 Industrial Finance Corporation of

India (IFCI)
Industrial Finance Corporation of India (IFCI) is actually the first financial institute the
government established after independence. The main aim of the incorporation of IFCI was to
provide long-term finance to the manufacturing and industrial sector of the country.

Initially established in 1948, the Industrial Finance Corporation of India was converted into a
public company on 1 July 1993 and is now known as Industrial Finance Corporation of India
Ltd. The main aim of setting up this development bank was to provide assistance to the
industrial sector to meet their medium and long-term financial needs.

The IDBI, scheduled banks, insurance sector, co-op banks are some of the major stakeholders
of the IFCI. The authorized capital of the IFCI is 250 crores and the Central Government can
increase this as and when they wish to do so.

Functions of the IFCI

 First, the main function of the IFCI is to provide medium and long-term loans and advances
to industrial and manufacturing concerns. It looks into a few factors before granting any
loans. They study the importance of the industry in our national economy, the overall cost of
the project, and finally the quality of the product and the management of the company. If
the above factors have satisfactory results the IFCI will grant the loan.
 The Industrial Finance Corporation of India can also subscribe to the debentures that these
companies issue in the market.
 The IFCI also provides guarantees to the loans taken by such industrial companies.
 When a company is issuing shares or debentures the Industrial Finance Corporation of India
can choose to underwrite such securities.
 It also guarantees deferred payments in case of loans taken from foreign banks in foreign
currency.
 There is a special department the Merchant Banking & Allied Services Department. They
look after matters such as capital restructuring, mergers, amalgamations, loan syndication,
etc.
 It the process of promoting industrialization the Industrial Finance Corporation of India has
also promoted three subsidiaries of its own, namely the IFCI Financial Services Ltd, IFCI
Insurance Services Ltd and I-Fin. It looks after the functioning and regulation of these three
companies.
Activities of the IFCI:

The promotional activities of IFCI are explained below:

1. Soft Loan Assistance:

This scheme provides soft loan assistance to existing industries in small and medium sector
for developing technology through in-house research and development.

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2. Entrepreneur Development:

IFCI provides financial support to EDPs (Entrepreneur Development Programmes) conducted

by several agencies all-over India. In co-operation with Entrepreneurship Development
Institute of India.

3. Industrial Development in Backward Areas:

IFCI also take measures to promote industrial development in backward areas through a
scheme of concessional finance.

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4. Subsidised Consultancy:

The IFCI gives subsidised consultancy for,

(i) Small Entrepreneurs for Meeting the Cost of Project.

(ii) Promoting Ancillary Industries

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(iii) To do the Market Research.

(iv) Reviving Sick Units.

(v) Implementing Modernisation.

(vi) Controlling Pollution in Factories.

5. Management Development:

To improve the professional management the IFCI sponsored the Management Development
Institute in 1973. It established the Development Banking Centre to develop managerial,
manpower in industrial concern, commercial and development banks.
IFCI as a Business Facilitator

In the last few decades, the Industrial Finance Corporation of India has made a significant
contribution to the development of our economy. Also, it is responsible for the growth,
expansion, and modernization of our industrial sector.

The Industrial Finance Corporation of India has also been beneficial for the import and export
industry, the cause of pollution control, energy conservation, import substitution, and many
such initiatives and industries. Some sectors, in particular, have seen a lot of benefits. Some
of these are

 Agricultural Based Industries like paper, sugar, rubber, etc.

 Service Industries like restaurants, hospitals, hotels, etc.
 Basic industries in any economy like steel, cement. Chemicals etc.
 Capital and goods industries like electronics, fibers, telecom services, etc.

 Industrial Credit and Investment Corporation of India

(ICICI)
The creation of Industrial Credit and Investment Corporation of India (ICICI) is another
milestone in the growth of the Indian Capital Market. It was incorporated in the year 1955, as
a company registered under the Companies Act. The ICICI was incorporated to finance small
scale and medium industries in the private sector.

The IFCI and SFCs confined themselves to lending activity and kept away from underwriting
and investing in business though they were authorized to subscribe for the shares and
debentures of the companies and to undertake underwriting business. Therefore, a large
number of up and coming enterprises faced continuous problems in raising funds in the
capital market.

Besides, they were not in a position to secure the desired amount of loan assistance from the
financial institutions due to their thin equity base. To encourage industrial development in the
private sector, a considerable provision of underwriting facility was considered necessary to
accelerate the phase of the industrialization. To fill these gaps, the ICICI was established.

Objectives of the ICICI

The major objective of the ICICI was to meet the needs of the industry for permanent and
long term funds in the private sector. In general, the major objectives of the Corporation are:

1. To assist in creation, growth and modernization of business enterprises in the non-public

sector.

2. To encourage and promote the involvement of internal and external capital sources, in such
enterprises.
3. To motivate pvt ownership of industrial investment and to promote and assist in the
expansion of markets.

4. To provide equipment finance.

5. To provide finance for rehabilitation of industrial units.

Functions of the ICICI

In order to accomplish the above objectives, the Corporation performs the following
functions:

1. Providing finance in the form of long-term or medium term loans or equity participation.

2. Sponsoring and underwriting new issues of shares and other securities,

3. Guaranteeing loans from other private investment sources.

4. Making funds available for reinvestment by revolving investment as rapidly as possible.

5. Providing project advisory services i.e. offering advice –

i. to private sector companies in the pre-investment stages on Government policies and

procedures, feasibility studies and joint venture search, and
ii. to Central and State Governments on specific policy related issues.

Role of the ICICI

The Corporation started a Merchant Banking Division in 1973 for advising its clients on a
selective basis, on raising finances in suitable forms and on restructuring of finances in the
existing companies. It also advises clients on amalgamation proposals. Assistance is provided
in preparing proposals for submission to financial institutions and banks and for negotiations
with them for loans, underwriting etc. This Division acts as Managers to the issue of capital.
Assistance is also provided for completion of formalities connected with the public issue and
of legal formalities for raising loans.

In 1982, the ICICI gave a new dimension to its merchant banking division by offering to
provide counseling for industrial investment in India to non-resident Indians and persons of
Indian origin living abroad. This is likely to prove not only the least expensive route for
technological up gradation but also a source of foreign currency funds by way of risk capital.

It has set up Venture Capital Funds for the promotion of green field companies and risk
capital investment and joined the other financial institutions in setting up SHCIL, CRISIL
and OTC Exchange of India Ltd. It has recently set up its own bank and a mutual fund like
the UTI.

The Corporation’s vision has been extending far beyond its immediate function of funding
industrial projects. It has been looking at all sectors of the economy and wherever a need was
perceived, has designed either a new concept or a new instrument, or even a new institution
to cater to it. In this regard, its development activities have encompassed such diverse areas
as technology, financing, project promotion, rural development, human resources
development and publications.

