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Ucit04 Answer
Ucit04 Answer
Ucit04 Answer
SECTION A
Q2: DESCRIBE THE QUALITY OF GOOD BUSINESS MAN
ANS:
Quality # 1. Knowledge of Business:
Quality # 2. Accuracy:
The next main quality is that he realises what he is talking about and
what he means. Precision in regard to the orders and their execution is
imperative. It is essential that he should be a man of right thinking. He
must be able to grasp his problems by treating them quantitatively.
Quality # 4. Alertness:
Quality # 9. Energy:
1. Agreement
The definition of the partnership itself makes it clear that there must
exist an agreement between partners to work together and share profits
amongst them. Partners may make such an agreement either orally or in
writing. If it exists in written form, we refer to such an agreement as a
partnership deed.
Such written or oral agreement between partners must ensure that they
are clear on their status as partners of their firm. This includes details
pertaining to their work as partners, the firm’s businesses, their profit
and loss sharing ratio, etc.
2. Business
The existence of a business is an essential feature of partnerships. There
can be no formal partnership under the Partnership Act if the partners
carry out charitable activities. Section 2 says that business includes any
trade, profession or occupation. What is essential is that the firm must
work with the intention of earning profits.
3. Profit sharing
A partnership does not exist unless partners share the profits of their
firm. A person who works for the partnership business without having a
share in its profits may be an employee, but not a partner. It is
noteworthy to point out that the law only requires the sharing of profits
amongst partners. Consequently, all partners need not share losses as
well.
4. Principal-agency relationship
A partnership firm’s business may be conducted either by all partners
together or by one partner acting on behalf of all others. We commonly
refer to such a peculiar relationship between partners as the principle
of agency.
This principle means that all partners are agents for each other. The
decisions of one partner taken in the ordinary course of business will
bind other partners as well. All partners are liable for acts of the firm
individually and severally.
a. Technical forces
b. Managerial forces
c. Financial forces
d. Marketing forces
e. Forces of risk and fluctuations
1. Technical forces influence size of a firm
Technical forces which influence the optimum size of firm are degree
of specialization (division of labour), mechanization and integration of
work processes.
In the case of division of labor, a job is split into small functions and
each function is assigned to a specific workman. When a workman
performs a specific operation over a long period of time, the skill of the
workman, speed of performance, quality of work etc improve.
From the beginning of 2019, a new reporting requirement means that larger
companies (with more than 250 employees) will have to explain how they
have fulfilled this duty in their annual report.
The duty states a director must act in a way that they consider, in good
faith, would be most likely to promote the success of the company for the
benefit of its members (shareholders) as a whole. When making decisions,
directors must also consider the likely consequences for various
stakeholders, including employees, suppliers, customers and communities.
They should also consider the impact on the environment, the reputation of
the company, company success in the longer term and all of the
shareholders (including minority shareholders).
Independent judgement
The third major duty requires directors to exercise independent judgement.
Directors are meant to develop their own informed view on the company’s
activities.
Gifts or benefits from third parties are also a potential threat to a director’s
objectivity. Most importantly, directors have a statutory duty to disclose any
direct or indirect interest in proposed or existing transactions or
arrangements with the company.
Keeping a record
One of the important purposes of the minutes of board meetings is to
provide a record of the board’s decision-making process.
By law, these minutes must be kept for 10 years. Years from now, it may
be difficult for you to remember if you fulfilled your directors’ duties in
respect of some key decision. The minutes can provide vital evidence that
you did – something that you may well have cause to be grateful for.
The Industrial policy of 1948, which was the first industrial policy
statement of the Government of India, was changed in 1956 in a public
sector dominated industrial development policy that remained in force
till 1991 with some minor modifications and amendments in 1977 and
1980. In 1991, far reaching changes were made in the 1956 industrial
policy. The new Industrial Policy of July 1991 heralded the framework
for industrial development at present.
Partnership Deed
A Partnership Agreement is an agreement between two or more individuals who
would like to manage and operate a business together in order to make a
profit. It is a relatively common business structure in India, and can be contrasted
to other common business structures such as a sole proprietor, a company or a
trust.
In a partnership, several partners are able to work together (unlike a sole
proprietor). Each partner shares a portion of the partnership's profits and
losses and each partner is personally liable for the debts and obligations of the
partnership.
