 32.
Large Scale Industry comprises of ________.
(a) Sophisticated Products
(b) Engineering Product
(c) Iron & Steel Industry
(d) All of the above.
Answer:
(c) Iron & Steel Industry

Question 33.
The public sector enterprises are owned by ________.
(a) Government
(b) Individual
(c) Society
(d) Public.
Answer:
(a) Government

Question 34.
Most of the investment done in PSE are by ________.
(a) Individual
(b) Private Body
(c) Government
(d) Non-Profit-organisation.
Answer:
(c) Government

Question 35.
The enterprises which are under monopoly of state enterprises are ________.
(a) Railway
(b) Post & telegraph
(c) Energy Production
(d) All of above.
Answer:
(d) All of above.

Question 36.
Characteristic of public enterprise to be responsible for nation denotes ________.
(a) Public Accountability
(b) Government Accountability
(c) Owner Accountability
(d) Ethics Accountability.
Answer:
(a) Public Accountability

Question 37.
Arranging day to day finance is the characteristic of ________.
(a) Private enterprise
(b) Public enterprise
(c) MNC
(d) Small scale industries.
Answer:
(b) Public enterprise

Question 38.
Statutory corporation is not created by Act of Government ________.
(a) False
(b) Partly True
(c) True
(d) Both
Answer:
(a) False

Question 39.
Government company refer to the company in which 51 % of ________ is held by the Government?
(a) Control
(b) Paid up capital
(c) Called up capital
(d) Unpaid capital
Answer:
(b) Paid up capital

Question 40.
Departmental enterprises comprises of ________.
(a) Railway, Telegraph, Defence
(b) Telecom, Railway, Defence
(c) Transport, Railway, Defence
(d) Network, Transport, Railway.
Answer:
(a) Railway, Telegraph, Defence

Question 41.
Person responsible for the collection of taxes on behalf of the Government are ________.
(a) Cashier
(b) Exchequer
(c) Manager
(d) Controller.
Answer:
(b) Exchequer

Question 42.
Which of them is a Navrafna’s of Government?
(a) IOD
(b) LOC
(c) IOC
(d) BOC
Answer:
(c) IOC

Question 43.
Which of them is not among the Navratna’s?
(a) HMT&LIC
(b) BHEL&GAIL
(c) MTNL&BPCC
(d) SAIL & ONGC.
Answer:
(a) HMT&LIC

Question 44.
LDC, stand for ________.
(a) Local development country .
(b) Less developments company
(c) Lack of developed company
(d) Less developed country.
Answer:
(d) Less developed country.

Question 45.
Which of them is not a merit of MNCs ________.
(a) Optimum utilization of resources
(b) Charge heavy fees
(c) Break monopolies
(d) Transfer of technologies.
Answer:
(b) Charge heavy fees

Question 46.
MNCs have their head quarters in more than ________ country/countries
(a) 1
(b) 2
(c) 4
(d) 6
Answer:
(a) 1

Question 47.
An enterprise engaged in production is a micro enterprise if the investment in Plant & Machinery does not exceed _______.
(a) 25 lakhs
(b) 1 Crore
(c) 50 lakhs
(d) None of the above
Answer:
(a) 25 lakhs

Question 48.
In India, a large scale enterprise refers to an enterprise in which investment in fixed assets is more than _______.
(a) 100 million
(b) 500 million
(c) 250 million
(d) 1000 million
Answer:
(a) 100 million

Question 49.
How many PSU’s are currently operating in India?
(a) 247
(b) 300
(c) 259
(d) 350
Answer:
(b) 300

Question 50.
How many companies in India are included in Miniratnas?
(a) 73
(b) 60
(c) 100
(d) 110
Answer:
(a) 73

Question 51.
Which of the following is not an advantage of MNC’s ________.
(a) It helps in generating tax revenues for the host
(b) It helps in generating employment opportunities
(c) Providing high quality goods
(d) Helps in development of backward areas
Answer:
(d) Helps in development of backward areas

Question 52.
BHEL, HPCL, NTPC, ONGC, SAIL are the examples of ________.
(a) Navratnas
(b) Miniratnas
(c) Swarnratnas
(d) Kohinoors
Answer:
(a) Navratnas

Question 53.
The contribution of PSU’s in the total national savings is ________.
(a) 4%
(b) 6%
(c) 1%
(d) 5%
Answer:
(a) 4%

Question 54.
The number of people currently employed in PSU’s in India are around _______.
(a) 1.9 million
(b) 3 million
(c) 4.8 million
(d) 5 million
Answer:
(a) 1.9 million

Question 55.
Which of the following statements is not true in respect of PSU’s?
(a) It has played a significant role in the Indian Economy
(b) The rate of return is high
(c) The total saving rate in PSU’s is nearly 35%
(d) The overall performance of most of the PSU’s is not satisfactory
Answer:
(b) The rate of return is high

Question 56.
Which of the following statement is true?
(a) The traditional small scale industries are labour intensive
(b) Modern small scale industries use highly sophisticated machinery and equipments
(c) Neither (a) nor (b)
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

Question 57.
A corporate body created by Parliament or state legislature by a special Act defining its powers i.e. functions etc. is called ________.
(a) Departmental undertaking
(b) Government company
(c) Statutory corporation
(d) Public company
Answer:
(c) Statutory corporation

Question 58.
An organisation established for providing essential services like railway, postal services, broadcasting etc. is called _______.
(a) Statutory Corporation
(b) Departmental undertaking
(c) Public Company
(d) Government company
Answer:
(b) Departmental undertaking

Question 59.
A government company refers to a company in which _______ is held by the central or state government
(a) 51 % of authorised capital
(b) 51% of Subscribed capital
(c) 51% of nominal capital
(d) 51 % of the paid up capital
Answer:
(d) 51 % of the paid up capital

Question 60.
Life Insurance Corporation, State Trading Corporation etc. are the examples of ________.
(a) Statutory corporation
(b) Government company
(c) Departmental undertaking
(d) Public company
Answer:
(a) Statutory corporation

Question 61.
ONGC, BHEL, Hindustan Machine Tools Limited etc are the examples of ________.
(a) Statutory corporation
(b) Government company
(c) Departmental undertaking
(d) None of the above
Answer:
(b) Government company

Question 62.
The country in which the headquarters of MNC are located is called ________.
(a) Host country
(b) Home country
(c) Principle country
(d) None of the above
Answer:
(b) Home country

Question 63.
The foreign country in which the MNC operates its business is called as ________.
(a) Host Country
(b) Home Country
(c) Foreign country
(d) None of the above
Answer:
(a) Host Country

Question 64.
Bringing credits savings and other essential services to the poor is called ________.
(a) Poor Finance
(b) Micro Credit
(c) Micro Finance
(d) Both (b) & (c)
Answer:
(d) Both (b) & (c)

Question 65.
Which one of the following is true about micro enterprises?
(a) Labour intensive
(b) Capital intensive
(c) Technology intensive
(d) None of the above
Answer:
(a) Micro enterprises refers to enterprises where the investment in plant and machinery does not exceed 25 lakh rupees. These enterprises require small amount of capital for its formation. Moreover, it helps in creating jobs as it is labour-intensive.

Question 66.
Which one of the following is a key in the firm’s growth phase?
(a) Increase in scale
(b) Increase in profit
(c) Increase in capital
(d) All of the above
Answer:
(d) Increase in firms scale, capital and profit all will result in firms growth. Increase in scale refers to the increase in production. Increase in capital also means firms factors of production. Moreover, increase in firm’s profits will result an increase in firms overall growth.

Question 67.
In which year was the new economic policy ushered that gave a new direction to Indian economy?
(a) 1993
(b) 1989
(c) 1991
(d) 1985
Answer:
(c) To improve the performance of the public enterprise, Government of India has taken several measures. On 24th July, 1991 the Government of India announced its industrial policy to improve the j performance and portfolio of public sector enterprises.

Question 68.
Which of the following is not true about the purpose of a business?
(a) Earning profit
(b) Supply of goods and services
(c) Creating job opportunities
(d) Performing sovereign functions
Answer:
(d) Business is an organisation in which organised production and exchange of goods and services are undertaken with a view to earn profits. It can also be referred as process of organising all the steps that are required to be undertaken for establishment of relationship between men, material and machinery in order to carry on business efficiently.

Thus, business is carried on for the purpose of:

  • Earning profit
  • Supplying goods and services
  • Creating job opportunities

Question 69.
The definition of Micro, Small and Medium Enterprises (MSMEs) in India is based on:
(a) Total sales of the unit
(b) Investment in machines and equipments
(c) Market coverage
(d) Export turnover
Answer:
(b) The definition of Micro, Small and medium enterprise in India is based on investment in machines and equipments. Under Micro Enterprise Investment in Plant and machinery does not exceed 25 Lakh rupees while Investment in equipment does not exceed 10 Lakh rupees. In small enterprises investment in P&M is more than 25 Lakh while Investment in equipment does not exceeds 2 crore.

Question 70.
The abbreviation ‘BIFR’ with reference to sick companies in India means:
(a) Board for Indian Financial Reserves
(b) Board for Industrial and Financial Resources
(c) Board for Industrial and Financial Reconstruction
(d) Board for International Fund Reserves
Answer:
(c) The government has taken every step to revive and restructure the public sector enterprises to improve their performance, productivity and profitability for sick companies in India, the enterprises are referred to Board for Industrial and Financial Reconstruction to prepare appropriate revival or rehabilitation package.

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Question 71.
Which one of the following is a push factor influencing the internationalisation of a company?
(a) Difficulty in finding skilled staff in the home country
(b) The need to be close to key resources
(c) Low-cost labour in other countries
(d) Financial incentives from governments in emerging markets.
Answer:
The following are some reasons to expand into different countries:

  • Reduce transport and distribution cost.
  • Avoid trade barriers.
  • Meet different rules and regulations.
  • Secure supplies of raw material or market.
  • Cost advantage-e.g. low labour cost.

Thus low labour cost in other countries is one of the push factor influencing the inter nationalisation of a company.

Question 72.
Foundation of public enterprises in India was laid down by:
(a) Indira Gandhi
(b) Jawaharlal Nehru
(c) Dr. Rajendra Prasad
(d) Dr. S. Radhakrishnan
Answer:
(b) The foundation of the strong public enterprises, particularly the goods producing section in the Indian economy was firmly laid by our Prime Minister Jawahar Lai Nehru who was also inspired and supported by the Josip Aiigned movement.

Question 73.
Transfer pricing litigations are generally related to _______.
(a) Domestic Companies
(b) Multinational Companies
(c) Public Enterprises
(d) Statutory Authority.
Answer:
(b) Multinational Companies have various disadvantages associated with it one of which is – Transfer pricing enables MNC’s to avoid taxes by manipulating prices in the case of intra-company transactions. Thus, Transfer pricing litigations are generally related to Multinational Companies.

Question 74.
Coca-Cola is an example of:
(a) MNC
(b) Indian Company
(c) Foreign Company
(d) None of these
Answer:
(a) Coca Cola is an example of MNC. MNC refers to a corporation / enterprise which manages its production / delivers services in more than one country.

Question 75.
________ is responsible for revival of Public Sector Enterprises.
(a) NTPC
(b) NCLT
(c) BRPSE
(d) MNC
Answer:
(c) BRPSE : Boards for reconstruction of Public Sector Enterprises. Established in December, 2004 as advisory body to advise the Government on the strategies, measures and schemes related to strengthening, modernizing, reviving and restructuring of public sector enterprises.

Question 76.
Microsoft is a:
(a) Indian Government Company
(b) Multinational Company
(c) Statutory Corporation
(d) Public Limited Company
Answer:
(b) Multinational Corporation is a corporation that manages production or delivers services in more than one country. Microsoft is also a Multinational Company.

Question 77.
Advantages of multinationals to home countries are _______.
(a) Ensure optimum utilisation of resources
(b) Promote bilateral trade relations
(c) Promote global Co-operations
(d) All of the above
Answer:
(d) Advantages of Multinational to home countries are:

  • Facilitate Inflow of Foreign Exchange
  • Promote Global Co-operations
  • Ensure Optimum Utilization of Resources
  • Promote Bilateral Trade Relations

Question 78.
For the goods having artistic features size of enterprise is preferred.
(a) Small scale
(b) Large scale
(c) Corporation
(d) Very large
Answer:
(a) Traditional as small scale industries includes goods having artistic features like Khadi handloom, village industries handicrafts, sericulture, coin etc.

Question 79.
Which is not a criterion for defining small business?
(a) Usually employs fewer people
(b) Is Geographically localised
(c) Is considered smaller in relation to competitors
(d) Financed by a large number of investors.
Answer:
(d) An Industrial unit can be categorised as a small scale unit if it fulfills the capital investment limit fixed by the Government of India for small scale sector. The investment in plant & machinery is more than 25 lakhs but does not exceeds 5 crores and the number or investors ar-e limited.

Question 80.
Push factors for locating a business includes:
(a) Availability of skilled labour
(b) Rising competition in an area
(c) Government support
(d) Technological advancement
Answer:
(a) Push factors for locating a business includes availability of skilled labour, availability of raw materials etc.

Question 81.
The size and structure of business depends on many factors which (are):
(a) Arbitrary and random
(b) In the control of enterprises
(c) Range from internal to external factors which are beyond the control of enterprises
(d) Beyond the control of enterprises
Answer:
(c) The size and the structure of business depends on many factors which range from internal to external factors which are beyond the control of the enterprises.

Question 82.
Which of the government agency look after the industrial sick unit?
(a) BRPSE
(b) BIFR
(c) IDBI
(d) All are applicable
Answer:
(b) BIFR looks after Industrial sick units. The government has taken every step to revive and restructure the public sector enterprises to improve their performance, productivity and profitability for sick companies in India. The enterprises are referred, to Board for Industrial and financial reconstruction (BIFR) to prepare revival or rehabilitation package.

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National, Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Question 83.
MNCs have their head quarters in more than countries/country.
(a) 6
(b) 2
(c) 4
(d) None of these
Answer:
(d) Multi National Corporation (MNC) or Multi National Enterprise (MNE) is a corporation enterprise which has its headquarters in one country and manages production or delivers services in more than one country.

Question 84.
What is the full form of SSI?
(a) Small scale industries
(b) Small scale enterprises
(c) Large scale enterprises
(d) Public enterprises
Answer:
(a) Full form of SSI is Small Scale Industries.

Question 85.
A public sector enterprise is suitable for:
(a) Fierce competitive projects
(b) High capital intensive projects
(c) Low capital intensive projects
(d) Low technology intensive projects
Answer:
(b) Public sector enterprise is suitable for high capital intensive projects as it denotes “state ownership and operation of industrial, agricultural, financial and commercial undertakings”. It is thus liable to the general public for their performances. It helps to reduce regional imbalances altogether.

Question 86.
Handicraft industry is a:
(a) Heavy capital intensive industry
(b) Medium/small scale industry
(c) Technical industry
(d) Macro industry.
Answer:
(b) Handicraft industry is a medium/small scale industry which are organised on a small scale and produce goods with the help of small machines, hired labour and power. Traditionally these industries are highly labour-intensive.

Question 87.
A Multinational Corporation (MNC) operates in:
(a) More than 1 country
(b) More than 5 countries
(c) More than 10 countries
(d) More than 2 countries.
Answer:
(a) A multinational corporation or multinational enterprise is a corporation that manages its production or delivers its services in more than one country.

Question 88.
A Multinational Corporation (MNC) operates in:
(a) More than 2 countries
(b) More than 10 countries
(c) More than one country
(d) More than 5 countries
Answer:
(c) Multinational Corporation refers to a corporation which manages its production/delivers services in more than one country. It has its management quarters in one country called home country and operates in several countries called host countries.

Question 89.
A(n) ________ is a group of firms producing a similar product or service, such as soft drinks, electronic games or computers.
(a) Cluster
(b) Division
(c) Sector
(d) Industry
Answer:
(d) In modern economies, there are dozens of industry classifications, which are typically grouped into larger categories called sectors, with individual companies being classified into an industry based on their largest sources of revenue. Thus, an industry is the group of firms producing a similar products and services.

Question 90.
Modern small-scale units are:
(a) Labour intensive
(b) Material intensive
(c) Technology intensive
(d) Capital intensive
Answer:
(c) Small scale enterprises are organized on the small scale, producing goods with the help of small machines, hired labour and power but in the modern small scale units, it makes the use of highly ‘ sophisticated machinery and equipment.
Example: Industries producing rubber products, chemical products etc.

Question 91.
The process under which profits go back to the head quarters of the MNC, rather than staying in the host country is called:
(a) Remittance of profits
(b) Transferring of profits
(c) Sending of profits
(d) Repatriation of profits
Answer:
(d) The word Repatriation means return of money back to ones’ own country. The process of sending profits back is called Repatriation of profit.

Question 92.
The definition of Micro-Small and Medium Enterprises (MSMEs) in India is based on:
(a) Total sales of the unit
(b) Investment in machines and equipments
(c) Market coverage
(d) Export turnover
Answer:
(b) Definition of Micro-small and medium enterprises based on ‘Investment in plant and machinery and its equipment’ in India.