It has set up ICICI Brokerage Services Limited in March 1995. It is a 100% subsidiary of I-
SEC. It commenced its securities brokerage activities in 1996. It is registered with the
National Stock Exchange of India Limited and The Mumbai Stock Exchange.

ICICI set up ICICI Credit Corporation in 1997, which later renamed as ICICI Personal
Financial Services Limited in 1999. It is offering a comprehensive range of goods and
services to retail customers.

ICICI Capital Services Ltd. was originally set up as SCICI securities Ltd. as a wholly owned
subsidiary of erstwhile SCICI Ltd. in 1994. Its object is providing stock broking services to
the institutional clients and undertaking activities such as underwriting, primary market
placements and distribution, industry and company research etc. It became a wholly owned
subsidiary of ICICI with effect from April 1, 1996.

ICICI has established ICICI bank for performing commercial banking functions in 1994. The
bank offers a wide variety of domestic and international banking services.

 What is Warehousing?

Warehousing is when you purchase goods from a manufacturer and store them before they
are shipped to another location for fulfilment

. You may store these goods in a warehouse, spare room, or other facilities. This all depends
on how much stock you have, and how big your business is. If you’ve a small business your
warehousing option doesn’t need to include transport access.

What Are the Functions of Warehousing?

The main function of a warehouse is to store products or goods before moving them to
another location. But there can be some secondary functions of warehousing that enhance a
warehouse’s space.

Shipment Hub

When warehouses are placed in a very strategic location, these can become shipping hubs
that receive shipments until they can be moved to other storage facilities across the country.

Assembly Line

Where products are delivered by the manufacturer in several pieces, companies can allot
areas within their warehouse to assemble products for retailers or customers.
Rental Storage Space

Whether sales are down, or you possess a warehouse that is too big for your stock at the
moment, renting space in your warehouse to other businesses is a good option for you if you
have space.

What Are the Types of Warehousing?

Warehousing comes in many shapes and sizes including the following:

1. Private Warehouses: Owned by private entities to store their own products or

equipment.

2. Public Warehouses: Owned by a government and semi-state body. They are available
for rent by private firms to store goods.

3. Co-Operative Warehouses: Owned by a co-operative where private firms can rent

space for storage.

4. Distribution Centres: Distribution centers receive shipments of goods and move them
fast from A to B.

What Are the Advantages of Warehousing?

Apart from the storage of products, warehousing has many advantages that are not initially
apparent. These include:

Improved Inventory Accuracy: Knowing how much inventory you have and how much you
have moved means you can plan for the future more precisely.

Reduced Overhead Cost: As you improve the running of a warehouse you can invest more in
further development and reduction of costs.

Better Staffing Levels: Understanding how busy your business will be over a period of time
will allow you to plan your staffing needs accordingly.

Protection of Goods: Having a storage facility that fits the needs of your goods it so important
to a business. If you have perishable goods that require refrigeration you need to ensure that
your warehouse lives up to this standard.

Central Location: When you source a warehouse close to a customer or manufacturing hub,
you can ensure better transit of goods, decreasing the time it takes to move products between
places.
Superior Flow of Goods: The better flow of goods from manufacturer to end consumer is
brought about by understanding the best layout of your warehouse and how to store goods
optimally to move them fast.

What Are The Elements of Warehousing?

Warehousing can be much more than the storage of goods. It can be a fulfilment center, an
assembly line, and so much more. With this in mind, there are a few elements of warehousing
that can help with storage, transport, and protection of goods. These include:

• Storage Systems to ensure maximum storage of goods and easy access at all times.

• Climate Control for goods that require cooler or warmer environments.

• Inventory Management Software to keep track of inventory coming in and out of your
warehouses.

• Sufficient Staff to keep processes moving according to plans.

• Transportation and Moving Equipment to deliver and transport goods to and from the
warehouse.

• Ample Security to keep the warehouse safe even at downtimes.

What is Warehouse Logistics?

Warehouse logistics is the management, planning, and organization of operations within a

warehouse. This includes managing space, planning shipments, and organizing information
so that the warehouse operates to the best of its abilities. It is important to strive for better
warehouse logistics so that you can offer customers better delivery times, and drive down
costs where possible.

IMPORTANCE OF WAREHOUSING TO YOUR BUSINESS:-

Warehousing has been around for quite a long time, and it has helped organizations
with various storage needs. Today, a warehouse isn’t just a storage room. A few
organizations offer extra administrations to streamline your whole inventory network
framework. This makes time utility as merchandise are possibly discharged when
they are required. In this way, on the off chance that you need to screen and track
your raw materials, finished goods, and other storage needs, at that point, you have
to lease a distribution center space.

The advantages of using such services are as follows –

Central Storage Location - A centralized location for all your storage needs help to
decrease the creation gap. This means you can get, store, circulate, and deliver
products effortlessly to save time and cost. For instance, a warehouse close to a
loading dock is perfect for getting and storing goods from suppliers. For another
organization, a warehouse amidst the city can enable them to distribute and mail
things to their clients easily. Preferably, while picking a distribution center, you want
to look at a location that will make the most sense for your operations. This can be
an area that can be easily accessed by your providers or one that is in your objective
market.

Improved Order Processing - At the point when clients submit their orders, all
they’re worried about is the delivery of their products. They need auspicious delivery
and quality services. Any potential satisfaction issue isn’t their worry; it’s yours.
Warehousing offers you “security stocking.” Ideally, this means your items are
accessible for transportation at whatever point clients put in their orders. You don’t
have to satisfy orders from your production facility. You can have enough stock for
the following couple of months, and this reduces delays in delivery. The exact
opposite thing you need is to lose your long-term customer or a deal since you
couldn’t fulfil an order.

Offers Additional Storage - You can have a storage space your creation facility, yet
your stock volume can exceed it during your bustling months. For this situation,
getting a warehouse space will make the most sense. You need your products to be
safe from harm and robbery. Essentially, warehouse space is incredible for putting
away surplus products, which clients and customers don’t require promptly. Most
organizations, as a rule, deliver merchandise fully expecting interest. This means
they’ll require sufficient capacity for their surplus merchandise until their clients and
customers begin putting in goods of order. A warehouse makes a perfect alternative
to address your issues.