Compared to a company or a trust, a partnership can have lower set up and
administration costs. However, while companies and trusts offer some protections
against liability, a partnership does not. A partnership is not a separate entity
from the partners. If the partnership incurs a liability, the partners are
personally responsible for it. Furthermore, a partner can become liable for debts
that another partner has incurred on behalf of the partnership.
Nevertheless, a partnership is a cheap and convenient way for a several people to
go into business together, and is a popular business structure for many Indians.
And an important step in getting the partnership established, is to make a written
record of the agreement between the partners, by using this Partnership Deed.
This Partnership Deed describes the partner responsibilities, outlines
the ownership interest in the partnership, defines the profit and loss
distribution of each partner, prepares the partnership for common business
scenarios, and includes other important rules about how the partnership will be
managed and conduct business.
The document is a critical foundational document for running a new business and
sets the business up for success by ensuring clear communication and defined
responsibilities for all of the partners. This Agreement documents both
contingency plans for when things go wrong as well as descriptions of the
partnership's day-to-day operations. A Partnership Deed protects all of the partners
involved in the business and any individuals who plan to do business together
should complete a Partnership Deed.
Q11: explain the various types of trade
ANS:
Trade means the sale, transfer or exchange of goods and services for a
money or money’s worth.
Types of Trade-
1. Internal Trade :
Both the buyer and seller belong to the same country in this type of trade.
Payments in this type of trade are made and received in the home currency.
(b) Retail Trade: Retail Trade refers to buying of goods from wholesalers
and/or manufacturers and selling them in small quantities to the ultimate
consumers. People engaged in retail trade are called ‘retailers’. They act as
a link between wholesalers and final consumers. Small scale retailers
include general shops, hawkers, pedlars, etc.
2. External Trade :
External Trade refers to buying and selling of goods and services between
different countries. In this trade, the seller and buyer belong to two
different countries. For example, the trade happening among traders of
India and China.
(a) Import Trade: It means purchasing goods and services from other
countries. For example, India buying petroleum from Iran.
(b) Export Trade: It involves selling goods and services to other countries.
For example, India selling some product to Russia.
SECTION B
Q13: briefly explain the objectives of business
ANS :
Five most important objectives of business may be classified
are as follows: 1. economic objectives, 2. social objectives, 3.
human objectives, 4. national objectives, 5. global objectives.
Objectives represent the purpose for which an organisation has been
started. Objectives guide and govern the actions and behaviour of
businessmen. According to William F. Glueck, “Objectives are those
ends which the organisation seeks to achieve through its existence and
operations.”
For instance, no business can prosper in the long run unless fair wages
are paid to the employees and customer satisfaction is given due
importance. Again a business unit can prosper only if it enjoys the
support and goodwill of people in general. Business objectives also
need to be aimed at contributing to national goals and aspirations as
well as towards international well-being. Thus, the objectives of
business may be classified as;
A. Economic Objectives
B. Social Objectives
C. Human Objectives
D. National Objectives
E. Global Objectives
A. Economic Objectives:
Economic objectives of business refer to the objective of earning profit
and also other objectives that are necessary to be pursued to achieve
the profit objective, which include, creation of customers, regular
innovations and best possible use of available resources.
Profits help businessmen not only to earn their living but also to
expand their business activities by reinvesting a part of the profits. In
order to achieve this primary objective, certain other objectives are
also necessary to be pursued by business, which are as follows:
B. Social Objectives:
Social objective are those objectives of business, which are desired to
be achieved for the benefit of the society. Since business operates in a
society by utilizing its scarce resources, the society expects something
in return for its welfare. No activity of the business should be aimed at
giving any kind of trouble to the society.
If business activities lead to socially harmful effects, there is bound to
be public reaction against the business sooner or later. Social
objectives of business include production and supply of quality goods
and services, adoption of fair trade practices and contribution to the
general welfare of society and provision of welfare amenities.
They should charge the price according to the quality of e goods and
services provided to the society. Again, the customers also expect
timely supply of all their requirements. So it is important for every
business to supply those goods and services on a regular basis.
This is an unfair trade practice. The business unit must not create
artificial scarcity of essential goods or raise prices for the sake of
earning more profits. All these activities earn a bad name and
sometimes make the businessmen liable for penalty and even
imprisonment under the law. Therefore, the objective of business
should be to adopt fair trade practices for the welfare of the consumers
as well as the society.