In Micro enterprises, investment does not exceed 25 lakh rupees. In case of small enterprises, investment is more than 25 lakh rupees but not exceed five crore rupees. In medium enterprises, investment is more than 5 crores rupees but not more than 10 crore rupees.

Question 93.
Which of the following is a Push Factor influencing the internationalisation of a company?
(a) Difficulty in finding skilled staff in the home country
(b) The need to be close to key resources
(c) Low cost Labour in other countries
(d) Financial incentives from governments in emerging markets.
Answer:
(c) Factors influencing the internationalisation of a company:

  • Reduce transportation costs and distribution costs
  • Avoid trade barriers
  • Meet different rules and regulations
  • Secure supplies of raw materials / markets
  • Cost advantages – i.e Law Labour costs
  • Economic growth and employment
  • Advantages of MNCs Hence, Option (C) is Correct.

Question 94.
Foundation of public enterprises in India was laid down by:
(a) Indra Gandhi
(b) Jawaharlal Nehru
(c) Dr. Rajendra Prasad
(d) Dr. S. Radhakrishnan.
Answer:
(b) The foundation of public enterprises particularly the goods producing sectors in Indian economy was firm laid down by our first prime minister Jawahar Lai Nehru who was also inspired and supported by Josip Broz Tito and Abdul Qamal Nasser.

Question 95.
Which one of the following is true about Investment Cost per Job?
(a) Investment costs per Job are high in large and medium industries.
(b) Investment costs per job are high in small industries.
(c) Investment costs per job are high in micro enterprises.
(d) Investment costs per job are higher in micro enterprises than small scale enterprises.
Answer:
(a) Investment Costs per job are low in Micro enterprises but high in large and medium enterprises.

Question 96.
Full form of MNC _______.
(a) Mega Nurturing Corporates
(b) Mega National Corporations
(c) Multinational Corporations
(d) None of these
Answer:
(c) MNC: Multinational Corporations.

Question 97.
NCLT given a delay period for filing _______.
(a) of 10 days
(b) of 100 days
(c) of 900 days
(d) of 90 days
Answer:
(d) NCLT given a delay period for filing of 90 days

Question 98.
BRPSE stands for:
(a) Board of Reconstruct Private Sector Enterprises
(b) Board for Reconstruction Public Sector Enterprises
(c) Board for Remuneration Partition and Serve Enterprises
(d) None of these
Answer:
(b) BRPSE: Board for Reconstruction Public Sector Enterprises.

Question 99.
Transfer pricing litigations are generally related to:
(a) Domestic Companies
(b) Multinational Companies
(c) Public Enterprises
(d) Statutory Authority
Answer:
(b) Multinational companies have various disadvantages associated with it, one of which is that transfer pricing enables it to avoid taxes by manipulating prices in case of intra-company transactions. Thus, transfer pricing litigations are generally related to multinational companies.

Question 100.
Trade between Home country to foreign country?
(a) Multinational country
(b) International
(c) Bilateral country
(d) None
Answer:
(a) Multinational corporations (MNCs) are key agents transforming the international political and economic landscape. Because they are highly visible organisations with great power and mobility, they inspire both awe and fear.

Question 101.
The capital market intermediaries act as a link between?
(a) Investors and issuers
(b) Investors and regulators
(c) Regulators and issuers
(d) Regulators, investors, issuers
Answer:
(d) In the context of capital market, capital market intermediaries are an important constituents of overall governance framework. Being an important link between regulators, investors and issuers, therefore expected to ensure that their internal control are so efficient that ensure effective investor service at all times.

Question 102.
Maharatna involves _______.
(a) NTPC
(b) ONGC
(c) SAIL
(d) All of the above
Answer:
(d) Maharatna involves 7 companies are:

  • NTPC
  • ONGS
  • SAIL
  • BHEL
  • IOCL
  • CIL
  • GAIL

Question 103.
Which of the following are included in traditional small industries.
(a) Khadi and Handloom
(b) Sericulture
(c) Both ‘A’ and ‘B’
(d) None
Answer:
(c) Traditional small industries involved Khadi and Handloom and sericulture as they are more labour intensive.

CS Foundation Business Environment and Law Notes

Forms of Business Organization – CS Foundation Business Environment Notes

Forms of Business Organization – CS Foundation Business Environment Notes

Introduction :
1. Business organisations are also known as Business undertaking, enterprises, firms or concerns.

2. Business is an organisation in which organised production and exchange of goods and services are undertaken with a view to earn profits.

3. All business activities fall under 3 categories :

  • Industry
  • Trade
  • Commerce.

4. Business organisation also referred as process of organizing all the steps that are required to be undertaken for establishment of relationship between men, material and machinery in order to carry on business efficiently.

5. Selection of right form of business organisation is responsible for the success of any enterprise.

6. Every organization possess the following characteristics :

  • Distinct Ownership: Business firm can be owned by an individual or group of individuals jointly.
  • Separate Status and Management: Every firm is a separate and an independent entity. So, any other firm cannot be accounted for it’s functioning.
  • Continuity in operations: Operations of every firm are carried on a continuous basis.
  • Lawful business: Business firms must carry on lawful business activities.
  • Dealing in goods and services: Every firm is engaged either in production or distribution (or both) of goods and services.
  • Risk involvement: Every business involves risk and uncertainty due to uncertain future decisions.

Characteristics of Ideal Business Organisation – Before selecting any form of business organisation, one must consider the following factors:

  • Easy Formation: Its formation must not involve much legal formalities. It must consume less time.
  • Liability of Owner: It can be limited or unlimited. Limited liability is more preferred from risk view point.
  • Continuity and Stability: This is essential as it enables the businessman to make long terms plans for his business.
  • Capital Adequacy: Business form must ensure raising of adequate amount of capital at most reasonable cost.
  • Flexibility of operations: Business must be flexible enough to adjust itself to the changes taking place in its environment.
  • Relationship between ownership, control and management: For efficient management, the control and management of the firm must be in the hands of the owners.
  • Lawful Business: Every business enterprise must undertake such business which is lawful, that is, the business must not involve activities which are illegal.
  • Dealing in Good and Services: Every business undertaking is engaged in the production and for distribution of goods or services in exchange of money.
    Forms of Business Organization – CS Foundation Business Environment Notes 1

Sole Proprietorship:
1. Sole Proprietorship is a type of business unit where one person is solely responsible for providing the capital, for bearing the risk of enterprise and for the management of the business.”

2. It refers to a form of business that is owned, managed and controlled by an individual with all authority, responsibility and risk.

3. It is also known as single ownership or single proprietorship.

4. The individual who owns and runs the business is known as sole proprietor or sole trader.

5. It is the oldest and most common business form.

6. It possess the following characteristics:

  • Single Ownership: It is run by single individual who owns and controls all assets and properties of the business and bears all risks.
  • individual Capital Contribution: Capital is arranged by sole proprietor himself either from personal resources or through borrowing.
  • individual Management and Control: All business decisions are taken by sole proprietor himself.
  • No sharing of Profit and Loss: Entire Profit arising out of business is enjoyed by sole proprietor himself. Similarly, he himself has to bear all the business losses.
  • Unlimited liability: In case of any loss, sole proprietor’s personal property can be used to pay off all the liabilities.
  • Less legal formalities: No legal formalities are required for its formation or even in its day to day operations.

It has the following advantages:
(i) Easy formation and winding up: No legal formalities are required for its formation. It can be started with small amount of capital. Similarly, its winding up also is completely dependent upon sole proprietor.

(ii) Prompt Decisions: Sole proprietor is free to take any decision on his own, thereby enabling quick decision making.

(iii) Flexibility in operations: Sole proprietor can take decision to change the nature, scope or scale of his business all by himself.

(iv) Maintenance of Business Secrecy: It is an important part of any business. Sole Proprietor is in better position to maintain business secrets as he has the complete ownership and control.

(v) Personal Contacts with Customers: Sole proprietor is able to maintain close and personal contacts with his customer’s, thus enabling him to know their likes and dislikes.

(vi) Direct Motivation: All profits earned are of proprietor. By working hard, he can earn more profits. This ensures direct link between reward and effort.

(vii) Encourages self employment: Unemployed people can start their business by being self employed. It also provides job opportunities to others by employing them. Apart from various advantages, sole proprietorship form of business also has certain disadvantages:

  • Unlimited liability and Risks: In case of loss, the proprietor’s personal property can be attached to meet the obligations. This increases the risks.
  • Limited Capital: Proprietor’s individual capital is insufficient to meet certain business requirements.
  • Limited managerial capability: It lacks professional management as the proprietor himself may not be an expert in every field.
  • Limited Size: It has a limited scope for expansion. Expanding beyond a certain limit makes it unmanageable for proprietor.
  • Lack of Continuity: Business continuity is uncertain as it depends – upon the life of the proprietor.

It is suitable for following:

  • Small size business
  • Small amount of capital is required
  • Small and local markets
  • Personal attention towards customers is required
  • Relatively small risks is involved
  • Simple nature of business
  • Manual skill is required
  • Production of goods of artistic nature

Hindu Undivided Family:

  • It is found only in India.
  • It is a most peculiar form of business organisation in which the family possesses some inherited property and the head of the family, known as Karta manages its affairs.
  • It is created by the operation of Hindu law and does not arises out of contract between co-parceners.
  • Its membership is limited upto 3 successive generations.
  • Members are known as Co-parceners.
  • Only coparcener can become a Karta.
  • Karta is the eldest male member of the family.
  • Karta’s position is sui generis (peculiar to himself).
  • The person becomes a member by taking birth in the HUF and not by a contract.
  • No stranger can be a karta.
  • Co-parceners can demand partition.

HUF possess the following characteristics :

  • Legal status: HUF is governed by Hindu law, thus can enter into partnership agreements.
  • Membership: Only male members who are coparceners by birth can be its member.
  • Management: All the affairs of HUF are managed by Karta.
  • Liability: Liability of all coparcener is limited except Karta.
  • Fluctuating share: Share of each member keeps on fluctuating by birth and death of male members.
  • Continuity: Death of any coparcener or even Karta does not effects its continuity.
  • Profit Sharing: All coparcener have equal share in the profits.

Advantages of HUF:

  • Assurance of share in profits : Interest of every member is safeguarded as he is assured of his share in profits
  • Freedom of action : Karta manages the affairs of HUF with full freedom, thus ensuring quick decisions. thus, enabling more efficient management.
  • Sharing of knowledge and experience : Young members get the benefit of elder people’s knowledge arid experience and inclusion of finer values of life.
  • Continued existence : Death of any coparcener or even Karta does not effect its continuity.

Disadvantages of HUF :

  • Lack of Motivation : Members lack of motivation to work hard as profit is shared by all equally.
  • Scope for misuse of power : Kara has full freedom to manage the affairs of HUF, which leaves scope for him to misuse his powers for personal gain.
  • Limited Resources : Risk cannot be undertaken due to limited financial and managerial resources.
  • Family Conflicts : Conflicts and quarrels may arise among three generations involved.
  • Instability : It can be dissolved any time through mutual agreement among members.

Partnership:

  • Haney, “Partnership is the relation between persons competing to make contract who agree to carry on a lawful business in common with a view of private gain.”
  • It refers to the voluntary association of two or more persons who agree to carry on some business jointly and share its profits and losses. They combine their funds and skills to carry on business together. (Not more than 20 members in non- banking business and not more than 10 members in case of banking business)
  • The Partnership Act does not lay down any maximum number of partners. But according to Section 464, Rule 10 of companies miscellaneous Rules, 2014, maximum number of partner is 100.
  • It is governed by Indian Partnership Act, 1932.
  • Every member is known as partner and collectively members are known as partnership firm.
  • It is suitable for small business of retail and wholesale, small manufacturing units, professional firms, etc.

It possess the following essential characteristics:
(i) Profit motive and sharing of profits and loss: It is formed with an objective of earning profit. Profit is distributed as per the agreed ratio. In absence of any agreement, it is equal.

(ii) Contractual Relationship: Relationship between partners arises out of contract in writing called ‘Partnership Deed’ and not out of status. Agreement may be verbal, written or implied.

(iii) Principal – agent relationship: Every partner is a principal when acting on his own behalf and is an agent of the firm when acting on behalf of others. His activities bind the firm.

(iv) Unlimited liability: Liability of all partners is unlimited. They are jointly and severally liable for all the debts and obligations of firm.

(v) Competence of partners: Only competent people are allowed to enter into partnership. Minors can only be admitted to benefits of partnership.

(vi) Legal Status: Law doesn’t recognize the firm as a separate entity distinct from the partners. The firm means the partners and the partners means the firm.

(vii) Voluntary Registration: Registration of a partnership firm is not compulsory but since it is considered desirable.

(viii) Transfer of interest: No partner can sell or transfer his interest in the firm to anyone without the consent of other partners (unless or otherwise agreed).

(ix) Dissolution: Dissolution refers to not only a complete closure but to change in existing agreement among the partners due to a change in the numbers of partners too.

Advantages of Partnership firm:

  • Easy Formation: It can be formed without much expense and legal formalities. Only an agreement among partners is required
  • Combination of business ability and skill: It enables the firm’s activities to be expanded by enabling several persons to pool their resources, capital, skill etc.
  • Collection of greater capital: Under partnership, all partners contribute their capital which places it in a better position than sole proprietor.
  • Advantage of Secrecy: It is not required to publish its financial accounts to public due to which secrets can be maintained.
  • No hasty and reckless decisions: Due to unlimited liability of partners, they tend to adopt sound business practices.
  • Protection to minor partner: Minor has limited liability and is admitted only to the benefits of the firm.
  • Favorable Credit Standing
  • Profit Incentive
  • Retention of a Skilled Worker
  • Increase in Spirit of Co-operation.
  • Tax Advantage
  • Easy Dissolution.

Disadvantages of Partnership Firm:

  • Disagreement Among Partners : Mutual conflicts and lack of team spirit among partners may cause loss of reputation and even firm’s dissolution.
  • Uncertain Life : It has uncertain continuity as death, insolvency etc of any of the partner may cause firm’s dissolution.
  • Unlimited Liability : Any one or all the partners can be held liable by creditors and their dues can be recovered from private property of such partners.
  • Reduced Public Confidence : Its accounts are kept secret, publicity is absent and moreover, doesn’t have any legal control due to which it lacks public confidence.
  • Loss of Business Opportunity : Due to differences in opinions among partners, delay in decision making occurs which causes loss of opportunity.
  • Risk of Implied Authority : Every partner acts on behalf of firm and all other partners. Thus, partner may have to pay for the dishonest partner even.
  • Frozen Investment
  • Possibility of Misuse of Resources.
  • Divided Control

Suitability:

  • For small business (i.e. retail and wholesale trade)
  • For Professional services
  • For Medium sized mercantile houses
  • For small manufacturing units

Company

  • “A company is an artificial person created by law, having a perpetual succession and common seal.” L.H. Haney.
  • “A company is an artificial entity which is formed and registered under this Act or an existing company.” Indian Companies Act, 2013
  • It refers to a voluntary association of persons who contribute money for some common purpose.
  • Money contributed is called capital or share capital.
  • People contributing capital are known as members or shareholders.
  • Share is the proportion of capital to which each member is entitled.
  • A company form of business organisation is a voluntary association of person to carry on business.
  • It is an association of person who generally contribute money for some common purpose.
  • The companies are governed by the Indian Companies Act, 2013.
  • As per Companies Act, 2013 “a company is formed and registered under the Companies Act or an existing company registered under any other Act”. Share Capital refers to the capital raised by the company by the issue of shares.
  • Share is the smallest unit into which the share capital of the company is divided.

Characteristics of company are as follows –

  • Incorporated Association: It comes into existence only after registration under the Companies Act. A company in India is Governed by the Indian Companies Act, 2013.
  • Artificial Legal Person: It is a legal personality created by law. It can acquire and dispose of the property, can enter into contracts, can sue and be sued in its own name.
  • Perpetual Succession: It is a legal entity separate from its members. Death or insolvency of any member does not effects its continuity.
  • Transferability of Shares: Shares in company are freely transferable which ensures safety of investment.
  • Limited Liability: Liability of all members is limited to the extent of face value of shares held by them.
  • The capital of the company is divided into shares of small part.
  • Representative Management: The shareholders elect the directors to manage the affairs of the company.

Advantages of Company:
(i) Accumulation of huge financial resources: It facilitates mobilisation of large amount of capital for investment. It can raise huge capital required for large scale operations.

(ii) Continuity of existence: Its enjoys perpetual succession, thus is more stable as compared to partnership.

(iii) Transferability of shares: Ownership in a company can be easily transferred by simply transferring the shares. This ensures liquidity and safety of investment.

(iv) Diffusion of risk: Due to large membership, risk is spread which encourages small investors.

(v) Economies of large scale production: Large size of business enables the company to enjoy all economies of large scale production which ensures increased production and enhanced efficiency.

(vi) Democratic Organisation: Company is managed by Board of Directors elected by the shareholders thus, directors are accountable and responsible to them.

(vii) Management Functions: The company employees professionals and experts which help in better management of the company.

(viii) Recognised Legal Entity: A company is incorporated under the law and hence enjoys a legal status. Hence, it can borrow money, deal in property, sue others etc.

(ix) Higher Profits: A company has economies of large scale production and thus, earns higher profits.

(x) Bold Management: As the companies have huge funds, they, can take big risks which the other forms of business cannot take.