Improved Production Quality - It’s anything but difficult to expect that warehousing
stock control frameworks just screen amounts. With better storage management, it’s
conceivable to monitor your production quality. You can utilize it to follow your crude
materials and finished products. These numbers can decide the number of materials
that experience your production procedure. As such, when you recognize
imperfections or quality issues in the production procedure, it’s simpler to seclude
deficient materials or finished goods. An effective warehouse center following
framework likewise enables you to work with your merchants and providers to
recognize and limit defective raw materials. This causes you to save time as you
won’t have to complete control at your office. Stock quality control systems help to
monitor the time span of usability and termination dates of your materials. Specialists
can without much of a stretch to recognize and remove stocks before they expire.
Leverage Seasonal Growth - As a private company, you don’t need amazon-like
facilities to hit your business targets. A warehouse space will simply do the trick. For
this situation, you have scale your tasks when the shopping seasons come. You can
monitor purchaser trends and stock up on inventories for peak seasons. This won’t
prompt a critical increment in expenses. Basically, a warehouse enables you to help
your tasks as required with no cost weight. You can exploit new chances and deals
cycles in the market.

Risk Management - As an entrepreneur, the exact opposite thing you need is to

encounter violent fluctuations in prices. This normally happens when the supply of a
specific product exceeds the market demand. On the off chance that you choose to
move, you can without much of a stretch endure loses. Rather, you can utilize a
warehouse to store your product. At the point when the interest turns out to be more
than the prompt supply and productions, you would then be able to discharge them
to the market. A warehouse additionally gives safe care of transient products. You
can use cold storage and refrigeration to avoid product spoilage. Obviously, you can
expect this storage service to cost more than customary capacity. Likewise,
businesses can limit the misfortune from flame, robbery, and harm by utilizing a
warehouse to store their products. Also, your merchandise is protected, so you can
anticipate full pay if there should be an occurrence of any harm or misfortune.

 What is a 'Bill of Lading'?

A bill of lading is a legal document between a shipper and a carrier that details the type,
quantity and destination of the goods being carried. The bill of lading also serves as a
shipment receipt when the carrier delivers the goods at the predetermined destination. This
document must accompany the shipped goods, no matter the form of transportation, and an
authorized representative from the carrier, shipper and receiver must sign it.

 FOREIGN EXCHANGE MANAGEMENT OF INDIA:- An exchange-rate regime is

the way an authority manages its currency in relation to other currencies and the foreign
exchange market. Between the two limits of fixed and freely floating exchange regimes, there
can be several other types of regimes. In their operational objective, it is closely related to
monetary policy of the country with both depending on common factors of influence and
impact.

The exchange rate regime has a big impact on world trade and financial flows. The volume of such
transactions and the speed at which they are growing makes the exchange rate regime a central piece
of any national economic policy framework.
In Fig. 21.2, as one moves from point A on the left to point B on the right, both the frequency of
intervention by domestic monetary authorities and required level of international reserves tend to be
lower.

Under a pure fixed-exchange-rate regime (point A), authorities intervene so that the value of the
domestic currency vis-a-vis the currency of another country, say the US Dollar, is maintained at a
constant rate. Under a freely floating exchange-rate regime, authorities do not intervene in the market
for foreign exchange and there is minimal need for international reserves.

Exchange Rate System in India:

India was among the original members of the IMF when it started” functioning in 1946. As such,
India was obliged to adopt the Bretton Woods system of exchange rate determination. This system is
known as the par value system of pegged exchange rate system. Under this system, each member
country of the IMF was required to define the value of its currency in terms of gold or the US dollar
and maintain (or peg) the market value of its currency within ± per cent of the defined (par) value.

The Bretton Woods system collapsed in 1971. Consequently, the rupee was pegged to pound sterling
for four years after which it was initially linked to the basket of 14 currencies but later reduced to 5
currencies of India’s major trading partners.

This system continued through the 1980s; through the exchange rate was allowed to fluctuate in a
wider margin and to depreciate modestly with a view to maintaining competitiveness. However, the
need for adjusting exchange rate became precipitous in the face of external payments crisis of 1991.

As a part of the overall macro-economic stabilisation programme, the exchange rate of the rupee was
devalued in two stages by 18 per cent in terms of the US dollar in July 1991. With that, India entered
into a new phase of exchange rate management.

Objectives of Exchange Rate Management:

The main objectives of India’s exchange rate policy is to ensure that the economic fundamentals are
truly reflected in the external value of the rupee.

The principal features of the current exchange rate regime in India can be briefly stated as
follows:

i. The rates of exchange are determined in the market.

ii. The freely floating exchange rate regime continues to operate within the framework of exchange
control.
iii. Current receipts are surrendered (or deposited) to the banking system, which in turn, meets the
demand for foreign exchange.

iv. RBI can intervene in the market to modulate the volatility and sharp depreciation of the rupee. It
effects transactions at a rate of exchange, which could change within a margin of 5 per cent of the
prevailing market rate.

v. The US dollar is the principal currency for the RBI transactions.

vi. The RBI also announces a Reference Rate based on the quotations of select banks on Bombay at
twelve noon every day. The Reference Rate is applicable to SDR transactions and transactions routed
through the Asia Clearing Union.

In short, the India rupee has matured to a regime of the floating exchange rate from the earlier
versions of a ‘managed float’.

 IMPORT CUSTOM CLEARANCE PROCEDURE

Either you (importer) or your customs broker can file the

necessary documents for import clearance procedures. Before
arrival of your goods, you can keep ready of all pertaining
documents required for import clearance. The major documents
required are Bill of Lading or Airway bill, commercial invoice,
packing list, Cargo Arrival Notice, Freight certificate, purchase
order or LC and other specific documents for your goods. You
need to track the shipment of arrival properly to avoid. Because
you need to customs clear the cargo as early as possible on
arrival of shipment. Otherwise, you need to pay demurrage to
the import handling authorities. Normally, a limited number of days of two or three are
allowed by import handling authorities as free of cost time duration. You can complete the
customs formalities within this time normally, subjected to produce of all required documents
with customs. You can arrange to keep soft copy of check list of Bill of Entry ready before
arrival of goods. You or your customs house agent may have the software to file Bill of Entry
at office or home. If you do not have such facility, you can approach private EDI (Electronic
Data Information) service providers who can arrange to submit the data on behalf of you.

Once the cargo arrives in port, carrier of goods files Import General Manifest (IGM) with
customs department. IGM is the details of import of goods to be filed with customs
mandatory, by all carriers once goods arrived. Normally, each aircraft or vessel has one IGM
number and each of consignments carries ‘line numbers’. So, each shipment carries a ‘line
number’ and the total load of the said vessel or aircraft has an IGM number. Here, you will
have one IGM number (common for one lot of goods arrived) and a ‘liner number’ for your
particular shipment. You need to enter this numbers in the specified column of Bill of Entry
while filing. This number will be automatically linked with your document while filing
uploading the bill of entry details with customs web software. The Bill of Entry number is
generated at one place for all over the ports of country as per software queue automatically. If
your goods are under green channel clearance, you can directly take delivery of cargo with
simple procedures at port. 
You may get bill of entry number, once after filing the required soft data of bill of entry
application. You need not go physically with customs department to get the same, as I have
already explained. Generating Bill of Entry number means the number of bill of entry allotted
by customs on filing as per serial order. So the said bill of entry details will be in queue in
soft system of concerned customs officer who process the bill for import clearance. If all
information are in order with proper documentation, he approves and pass over for inspection
of cargo by software. Of if he requires more documents or further clarification; the same
‘query’ will be mentioned in the software system.