С. Human Objectives:
Human objectives refer to the objectives aimed at the well-being as
well as fulfillment of expectations of employees as also of people who
are disabled, handicapped and deprived of proper education and
training. The human objectives of business may thus include economic
well-being of the employees, social and psychological satisfaction of
employees and development of human resources.
D. National Objectives:
Being an important part of the country, every business must have the
objective of fulfilling national goals and aspirations. The goal of the
country may be to provide employment opportunity to its citizen, earn
revenue for its exchequer, become self-sufficient in production of
goods and services, promote social justice, etc. Business activities
should be conducted keeping these goals of the country in mind, which
may be called national objectives of business.
(i)Creation of Employment:
One of the important national objectives of business is to create
opportunities for gainful employment of people. This can be achieved
by establishing new business units, expanding markets, widening
distribution channels, etc.
E. Global Objectives:
Previously India had very restricted business relationship with other
nations. There was a very rigid policy for import and export of goods
and services. But, now-a-days due to liberal economic and export-
import policy, restrictions on foreign investments have been largely
abolished and duties on imported goods have been substantially
reduced.
1. Limited liability:
Shareholders of a company are liable only to the extent of the face value of
shares held by them. Their private property cannot be attached to pay the
debts of the company. Thus, the risk is limited and known. This encourages
people to invest their money in corporate securities and, therefore,
contributes to the growth of the company form of ownership.
3. Continuity:
A company enjoys uninterrupted business life. As a body corporate, it
continues to exist even if all its members die or desert it. On account of its
stable nature, a company is best suited for such types of business which
require long periods of time to mature and develop.
4. Transferability of shares:
A member of a public limited company can freely transfer his shares without
the consent of other members. Shares of public companies are generally
listed on a stock exchange so that people can easily buy and sell them.
Facility of transfer of shares makes investment in companies liquid and
encourages investment of public savings into the corporate sector.
5. Professional management:
Due to its large financial resources and continuity, a company can avail of the
services of expert professional managers. Employment of professional
managers having managerial skills and little financial stake results in higher
efficiency and more adventurous management benefits of specialisation and
bold management can be secured.
7. Public confidence:
A public company the confidence of public because its activities are
regulated by the government under the Companies Act. Its affairs are known
to public through publication of accounts and reports. It can always keep
itself in tune with the needs and aspirations of people through continuous
research and development.
8. Social benefits:
Company form of organisations has helped increase production and improves
living standards of people. It has generated employment for a large number of
persons.
Demerits:
A joint stock company suffers from the following weaknesses:
1. Legal formalities:
Formation of a company is a time-consuming and expensive process. Too
many legal formalities have to be observed and several legal documents have
to be prepared and filed. Delay in formation may deprive the business the
momentum of an early start.
2. Lack of motivation:
The directors and other officers of a company have little personal
involvement in the efficient management of a company. Divorce between
ownership and control and absence of a direct link between effort and reward
lead to lack of personal interest and incentive it is difficult to keep personal
touch with customers and employees. As a result, efficiency of business
operations may be low.
3. Delay in decisions:
Red tape and bureaucracy do not permit quick decisions and prompt action.
There is little scope for personal initiative and a sense of responsibility. Paid
employees like to play safe and tend to shift responsibility. There is lack of
flexibility of operations in a company.
4. Economic oligarchy:
The management of company is supposed to be carried on according to the
collective will of its members. But in practice, there is rule by a few
(oligarchy). Often directors try to mislead the members and manipulate
voting power to maintain and perpetuate their control.
The shareholders become mere pawns in the game of a small clique or coterie
of directors. Shareholders are often ignorant and indifferent about the
working of a company. Therefore, they fail to exercise their voice in the
functioning of the company.
5. Corrupt management:
In a company, there is often danger of fraud and misuse of property by
dishonest management. Bogus companies may be formed to deprive the
investors of their hard-earned money.
7. Unhealthy speculation:
The shares of a public company are dealt in on a stock exchange. The prices
of these shares fluctuate depending upon the financial health, dividends,
future prospects and reputation of the company.
Directors of a company may indulge in speculation on the basis of inside
information for their private gain and at the cost of small investors. Company
organisation may also lead to concentration of economic power in a few
hands.
8. Conflict of interests:
Company is the only form of business wherein a permanent conflict of
interests may exist. In proprietorship there is no scope for conflict and in a
partnership continuous conflict results in dissolution of the firm. But in a
company conflicts may continue between shareholders and board of directors
or between shareholders and creditors or between management and workers.