(xi) Full Legal Cover: A company is recognised by law and enjoys full legal cover and thus people have more confidence in them

(xii) Social Benefits: A company also has many social benefits and helps in the growth of people of low income groups.

Disadvantages of Company:
(i) Fraudulent management: The directors and investors may present a rosy picture of the company in its annual report due to which innocent investors are duped.

(ii) Complicated formation: Its formation requires adherence to too many legal formalities and is also expensive.

(iii) Lack of secrecy: It has to disclose all its strong and weak points in its annual reports due to which nothing remains secret.

(iv) High nepotism: Due to involvement of top heavy management, employees are selected on basis of personal interest rather than ability.

(v) Social abuses: It brings out the evils of factory system like pollution, insanitation etc. It is also a source of encouraging monopolies.

(vi) Undue speculation: Directors may indulge in speculation by misusing the inner information of the company for speculative purpose. This is harmful for shareholder’s interest.

(vii) Double taxation: Tax is to be paid on the earnings as well as on the distribution of dividends.

(viii) Separation of ownership from management: The company is managed by the directors who are not the real owners of the company and can thus exploit the shareholders.

(ix) Exploitation of shareholders: The concentration of powers in a few hands leads to the exploitation of shareholders.

(x) Impersonal relationship: Due to the wide gap between the employer and the employee, there is lack of personal relationship.

(xi) Grouping of powers: There is tussle of grouping for power between groups.

It is suitable where:

  • Volume of business is large
  • widespread area of operation
  • heavy risk is involved
  • need for huge financial resources and manpower
  • need for professional management
  • flexibility in operations is required

Forms of Company: A company, as an organisation may be a public company or private company. An One Person Company is a special form of private company.

Private Company: A private company has –

  • limit on maximum to two hundred members other than present and past employees;
  • restrict the right to transfer its shares; and
  • prohibits any invitation to the public to subscribe for any securities of the company.
  • Private company (or a private limited company) may have two members normally or single member in case such private company is a One Person Company (OPC).

Public Company:
A public company is a company which is not a private company.
A public company do not have restriction like private company, but it needs minimum seven members. A private company (or a private limited company) may have two members normally or single member in case such private company is a One Person Company (OPC).

One Person Company:
One Person Company is a company with only one person as its member. All restrictions applicable to a private company shall apply to one person company as it is essentially a private company.

As these three form of companies has different organisational setup and scale of operations, government usually give some relaxation to private companies in respect of various compliances. There are some additional relaxation for one person company in respect to general meetings and board meetings.

Statutory Bodies and Corporations:

  • It refers to an autonomous corporate body created under an Act of Parliament or an Act of State legislature.
  • It is set up by Statute
  • It is a combination of public ownership, public accountability and business management.
  • It is an organisation that is clothed with the power of the government, but is possessed with the flexibility and initiative of private enterprise.
  • Example : RBI, SBI, LIC, ID8I etc.

It possess the following characteristics:

  • Legal Entity : It has a separate legal entity. It can enter into contracts, can sue and be sued in its own name. It has a perpetual succession and common seal.
  • Financial independence : Government provides it with initial capital and borrowings. Thereafter, it has all freedom to use its financial resources.
  • Corporate Body : It is an incorporated body established under a Special Act of Parliament.
  • Government Ownership : It is wholly owned by CG, SG or both.
  • Management and Personnel : It is managed by Board of Directors appointed by Government.
  • Accounting System : Budgetary, accounting and audit regulations applicable to Government departments are not applicable to them.
  • Service Motive : Its objective is public welfare and service rather than private profits.

It offers the following advantages:

  • Flexible Operations : Unlike other government departments, it is free from bureaucratic control. Thus, decisions can be taken without any delay.
  • Operational Autonomy : It does not involve interference of the Government.
  • Special Privilege : It is often granted special Privilege
  • Continuity : Due to a separate legal entity it has stable continuity.
  • Availability of Managerial Talent : More talented people can be employed by offering them better terms and conditions.

It suffers from following disadvantages:

  • Difficult Formation : A special law needs to be passed by Parliament for its formation.
  • Excessive Accountability : Ministerial and political interference effects its operational autonomy.
  • Inflexibility : Special law passed by Parliament has to be amended for changing the objects or powers.
  • Clash of Divergent Interests : Conflicts arises when Board of Directors is constituted to give representation to divergent interests.

It is suitable:

  • For undertakings that require Monopoly powers.
  • Undertakings exercising powers conferred by legislature and enterprises.
  • For undertakings that need to be financed by the state.

Co-operative, Societies and Trusts:

  • Co-operation is derived from Latin word ‘Co-operari’ ‘Co’ means ‘with’ and ‘operari’ means ‘to work’.
  • It is a voluntary association of persons who join together to safeguard their own interests. It is a business activity without having any profit.
  • “Co-operative society is a voluntary association of individuals which has its objectives in the promotion of economic interests of its members in accordance with co-operative principles.”
  • It works on principles of self help as well as mutual help.

Co-operative Societies Act, 1912

  • Any ten members can form co-operative society.
  • It is governed by Co-operative Societies Act, 1912.

Its objectives are:

  • Rendering service rather than earning profit.
  • Mutual help rather than competition.
  • Self-help rather than dependence.

Types of Co-operative Societies –
(i) Consumer’s Co-operative Societies: They provide goods to consumers at a reasonable price by eliminating the middlemen. They work for protection of consumer’s interest.
Example → Kendriya Bhandar, Apna Bazar and Sahkari Bhandar etc.

(ii) Producer’s Co-operative Society: These are formed for the protection of small producer’s interests by removing difficulty in collection of various factors of production and facing market problems.
Example → Handloom societies like APPCO, Bayanika Haryana Handlooms etc.

(iii) Marketing Co-operative Society: These are formed to enable the producers to sell their products at reasonable prices by eliminating middlemen.
Example → Gujarat Co-operative Milk Marketing Federation etc.

(iv) Credit Co-operative Society: These are formed to provide credit to its members for productive purposes at a very low rate of interests.
Example → Village Service Co-operative Society and Urban Co-operative Banks etc.

(v) Housing Co-operative Society: These undertake the function of purchasing land, constructing houses or flats and making them available to its members on ownership basis or at fair rents. They also provide loan at lower interest rates to its members for constructing houses.
Example → Employees Housing Society, Metropolitan Housing Co¬operative Society etc.

(vi) Farming Co-operative Society: These are formed by small farmers to enjoy the benefit of large scale farming.
Example → Lift – irrigation Co-operative society, Pari – panchayats etc.

Definitions of Co-operative Organisation:
“Cooperative is an association of person usually of limited means, who have voluntarily jointed together to achieve a common economic and through the formation of a democratically controlled business organisation, make equitable contribution to the capital required and accepting a fair share of risks and benefits of the undertaking.”

“Cooperative is a form of organisation wherein persons voluntary associates together as human beings on the basis of equality for the promotion of the economic interests of themselves.”

“As a society which has its objectives the promotion of economic interest, its members in accordance with cooperative principles. Cooperative society is that society which has been registered under the, Cooperative Societies, Act, 1912, or under any other law for the time being in force in any state registration of cooperative society.”

“Cooperative society is an association of the weak who gather together for a common economic need and try to lift themselves from weakness into strength through business enterprise.”

Characteristics of Co-operative Society:
(1) Voluntary association :Any association of persons having a common interest is free to join and can also leave by a mere notice to society. There should be minimum 10 members to form a cooperative society.

(2) Separate Legal entity : After registration cooperative society is recognized as separate entity by law. The income of cooperative societies is legally taxable under Income Tax Act, 1961.

(3) Democratic Management : Equality is the assence of cooperative enterprises. No member detects the terms and conditions of the functioning because “One man One vote” is thumb rule.

(4) Service Motive : Sole purpose of cooperative society is mutual benefit through self help and collective effort.

(5) Utilization of Surplus : According to the Indian Cooperative Societies Act, 1912 each society must transfer atleast one-forth (1/4) of its profits to general reserve. It may distribute the profit for dividend and welfare in the ratio of 90:10.

(6) Cash Trading: Except the members of the society it sells the goods on the basis of cash only. Rule of “Cash & Carry” is fallowed.

(7) Fixed Rate of Return: In the return to the capital invested, the members are assured of a fixed rate of return maximum to the extent of 9% per annum on the sum deployed by tnem.

(8) Government Control: All the cooperative societies are regulated by the government through its different rules and regulation.

(9) Capital: The capital of the society is raised by the way of share capital, major part is financed through taking loan from the Government or from the apex cooperative institutions.

It possess the following advantages:

  • Voluntary Association: Members come together on their own accord and even leave as per their own desires.
  • Easy Formation: It does not need to follow long and complicated legal formalities for its for on.
  • Limited Liability: Liability of members is limited to the extent of capital contributed by them.
  • Open Membership: Any person can become its member.
  • Democratic Management: Every member have equal voting rights, thus have equal voice in the management. (One man one vote is the thumb rule)
  • Perpetual Succession: Its life is not effected in any way by the way of death, insolvency or conviction of any of its members.
  • Low Prices: It make the goods and services available to its members at reasonable prices by eliminating the middlemen.
  • Mutual Help
  • Social Advantages
  • Remove defects of capitalism
  • Government support
  • Mobilisation of saving.

It suffers from following disadvantages:

  • Limited Resources: They have limited financial resources as it is limited to the member’s contribution.
  • Inefficient Management: It is managed by its members who lack managerial and professional skills.
  • Lack of Secrecy: It becomes difficult to maintain secrecy as all its affairs are exposed to its members.
  • Excessive Government Interference: Excessive State regulations effects its functioning thereby adversely effecting its operations.
  • Cash Trading: All its transactions are done in cash. Thus, non¬availability of credit facilities sometimes disables the members to buy.
  • Lack of unity among members.
  • Lack of motivation.
  • Political interference

It is suitable:

  • Where service is to be provided
  • Where economic interests in promoted
  • For small and medium size firms.

The large sized IFFCO (Indian farmers & fertilizers co- operative) and the Kaira Co-operating processing milk under the brand name ‘AMUL’ are illustrious examples.

Limited Liability Partnership (LLP):

  • It combines the advantages of company and partnership.
  • Under it, all partners have a form of limited liability for each individual’s protection within the partnership.
  • Partners also have a right to manage the business affairs.
  • It is managed as per LLP Agreement.
  • It is governed by Limited Liability Partnership Act, 2008.
  • Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March, 2009.

It possess the following characteristics :

  • Body corporate
  • Separate legal entity
  • Perpetual succession
  • Mutual rights and duties of partners are governed by an LLP agreement subject to provisions of LLP Act, 2008
  • In absence of any agreement, it would be governed by the framework provided in Schedule 1 of LLP Act, 2008
  • Liability of partners is limited to the extent of capital contributed by them
  • No partner is liable for the independent or unauthorized actions of other partners or their misconduct
  • Every partner is a equal member
  • Every partner have a equal share in profit and loss
  • Each partner is protected against the other partner’s action
  • The contribution of the partners can be tangible, intangible or both
  • There is no limit for the maximum number of members in LLP

LLP Process:

  • Acquire DPIN and DSC
  • Register DPIN, DSC with LLP
  • Check name availability
  • Download UP forms
  • File Electronically
  • Track Status
  • Receive Certificate

DPIN – Designated Partners Identification Number

DSC – Digital Signature Certificate

It offers the following advantages:

  • Separate legal entity
  • Easy formation
  • Flexible operations
  • Perpetual existence
  • No minimum capital contribution
  • Easy dissolution
  • Low cost of formation
  • No partner liable for other partner’s act
  • No restriction on maximum number of partners
  • No need to maintain statutory records except Books of Accounts

It suffers from following disadvantages:

  • Funds from public cannot be raised
  • Owners are the managers
  • Act of every partner binds LLP
  • Under certain cases, partner’s liability may be extended to their personal property

Associates of Persons : AOP is an informal form of business. According to CIT v Indira Balkrishna (39 ITR 546) “where two or more persons join in a common purpose or common action, with object to produce, income profits or gains, it is called an “associates of persons”.

Characteristics of AOP :

  • Two or more persons join
  • Voluntarily
  • Common purpose or common action
  • Object to produce profit or gains
  • Creates some kind of scheme for common management

“AOP is not created but formed” Body of Individuals” : BOI is a formation of individuals who carry some activity with object to earn income, having common purpose is not essential for BOI.

BOI is Sub- domain of AOI – AOI and BOI, whether incorporated or not treated as a ‘person’ under Income Tax 1961.

Self Help Groups : Self help groups are essentialy BOI, which are form to promote entrepreneurship and financial helps in rural areas usually “Ten or more” persons shares different skills and indulge in mainly production activities.
Example : pickles production, Spices, handicraft+etc.

Advantages of AOP / BOI :

  • Suitable for Short term business plan
  • No formality required for formation
  • Object to can profit is enough to form such organisation
  • Easy to wind – up
  • Suitable for Special Purpose Vehicle (SPV) and international commercial buildings

Disadvantages of AOP / BOI:

  • Non formal Set-up
  • Income is more important than business
  • Not a purpose of wealth creation

Joint Venture : It is also an informal form organisation “when two or more business organisation center into a commercial enterprise undertaken jointly it is called a Joint Venture.”

Elements of a Joint Venture, are :

  • Number of parties
  • The geographic, Product, technology & value chain
  • Contributions of parties
  • Split ownership
  • Economic arrangements
  • Governance & control
  • Contractual agreements with parent companies

Selection of an Appropriate form of Business: This depends upon following factors:
(i) Nature of business activity: Businesses providing direct services should be set up as sole proprietor, business requiring pooling of skills and funds should be set up as partnership, while manufacturing concerns of large size should set up as companies.

(ii) Business control: Sole proprietorship is preferred if direct control over business is required else company should be formed.

(iii) Liability of owner: A company who can bear the burden of unlimited liability can go for sole proprietorship business.

(iv) Finance: Business requiring huge capital should opt for company form.

(v) Business volume: Large scale enterprises should be set up as company form.

(vi) Independence: Person requiring freedom from government interference, should select partnership or sole proprietorship.

(vii) Area of operation: In case of wide spread area of operation i.e. national or international, company form is suitable. .

Other Types of Corporations:

  • Domestic corporation is a company that conducts its affairs in its home country. It is able to conduct business in other states or other parts of the country where it has filed its articles.
  • Foreign corporation/alien corporation/out-of-state corporation is incorporated under the laws of foreign country. It does its business in a state other than the one is which it is incorporated.
  • Public corporation is formed by government to meet some governmental or political purposes.
  • Private corporations are formed for benefits of public purposes. They are not privately owned.
  • Non-profit corporation/not for profit organisation exists for educational or charitable reasons, and from it the shareholders or trustees do not benefit financially.
  • Money earned is retained by the corporation and used for its own expenses, operations and programs.
    Professional corporations includes the professional practitioners by profession. It provides certain tax benefits.