You or your customs broker can view the status of bill of entry online whether any ‘query’ is
there and blocked the process or already ‘passed’ over to next procedures. If any ‘query’ for
further documentation or personal meeting, you can follow the same. The importer or his
agent may be called for personal hearing for any clarification required by customs officials
under certain types of goods imported where in customs requires more clarification. Once the
bill of entry assessment completed by customs official, the document pass over for inspection
procedures as explained. You or your customs broker arranges examination of goods by
‘goods registration’ electronically at customs department software system.

The inspection is carried out under the supervision of necessary customs officials and enters
examination report in the system. Once approving the inspection report by concerned officer,
bill is ‘passed out of customs’ for delivery, if no duty amount is involved. If duty involved,
you can arrange to pay the same and produce with the deputed customs officials. The customs
department updates the duty amount and ‘pass out’ order is generated by software. If you pay
customs duty online with the electronic arrangements of customs, the details of import duty
paid is reflected in customs website within a specified period of time of deposit. This facility
introduced recently helps importers minimize the formalities to pay customs import duty.

Prints of processed bill of entry are generated and customs officer signs physically on the said
bill of entry. You can arrange delivery of cargo once after submitting the bill of entry of
‘passed out of customs’ with the carrier of goods. The carrier, after collecting necessary
charges if any, issued delivery order to the custodian of cargo. The custodian of cargo
delivers cargo to you or your authorized customs broker. You move the cargo to your place.

 A GOOD FILING SYSTEM IS IMPERATIVE TO EVERY BUSINESS

 When running your own business, no matter the size or how many clients you have, it is
essential to have a good filing system on hand. This makes your entire business life easier,
and allows you to be more productive throughout the day.

Advantages
There are many advantages of using a solid filing system, and you are bound to see the
advantage of the equipment as soon as you implement the system. Once you have the new
filing system in place and functioning, you are going to wonder why it took you so long in
the first place to initiate the filing system, and what you ever did before, without it!
Organisation
A good filing system is going to allow you to bring up previous customers and orders in the
blink of an eye. The faster you are able to bring this information up, the less time you spend
digging through a drawer or file on your computer. This is especially important if the
individual is on the phone. Neither one of you most likely wants to be on hold for this long,
so the faster you are able to bring up this information the better.

Easy Access
If you have a large listing of clients, it is often difficult to locate one individual in particular.
Even if you have the names alphabetised, it is going to take you some time to flip through all
the files you have, just to find the information you desire. And this only brings out their
folder. You still have to look through the folder in order to find the correct order number, or
date, or any other bit of information. With a good filing system, such as one that is installed
on your computer, you are able to simply type in the individuals name, and all their
information appears on the screen. From here, you just need to type in the desired
information and this is shown on the clients account. The entire process goes from several
minutes (if not longer), to just a few seconds. If you have someone performing this task all
day, they are going to significantly improve on the amount of work they can produce,

Having a good filing system is important in every business, as it is going to make every task
you perform faster, so you no longer need to thumb through drawer after drawer of folders,
just to find one individual. Once you implement the new filing system, you are going to be
extremely happy you do, especially when you see the amount of time you are saving.

 IMPORTANCE OF LOGISTIC IN SERVICE BUSINESS

Logistical management system includes warehousing and warehouse management.

Warehousing services are very common nowadays and they are found everywhere.
Warehousing is part of or is a component of a supply chain management. A warehouse is a
place where finished goods are stored. Apart from storage, a warehouse also is where packing
and shipping of goods is done. Warehousing provides a very important economic benefit to
the owner or business and to the customers. Here are some of the reasons why a warehouse is
important;

1. Central location

A warehouse is centrally located so that it can be easy to receive, store and at the same time
distribute products. When the inbound shipment arrives in a store it is the role of the
warehouse personnel to identify the products, sort the products and at the same time dispatch
the products to the storage locations. A warehouse should be centrally located in the sense
that it must have the security measures and the environment should be friendly.

2. Economic benefits

What are the economic benefits of warehousing? They provide economies of scale and they
do this through the storage facilities, efficient operations and a central location. It’s through
accumulation and consolidation operations that the warehouse is able to realize economic
benefits. The role of accumulation operations is to enable the warehouse to act like the buffer
so that it can be able to balance both the supply and demand. The consolidation operations
ensure that the outbound delivery costs are cut and this should be done to both the businesses
and the customers.

3. Value-Adding operations

The main favorit role of a full service logistics system is to ensure that the overall
inventories and the cycle times are reduced and at the same time to lower the costs. It’s also
aimed at ensuring that the customer service is improved in one way or the other. It enables
customers to have the right products and to ensure that these products are readily available
and are at the right place. Another very important benefit of warehousing is that it increases
the utility value of some goods hence making operations easy. Some of the other operations
that are meant to add value are order assembly, order consolidation, cross docking and
product mixing. These operations also aim at improving the overall logistics system.

4. Service Benefits

Warehouses are sometimes used to act as contingency plans so that the outbound orders are
fully filled. Safety stocking is very necessary in this case because it allows a business to
maintain a certain number of inventories. Do you know what safety stocking means? It
simply means an emergency which might include delays in transportation, shipment
containing damaged or defective goods. From the outbound side, safety stocking can be
described as insurance given against the out of stock items.

In summary, Warehousing is very important to any logistical management system. It’s

meant to store finished good and also do packing and shipping. Warehousing should be done
in an effective way so that it can provide an important economic benefit.

 FRANKING MACHINE is a machine used to affix postage stamp on outward

letters and envelopes. In big offices where hundred of outgoing letters require
stamping franking machine is of great value because this machine can print the
impressions of postal stamps of various denominations. These machines are hired
from the post office under a license. At the time of postage impression, the firms
name, trade mark is automatically printed. These machines save time, labor on affix
of postage stamps, and are quicker and neater. The possibility of pilferage in stamp
use is limited.

External and Internal Trade

If one company in India trades with another company in India, this trade is internal.
However, trade that occurs between India and Australia, would be external trade. This is also
called international trade. Let's highlight some of the features between internal and external
trade. The following table covers the concepts in depth. In order to help you visualize the
concepts, we will use India when describing internal trade, and we'll use its trade with
Australia for external trade discussion:

Topic Internal External

Produced in India and sold in Australia;

Goods/services Produced and sold in India
produced in Australia and sold in India
 Not traded externally; Demand and Goods demanded by Australia are traded to
Goods/services
distribution remains in India Australia

Value is determined by exchange rate

Value of Goods Stated in Indian Rupees
(Rupee and Australian Dollar)

Land, labor and capital can be moved Cannot be moved easily to external
Capital
around countries (hence external trade)

India is a big player when it comes to international trade. Let's take a look at some
advantages and disadvantages of international trade.