9. Lack of secrecy:
Under the Companies Act, a company is required to disclose and publish a
variety of information on its working. Widespread publicity of affairs makes
it almost impossible for the company to retain its business secrets. The
accounts of a public company are open for inspection to public.
1. Plant location:
Usually, a public utility has no choice as to the site for the location of its
plant. The choice of location is confined to the city or town for which the
concern has been granted franchise.
The plant has to be located at the site fixed by the Government. Public
utilities have to depend upon the government for the availability of space as
they require large areas for their operations.
2. Size of business:
In general the size of a public utility concern has to be quite large. It cannot
operate efficiently below a certain minimum size for three reasons.
First, huge amount of fixed capital required for such a concern can be
provided only by large-scale enterprises.
Secondly, a public utility concern has to start its operations at a full swing in
the very beginning. It is not possible to begin with a small size and to expand
gradually like other business concerns.
3. Marketing problem:
A public utility concern has to face little problem in selling its services
because it has not to face competition. The services are standardised and
essential. There is no need for advertising or salesmanship.
But, a public utility concern must provide efficient and courteous services. In
some cases like transport and postal services, the consumers come into
frequent contact with the operators.
There are no middlemen and a public utility concern provides direct services.
In many cases, the service has to be provided at the premises of the
consumer, e.g., water, electricity, gas, etc. There are no problems of credit,
collection and bad debts as sales are made generally on cash basis.
But the departmental form lacks the flexibility necessary for the supply of
efficient and prompt services to the public.
(b) Municipal bodies:
In India, majority of the public utility concerns are operated by municipalities
or other local bodies. The local body consists of the elected representatives
from the local population.
The local body can readily take up the local problems to protect the public
interest. But the elected representatives may not be competent enough to
manage the concern efficiently.
SECTION C
Small scale production firms has the actual survival value side by side
with large scale production. The facts are that small scale firms have a firm
footing along with the large scale firms. The reasons are that small scale
firms concerns enjoy certain advantages which are peculiar to their own.
They are following:
(i) Close supervision. When production is being carried on a small scale, the producer
can easily supervise each part of the work. The raw material is fully utilized by avoiding
the waste. As the workers are closely supervised they work efficiently. The machines
are carefully handled. All this results in lowering of cost production.
(ii) Economic independence. In a small firm, the producer is generally the sole
proprietor himself. When he clearly knows that the whole profit will go to him and not to
anybody else, he works untiringly.
(iii) Economy in management. A large firm has to spend a sizeable portion of the
income on maintaining administrative machinery but that is not the case with the small
firm. In a small firm, the proprietor himself is the manager. He does not need
superfluous account keeping. He just writes the income and expenditure of his business
on a small notebook and keeps that with himself.
(iv) Close contact with customers. As the, workers employed in a small firm are few
in number, the employer can have a close contact with them. He can listen to their
grievances personally and can redress them if he thinks them justified. Due to better
understanding between the and the employees, the chances of industrial disputes are
reduced.
(v) Greater adaptability to Changes. Another advantage claimed by a small firm is
that it can easily adjust its supply to the changed conditions in demand. As the small
firm has not to consult the various share-holders of the business, so it can easily arrive
at quick decisions and these decisions can be promptly executed.
In addition to the advantages discussed above, there are some special circumstances
where small scale production is most suitable and economical than large scale
production:
(i) When the demand for a commodity is small and is expected to remain as such for
many years to come, then the production will not be carried out on a large scale.
Similarly, if the demand is of a fluctuating nature, the goods are produced on small
scale and not on large scale.
(ii) Production is also carried on small scale where the scope of division of labor is
limited. For example, in tailoring, repairing agricultural concerns, the division of labor
cannot be introduced on a large scale. In tailoring, the clothes are prepared according to
the individual tastes of the customers. So, is also the case in repairing. In agricultural
work cannot be divided into processes and sub-processes. So, it is generally organized
on a small scale.
(iii) Small scale production is also able to hold its own in that field where production is
carried on according to the individual tastes. For instance, in jewellery, embroidery
works and in other autistics wares, the demand is met locally and the work is done
strictly according to the wishes of the customers customers.
(iv) The goods are also produced on small scale where it is not possible to standardize
them.
4. Dynamic Leadership
5. Pleasant Personality
Proper location and layout helps to reduce production and operation cost
and increase efficiency of the business. Suitable location and proper layout
helps to maximize profit.
8. Employees Morale
9. Modern Technology