Multiple Choice Questions

Question 1.
Which of the following is a form of business organisation?
(a) Temple
(b) Church
(c) Partnership
(d) Mosque
Answer:
(c) Partnership

Question 2.
Following is not a characteristic of business organisation:
(a) Discontinuity of operations
(b) Distinct ownership
(c) Lawful business
(d) Risk involvement
Answer:
(a) Discontinuity of operations

Question 3.
________ is a form of business that is owned, managed and controlled by an individual.
(a) Partnership
(b) Company
(c) HUF
(d) Sole Proprietorship
Answer:
(d) Sole Proprietorship

Question 4.
Individual owing and running the business is known as ________.
(a) Single owner
(b) Sole Trader
(c) Single Trader
(d) Businessman
Answer:
(b) Sole Trader

Question 5.
Which is the oldest business form?
(a) Partnership
(b) HUE
(c) Sole Proprietorship
(d) Co-operative Society
Answer:
(c) Sole Proprietorship

Question 6.
Which of the following would have unlimited liability?
(a) Co-operative Society
(b) Company
(c) Sole Proprietorship
(d) Shareholders
Answer:
(c) Sole Proprietorship

Question 7.
Which of the following is an advantage of sole proprietorship?
(a) Easy formation
(b) Maintenance of business secrecy
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 8.
Which of the following has most stable existence?
(a) Sole proprietorship
(b) Partnership
(c) Company
(d) HUF
Answer:
(c) Company

Question 9.
Which form of organisation is only found in India?
(a) HUF
(b) Co-Operative Society
(c) Joint Stock Company
(d) Governmental Undertaking
Answer:
(a) HUF

Question 10.
What is the maximum strength of HUF ________.
(a) 10
(b) 20
(c) 100
(d) No limit
Answer:
(d) No limit

Question 11.
The business affairs are managed by the head of the family, known as ________.
(a) Co-parcener
(b) Owner
(c) Shareholder
(d) Karta
Answer:
(d) Karta

Question 12.
Only coparcener can become a Karta, This statement is ________.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(a) True

Question 13.
Karta’s liability is ________.
(a) Limited
(b) Unlimited
(c) Limited by guarantee
(d) None of the above
Answer:
(b) Unlimited

Question 14.
Mutual agency is an important feature of ________.
(a) HUF
(b) Joint Stock Company
(c) Partnership
(d) Co-operative Society
Answer:
(c) Partnership

Question 15.
Company have a perpetual succession and work under a common seal. This statement is ________.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) True

Question 16.
Company is managed by shareholders.
(a) True
(b) False
(c) Can’t say
(d) None of the above
Answer:
(b) False

Question 17.
Statutory body is a body that is created under an Act enacted by ________.
(a) Association of people
(b) Association of ministers
(c) Both (a) and (b)
(d) Judiciary
Answer:
(b) Association of ministers

Question 18.
RBI is an example of ________.
(a) Departmental undertaking
(b) Statutory corporation
(c) Governmental undertaking
(d) None of these
Answer:
(b) Statutory corporation

Question 19.
In which of the following, the ownership of venture is reflected by ownership of shares or stock?
(a) HUF
(b) Partnership
(c) Corporations
(d) Trusts
Answer:
(c) Corporations

Question 20.
Statutory Body is a combination of ________.
(a) Public ownership and accountability
(b) Public ownership and business management
(c) Public and private ownership
(d) Public ownership, public accountability and business management
Answer:
(d) Public ownership, public accountability and business management

Question 21.
Following is not a type of co-operative society ________.
(a) Producer’s cooperative society
(b) Wholesaler’s cooperative society
(c) Marketing co-operative society
(d) Consumer’s co-operative society
Answer:
(b) Wholesaler’s cooperative society

Question 22.
LLP Act, 2008 came into effect on ________.
(a) 31/4/2009
(b) 31/3/2008
(c) 31/3/2009
(d) 31/4/2008
Answer:
(c) 31/3/2009

Question 23.
For having direct control over the business activities, which form is preferred ________.
(a) Partnership
(b) Sole proprietorship
(c) HUF
(d) Company
Answer:
(b) Sole proprietorship

Question 24.
Which is not a characteristic of sole proprietorship?
(a) No sharing of profit and loss
(b) One-man’s capital
(c) Less legal formalities
(d) Association of persons
Answer:
(d) Association of persons

Question 25.
What are the characteristics of HUF?
(a) Governed by Hindu Law
(b) Continuity
(c) Fluctuating share of each member
(d) All of these
Answer:
(d) All of these

Question 26.
Which is not an advantage of Joint Hindu Family business.
(a) Limited resources
(b) Continued existence
(c) Freedom in managing
(d) Assured share in profit
Answer:
(a) Limited resources

Question 27.
The companies are governed by which Act?
(a) Indian Contract Act, 1872
(b) Partnership Act, 1932
(c) Companies Act, 2013
(d) None of these
Answer:
(c) Companies Act, 2013

Question 28.
What are the advantages of company?
(a) Great stability
(b) Limited liability
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)

Question 29.
Cooperative society is that society which has been registered under the Cooperative Society Act _____.
(a) 1920
(b) 1932
(c) 1912
(d) 1872
Answer:
(c) 1912

Question 30.
LLP, this forms of organisation has been introduced in India by way of?
(a) LLP Act, 2009
(b) LLP Act,2008
(c) LLP Act, 1932
(d) None of these
Answer:
(b) LLP Act,2008

Question 31.
Which is the first step to start LLP?
(a) Acquire DPIN. Acquire DSC
(b) Register OPIN
(c) Download LLP forms
(d) Track status
Answer:
(b) Register OPIN

Question 32.
Which ¡s the last step to end LLP?
(a) Receive certificate
(b) Signature
(c) File electronically
(d) Track status
Answer:
(a) Receive certificate

Question 33.
“Co-operative” is derived from which word?
(a) Greek word, co-operan
(b) French word, co-operan
(c) Latin word, co-operan
(d) Indian word, co-operan
Answer:
(c) Latin word, co-operan

Question 34.
Find the odd one out?
(a) RBI
(b) SBI
(c) PNB (Punjab National Bank)
(d) HDFC
Answer:
(a) RBI

Question 35.
Direct motivation, maintenance of business secrets, close personal relations etc are the advantages of ________.
(a) Partnership
(b) Limited liability partnership
(c) HUF
(d) Sole Proprietorship
Answer:
(d) Sole Proprietorship

Question 36.
The profit share of Co-parceners in a HUF ________.
(a) Depends on the Capital Contributed
(b) Depends on the decision of Karta
(c) Is equal
(d) None of the above
Answer:
(c) Is equal

Question 37.
In case of death of a Co-parceners ________.
(a) The wife of the deceased Co-parcener can demand partition
(b) Wife can become the Co-parcener
(c) The wife can claim share of profit
(d) All of the above
Answer:
(c) The wife can claim share of profit

Question 38.
Which of the following statement is true in respect of a HUF?
(a) The liability of Co-parceners is limited
(b) The liability of Karta is unlimited
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

Question 39.
Which of the following statements is true ________.
(a) The creditors can claim the entire debt from any of the partner
(b) The partners can share profits in any ratio as agreed
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

Question 40.
Registration of Partnership is not compulsory but beneficiary.
(a) True
(b) Partly True
(c) False
(d) Partly False
Answer:
(a) True

Question 41.
In case of death of a partner ________.
(a) The partnership dissolves
(b) The partnership firm dissolves
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) The partnership dissolves

Question 42.
Greater Permanency, limited liability, case of transfer of ownership are the advantages of ________.
(a) HUF
(b) LLP
(c) Sole Proprietorship
(d) Company
Answer:
(d) Company

Question 43.
Lack cf secrecy, promotion of frauds, separation of ownership from management are the disadvantages ________.
(a) Partnership
(b) LLP.
(c) Company
(d) All of the above
Answer:
(c) Company

Question 44.
The minimum number of members to form a Co-operative Society is ________.
(a) Ten
(b) Fifty
(c) Hundred
(d) Twenty
Answer:
(a) Ten

Question 45.
The main objectives of a Co-operative Society are ________.
(a) Rendering service rather than earning profits
(b) Self help in place of dependence ‘
(c) Mutual help instead of competition ‘
(d) All of the above
Answer:
(d) All of the above

Question 46.
AMUL milk products is an example of ________.
(a) Co-operative Farming Society
(b) Consumer Co-operative Society
(c) Co-operative Credit Society
(d) Co-operative Market Society
Answer:
(d) Co-operative Market Society

Question 47.
APPCO, Bayanika, Haryana Handloom are examples of ________.
(a) Co-operative Marketing Society
(b) Co-operative Farming Society
(c) Producers Co-operative Society
(d) None of the above
Answer:
(c) Producers Co-operative Society

Question 48.
The.societies formed to provide financial support to the members are called ________.
(a) Co-operative Credit Society
(b) Housing Co-operative Society
(c) Co-operative Finance Society
(d) None of the above
Answer:
(a) Co-operative Credit Society

Question 49.
Voluntary association, utilization of surplus, cash trading etc. are the characteristics of ________.
(a) Co-operative society
(b) Company
(c) Statutory body
(d) All of the above
Answer:
(a) Co-operative society

Question 50.
Registration of co-operative society is compulsory.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) True

Question 51.
The maximum rate of return that a co-operative society can give to its members is ________.
(a) 9%
(b) 10%
(c) 5%
(d) 12%
Answer:
(a) 9%

Question 52.
The maximum rate of dividend that a Co-operative Society can distribute is _________
(a) 90% of Surplus
(b) 50% of Surplus
(c) 100% of surplus
(d) 10% of Surplus
Answer:
(a) 90% of Surplus

Question 53.
The minimum amount to be transferred to the general reserve is ________.
(a) One-fourth of profits
(b) One-half of profit
(c) One-fifth of profit
(d) None of the above
Answer:
(a) One-fourth of profits

Question 54.
Which of the following statement is True?
(a) Co-operative Societies sell the goods on cash basis only
(b) Members can purchase goods on credit
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

Question 55.
Which of the following statement is true in respect of the voting rights of a member in a Co-operative Society?
(a) Each member has one vote
(b) Voting rights are proportionate to the capital contributed
(c) Voting rights is not exercised by the members
(d) None of the above
Answer:
(a) Each member has one vote

Question 56.
The Co-operative Society is registered under the ________.
(a) Co-operative Societies Act,1932
(b) Indian Co-operative Societies Act, 1944
(c) Co-operative Societies Act, 1912
(d) All of the above
Answer:
(c) Co-operative Societies Act, 1912

Question 57.
The maximum number of partners in a LLP are ________.
(a) No limit
(b) 50
(c) 100
(d) 20
Answer:
(a) No limit

Question 58.
In case of sole proprietorship there is a direct link between:
(a) Profit and Loss
(b) Asset and liabilities
(c) Goods and Services
(d) Effort and reward
Answer:
(d) Effort and reward

Question 59.
In Hindu Undivided Family (HUF) form of business all the members of Hindu Undivided Family own the business ________.
(a) Individually
(b) Separately
(c) Jointly
(d) With Society
Answer:
(d) With Society

Question 60.
If the partnership agreement is in ________ it is known as ‘Partnership Deed.’
(a) Verbal
(b) Written
(c) Implied
(d) Verbal, written or implied
Answer:
(b) Written

Question 61.
A minor can be admitted to the Benefits of partnership which means:
(a) He can have a share in the loss only
(b) He can have a share in the profits only.
(c) He cannot have any share in profit or loss.
(d) He can have a share in the profits only if other partner by majority agrees to give it.
Answer:
(b) He can have a share in the profits only.

Question 62.
Statutory body is a body that is created under an:
(a) Act of parliament
(b) An act of legislatures
(c) Neither (a) or (b)
(d) Either (a) or (b)
Answer:
(d) Either (a) or (b)

Question 63.
_______ is a feature of partnership form of business.
(a) Separate legal entity from the firm
(b) Limited scope for raising finance
(c) The liability of a partner is limited to his contribution to capital
(d) Registration of partnership s compulsory
Answer:
(b) Following are the essential features of a partnership form of business:

  • Can be started by minimum 2 persons.
  • Scope for raising finance is limited.
  • Formed for earning profit
  • Liability of all partners is unlimited.
  • Registration is voluntary.
  • There exist a principal-agent relationship.

Thus, among the given options “limited scope for raising finance” is a feature’of partnership form of business.

Question 64.
_______ form of business is/are appropriate for retail business.
(a) Sole proprietorship
(b) Partnership
(c) Company
(d) Both (a) and (b)
Answer:
(d) Business providing direct services like retail business should be set up as sole proprietor; businesses requiring pooling of skills and funds should be set up as partnership, while manufacturing concerns of large size should be set up as companies. Thus, both sole proprietorship and partnership form of business are appropriate for retail business.

Question 65.
Which one of the following does not have perpetual succession?
(a) Company
(b) Statutory Corporation
(c) Sole Proprietorship
(d) Co-operative Society
Answer:
(c) Perpetual succession means that the death / insolvency of any member of a concern does not affects its continuity. Thus, its legal entity is separate from its members. All except sole proprietorship are formed like a corporate form of organisation and thus, have perpetual succession.

Question 66.
In a Hindu Undivided Family, liability of is unlimited.
(a) Karta
(b) Co-parceners
(c) Both a and b
(d) Neither a and b
Answer:
(a) In HUF, liability of all the co-partners is limited except Karta, thus, enabling more efficient management. Thus, the liability of Karta is unlimited.

Question 67.
In relation to business organisation structure, which one of the following is easy to form and wind up?
(a) A company
(b) A sole proprietorship
(c) Statutory corporation
(d) Public enterprises.
Answer:
(b) One of the advantages of sole proprietorship form of business is that no legal formalities are required for its formation. It can be started with a small amount of capital. Similarly, its winding up also is completely dependent upon sole proprietor. Thus, sole proprietorship form of business have easy formation and winding up.

Question 68.
Which is not a feature of LLP?
(a) Separate legal entity
(b) All LLP have existence for fixed period.
(c) Partners in an LLP are required to turn into an agreement
(d) In an LLP, partners are not liable for the act of other partners.
Answer:
(b) Following are the features of a limited liability partnership:

  • Body corporate.
  • Separate Legal Entity.
  • Perpetual Succession.
  • Easy formation.
  • Flexible operations.
  • No minimum capital contribution.
  • Easy dissolution.
  • Low cost of formation.
  • No partner liable for other partner’s act.
  • No restriction on maximum number of partners.
  • Mutual rights and duties of partners are governed by an LLP agreement.

Thus, among the given options, option B i.e. “All LLP have existence for fixed period” is not a feature of LLP.

Question 69.
Voting right that vests with each member of co-operative society is:
(a) One member one vote
(b) Right to vote in proportion of capital contributed
(c) Right to vote as mentioned in memorandum
(d) None of the above.
Answer:
(a) Co-operative societies have a democratic management i.e. every member have equal voting rights or one member have one vote, thus having equal voice in the management.

Question 70.
Gas Authority of India Limited is an example of:
(a) Limited liability partnership
(b) Private limited company
(c) Public enterprise
(d) None of the above.
Answer:
(c) Public enterprises refers to business organisation owned, managed and controlled by local, central or State Government. Whole or most of the investment is made by government itself.
Example: Gas Authority of India Limited, Hindustan Machine Tools, etc.

Question 71.
Which one of the following is treated as a separate legal entity different from its members?
(a) Sole proprietorship
(b) Hindu undivided family
(c) Partnership
(d) Limited liability partnership
Answer:
(d) Limited Liability Partnership has a separate legal entity, liable to the full extent of its assets. The liability of the partner would be limited to their agreed contribution in the LLP. Thus, Limited Liability Partnership is treated as separate legal entity, different from its members. In all other cases the entity and its members are same persons.

Question 72.
Why co-operative marketing society is formed?
(a) To protect the interest of general consumers
(b) To sell the product of small farmers and producers
(c) To protect the interest of small producers
(d) To provide financial support to the members
Answer:
(b) Co-operative marketing societies are formed by small producers and manufactures who find it difficult to sell their products individually. The society collects the products from the individual members and takes the responsibility of selling the products in market. Thus, co-operative marketing societies are formed to sell products of small farmers and producers.

Question 73.
The choice of an appropriate form of business organisation largely depends upon:
I. Ease of formation
II. Continuity and stability
III. Liability aspects
Correct option is –
(a) I and II (b) II and III
(c) I and III (d) I, II and III
Answer:
(d) Before selecting any form of business organisation, one must consider, the following factors:

  • Easy formation
  • Liability of owner
  • Continuity and stability
  • Capital Adequacy
  • Flexibility of operations
  • Relationship between ownership, control & management.

Thus I, II and III i.e. Ease of formation, continuity and stability and liability aspects, all are considered while making choice of an appropriate form of business organisation.

Question 74.
The minimum number of members required to get a co-operative society registered is _______
(a) 15
(b) 20
(c) 10
(d) 5
Answer:
Co-operative society is a voluntary association of persons who join together to safeguard their own interest. It is a business activity without having any profit. Any 10 members can form co-operative society.

Question 75.
Which of the following entity is created under an Act of the Parliament or an Act of the State legislature?
(a) Statutory corporation
(b) Government companies
(c) Co-operative society
(d) Limited Liability Partnership
Answer:
(a) Statutory corporation refers to an autonomous corporate body created under an Act of Parliament or as Act of state legislature. It is set up by statute.

Question 76.
Which form of business organisation has a separate legal entity?
(a) Hindu Undivided Family (HUF)
(b) Co-operative society
(c) Partnership firm
(d) Sole proprietorship
Answer:
(b) Co-operative society possess the following characteristics-

  • Voluntary Association
  • Separate legal entity
  • Democratic management
  • Service motive
  • Utilisation of surplus
  • Cash Trading
  • Fixed Rate of Return
  • Government control
  • Share Capital.

Question 77.
What is the liability of each partner under LLP?
(a) Limited
(b) Unlimited
(c) Partially Limited
(d) None of the above
Answer:
(a) Under Limited Liability Partnership, as the name represents all the partners have a form of limited liability for each individual’s protection within the partnership.

Question 78.
Which of the following is not a form of organisation?
(a) Partnership
(b) Company
(c) Partners
(d) Sole Proprietorship
Answer:
(c) Partnership, Company, Sole proprietorship are forms of organisation while partners are the members of a partnership firm and not a form of business organisation.

Question 79.
Who can be the head of Joint Hindu Family business?
(a) Karta
(b) Co-parcener
(c) Manager
(d) Director
Answer:
(a) According to the Hindu Law of Society, only Karta i.e. the eldest male member of the Hindu family can be the head of Joint Hindu Family Business. Hence option (a) is correct.

Question 80.
Members of HUF are known as _______.
(a) Partners
(b) Shareholders
(c) Members
(d) Co-parceners
Answer:
(d) HUF is a most peculiar form of business organisation in which the family possesses some inherited property. Its members are known as Co-parceners.

Question 81.
Which amongst the following is a feature of LLP?
(a) Separate legal entity
(b) Unlimited liability
(c) No perpetual succession
(d) Not a body corporate
Answer:
(a) Following are the features of a LLP :

  • Body corporate
  • Separate legal entity
  • Perpetual succession
  • Easy formation
  • Flexible operations
  • No minimum capital contributions
  • Easy dissolution
  • Low cost of formation
  • No partner liable for other partner’s act
  • No restriction on maximum number of partners.
  • Mutual rights and duties of partners are governed by an LLP agreement.

Thus, among the given options, option (a) i.e. Separate legal entity is a feature of LLP.