Advantages and Disadvantages of International Trade

The whole point of international trade is to get something you need, and trade away
something you don't need (or an excess). For example, if Australia has excess bauxite and
India has an excess of jute, the two nations can trade.

Advantages Disadvantages

Sharing of resources Natural resource depletion

Diversity of products Decline of domestic industry

Promotes the Global Village Loss of/promotion of cultural identities

Jobs/Employment Government control of workforce

Investment opportunity Control of resources

New technology Social welfare issues

International trade is characterised by the following special problems or difficulties.

1. Distance:

Due to long distance between different countries, it is difficult to establish quick and close
trade contacts between traders. Buyers and sellers rarely meet one another and personal
contact is rarely possible.

There is a great time lag between placement of order and receipt of goods from foreign
countries. Distance creates higher costs of transportation and greater risks.

2. Different languages:

Different languages are spoken and written in different countries. Price lists and catalogues
are prepared in foreign languages. Advertisements and correspondence also are to be done in
foreign languages.
A trader wishing to buy or sell goods abroad must know the foreign language or employ
somebody who knows that language.

3. Difficulty in transportation and communication:

Dispatch and receipt of goods takes a longer time and involves considerable expenses. During
the war and natural calamities, transportation of goods becomes even more difficult.
Similarly, the costs of sending or receiving information are very high.

4. Risk in transit:

Foreign trade involves much greater risk than home trade. Goods have to be transported over
long distances and they are exposed to perils of the sea. Many of these risks can be covered
through marine insurance but increases the cost of goods.

5. Lack of information about foreign businessmen:

In the absence of direct and close relationship between buyers and sellers, special steps are
necessary to verify the creditworthiness of foreign buyers. It is difficult to obtain reliable
information concerning the financial position and business standing of the foreign traders.
Therefore, credit risk is high.

6. Import and export restrictions:

Every country charges customs duties on imports to protect its home industries. Similarly,
tariff rates are put on exports of raw materials. Importers and exporters have to face tariff
restrictions.

They are required to fulfil several customs formalities and rules. Foreign trade policy,
procedures, rules and regulations differ from country to country and keep on changing from
time to time.

7. Documentation:

Both exporters and importers have to prepare several documents which involve expenditure
of time and money.

8. Study of foreign markets:

Every foreign market has its own characteristics. It has requirements, customs, weights and
measures, marketing methods, etc., of its own. An extensive study of foreign markets is
essential for success in foreign trade. It is very difficult to collect accurate and up to date
information about foreign markets.

9. Problems in payments:

Every country has its own currency and the rate at which one currency can be exchanged for
another (called exchange rate) keeps on fluctuating change in exchange rate create additional
risk.
Remittance of money for payments in foreign trade involves much time and expense. Due to
wide time gap between dispatch of goods and receipt of payment, there is greater risk of bad
debts.

10. Frequent market changes:

It is difficult to anticipate changes in demand and supply conditions abroad. Prices in

international markets may change frequently. Such changes are due to entry of new
competitors, changes in buyers' preferences, changes in import duties and freight rates,
fluctuations in exchange rates, etc.

11. Investment for longer period:

There is longer time gap between supply of goods and receipt of payment. Therefore, the
exporter's capital remains locked up over a longer period.

12. Intense competition:

Traders who want to sell goods abroad have to face severe competition from different
countries. Considerable market research is necessary to ensure suitability of product in
foreign markets. Heavy expenditure on advertising and sales promotion may be necessary.

Essentials (or) Characteristics of Good filing system

1. Compactness: The compact filing system should be adopted by every business office. It
means that the filing system should not require any unnecessary space.

2. Simplicity: The filing system should be simple and not too elaborate. At the same time,
the usefulness of the filing system cannot be sacrificed for the sack of simplicity.

3. Accessibility: A good filing system should be arranged in such a way that the records are
easily available whenever required. The filing system should allow the insertion of
additional documents without disturbing the existing order of files.

4. Economy: The filing system should be economical in time, space, money and operations.
The cost of installation and operation of filling system should be as low as possible. The
selected filing equipment should occupy minimum space but can accommodate maximum
number of files.

The cost of filing equipment should be very low. The filing equipment save the time of
operation i.e. locating, inserting and placing of documents and papers in a file. The unwanted
records may be disposed of in order to economies space.

5. Flexibility: The filing system can be expanded if the volume of business transactions
increased. An inflexible system is not useful after crossing a certain limit.

6. Classification: The filing system should be supported by a proper system of

classification. Proper classification reduces the number of files to be maintained and helps in
inserting as well as locating the documents in the files.
7. Safety: The filed documents and records should be in safe condition and available
whenever required. The documents and records should be protected from insects, rain, dust,
or mishandling.

8. Cross Reference: A cross reference should be given wherever a document can be filed
more than one head to avoid confusion and facilitates easy location of files. It saves time
and human resources.

9. Easy Location: Documents and records should be kept in such a way that they can be
easily located whenever required with the minimum delay possible. At the same time, it does
not require heavy expenditure to achieve this purpose.

10. Indexing: A well designed index is also used to supplement the filing system. It will help
to locate the file quickly when it is required.

11. Retention: Every documents and records are maintained for a minimum period of time.
Then, the dead records and documents can be discarded without too much disturbance. The
remaining documents and records are retained even after a storage period.

12. Out guides: A reference is to be maintained in the files that the list of documents or
records are withdrawn by the office staff or department and returned the documents with
date. Rules and procedures can be framed and followed to prevent misfiling.

13. Minimum Misfiling: The main difficulty is not concerned with filing but in finding the
documents. Misfiling causes delay in the location of desired document. Hence, the authorized
staff alone is permitted to have access to files.

MATE’S RECEIPT
Document signed by an officer of a vessel evidencing receipt of a shipment onboard the
vessel. It is not a document of title and is issued as an interim measure until a proper bill of
lading can be issued.

ADVANTAGE OF FOREIGN TRADE

1. Geographical specialization:

Foreign trade enables each country to specialise in the production of those goods and services
for which it has the greatest relative advantages in comparison with other countries.

Such geographical specialisation helps to improve the productivity and quality of goods and
services. It also leads to lower cost of production.