Question 82.
Head of HUF is known as _______.
(a) Karta
(b) Co-parceners
(c) Manager
(d) Head
Answer:
(a) HUF is the most peculiar form of business organisation in which the family possesses some inherited property and the head of the family, known as Karta, who manages its affairs.

Question 83.
In case of HUF what are liabilities of Co-parcener and Karta _______.
(a) Both have unlimited liability.
(b) Co-parcener’s liability is limited while Karta’s liability is unlimited.
(c) Karta’s liability is limited while Co-parcener’s liability is unlimited.
(d) Both have limited liability.
Answer:
(b) In HUF, liability of all the co-parceners is limited except Karta, thus enabling more efficient management. Thus, liability of Karta is unlimited and co-parceners is unlimited.

Question 84.
To form a partnership, the minimum capital contribution should be:
(a) ₹ 1 Lakh
(b) There is no minimum limit
(c) ₹ 1 Crore
(d) ₹ 5 Lakh
Answer:
(b) In a partnership, there are no complicated legal formalities involved in the establishment of partnership business. The partners entered ‘ into a partnership agreement can start their business, there is no such any minimum capital contribution limit. However, in case of sole proprietorship, the capital is limited to the savings of one owner or his borrowing capacity. Hence, option B is correct.

Question 85.
The Karta in Joint Hindu Family business has:
(a) Unlimited liability
(b) Joint liability
(c) Limited liability
(d) No liability for debts
Answer:
(a) The liability of the Co-parceners is limited, except for that of the Karta. This makes the Karta to manage the business in the most efficient manner. Thus, the Karta in Joint Hindu Family business has unlimited liability.

Question 86.
The objects and powers of a statutory corporation:
(a) May not change
(b) May not be changed easily
(c) May change easily
(d) None applicable
Answer:
(b) The objects and powers of a statutory corporation may not change easily. For this, special law passed by Parliament has to be amended for changing the objects or powers.

Question 87.
Which corporation has both characteristics i.e. of a partnership and of a separate legal entity?
(a) Limited Liability Partnership (LLP)
(b) Company
(c) Partnership
(d) Statutory Body
Answer:
(a) A Limited Liability Partnership, popularly known as LLP combines the advantages of both the company i.e. separate legal entity and partnership into a single form of organization.

Question 88.
Kendriya Bhandar is a:
(a) Co-operative Credit Society
(b) Consumers Co-operative Society
(c) Producers Co-operative Society
(d) Co-operative Marketing Society
Answer:
(b) Kendriya Bhandar, Apna Bazar and Sahakari Bhandar are examples of consumer’s Co-operative society.

Question 89.
What is Karta’s liability in HUF?
(a) Limited
(b) Unlimited
(c) Limited by guarantee
(d) None of these
Answer:
(b) The liability of the co-parceners is limited, except for that of the Karta. This make the Karta to manage the business in the most efficient manner. Thus, the Karta in Joint Hindu family business has unlimited liability.

Question 90.
Which of these is not a statutory corporation?
(a) RBI
(b) SBI
(c) LIC
(d) Bank of Baroda
Answer:
(d) Statutory body is a body that is created under an Act of Parliament or an Act of state legislatures.
Examples : RBI, SBI, LIC. Bank of Baroda is a private institution. Hence, option(d) is correct.

Question 91.
Liability of other Co-parceners are:
(a) Limited upto the extent of share except Karta
(b) Unlimited upto the extent of share except Karta
(c) Unlimited
(d) Limited
Answer:
(a) The liability of each member of the hindu undivided family business is limited to the extent of his share in the business while karta has unlimited liability.

Question 92.
Business undertaking are generally exposed to:
(a) Risk and uncertainty both
(b) Uncertainty only
(c) Risk only
(d) Neither risk nor uncertainty
Answer:
(a) Business undertakings are always exposed to risk and uncertainty. Business is influenced by future conditions which are unpredictable and uncertain. This makes business decisions risky, thereby increasing the chances of loss arising out of business.

Question 93.
A Public Corporation has:
(a) Public ownership
(b) Public accountability
(c) Business management tor public
(d) All are applicable
Answer:
(d) A public corporation is formed by the government- to meet some governmental and political purpose. The very common examples are for the cities and town benefits.

Question 94.
The liability of each member of the Hindu Undivided Family business is:
(a) Limited to a sum as declared by him in general public
(b) Unlimited
(c) Limited to the extent of his share in the business except karta
(d) Limited to the extent of his share in the business including that of karta
Answer:
(c) The liability of each member of the Hindu Undivided Family business is limited to the extent of his share in the business except karta. This makes the Karta to manage the business in the most efficient manner.

Question 95.
The affairs of a company is overseen by:
(a) Shareholders
(b) Employees
(c) Board of Directors
(d) Dividend Holders
Answer:
(c) A company is a voluntary association of people carrying on business, it is a Artificial Legal person whose management is separated from ownership. Ownership lies with shareholders who contribute share capital and management lies with the Board of Directors who oversee the affairs of company.

Question 96.
In case of Hindu Undivided Family, the individual share of each co-parcener:
(a) depends upon his efficiency
(b) keeps changing on the death or birth of co-parcener
(c) is fixed
(d) keeps changing annually
Answer:
(b) The individual share of each co-parcener keeps on fluctuating. This is because, every birth of a male child in the family adds to the number of co-parceners and every death of a co-parcener reduce the number. So, we can say that individual shate of each co-parcener keeps changing on the death or birth of co-parcener.

Question 97.
The size and structure of business depend on many factors which (are):
(a) In the control of enterprises
(b) Arbitrary and random
(c) Range from internal to external factors which are beyond the control of enterprises
(d) Beyond the control of enterprises.
Answer:
(a) The Size and Structure cf Business depend upon factor such as:

  • District Ownership
  • Lawful Business
  • Separate Status
  • Deals in Goods and Services
  • Risk involvement

Question 98.
Limited Liability Partnership is constituted under _______.
(a) The Companies Act, 2013
(b) Limited Liability Partnership Act, 2008
(c) Partnership Act, 1932
(d) None is applicable
Answer:
(b) Limited Liability Partnership, the world wide recognized form of business organisation has been introduced in India by the way of Limited Liability Partnership Act, 2008.

Question 99.
In case of Cooperative Societies minimum number of members are:
(a) 7
(b) 2
(c) 5
(d) 10
Answer:
(d) In case of Co-operative society the minimum number of members required are 10 under the Co-operative Society Act, 1912 but the Act does not specify the maximum number of members for any co-operative society.

Question 100.
Sole proprietary business is suitable when market is:
(a) Non Existent
(b) National
(c) Local
(d) Global
Answer:
(c) The sole proprietorship business is most suitable where the market for the product is small and local, where the capital requirement is small and the risk involvement is not too heavy. Thus, Option C is correct.

Question 101.
Limited liability partnership is constituted under _______.
(a) Companies Act, 2013
(b) Limited Liability Partnership Act, 2008
(c) Partnership Act, 1932
(d) None is applicable
Answer:
(b) Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March, 2009. Thus it is governed by Limited Liability Partnership Act, 2008.

Question 102.
In case of Co-operative Societies, liability of members is:
(a) Unlimited
(b) Limited but unlimited in few cases
(c) Limited to the extent of capital contribution
(d) None is applicable
Answer:
(c) The liability of member is limited to the extent of capital contributed by them. He is not personally liable of co-operative society for any liabilities.

Question 103.
Which of the following is treated as a separate legal entity different from its members?
(a) Sole proprietorship
(b) Hindu undivided family
(c) Partnership
(d) Limited liability partnership
Answer:
(d) There are so many types of organisation like:

  • Sole proprietorship
  • Hindu undivided family
  • Company
  • Partnership and (a Limited Liability Partnership).

Limited liability partnership is a forms of organisation which is treated as a separate legal entity from its members separate legal entity means members have only limited liability, they do not need to keep their private property at stake. In case of dissolution of partnership firm, only firm’s asset used to pay outsiders or other liability, not need to use private property of members.

Question 104.
Why Co-operative Marketing Society is formed?
(a) To protect the interest of general consumers
(b) To sell the product of small formers and producers
(c) To protect the interest of small producers
(d) To provide financial support to the members.
Answer:
(b) Co-operative Marketing Society: Societies are formed by small producers and manufacturers who find it difficult to sell their products individually. The society collects the products from the individual members and take the responsibility to selling those products in the market.

Example : Gujrat Co-operative Milk Marketing Federation that sells AMUL Milk Products. Thus, To sell the product of small producers and manufacturers.

Question 105.
Last process of formation of a LLP:
(a) Download LLP Form
(b) Check name availability
(c) Acquire DPIN
(d) Register DPIN
Answer:
(a) Formation of LLP:

  • Obtain DSN/DPIN
  • Register DPIN
  • Check name availability
  • Download LLP form

hence, option (a) is correct answer

Question 106.
Public Corporation is also called ________.
(a) Departmental undertaking
(b) Statutory corporation
(c) Co-operative Society
(d) All of the above.
Answer:
(b) Public Corporations are also called Statutory Corporations.

Question 107.
Registration of partnership is:
(a) Voluntary
(b) Mandatory
(c) Compulsory
(d) None
Answer:
(a) Registration of a partnership firm is voluntary not mandatory.

Question 108.
Minimum requirement of capital to form an LLP is?
(a) ₹ 50,000
(b) ₹ 1 lakh
(c) No such capital required/prescribed
(d) ₹ 25,000
Answer:
(c) Minimum formation capital is not required to form a LLP.

Question 109.
A Multinational Company operates in:
(a) More than one country
(b) less than one country
(c) More than 100 countries
(d) More than 20 countries.
Answer:
(a) A company that operates more the one country is termed as Multinational Company.

Question 110.
OPC must have minimum ________ number of Directors.
(a) One
(b) Three
(c) Five
(d) None
Answer:
(a) One person company must have minimum One Director.

Question 111.
Legacy promotes ________ to business
(a) Start a business
(b) Growth & Development
(c) Maturity
(d) None
Answer:
(b) Legacy means Growth and Development to business.

Question 112.
Oldest form of Organisation:
(a) Partnership
(b) HUF
(c) Sole proprietorship
(d) Company
Answer:
(c) Sole proprietorship is the oldest form of organisation.

Question 113.
The choice of an appropriate from of business organisation largely ________ depends upon:
I. Ease of formation
II. Continuity and Stability
III. Liability aspects
Correct option is:
(a) I and II
(b) II and III
(c) I and III
(d) I, II and III
Answer:
(d) Before selecting any form of business organisation, one must consider the following factors:

  • Easy formation
  • Liability of owner
  • Continuity and stability
  • Capital Adequacy
  • Flexibility of operations
  • Relationship between ownership, control and management.

Thus (i), (ii) & (iii) i.e. case of formation, continuity & stability and liability aspects, all are considered while making choice of an appropriate form of business organisation.

Question 114.
The minimum number of members required to get a Co-operative Society registered is:
(a) 15
(b) 20
(c) 10
(d) 5
Answer:
(c) Co-operative Society is a voluntary association of persons who join together to safeguard their own interest. It is a business activity without having any profit. Any 10 members can form Co-operative Society.

Question 115.
Which of the following entity is created under an Act of the parliament or an Act of the State Legislature?
(a) Statutory Corporation
(b) Government Companies
(c) Co-operative Society
(d) Limited Liability Partnership
Answer:
(a) Statutory Corporation refers to an autonomous corporate body created under an Act of Parliament or as act of State legislature. It is set up by statute.

Question 116.
Which form of business organization has a separate legal entity?
(a) Hindu Undivided Family (HUF)
(b) Co-operative Society
(c) Partnership firm
(d) Sole proprietorship
Answer:
(b) Co-operative Society possess the following characteristics

  • Voluntary Association
  • Separate Legal Entity
  • Democratic management
  • Service motive
  • Utilisation of surplus
  • Cash trading
  • Fixed Rate of Return
  • Government control.

Thus, Co-operative Society has separate legal entity.

Question 117.
What is Karta liability in HUF?
(a) Limited by gaurentee
(b) Unlimited
(c) Limited
(d) (b) and (c) both
Answer:
(b) The liability of co – parceners is limited, except for that of Karta. This makes the Karta to manage the business in the most efficient manner. Thus the Karta in HUF has unlimited liability

Question 118.
Liability of ‘KARTA’ is:
(a) Unlimited
(b) Limited to his share
(c) Can’t say
(d) Limited
Answer:
(a) The liability of each member of the Hindu Undivided Family business is limited to the extent of his share in the business. But the liability of ‘Karta’is unlimited as, it extends to his personal property.

Question 119.
Liability of ‘KARTA’ is:
(a) Unlimited
(b) Limited to his share
(c) Can’t say
(d) Limited
Answer:
(d) There is no minimum required capital to start a limited liability partnership, according to Companies Amendment Act, 2015. A LLP hpn even be started with Re. 1/- capital. There is no minimum capital for LLP.

CS Foundation Business Environment and Law Notes

Business Environment – CS Foundation Business Environment Notes

Business Environment – CS Foundation Business Environment Notes

Introduction:
Chester I. Barnard, “Environment consists of atoms and molecules, agglomeration of things in motion, alive, of men and emotions, of physical, and social laws, social ideas, norms of actions, of forces and resistence. The number is infinite and they are always present, they are always changing.”

  • Environment is always changing.
  • Each business operates in a unique environment.
  • Environment influence businesses and in turn, businesses influences environment.

Meaning of Business Environment:

  1. The term ‘business is wide and is put to different usages.
  2. ‘Business’ can referred as any activity consisting of purchase, sale, manufacture, processing and /or marketing of products and/or services.
  3. Business is said to exist for profits.
  4. Both society and business cannot function without each other.
  5. Business vary in size, as measured by the number of employees or by sales volume etc.
  6. There is the single word that describes today’s business, it is ‘change’.
  7. “Modern business is dynamic”.
  8. ‘Environment’ refers to the surroundings.
  9. ‘Business environment’ is the sum of several external and internal forces that affects the functioning of business.
  10. “Environment factors or constraints are largely if not totally, external and beyond the control of individual industrial enterprises and their managements.”
  11. There is close interaction between Business and its Environment.
  12. Factors such as change in technology, factors etc., are to be considered by an organisation in order to survive in the changing business environment.
  13. In order to be successful, business is required to not only recognise various elements of environment but also have to respect, adapt or manage and influence them.
  14. Environment possess threat to the firm as well as offer immense opportunities for exploitation.
  15. However, besides earning profits, business survives for various other reasons in the society. They are –
    (a) becoming an important institution of society
    (b) supplying goods and services
    (c) creating jobs for unemployed
    (d) offering better standard/quality of life
    (e) contributing to the overall economic growth of the country.

Features of Business Environment:
1. The following features of business environment helps a person to understand the environment within which his business has to function:
(i) Dynamic: Business environment is always changing in nature. This is due to the various types of influences operating in the environment like needs of customers, fashion, technology, etc.

(ii) Multi-faceted: Any change occurring in the business environment are viewed differently by different persons. What form does this change takes depends upon the observer’s perception. E.g. a same development may be taken as opportunity for some while it may be taken as threat for some others.

(iii) Sum of external forces: Business environment is an aggregate of various externa! factors.

(iv) Uncertainty: In today’s world, environment is changing every moment. Thus, with such frequent changes it is difficult to predict the future happenings and non-happening.

(v) Both specific and general forces: Business environment consists of both specific and general forces. Specific forces refers to the forces that affects the individual enterprises iike customers* suppliers etc. General forces refers to the forces that affects all the enterprises in an industry together like social, legal conditions etc.

(vi) Relativity: Business environment can be regarded as a relative concept as it changes from one region to another, from one country to another and even from one individual to another individual.

2. Importance of Business Environment: Giving Direction for Growth: Correct assessment and interaction with environment leads to new frontiers of growth for the business enterprises. Adoption of the changes in the business environment and thereby, moving along with it, helps the business in various ways which are as follows:
(i) Threat Identification: Identifying the threats operating in the environment beforehand helps the firms to take corrective and preventive measures. This is essential for the firms in order to survive competition.

Example : Microsoft keeps upgrading its product and launches new version of windows in order to be the market leader similar is the case with i-phone.

(ii) Performance Improvement: By keeping a continuous check on the environment, the firms can adopt the business practices suitable for the present situation, thus improving its performance.

(iii) Meeting Competition: Keeping track with the changing environment helps the firm to analyze its competitor’s strengths, weaknesses and further strategies. Thus, the firm can form its own strategies accordingly. Example : Nokia has launched its Lumia Series Phones in order to cope competition with Samsung Galaxy.

(iv) Advantage of first mover: The firm can succeed its competitors only by exploiting the opportunities coming their way before their competitors.

(v) Able to cope with rapid changes: All firms must understand the dynamic environment properly and must take suitable steps in order to cope up with these rapid changes taking place.

(vi) Continuous learning: Business environment helps the managers to face the challenges as it requires them to update their skills and knowledge.

(vii) Building image: Company’s which are more sensitive to the changes in the environment are in better position than others. Thus, it helps the company to build its goodwill. Example : Windows are frequently updated by Microsoft.

Vision Statement:
1. ‘Vision Statement’ is a road map of a company’s future. It describes the desired future position of the company.

2. Vision Statement answers the following question:

  • Who we are and where we are new?
  • Where we are going?

Some examples of Vision Statement:

  • Disney’s Mission : is to entertain inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands creative minds and innovative technologies that make ours the world’s premier entertainment company.
  • ICSI : ‘to be a global leader in promoting good corporate governance’

Mission Statement:
1. ‘Mission Statement’ helps defining the company’s business, its objectives and. its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus, activities, and business make up.

2. When your vision is your ultimate goal, your mission is how you will get there.

3. Mission Statement answers the following questions:

  • What does our company do?
  • Who do we do it for?
  • Where do we exist?
  • How does we do it?
  • Why does our company do it?

4. The business vision and mission is paramount to the future growth and success of the business no matter the size of the organisation.

5. Internal factors include the vision and mission of the organization and other internal mechanism of the organization.

Some examples of mission statement:

  1. Reliance Industries : ‘To become major player in chemical business and grow in other growth oriented industries like infrastructure’.
  2. ICSI : To develop high caliber professionals facilitating good corporate governance.
  3. Facebook : ‘To give people the power to share and make the world more open and connected’
  4. Ranbaxy : To become a $1 billion research – based global pharmaceuticals’.

Uses of Vision And Mission Statement:
Vision and Mission Statement provides various uses to the organization:

Internally:

  1. Helps in defining performance standards.
  2. Guides the employees in decision making.
  3. Guides the management while planning on strategic issues.
  4. Inspires the employees to work more productively.
  5. Helps establishing a framework for ethical behaviour.

Externally:

  1. Helps in better communication with customers, suppliers and alliance partners and also create closer linkage.
  2. Provides external support.
  3. Serves as a public relations tool.
    Business Environment – CS Foundation Business Environment Notes 1

Internal Environment: It consists of the factors that are within the control of business.
(i) Man i.e. Human Resources: It is the strength and weakness of any organisation and must possess various characteristics like, skills, quality high morale, attitude etc.

(ii) Money i.e. Financial Resources: Various financial factors like the financial position, financial policies and its resources affects the business functioning. The source of finance is share capital banking and other financial institutions etc.

(iii) Various Marketing Resources: Factors like brand, equity, distribution network etc. effects the marketing efficiency and performance of a company directly, thereby affecting the company’s decision making.

(iv) Machinery i.e. Physical Assets: Efficient working of any organisation is possible only on proper acquisition and working of assets. Money invested in such assets must provide enough returns and profits so as to satisfy the organisation. It also depends on the technical development and government policy.

(v) Management Structure: It includes the internal structure of any organisation like the Board of Director’s Composition etc. which directly affect the company’s decision. It also affects the strategies undertaken by the company. The management structure must be in accordance with the business environment.

(vi) Miscellaneous Factors: It includes:
1. R & D:- R & D refers to the company’s ability to innovate and compete, it is mainly focused on technological improvement, (i.e. designing, producing and distributing product in a more creative innovation manner.)

2. Company’s Image & Brand Equity: Image of the company in the outside environment (market) has a direct bearing over the internal environment of the company (ex: raising finance, making JV, expansions, acquisitions etc.)

3. Value system: The principle of wrong and right that are accepted by an individual or organisation are what comprise value system. Value system has important bearing on the business policies, mission, objectives and practices.

  • Company’s brand image and goodwill
  • Competitor’s action it involves
  • Identifying Competitor’s
  • Assessing their strengths, weakness etc.
  • Selecting strategy to deal with them
  • Research and Development
  • Value System of Business

External Environment : It consists of the factors that are outside the company’s boundaries, thus the company have no control over them. Company must adapt to such changes. External environment can be micro or macro.

Micro Environment:

  • It is also known as task or operating environment.
  • It is the immediate environment with which the organisation interacts for its day to day operations.
  • These factors are more closely linked with the company than the macro factors.
  • It affects a particular firm only.
  • The micro environmental forces, though are external factors, still have a direct bearing on the operations of the firms.

It deals with the following:
(i) Consumers/Customers: The main aim of every business is to create and retain customers. Customers pay for company’s product. Thus, they must be provided quality goods at most reasonable prices. Organisation survive on the basis of meeting ‘customer needs & wants’.

(ii) Competitors: Before making any strategy, business must be aware of its competitor’s actions to the environment changes. This will maintain and improve the company’s position. The name of the game in marketing a product is differentiation. Every firm has Unique Selling Point (USP).

(iii) Employees: It includes Board of Directors, owners and employees that are considered as the backbone of the organisation. They influence the day to day functioning of organisation and should be provided with proper training and development while considering the dividend policy of the company. We can say Training & Development play important role.

(iv) Suppliers: They provide raw material for the business’s production activities. They have their own bargaining power which seriously affects the industry’s cost structure.

(v) Shareholders: They invest in company’s capital thus are the owners of company. They affects the company’s operations as they have a right to vote on ail the decisions. Balance must be maintained between organisation’s health and shareholder’s interest.

(vi) Media: It must be organised in such a way that it promotes the ‘ positive things of organisation while reduces the impact of negative things. It helps in building image and reputation.

Some organisation employ (PR) consultants to manage particular event or incident. Positive media can ‘make’ an organisation & negative media attention can ‘break’ an are required.

Macro Environment:

  • When the macro factors become uncontrollable the success 01 company depends upon its adaptability to the environment.
  • It is also known as General or Remote environment.
  • It is beyond the direct influence and control of organisation.
  • These factors are more uncontrollable than micro factors.
  • It covers the broader issues with which the organisation deals for long term working.

It deals with the following: (STEEP)
(i) Socio-Cultural and Demographics: It consists of societal values, lifestyle and various characteristics of population. Those characteristics have to be identified which affects the further strategic competitiveness of the company. They affect directly or indirectly to the business environment. It include social factor like customs, tradition, values, beliefs, poverty, literacy, life expectancy rate etc.

(ii) Technological: This environment includes the methods, techniques and approaches adopted for production of goods and services and their distribution. Technology and business are highly inter related and inter-dependent. Technology influences the business operations and brings many opportunities for the business. It come in many form like medical devices etc.

(iii) Economic: It represents the situation of the region and nation in which the firm operates. Business obtains all its inputs from the economic environment and all its outputs are also absorbed there. It includes the following factors :
(a) Economic Conditions

  • Gross Domestic Product,
  • Per Capital Income,
  • Capital Availability,
  • Foreign Exchange Reserves etc.
  • Markets
  • Foreign Trade
  • Capital Market

(b) Economic Policies

  • Industrial Policy,
  • Fiscal Policy,
  • Monetary Policy,
  • Foreign Investment Policy,
  • EXIM Policy, etc.

(c) Economic System

  • Capitalistic Economy,
  • Socialistic Economy,
  • Mixed Economy.

(iv) Ecology and Physical Environment: These factors are important for those units which carry on production and manufacturing activities. It includes weather, climatic conditions, availability of natural resources, location aspect etc. They play an important role for those who carry out production & manufacturing activities.

(v) Political and Legal: Political environment means the political system, the government policies and their attitude towards the business community. Political groups put pressure on business for political gain by raising the sensitive issues relating to public.

Legal environment means the flexibility and adaptability of law and other legal rules governing the business. Every business has to work within the framework of law. Political Environment refer three political institution viz. legislature, executive, judiciary in shaping, directing and controlling business activities.

Global Integration: There was a growth in NNP, per capita income, infrastructure etc.

  • Government has taken several steps to speed up the industrial growth and solve various economic problems.
  • Government efforts resulted in a mixed response.
  • Radical change in economic policies was brought in 1991.
  • Foreign Investment Promotion Board was set up to channelize the foreign capital investment in India.
  • It includes – Liberalisation, Privatisation and Globalisation
  • This resulted in increase in Per Capita income, Net National Product, Infrastructure development, etc.

Features of Current Phase of Globalisation:

  • Developing new financial markets
  • Growing Global Consumer Market with global brands.
  • Reducing anti-trust laws and proliferating mergers and acquisitions.
  • Growing trend of multilateral agreements
  • Conventions and agreements on the global environment

Liberalisation – refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.

Liberalisation Includes:

  • Abolishing industrial licencing requirement
  • Freedom in fixation of prices of goods and services.
  • Reduction in tax rates.
  • Freedom in deciding business scale.
  • Simplifying import export procedure.
  • High foreign exchange reserve.

Benefits of Liberalisation:

  • Liberalisation has led to expansion of Indian Economy.
  • Easy entry of foreign business organisations in India.
  • Stiff competition has led to increase in efficiency.
  • High growth rate.
  • Availability of goods at competitive prices.
  • Healthy stock market
  • Low inflation rate, etc.
  • Good industrial relation
  • Strong rupee
  • High foreign exchange Rate

Privatization:
1.  Privatization refers to the transfer of assets or service functions from public to private ownership or control. “It means the withdrawal of the state from an industry or sector – partially or fully.”

2. Privatization has become a universal trend. Even in communist countries it became a measure of economic rejuvenation.

3. Launching and sustaining transformation of the economy from a command to a market mode (capitalistic).

4. Its objectives are:

  • To increase the size of private sector, distributing more widely in the population at large.
  • Improving the performance of Public Sector Units.
  • Encourage private sector investments.
  • Revenue generation.
  • Reduction of administrative burden.
  • Launching and sustaining the transformation of the economy for a command to a market model.

Routes of privatization/Methods of privatization:

  • Divestiture : The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy. Business may divest by selling of ownership stakes.
  • Contracting : Under this, the government give contracts for services to be performed and delivered to other organisations.
  • Liquidation : It can be formal (sale of assets and closure of enjire enterprise) or informal (suspending some of its operations).
  • Denationalisation/Reprivatization : it means transferring something from state ownership to private ownership.
  • Franchising : Government gives authorisation to someone to sell or distribute its goods or services in a certain designated area.
  • Leasing : It is a process by which government can obtain the use of certain fixed assets for which it may pay a series of payments.
  • Government withdrawal : Government withdraws its production from certain goods and services, leaving them completely with private enterprises.

Benefits of privatization:

  • Reducing fiscal burden
  • Reviving sick units
  • Reducing the size of administrative machinery
  • Helps in generating funds
  • Enabling the government to concentrate on essential states.
  • Private sector registered fast growth in the post liberalized period.

Functions of privatization:

  • Better management of enterprises
  • Encourage entrepreneurship
  • Accelerate pace of economic development
  • Increase number of workers and common man who an shareholders.

Problems in privatization:

  • Growth of monopoly power
  • Loss making units are not bought
  • Lop- sided industrial development

Globalization (Became a buzzword):
(i) It refers to integration of world into one huge market by removing the trade barriers among countries. It means, the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more rapid and wide spread diffusion of technology.

(ii) Globalisation is at two levels:

  • Macro and
  • Micro

(ii) Reasons for globalisation:

  • Rapid shrinking of time and distance.
  • Domestic markets are no longer adequate and rich.
  • Foreign market becomes large enough to justify foreign investment.
  • Reduce high transportation cost
  • Political stability
  • To get technology
  • To secure reliable or cheaper source of raw materials.
  • Generate higher sales
  • Better cash flows.

US, Canada and Mexico have signed the North America Free Trade Agreement (NAFTA) to remove all trade barriers among their countries.

The following are the features of the current phase of globalization:
New Markets –

  • Growing global markets in services – banking, insurance, transport.
  • New financial markets- deregulated, globally linked, working around the clock, with action at a distance in real time, with new instruments such as derivatives.
  • Deregulation of anti-trust laws and proliferation of mergers and acquisitions.
  • Global consumer markets with global brands.

(iv) New Rules and Norms –

  • Market economic policies spreading around the world, with greater privatization and liberalization than in earlier decades
  • Widespread adoption of democracy as the choice of political regime
  • Human rights conventions and instruments building up in both coverage and number of signatories – and growing awareness among people around the world
  • Consensus goals and action agenda for development
  • Conventions and agreements on the global environment – biodiversity, ozone layer, disposal of hazardous wastes, desertification, climate change.
  • Multilateral agreements in trade, taking on such new agendas as environmental and social conditions.
    New multilateral agreements for services, intellectual property, communications – more binding on national governments than any previous agreements
  • The multilateral agreement on investment under debate.

(v) Comparative Analysis of Business Environment – India and other countries:
1. Business Environment of a company comprises of all factors which, directly affect the functioning of a company or business enterprise.

2. Every country is different in terms of micro environment and macro environment which it provides to corporate entities operating there. India has a young population, with around 65% in the age group of 15 to 64 years.

3. The Companies Act, 2013 has also greatly impacted the doing business in India.

4. As per the World Bank doing business, India made the biggest improvement in business regulation, increasing its distance to frontier score by 2 points and moving up in the ease of dong business ranking from 134 in 2015 to 130 out of 189 countries in 2016.

5. The ‘Doing Business’ rankings are published by the World Bank each years and the rankings are based on 10 parameters.

7. India ranks in the top 10 in Protecting Minority Investors.

8. India is a vibrant market for telecommunication products such as mobile telephones and internet connections, automobiles and several other consumer and luxury goods.

9. India has witnessed massive improvement in the quality of Its automobile manufacturing after 1990s when several international players began manufacturing their products in India.

10. The socio-cultural fabric is another important environmental factor that should be analysed while comparing business India with respect to other countries.

11. The differences in language sometimes pose a serious problem, even necessitating a change in the brand name.

12. Geographical and ecological factors, such as natural resources endowments, weather and climatic conditions, topographical factors, locational etc. are all relevant to business.

13. Technological factors sometimes pose problems. A firm, which is unable to cope with the technological changes may not survive.

14. India is the world’s largest democracy in terms of voters and is a parliamentary form of government with a two timed parliament executive and judiciary all having district but inter related functions.

15. India has reasonably liberalized economy since the economic reforms initiated in 1991.

16. GDP growth rate in India is 7% per annum.

17. India is a country with strong banking system and vibrant capital market.

18. India’s financial system is led by its large banking industry with total deposits of all scheduled commercial banks in India in nearly US $ 1.52 trillion.

19. Outstanding loans and advances is approx US $ 1.1 trillion (₹ 74,352 billion) as on March, 2014.

20. As per the latest data from world federation of exchanges the share of the US in world cap is 38%, that of India 2.00% and of China 14.3%.

21. The foreign investment has shown positive growth in both portfolio and direct investment terms over the last two decades.

22. The factors of the business environment can be broadly divided as:
(a) Micro environment: It consists of factors specific to the company such as its customers, competitors, suppliers, investors and creditors of the company which impact functioning and performance of the company directly and is part of its immediate environment.

(b) Macro environment: The macro environment consist of factors which impact all companies or corporate entities functioning in a country and include legal and taxation issues, regulators, political and government influences, social and cultural issues, technological and economic factor.

23. These parameters are as follows:

  • Starting a business
  • Dealing with construction permits
  • Getting electricity
  • Registering property
  • Getting credit
  • Protecting minority investors
  • Paying taxes
  • Trading across borders
  • Enforcing contracts, and
  • Resolving insolvency.

Multiple Choice Questions

Question 1.
Profit is the only objective of all business firms _______.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(b) False

Question 2.
Modern business is _______.
(a) Constant
(b) Profitable
(c) Dynamic
(d) Stable
Answer:
(c) Dynamic

Question 3.
Features of business environment does not include:
(a) Uncertainty
(b) Relativity
(c) Static Nature
(d) Specific and General forces
Answer:
(c) Static Nature

Question 4.
_______ tells the purpose of business existence.
(a) Vision
(b) Mission
(c) Both (a) and (b)
(d) None of the above
Answer:
(b) Mission

Question 5.
Both Vision and Mission statements are commonly used to:
(a) define measurement standards
(b) create wider linkages with customers, suppliers and alliance partners
(c) guide managements thinking on strategic issues
(d) enlist internal support
Answer:
(c) guide managements thinking on strategic issues

Question 6.
“Where you can visualize your business in 7 years time”. This is a:
(a) Mission Statement
(b) Vision Statement
(c) Business Statement
(d) Statement of purpose.
Answer:
(b) Vision Statement

Question 7.
“To be a global leader in promoting good corporate governance” is a _______ of ICSI .
(a) Vision
(b) Mission
(c) None of the above
(d) Both (a) and (b) above.
Answer:
(a) Vision

Question 8.
Types of Business Environment includes the following:
(a) Internal
(b) External
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 9.
Internal business environment does not include:
(a) Man
(b) Money
(c) Marketing Resources
(d) Government Policies.
Answer:
(d) Government Policies.

Question 10.
Environment factors which are within the control of business are known as:
(a) Micro factors
(b) Internal factors
(c) Macro factors
(d) External factors
Answer:
(a) Micro factors

Question 11.
_______ is a type of external environment.
a) Operating
(b) General
(c) Remote
(d) All of the above.
Answer:
(d) All of the above.