2. Optimum use of resources:

Foreign trade helps each country to make optimum use of its national resources. Each country
can concentrate on production of those goods for which its resources are best suited. It can
exchange its surplus for those goods which it is not suited to produce. In this way wastage of
resources is avoided.
3. Economic development:

Foreign trade enables developing countries like India to import machinery, equipment and
technology for rapid industrialisation.

With the help of advanced technology and capital goods from abroad an underdeveloped
country can use its natural resources and increase rate of growth. Japan, United Kingdom and
USA have achieved remarkable economic progress through imports of raw materials and
exports of manufactured goods.

A country can earn valuable foreign exchange through exports. Foreign trade also increases
income of government in the form of customs duty.

4. Economies of scale:

Foreign trade helps each country to produce not only for home consumption but for export to
other countries also. It creates a very wide market for the surplus output of a country.

Every country can sell its surplus goods in foreign markets. This leads to large scale
production which provides several advantages.

5. Generation of employment:

Foreign trade generates employment opportunities by assisting the expansion and growth of
agricultural and industrial activities. It also offers direct employment to a large number of
intermediaries employed in export and import trade.

6. Higher standard of living:

Through foreign trade every country can obtain the goods and services which are not
produced within the country. Citizens of a country can enjoy a more variety of goods and
services. Therefore, exchange of goods and services between countries leads to a higher
standard of living for all.

7. Price equalization:

Foreign trade helps to equalize prices of commodities throughout the world markets after
making allowance for transport and customs duties. Whenever the price of a commodity
tends to rise in a country, imports can be increased to check the rise in prices.

Similarly, whenever prices of a commodity decline sharply, the commodity can be exported
in larger quantities to check the fall in prices. In this way violent fluctuations in prices can be
reduced.

8. Security from famine:

Natural calamities such as famine, flood, earthquakes, etc. may affect the production of goods
in a country. Deficiency in supply of essential commodities in the country can be met by
imports from other countries. Foreign trade can protect a country from starvation. Food and
medicines can be imported from other countries during emergent conditions.
9. International brotherhood:

Through foreign trade people of different countries come in contact with each other. There is
exchange of culture and ideas and mutual understanding. Foreign trade, therefore, contributes
to international cooperation and peace.

It develops cultural and social relations, in addition to business relations, between people
belonging to different countries.

10. Development of transportation and communication:

Foreign trade requires the best means of transportation and communication. It causes
development of modern means of transportation and communication.

DELEGATION:

Delegation is the actual process of assigning job activities and corresponding authority to
specific individuals within the organization.

Important Dimensions of Delegation include:

1. Steps in the Delegating Process

2. Obstacles to the delegation Process
3. Elimination of obstacles to the delegation process.
4. Centralization and Decentralization

STEPS IN THE DELEGATION PROCESS:

According to Neman and Warren, the delegation process consists of 3 steps:

1. Assign Specific duties to the individual. Manager must be sure that the subordinate
assigned to specific duties has a clear understanding of what these duties entail.
Whenever possible, the activities should be stated in operational terms so the
subordinate knows exactly what action must be taken to perform the assigned duties.  
2.  The delegation process involves granting appropriate authority to the subordinate -i.e.
the subordinate must be given the right and power within the organization to
accomplish the duties assigned.                                
3. The subordinate must be aware of the responsibility to complete the duties assigned
and must accept the responsibility.

GUIDELINES FOR MAKING DELEGATION EFFECTIVE:

1. Give employees task to pursue tasks in their own way.                                       

2. Establish Mutually agreed upon results and performance standards for delegated
tasks.                                                                                                                 
3. Encourage employees to take an active role in defining, implementing and
communicating progress on tasks.                                                                       
4. Entrust employee with completion of whole projects or tasks whenever possible.        
 5. Explain the relevance  of delegated tasks to larger projects or to department or
organizational goals.                                                                         
6. Give employees the authority necessary to accomplish tasks.                        
7. Allow employees access to all information, people and departments necessary to
perform delegated tasks.                                                                           
8. Provide training and guidance necessary for employees to complete delegated tasks
satisfactorily.                                                                                     
9. When possible, delegate tasks on the basis of employee interests.

Meaning of Office Layout

Office layout means the systematic arrangement of office equipment, machines and furniture
and providing adequate space to office personnel for regular performance of work with
efficiency.

Principles of Office Layout:

The main principle behind the office layout design should be such that it occupies the
available space in an economical way so that the aim and objectives of the organization or
business is achieved.

The layout must be effective such that the workstations are planned to be positioned such that
data is being transmitted with minimal costs and information can flow with minimum delays
or without interruption.

The workstation has to be provided with items necessary for executing the job. Care has to be
taken for storage of information and documents. Listed are some of the principles to be taken
care while designing

1. Natural lighting:

Designing offices that face the north or east gets more of natural lighting. It avoids more
consumption of power.

2. Placing computers:

Desks having computers or desktops must be placed in such a way that staff sitting at it must
not have their backs or faces to the windows.

3. Designing work tables:

It is preferable to seat staff not facing each other. It is said to disrupt work. Besides having
minimum intrusion is better. Also reducing the field of vision of employee to other
employees will reduce distraction.

Also they need to be provided with adequate lighting, ventilation, and ergonomic chairs and
tables to prevent eyestrain and muscle aches.
4. Flow of work:

By carefully studying the sequences of the tasks to be done, the design of the work space is
imitated. If the person has to go back and forth in the space it will bring frustration and
reduce output. Ensure that flow of work is smooth and in one direction.

5. Pleasant:

The most important of all the aspects is that design should be aesthetically pleasant. Do not
concentrate on functionality alone but also on its looks. The space has to be optimally used.

6. Provision of tools:

Assignments are completed quickly if they have the necessary space and tools to perform
them. The work station should be spacious enough to accommodate their files, papers and
their documents. Having copiers and printers closer to them is better to avoid them frequently
moving out and wasting their time.

7. Grouping:

Placing same functional type of work together or closer to each other will help to reduce time
wastage. The employees have freedom to consultation and information easily so that work is
handled efficiently. Hence, it is better to list out the functions or tasks that employees
perform and design the office planning and layout accordingly.

8. Open an private space:

The employer needs to verify which tasks require collaboration with one another and which
set of tasks require concentration. Based on this, specific cubicles are designed with open or
low separators and others with separate cubicles or traditional with closed doors. Making a
separation between the two types is essential

9. Informal and formal spaces:

Every work space do require employees to take breaks in between work. For this, communal
spaces are designed that is closer to the work stations. These informal communal spaces are
often build with more space to accommodate large numbers during coffee or lunch breaks.
The informal communal spaces meant for conferences or meetings are often placed away
from busy work space that is noisy.

10. Security:

As it is aware that information is very critical to any business, care needs to be exercised to
define a level of security and norms for workstations processing data. Mainly the storage of
confidential and sensitive data has to be placed away from main work space and protected.
11. Reducing risk:

Designing has to be such that it reduces risk of accidents or falls. Allowing ergonomic norms
of wiring and placing of tables, chairs, and work stations provides safe working conditions.
The safety would be maintained.

12. Reduce distances:

While figuring out the work space the distance between movements of each task has also to
be considered. Movements like walking, carrying, pulling consumes time and energy. It
causes exhaustion thereby reducing effectiveness. Hence, distances has to be reduced to
minimize costs and energy.

Meaning of Span of Supervision

The span of supervision is also called as the span of control. It refers to the number of
subordinates a manager can effectively manage.

If the number of subordinates placed under a manager is small, he can control the
subordinates effectively. But if the number of subordinates is too small, he may not be able to
accomplish the task. Further, the manager’s time and energy may not be utilized properly.

On the other hand, if the number of subordinates is too large, effective control may not be
easy. The General Manager of an enterprise may be a boss for thousands of persons. But the
persons with whom he may come in personal contact may not be more than 2 or 3 dozens.
And the number of persons whom he can effectively supervise and control may be less than a
dozen.

 Importance of Railways in India

Indian Railway provides the most important mode of public transport in India. This is the
most commonly used and cost effective long distance transport system of the country. Indian
Railway is operating by Ministry of Railways. Indian Railways is touching life of almost
every people across India covering 29 states and 7 Union Territories with its over 40,050
miles or 64,460 kilometers railway network as of 2011.

Indian Railways is the fourth largest railway in the World which is transporting around 7651
million passengers & over 921 MT of freight per annum (As of 2011).

Considering its importance, Railways were first introduced in India with passenger rail
service from Mumbai to Thane on 16th April, 1853 by two companies, East India Railway and
Great Indian Peninsular Railway. Both the companies were created to construct railway line
between Kolkata and Mumbai. Then the Governor General of India, Lord Dalhousie made
plan to construct various railway lines between principle regions in India.

Indian Railways is also helping Indian economy in many ways like by providing fast and
reliable transport medium for various needy articles across the country. These include Rice,
Wheat, Cereals and Vegetable oils etc. Indian Railways is also transporting various petroleum
products like Petrol, Diesel, Cooking Gas, Natural Gas, Kerosene etc.
Definition of addressing machine
: a business machine that automatically imprints names, addresses, or other information on
successive envelopes or forms

Definition of 'Call Money Rate'

Definition: Call money rate is the rate at which short term funds are borrowed and lent in the
money market.
Description: The duration of the call money loan is 1 day. Banks resort to these type of loans to fill
the asset liability mismatch, comply with the statutory CRR and SLR requirements and to meet the
sudden demand of funds. RBI, banks, primary dealers etc are the participants of the call money
market. Demand and supply of liquidity affect the call money rate. A tight liquidity condition leads to
a rise in call money rate and vice versa.

 Measuring Transport System Efficiency

There are several possible ways to measure transport system efficiency, which can result in
very different conclusions about what solutions are optimal:

 Conventional roadway planning evaluates roadway efficiency based primarily on motor

vehicle travel speeds. From this perspective increasing transport system efficiency requires
increasing roadway capacity and design speeds. This supports roadway expansions.
 Traffic network planning evaluates roadway efficiency based on automobile access, and so
recognizes the reduced travel distances that result from more connected road networks and
two-way streets. This supports efforts to increase both traffic speeds and road network
connectivity.
 Multi-modal transport planning recognizes that travel demands are diverse because not
everybody can drive, and transport costs (including road space, parking, vehicle, travel time,
accident risk and environmental costs) and benefits vary. For example, it is inefficient if
inadequate transport options forces parents to chauffeur children to school if they would
prefer to walk or bicycle, or forces commuters to drive when public transit is overall
cheaper. From this perspective transport systems are most efficient if they support and
encourage use of resource-efficient modes, so users choose the most efficient option for
each trip. This supports complete streets policies, including bike- and bus-lanes, and other
efforts to improve and encourage use of resource efficient modes.
 Accessibility-based transport planning recognizes that mobility is seldom an end in itself; the
ultimate goal of most transport is access [PDF] to services and activities such as education,
employment, shopping and recreation. Several factors can affect accessibility including
mobility (travel speed and affordability), the quality of transport options, transport network
connectivity, land use accessibility, and mobility substitutes such as telecommunications and
delivery services. From this perspective, transport systems are most efficient if they increase
road network connectivity, support efficient modes, and encourage more accessible land
use. This justifies integrated planning that increases transport network connectivity and
supports more accessible and multi-modal community development.
 Economic efficiency refers to the degree that consumer benefits provided by a good exceeds
the costs of producing that good (roads can be considered a good consumed by users). From
this perspective roads are most efficient if managed or priced to favor higher-value trips and
more resource-efficient modes over lower-value trips and less efficient modes. This can
justify priority treatment of freight and service vehicles (they tend to be high value), and
public transit and high occupant vehicles (they tend to be space efficient), or even better,
congestion pricing (road tolls that are higher during peak periods) that test users’ willingness
 to pay for scarce road space, which allows higher value trips and more efficient modes to
outbid lower-value trips and more space-intensive modes.
 Planning efficiency refers to the degree that planning activities are comprehensive and
integrated, so that individual, short-term decisions support strategic, long-term goals. This is
functional way to develop more accessible and economically efficient roadway systems.
From this perspective transport systems are most efficient if planned, designed and
managed to support strategic objectives. For example, efficient planning justifies special
truck lanes if that supports regional industries, bus lanes and pedestrian improvements that
support transit oriented development, streetscaping that supports local commercial district
redevelopment, and constraints on urban fringe roadway expansion if that support strategic
objectives to encourage more compact development.

DEELEGATION OF AUTHORITY

Delegation of power/authority is not an easy thing to do. It involves risk. Delegation may be a
temporary need in case of the absence or unavailability of the manager(s), or it could be the
need of an expanding business. Delegation is important for organizational growth as it helps
develop future managers. However, that's true only if authority is delegated to the right
individual(s) and in the right way.
Delegation involves assignment of tasks or transfer of authority to others in the team, giving
them an opportunity to shoulder additional responsibility and act on the manager's behalf.
This leads to better distribution of work and helps develop leadership. However, if authority
is not delegated to the right candidates, there is a risk of them taking undue advantage of the
privilege. Secondly, if the delegates lack the required knowledge/training, there are chances
of failure. Even a lack of support and motivation from the manager can affect the delegates'
performance. Here, we tell you more about the advantages and disadvantages of delegation of
authority.

ADVANTAGES

Builds Trust and Understanding -Delegation involves trusting in someone's abilities and
relying on them. This helps build a feeling of mutual understanding and trust. It gives
managers the opportunity to understand the employees' approach towards work.