Question 12.
Micro factors are the factors that are in the company’s immediate environment.
(a) True
(b) False
(c) Partly True
(d) None of the above
Answer:
(a) True

Question 13.
Micro environmental factors can be described as _______ close to a business that have a direct impact on its strategy.
(a) External factors
(b) Internal factors
(c) Both (a) and (b)
(d) Competitive factors
Answer:
(b) Internal factors

Question 14.
Macro environment is also known as :
(a) Task environment
(b) Remote environment
(c) Global environment
(d) Operating environment
Answer:
(b) Remote environment

Question 15.
_______ factors affects the economy as a whole and are not Particular to any organisation.
(a) Micro
(b) Macro
(c) Internal
(d) None of the above
Answer:
(b) Macro

Question 16.
Change in technology, economic conditions, political and legal factors are _______ factors.
(a) Internal
(b) External
(c) Both (a) and (b)
(d) None of these
Answer:
(b) External

Question 17.
Which of the following is not included in liberalization _______.
(a) Reduction in tax matter
(b) Abolition of licensing
(c) Simplification of policies
(d) Imposition of tariff barriers.
Answer:
(d) Imposition of tariff barriers.

Question 18.
Which of the following is a type of economic system?
(a) Capitalistic economy
(b) Socialistic economy
(c) Mixed economy
(d) All of the above
Answer:
(d) All of the above

Question 19.
_______ is a process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.
(a) Privatisation
(b) Globalisation
(c) Liberalisation
(d) None of the above.
Answer:
(c) Liberalisation

Question 20.
Liberalisation does not include:
(a) Abolishing industrial licensing requirement in most of the industries
(b) Freedom in fixing prices of goods and services
(c) Restriction in deciding the scale of business activities
(d) Simplifying the procedure for imports and exports.
Answer:
(c) Restriction in deciding the scale of business activities

Question 21.
Following is not an objective of privatisation :
(a) Improving the performance of PSU’s
(b) Decreasing the size of private sector
(c) Reducing administrative burden
(d) Revenue Generation.
Answer:
(b) Decreasing the size of private sector

Question 22.
Routes of privatisation include :
(a) Divestiture
(b) Contracting
(c) Nationalisation
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

Question 23.
NAFTA stands for:
(a) New American Free Trade Agreement
(b) North African Free Trade Agreement
(c) North American Free Trade Agreement
(d) North American Full Trade Acceptance.
Answer:
(c) North American Free Trade Agreement

Question 24.
NAFTA was signed among following countries:
(a) US, Canada, Mexico
(b) India, US, Pakistan
(c) US, Canada, UK
(d) None of the above.
Answer:
(a) US, Canada, Mexico

Question 25.
_______ describes the desired future position of the company,
(a) Internal Environment
(b) Mission Statement
(c) Vision Statement
(d) External Environment.
Answer:
(c) Vision Statement

Question 26.
A Business has absolute control on the _______.
(a) Internal Environment
(b) External Environment
(c) Both (a) & (b)
(d) None of these.
Answer:
(a) Internal Environment

Question 27.
Micro and Macro Environment is the part of _______.
(a) Business Environment
(b) Internal Environment
(c) External Environment
(d) Both (b) & (c).
Answer:
(c) External Environment

Question 28.
Micro Environment is also known as _______.
(a) Operating Environment
(b) Task Environment
(c) Both (a) and (b)
(d) Either (a) or (b).
Answer:
(c) Both (a) and (b)

Question 29.
Financial Factors, Human Resource, Marketing Resource and Miscellaneous Factors are _______ Factors.
(a) Micro
(b) Macro
(c) Internal
(d) External.
Answer:
(c) Internal

Question 30.
GDP, Per capital income, foreign exchange are the examples of _______.
(a) Economic Policy
(b) Economic System
(c) Economic Conditions
(d) Both (a) and (b).
Answer:
(c) Economic Conditions

Question 31.
When did Government of India introduced a change in Economic Policy _______.
(a) 1892
(b) 1991
(c) 1895
(d) 1781
Answer:
(b) 1991

Question 32.
Through the _______ Process, Indian economy has opened up and started interacting with the world.
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) None of these.
Answer:
(a) Liberalisation

Question 33.
Which process of development became a vital measure of economic rejuvenation in the communist countries:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) Both (a) and (b).
Answer:
(b) Privatisation

Question 34.
_______ has become universal trend.
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) None of these.
Answer:
(b) Privatisation

Question 35.
High growth rate, easy availability of goods, at competitive rate, high foreign exchange reserve can be achieved by:
(a) Liberalisation
(b) Privatisation
(c) Globalisation
(d) All of the above.
Answer:
(a) Liberalisation

Question 36.
_______ means transferring something from state ownership to private ownership.
(a) Decentralisation
(b) Denationalisation
(c) Divestiture
(d) None of these.
Answer:
(b) Denationalisation

Question 37.
Problems in Privatisation are:
(a) Growth of monopoly power
(b) Loss making units are not bought
(c) Lop-sided industrial development
(d) All of the above.
Answer:
(d) All of the above.

Question 38.
_______ refers to integration of world into one huge market by removing the trade barriers among countries.
(a) Privatisation
(b) Liberalisation
(c) Globalisation
(d) None of these.
Answer:
(c) Globalisation

Question 39.
Benefits of Privatisation does not include _______.
(a) Reducing fiscal burden
(b) Sick units reconstruction
(c) Reducing the size of administrative machinery
(d) Low inflation rate.
Answer:
(d) Low inflation rate.

Question 40.
_______ is the process by which government can obtain the use of certain fixed assets for which it may pay a series of payments.
(a) Franchising
(b) Leasing
(c) Contracting
(d) Both (a) and (b).
Answer:
(b) Leasing

Question 41.
_______ helps defining the company’s business, its objectives and its approach to reach those objective.
(a) Vision statement
(b) Mission statement
(c) Business statement
(d) Statement of purpose.
Answer:
(b) Mission statement

Question 42.
_______ means the flexibility and adaptability of law and other legal rule governing the business.
(a) Political Environment
(b) Legal Environment
(c) Technological Environment
(d) Both (a) and (c)
Answer:
(b) Legal Environment

Question 43.
Economic Policies are framed by _______.
(a) Private
(b) Business
(c) Government
(d) Semi government
Answer:
(c) Government

Question 44.
Legislature, executive and the judiciary comes under the _______.
(a) Political Environment
(b) Physical Environment
(c) Legal Environment
(d) Both (a) and (c).
Answer:
(a) Political Environment

Question 45.
A statement answers the question “why do we exist”?
(a) Vision
(b) Mission
(c) Both (a) and (b)
(d) None of the above.
Answer:
(b) Mission

Question 46.
_______ Statement defines the company’s business, its objectives and its approach to reach these objectives.
(a) Vision
(b) Mission
(c) Profitability
(d) Annual Report
Answer:
(b) Mission

Question 47.
In a mission /vision Statement, the matters relating to guiding employee decision making, establishing ethical behaviour, performance standards etc are.
(a) Internal to organisation
(b) External to organisation
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(a) Internal to organisation

Question 48.
The matters relating to creating close linkages and letter communication with customers, suppliers and alliance partners given in a mission/ vision Statement are
(a) Internal to organization
(b) External to organization
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) External to organization

Question 49.
_______ is the future dream of a business.
(a) Balance Sheet
(b) Vision Statement
(c) Mission Statement
(d) None of the above
Answer:
(b) Vision Statement

Question 50.
The question like “Where do you exist”, “How does it do it” are covered by _______.
(a) Vision Statement
(b) Mission Statement
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(b) Mission Statement

Question 51.
Which of the following is-not covered by the organisation’s Internal Environment _______.
(a) Human Resource
(b) R & D
(c) Media
(d) Management Structure
Answer:
(c) Media

Question 52.
The forces which are external but still have a direct bearing on the operations of the firm are called.
(a) Micro Environment
(b) Macro environment
(c) Internal Environment
(d) All of the above
Answer:
(a) Micro Environment

Question 53.
Customers, shareholders, competitors, etc. are the elements of _______.
(a) Micro Environment
(b) Internal environment
(c) Macro Environment
(d) None of the above
Answer:
(a) Micro Environment

Question 54.
Technology, Culture, Demographics etc. are the elements of _______.
(a) Internal Environment
(b) Micro Environment
(c) Macro Environment
(d) None of the above
Answer:
(c) Macro Environment

Question 55.
The size, density, distribution and growth rate of population is called _______.
(a) Ecology
(b) Habitat
(c) Demographics
(d) None of the above
Answer:
(c) Demographics

Question 56.
_______ was Set up to channel foreiqn capital investment
(a) SEBI
(b) Foreign Investment Promotion Board
(c) Special Economic Zone
(d) International Trade Promotion Board
Answer:
(d) International Trade Promotion Board

Question 57.
Which of the following is an element of Political environment?
(a) Legislature
(b) Judiciary
(c) Executive
(d) All of the Above
Answer:

Question 58.
Which of the following is a method of Privatisation _______
(a) Divestiture
(b) Denationalization
(c) Franchising
(d) All of the above
Answer:
(d) All of the above

Question 59.
The form of privatisation in which the government company retains its legal status even though some or all of its operations are suspended is called.
(a) Controlling
(b) Formal liquidation
(c) Informal liquidation
(d) Denationalisation
Answer:
(c) Informal liquidation

Question 60.
The method of Privatisation in which the government authorises the delivery of certain services in a designated area is called _______.
(a) Franchising
(b) Leasing
(c) Contracting
(d) Divesture
Answer:
(a) Franchising

Question 61.
Which of the foliowing is not a use of Vision/Mission Statement?
(a) Inspiring the Employees
(b) Defining Problems & Standards
(c) Increasing the profits and revenue
(d) Defining the Performance Standards
Answer:
(c) Increasing the profits and revenue

Question 62.
Which of the following is not true in relation to the business environment?
(a) It is beyond the organisational
(b) It is a sum total of internal and external control factors
(c) Organisation can remain insensitive to the business environment
(d) It is dynamic in nature
Answer:
(c) Organisation can remain insensitive to the business environment

Question 63.
USP stands for _______.
(a) Unique Selling Price
(b) Unique Strategic Price
(c) Unique Selling Point
(d) Ultimate Selling Price
Answer:
(c) Unique Selling Point

Question 64.
The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy is called as _______.
(a) Divestiture
(b) Environment withdrawal
(c) Denationalisation
(d) Reprivatisation
Answer:
(a) Divestiture

Question 65.
The process of restoring to its former properties seized by the government is called _______.
(a) Divestiture
(b) Restoration
(c) Reprivatisation
(d) Liquidation
Answer:
(c) Reprivatisation

Question 66.
Sole proprietorship for is most suitable for;
(a) Where the nature of business is simple
(b) Where manual skill is required
(c) Where the market for the product is small & local
(d) All of the above
Answer:
(d) All of the above

Question 67.
Which of the following can be treated as characteristics of business organization?
(a) All business enterprise engage in operation on a continuous basis.
(b) Business undertakings are not exposed to any risk for uncertainty.
(c) A business firms are owned by one individual and not by a group of individuals jointly.
(d) All of the above.
Answer:
(a) All business enterprise engage in operation on a continuous basis.

Question 68.
_______ in any organization must have characteristic like skills, quality, high morale, commitment towards the work, attitude etc.
(a) Marketing Resources
(b) Financial factors
(c) Human Resource
(d) All of the above
Answer:
(c) Human Resource

Question 69.
Which of the following is a part of liberalisation process?
(a) Making industrial licensing requirement mandatory in most of the industries
(b) Regulating the scale of business activities
(c) Fixing of prices of goods and services
(d) Simplifying the procedures for imports and exports
Answer:
(d) Liberalisation refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.
It includes:

  • Abolishing industrial licensing requirement
  • Freedom in fixation of goods and services
  • Reduction in tax rates
  • Freedom in deciding business scale
  • Simplifying import export procedures

Thus, among the given options, simplifying the procedures for imports and exports is right.

Question 70.
Macro factors of business environment are generally:
(a) As controllable as micro factors
(b) Less controllable than micro factors
(c) More controllable than micro factors
(d) None of the above
Answer:
(b) Macro Environment also known as General or Remote Environment is beyond the direct control and influence of the organisation. These factors are more uncontrollable than micro factors i.e. they are less controllable than micro factors.

Question 71.
Which one of the following is the result of product differentiation?
(a) Brand Equity
(b) Competitive Advantage
(c) Value System
(d) None of the above
Answer:
(b) Competitor analysis is a critical aspect of analyzing the internal business environment. Competitor’s action affect the ability of the business to make profits, because competitors will continually seek to gain advantage over each other, by differentiating their product and service and by seeking to provide better value for money.

Question 72.
Which one of the following is the desired future position?
(a) Financial Statement
(b) Vision Statement
(c) Objectives
(d) All of the above
Answer:
(b) Vision Statement is a road map of a company’s future. It describes the desired future position of the company.

Question 73.
Mission Statement of a company is derived from its:
(a) Articles of Association
(b) Vision Statement
(c) Memorandum of Association
(d) Prospectus
Answer:
(b) Mission Statement helps defining the company’s business, its objectives and its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus, activities and business makes, thus helping an organisation to reach its desired future position as set out in its vision statement.
Thus, mission statement of a company is derived from its Vision Statement.

Question 74.
There is a close and interaction between the business and its
environment.
(a) Frequent
(b) Continuous
(c) Seldom
(d) Occasional
Answer:
(b) Business, environment is always changing in nature. Moreover, environment influences business and in turn, business influences environment. Thus, it can be said that there is close and continuous interaction between business and its environment.

Question 75.
Which one of the following shows a big picture of what a company wants to achieve in future?
(a) Vision statement
(b) Mission statement
(c) Value statement
(d) Quality statement.
Answer:
(a) Vision statement is where you want your business to reach at. It is your future dream for your business. Thus we can say that Vision Statement shows a big picture of what a company wants to achieve in future.

Question 76.
Value system of an organisation have an impact on its:
I. Objectives
II. Policies
III. Practices
IV. Profit
The correct option is:
(a) I and II only
(b) I, II and III only
(c) II, III and IV only
(d) I, II, III and IV.
Answer:
(b) The principles of right and wrong that are accepted by an individual or organisation are what comprise value system. The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and objectives of the organisation, business policies and practices.
Thus, value system has no impact on profits of an organisation.

Question 77.
Which among the following are the key drivers of globalisation?
(a) Government action, exchange rates, competition and socio-demographic factors
(b) Market convergence, competition, exchange rates and cost advantages
(c) Cost advantages, government action, economic cycles and competition
(d) Market, cost, competition and government policies.
Answer:
(d) Key drivers of Globalisation:

  • Market driver
  • Cost driver,
  • Government driver
  • Competitive driver
  • Other drivers.

Question 78.
Which one of the following is not a feature of business environment?
(a) Dynamic nature
(b) Image building
(c) Uncertainty
(d) Totality of external forces
Answer:
(b) Following are the features of Business Environment:

  • Dynamic
  • Multi – faceted
  • Sum of external forces
  • Uncertainty
  • Both specific and general forces
  • Relatiyity

Therefore, image building is not a feature of business environment.

Question 79.
Which one of the following describes the desired future position of a company?
(a) Mission statement
(b) Vision Statement
(c) Competitive advantage
(d) Qualitative policy
Answer:
(b) ‘Vision Statement’ is a road map of a companies future. It describes the desired future position of the company.

Question 80.
The process of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise is known as :
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above
Answer:
(a) Liberalisation refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises.

Question 81.
Business environment consists of which element?
(a) Internal
(b) External
(c) Both (a) & (b)
(d) None of these
Answer:
(c) Business environment factors is a sum of several external and internal forces that affects the functioning of the business. Thus, it contains both internal and external elements.

Question 82.
Which of the following is not an economic policy?
(a) Industrial Policy
(b) Fiscal Policy
(c) Exim Policy
(d) Technological Policy
Answer:
(d) Economic policies are:

  • Industrial policy
  • Fiscal policy
  • EXIM policy
  • Foreign investment policy

Thus, technological policy is not an economic policy.

Question 83.
Macro environment, is concerned with major issues and upcoming changes in the environment.
(a) True
(b) False
(c) Partly True
(d) Partly False
Answer:
(a) It is true that macro environment is concerned with major issues with which the organisation deals for long term working.

Question 84.
Which of the following factor is not included in micro-environment?
(a) Customers
(b) Employees
(c) Suppliers
(d) Technology
Answer:
(d) Micro economics comprises of following factors.

  • Consumer / Customers – Competitors
  • Employees – Suppliers
  • Share holders – Media

Thus, in the given question, technology is not a factor of micro environment.

Question 85.
The economic environment of business in India is changing at a fast rate mainly due to economic policies:
(a) True
(b) False
(c) Partly Yes
(d) Partly No
Answer:
(b) The economic conditions of a country refer to a set of economic factors that have great influence on business organisations. Hence, the given statement that economic environment of business in India is changing at a fast rate mainly due to economic policies are false.

Question 86.
Which of the following affects an individual enterprise?
(a) General forces
(b) Specific forces
(c) Both (a) and (b)
(d) None of these
Answer:
(b) General forces affect the enterprises or industry as a whole while the specific forces affect the individual enterprises.
Hence, option (b) is correct.

Question 87.
Which among the following is the vision of ICSI?
(a) “Promoting global excellence”
(b) ‘To be a global leader in promoting good corporate governance”
(c) “Partners in Nation building”
(d) “Building corporate responsibility”
Answer:
(b) Vision statement is a road map of a company’s future. Following is the vision of ICSI, “To be a global leader in promoting good corporate governance.

Question 88.
When a state owned enterprise is given in private hands, it is known as ______.
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) Transformation
Answer:
(c) Privatization refers to the transfer of assets or service functions from public to private ownership or control.
Thus, under privatisation a state owned enterprise is given in private hands.

Question 89.
Who started the process of liberalisation?
(a) Yashwant Singh
(b) Jashwant Singh
(c) Manmohan Singh
(d) Mahatma Gandhi
Answer:
(c) Manmohan Singh started the process of liberalisation.

Question 90.
Mission Statement is derived from ______.
(a) Future position of the company
(b) Company’s business and its objectives
(c) Both (a) and (b)
(d) None
Answer:
(b) Mission statement helps defining the Company’s business, its objectives and its approach to reach those objectives. It broadly describes an organisation’s present capabilities, customer focus activities and business makes, thus helping an organisation to reach its desired future position as set out in its vision statement.

Question 91.
Which one of the below is not an example of mission statement?
(a) Disney :‘To make people happy”.
(b) Facebook: “To give people the power to share and make the world more open and connected.”
(c) Google : ‘To organise the world’s information and make it universally accessible and useful.
(d) ICSI : “To develop high caliber professionals facilitating good corporate governance.”
(e) None of these
Answer:
(a) Vision Statement of Disney, ‘To make people Happy.”

Question 92.
Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing it to competitors. The mentioned advantage can be categorised under:
(a) First mover advantage
(b) Initial identifier advantage
(c) Earlier advantage
(d) Second mover advantage
Answer:
(a) Under first mover advantage, early identification of opportunities helps an enterprise to be the first to express them instead of losing them to competitors. For ex. Maruti Udyog became the leader in the small car market because it was the first to recognize the need of small cars in India.

Question 93.
Recruitment of public relations consultants are a part of ______.
(a) Operating Environment
(b) General Environment
(c) Macro Environment
(d) Competitive Environment
Answer:
(a) Public relations is a practice of managing the spread of information between an individual or an organisation the public. Public relations is the idea of creating coverage for clients, rather than marketing or advertising the aim of public relations is to inform the public, prospective customers, investors, partners, employees and other stakeholders and ultimately persuade them to maintain certain view about the organisation. So recruitment of public relation consultants is a part of Operating Environment.

Question 94.
Liberalization in India did not result in:
(a) A high growth rate
(b) A healthy and flourishing stock market
(c) Easy availability of goods at competitive prices
(d) Low foreign exchange reserves
Answer:
(d) Benefits of liberalization includes:

  • It has led to expansion of Indian Economy.
  • Easy entry of foreign business organisation in India.
  • High growth rate.
  • Availability of goods at competitive prices.
  • Healthy stock market.
  • Low inflation rate.

But it does not result in low foreign exchange reserves.

Question 95.
Where is company’s mission statement derived from?
(a) From the vision of the company ‘
(b) From the company policies
(c) Memorandum of Association of the Company
(d) All of the above
Answer:
(a) Elements of Mission and Vision statements are often combined to provide a statement of the purposes, goals and values of the companies. However, some times the two are used interchangeably. Where your vision is your ultimate goal, your mission is how you get there.

Question 96.
Opening up of an industry that has been reserved for the public sector to the private sector is an example of:
(a) Modernisation
(b) Liberalisation
(c) Globalisation
(d) Privatisation
Answer:
(d) Another dimension of privatization is opening up of an industry that has been reserved for the public sector of the private sector.

Question 97.
Mission statement is derived from ______.
(a) Vision statement
(b) Laws and statutes
(c) Company policies
(d) The company’s memorandum of association
Answer:
(a) The mission statement of a enterprise is derived from its vision, at some places mission and vision statements are used interchangeably.

Question 98.
Which of these is not included in (NAFTA) North American Free Trade Agreement?
(a) US
(b) India
(c) Mexico
(d) Canada
Answer:
(b) US, Canada and Mexico have signed the North American Free Trade Agreement to remove all trade barriers among these countries. India is not a part of NAFTA.

Question 99.
Who started the process of liberalisation?
(a) Yashwant Singh
(b) Jashwant Singh
(c) Manmohan Singh
(d) Mahatma Ghandhi
Answer:
(c) Manmohan Singh started the process of liberalisation.

Question 100.
When did Government of India introduced a change in Economic policy?
(a) 1892
(b) 1991
(c) 1895
(d) 1781
Answer:
(b) Government of India introduced a change in Economic policy 1991. This policy abolished licensing in most of the cases, allowed private participation in most industries, disinvestment was carried out in many public sector enterprises and opened up the economy considerably.

Question 101.
Mission statement is derived from:
(a) Company policies
(b) The Companies memorandum of association
(c) Vision statement
(d) Laws and statutes
Answer:
(c) Mission statement is derived from the vision statement, as mission statement defines the company’s objective, business and its approach to reach those objectives or the desired future position of the company. Thus, elements of mission and vision are often combined to provide a statement of purpose, goal and values of the company.

Question 102.
Product differentiation is an example of:
(a) Brand loyalty
(b) Value statement
(c) Brand equity
(d) Competitive advantage.
Answer:
(d) Product differentiation is an example of competitive advantage. To explain it is a critical aspect of analyzing the internal business environment. Competitor’s action affect the ability of the business to make profit and gain an advantage over each other; thus for seeking to provide better value for money.

Question 103.
Which of the following is correct?
(a) Privatisation got momentum in India after 1947
(b) Privatisation and liberalisation has no co-relation
(c) Privatisation facilitates liberalisation
(d) Liberalisation facilitates privatisation
Answer:
(b) Privatisation : The transfer of a business, industry or service from public to private ownership and control, liberalisation. The process of eliminating unnecessary controls and restrictions on the smooth ” functioning of business enterprises. Thus, we can say that there is no co-relation between privatisation and liberalisation.

Question 104.
_______ is not part of External Environment analysis:
(a) Analysing financial ratio
(b) Studying the political environment
(c) Analysis available technologies
(d) Analysis social, cultural, demographic and geographic forces
Answer:
(a) The external environment of an organisation comprises of all entities that exists outside its boundaries, but have significant influence over its growth and survival. Hence, analysing financial ratio is not a part of external environment analysis.

Question 105.
Which of the following is a part of internal environment scanning:
(a) Political environment
(b) Customer preferences
(c) Chain of command
(d) Law and order
Answer:
(b) Customer preferences is a part of internal environment scanning as the organisation survive on the basis of meeting “customer needs and wants” and providing benefits to their customers. Failure to do so will result in a failed business strategy.

Question 106.
Which of the following is not included in an analysis of the business environment?
(a) Economic trends
(b) Animal behaviour
(c) Social behaviour
(d) Political trends
Answer:
(b) The acronym for macro analysis is STEEP. The five areas of Interest are:

  • Socio Cultural and Demographics
  • Technology
  • Economic Condition
  • Ecology and Physical Environment
  • Political and Legal trend

Question 107.
Opening up of an industry that has been reserved for the public sector to the private sector is an example of:
(a) Modernization
(b) Globalization
(c) Liberalization
(d) Privatization
Answer:
(d) Privatization has become an universal trend means transfer of ownership or management from public sector to private sector.

It also means withdrawal of state from an industry or sector, partial or fully. Another dimension of privatization is opening up industry that has been reserved for public sector to private sector.

Question 108.
Which of the following is not correct?
(a) Identification of possible threats does not help an organization to face the competition
(b) Identification of possible threats helps an organization to grow even in competition
(c) Identification of possible threats helps in taking corrective and improving measures to survive the competition
(d) Identification of possible threats require thorough knowledge of business environment
Answer:
(a) Identification of possible threat help an organisation to face competition and even grow.

Question 109.
Generally the main reason behind starting a business is:
(a) Social service
(b) Earning profits
(c) Earning name
(d) Spiritual reasons
Answer:
(b) Every business serve a common purpose to earn profit. All other reasons are secondary.

Question 110.
Key goal in the firm’s growth phase is:
(a) Expansion of sales
(b) Expansion of capital
(c) Cutting costs
(d) Expansion of profit
Answer:
(a) After the successful introduction of a product, the company tries to increase its market share or sales in the growth phase, which is its percentage of sales volume compared to competitors in the same category. The company focuses on additional promotional and distribution efforts to reach as many potential end users as possible.

Question 111.
Competitors are a part of:
(a) External business environment
(b) Internal business environment
(c) Both External and Internal environ Merit
(d) Neither External nor Internal environment
Answer:
(a) External Environment consist of the factors that are outside the company’s boundaries, thus the company has no control over them. Competitors are the part of the same. Before making any strategy, business must be aware of its competitors actions to the environment changes.

Question 112.
An activity which is related with continuous and regular production and distribution of goods and services for satisfying human wants is called:
(a) Production
(b) Distribution
(c) Service
(d) Business
Answer:
(d) Business is very wide term and is put to different usages. It can be referred as the activity consisting of purchase, sale, manufacturing, processing and marketing of goods and services. It exist for profits and satisfying human wants in many ways. Therefore society and business cannot function without each other.

Question 114.
The World Trade Organisation (WTO) is stimulating:
(a) Privatisation
(b) Liberalisation
(c) Localization
(d) Globalisation
Answer:
(d) Globalisation refers to integration of world into huge market by removing the trade barrier among countries. US, Canada and Mexico have signed the North America Free Trade Agreement (NAFTA) to remove all the trade barrier among the countries. Thus, World Trade Organisation (WTO) has stimulated the cross borders trade.

Question 115.
Which of the following is correct?
(a) Liberalization facilitates privatization
(b) Privatization and liberalization have no co-relation
(c) Privatization got momentum in India after 1947
(d) Privatization facilitate liberalization
Answer:
(b) Privatisation and Liberalisation are 2 different concept and they have no correlation among them.

Question 116.
Globalization is an example of which environmental factor?
(a) Economic
(b) Political
(c) Social
(d) Legal
Answer:
(a) Globalisation is an example of economic environmental factor.

Question 117.
Every identification of opportunities help an enterprise to be the first to exploit them instead of losing them to competitors. The mentioned advantage can be categorized under:
(a) Second mover advantage
(b) First mover advantage
(c) Initial identifier advantage
(d) Earlier advantage
Answer:
(b) First mover advantage means early identification of opportunities allows enterprise to exploit them instead of losing them to competitors.

Question 118.
Examples to an organization’s functional units include all of the following except:
(a) Research and development
(b) Competencies
(c) Marketing
(d) Production
Answer:
(b) Organisation’s functional units include :

  • Production
  • Marketing
  • Finance
  • HR
  • R & D

Competencies can not be included in organisations functional units.

Question 119.
Observing Business environmental changes on a continuous basis to ascertain the future value, is called:
(a) Monitoring
(b) Assessing
(c) Forecasting
Answer:
(c) Forecasting means ascertaining future value by continuous observing of environmental changes.

Question 120.
Which of the following shows a big picture of what a company wants to Achieve in future?
(a) Vision statement
(b) Mission statement
(c) Value statement
(d) Quality statement
Answer:
(a) The vision statement describes future position of company or we can say vision statement shows a big picture of what a company wants to achieve in future.

Question 121.
Value System of an organisation have an impact on its:
I. Objectives
II. Policies
III. Practices
IV. Profit
The correct option is:
(a) I and II only
(b) I, II, and III only
(c) II, III, and IV only
(d) I, II, III and IV
Answer:
(b) Value System : A coherent set of the principles of right and wrong accepted by a person, organisation or society. The value system of the founders and those pf helm of affairs has important bearing on the choice of business, the Mission and Objectives of the organisation, business Policies and Practices. Value System is used as a guide to operate the organisation. It is not related to profit.

Question 122.
Which of the following are the key drivers of globalisation?
(a) Government action, exchange rates, competition and socio-demographic factors
(b) Market coverages, competition exchange rates and cost advantages
(c) Cost advantages, Government action, economic cycles and competition
(d) Market, cost, competition and Government policies.
Answer:
(d) Globalisation means the growing economic interdependence of the countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also through the more rapid and wide spread diffusion of technology. Market cost, government policies and competition are the key drivers or integral part of globalisation.

Question 123.
In a business environment, which one of the following is not a political factor?
(a) Tax policy
(b) Employment laws
(c) Environment regulations
(d) Exchange rate
Answer:
(d) Exchange Rate does not come under political factor if we talk about in a business environment.
Entrepreneurs are classified as land owners who are financially independent aristocrat or aristocrat means governed by one person.

Question 124.
WTO is related with ________.
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above.
Answer:
(b) World Trade Organisation (WTO) promotes Globalisation,
option (b) is correct.

Question 125.
Reducing Government Control is a feature of:
(a) Globalisation
(b) Liberalisation
(c) Privatisation
(d) All of these
Answer:
(b) Features of liberalisation:

  • Abolishing industrial licensing requirement
  • Freedom in fixation of prices
  • Reduction in tax burden
  • Freedom in deciding business scale
  • High forex reserve
  • Relaxation / Reduction of government control

Question 126.
Which one of the following is not a feature of business environment?
(a) Dynamic building
(b) Image building
(c) Uncertainty
(d) Totaly of external forces
Answer:
(b) Business Environment has the following features.

  • Dynamic
  • Multi faceted
  • Sum of External Forces
  • Uncertainty
  • Both Specific and general forces
  • Relativity

Therefore, image building is not a feature of business environment.

Question 127.
Which one of the following describes the desired future position of a company?
(a) Mission Statement
(b) Vision Statement
(c) Competitive advantage
(d) Qualitative policy
Answer:
(b) Vision statement is where you want your business to reach at. It is your dream for your business. Thus we can say that Vision Statement describes the desired future position of a company.

Question 128.
The process-of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise is known as:
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) None of the above
Answer:
(a) Liberalisation refers to relaxation of previous government restrictions usually in areas of social and economic policies. It refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise.

Question 129.
Product differentiation is an example of:
(a) Brand Loyalty
(b) Value Statement
(c) Brand Equity
(d) Competitive Advantage
Answer:
(d) Product differentiation is an example of competitive advantage. It is a critical aspect of analysing the internal business environment. Competitor’s action affect the ability of the business to make profits and gain an advantage over each other, thus for seeking to provide better value of money.

Question 130.
Which of them is a object of a business that goes beyond earring profits:
(a) An important institution in society
(b) Creating job opportunities
(c) Offering better quality of life
(d) All of the above
Answer:
(d) Beside earning profits, business survives for various other objects including –

  • Becoming an important institution of society
  • Supplying goods and services
  • Creating job’s for unemployed
  • Offering better Standard / quality of life
  • Contributing to the overall economic growth of the country

Thus all the above stated options are correct

Question 131.
Types of business Environment:
(a) Internal
(b) External
(c) Internal, External, General Specific
(d) (a) and (b) both
Answer:
(d) Business Environment has following two types –

  • Internal Environment the factors which are within the control of business entity.
  • External Environment factors that are out the company’s boundaries, thus the company have no control over them.

Thus the correct answer is option (d)

Question 132.
Match the following:
(a) Globalisation (i) To allow using once name and technique
(b) Franchising (ii) Global and cross border transactions
(c) Privatisation (iii) Abolishing industrial licensing
(d) Liberalisation (iv) Moving to private sectors from state ownership
Options:
(a) (a) III, (b) IV, (c) I, (d) II
(b) (a) II, (b) I, (c) IV, (d) III
(c) (a) IV, (b) I, (c) III, (d) II
(d) (a) I, (b) II, (c) III, (d) IV
Answer:
(b) Globalisation refers to integration of world into one huge market by removing trade barriers among countries. It comprises of global and cross border transactions. Franchising means giving authority to some one to use once name and technique.

Privatisation refers to transfer of assets or service function to private sector from state ownership. Liberalising refers to eliminating unnecessary controls and restrictions. It includes abolishing Industrial Licensing requirement. Thus the correct answer is option (b).

Question 133.
Which statement tells about company’s objectives, it’s approach to reach their objectives.
(a) Mission
(b) Vision
(c) Both
(d) Statement of objectives
Answer:
(a) A mission statements defines the company’s business its objectives and its approach to reach those objective. It can be crafted in the following steps:

  • What does company do?
  • What do you do it for?
  • Where do you exist?
  • How does it do it?
  • Why does your company do it?

Question 134.
To develop high caliber professionals facilitating good corporate governance is:
(a) Mission
(b) Vision
(c) Objective
(d) Motto
Answer:
(a) The Institute of Company Secretary of India has the mission statement as -“To develop high caliber professionals facilitating good corporate governance”.

Question 135.
Liberalisation includes:
(a) Simplifying the procedures for imports and exports.
(b) To generate revenue for the state
(c) It may result in better management of the company
(d) None
Answer:
(a) Liberalization refers to the process of eliminating unnecessary control and restrictions on the smooth functioning of business enterprises.

It includes:

  • Freedom in deciding the scale of business activities
  • Simplified policies to attract foreign capital and technology to India
  • Simplifying the procedures for imports and exports.
  • Reduction in tax rates, etc.

Question 136.
The withdrawal of the state from an industry or sector, partially or fully.
(a) Liberalization
(b) Privatization
(c) Both
(d) Globalisation
Answer:
(b) ‘Privatization’ which has become a universal trend means transfer of ownership and/or management of an enterprise from the public sector to the private sector. There is a withdrawal of the state from an industry or sector, partially or fully.

CS Foundation Business Environment and Law Notes