Motivates Employees -Entrusting employees with additional responsibilities works as a great

motivator at the workplace. An employee who feels trusted; i.e. when he knows that the
higher management trusts him and relies on his capabilities, he works with greater efficiency.
Delegation of authority makes him feel important and more responsible.
Tests Employee Skills

With authority comes added responsibility, shouldering which, is not easy. It requires one to
work with greater focus and efficiency, and to take initiatives, be alert, think creatively,
analyze situations, and take decisions. Assessing how well the delegates are functioning can
help a manager rate their performance and take decisions about their promotions.

Provides Training -Delegation gives the employees an experience of the actual work, thus
providing them with practical training of the job. Delegation of authority involves sharing
and transfer of knowledge, thus increasing the delegates' general awareness and know-how of
the work. The skills and gained knowledge is tested while working, thus giving the
employees an opportunity to prove themselves.
Achieves Work Distribution -This can be considered as a major advantage of delegation, as it
reduces the burden of work with the manager, gives more people a chance to share
responsibility, and thus leads to a fair distribution of work. Delegating authority for a certain
project or task can help a manager concentrate on other more important tasks. Transfer of
smaller responsibilities can make it easy for a manager to shoulder greater or more important
responsibilities in the organization.

Gives Scope for Innovation -To implement new ideas in the organization, one needs to have
certain powers and the right amount of freedom. A rigid framework and lack of authority may
restrict an individual from thinking differently. If deserving individuals are given the right
authorities, they may be able to bring innovation. Delegation of authority may invite out-of-
the-box ideas and positive changes in the organization.

Builds Team Spirit -Delegating authority to a group of individuals increases their bonding
and mutual understanding. They get a chance to work together towards a common goal, thus
building the team spirit.

DISADVANTAGES

Misuse of Power -In delegating authority, there is a risk of the delegate misusing his power
for personal gains. He may have access to confidential information, which he may leak to the
competitors, or involve himself in other fraudulent activities. This possibility raises a
question mark on the employee's integrity, in which case, choosing such an individual as the
delegate would be a wrong decision.

Failure to Fulfill the Tasks -The manager's instructions may not be well taken care of by the
delegate, or he may not be very particular about following them. This may breed from
unwillingness or incapacity of the delegate.

Delay -The delegate may take long to understand the new responsibility. As he has authority,
delayed actions on his part may hamper his team's performance. A delay in planning or
taking decisions may not be affordable for the organization. Hence, it is not advisable to
delegate authority when there is a time crunch.

Impact on Quality of Work -There are chances of quality being affected simply because the
employee is new to the work. The experience and knowledge that the manager has, may be
lacking in the delegate. He might make mistakes. His way of working may be different. This
may impact the overall quality of work. Thus, it is important for a manager to understand that
his responsibility does not end after delegation.

Delegation of authority must be planned and executed with care. Only the deserving
candidate should be given additional responsibilities. The manager should give clear
instructions and provide the delegate with sufficient training. Even after delegating, frequent
monitoring may be required in the initial phase.

Managers are reluctant about delegating authority; sometimes due to fear of the delegate
outsmarting them, and at times due to a doubt about the delegate's dependability. But if
managers look at the bigger picture and if they can choose the right people for delegation of
authority, it can work in favor of the organization's growth and success.

 Classification of Filing System

The chief difficulty in office management is not filing but in finding. It is essential to
determine the nature of each and every document, sort them on a predetermined basis and
then filed. Then only a document, which is needed for reference in future can be traced out
and made available. The process of sorting out the document on some definite basis is called
classification of filing.

Classification can be defined as the process of selecting headings under which documents are
grouped or classified on the basis of certain common characteristics before filing takes place.

We all know that the principal object of classification of files is to ensure prompt availability
of information whenever it is needed. Classification aids the filing functions to attain these
principal objects.

The efficiency, particularly, the accessibility of a filing system depends largely upon the care
with which documents are classified. By classifying similar paper or papers belonging to a
particular head or subject, office staff are able to trace out the paper or documents required at
any time with minimum delay and trouble.

The office manager, while designing a plan for filing department should also evolve suitable
classification system. The decision regarding classification generally depends upon the
purpose for which it is required.

Direct and Indirect Classification of files

Classification systems may be either direct or indirect. Direct filing means that the documents
can be stored or retrieved without reference to an index. In an indirect system, index is
necessary.

Methods of Classification of files

The files can be arranged on any one or more of the following basis.

1. Alphabetical classification.
2. Numerical classification.
3. Geographical classification.
4. Subject-wise classification.
5. Chronological classification.

 Functions of central bank – Custodian of foreign exchange reserves

of the country and maintenance of exchange rate stability
The central bank acts as a custodian of the country’s gold and foreign exchange reserves like
the U S Dollars, Japanese Yen, British Pound etc, obtained by the government and in the
international trade.

A country maintains foreign exchange reserves in the form of gold and special drawing rights
[SDR’s of IMF] and foreign currency.

The central bank performs this function in order to

a] To maintain stability in the rate of exchange

Foreign exchange reserves help to determine and maintain thr rate of exchange

The foreign exchange reserves indicate a sound balance of payments position. A good
amount of foreign exchange reserves helps to maintain exchange rate stability.

b] To maintain international liquidity

It helps to maintain the international liquidity of the country [ie meeting any foreign
obligation such as payment of the principal amount and interest of foreign loans in
appropriate currencies].

c] To correct adverseness in the balance of payments.

The central bank exercises effective control over foreign exchange to meet the deficit in the
balance of payments and to maintain the international liquidity of the country.

d] To manage exchange control international operations

It also manages exchange control operations by supplying foreign currencies to importers,

businessmen and students going abroad. In India,

e] The central bank acts as the agent of the international institutions like the IMF, World
Bank etc.

In India the RBI has the responsibility of maintaining the exchange value of the rupee.

Since 1991, RBI has been taking several steps from time to time to establish the exchange
rate of the rupee especially in terms of dollars.

FIXED CAPITAL WORKING CAPITAL

Fixed capital may be defined as capital Working capital may be defined as capital
invested in long-term assets. invested in current assets
Requirement
Fixed capital is required for establishment of Working capital is required to utilize fixed
business. assets of the company.
Sources of Funds
 FIXED CAPITAL WORKING CAPITAL
The industrial units mobilize fixed capital The industrial units mobilize working capital
from various sources like shares, debentures, from the commercial bank loans, profits
banks etc. which are to be repaid over long retained, etc. which are repayable before one
time period. year.
Conversion
The working capital investments have high
The fixed capital which is used for fixed assets
liquidity and can be easily convertible into
is not easily convertible into cash.
cash.
Nature
Fixed capital is a one-time investment to
Working capital is required constantly for day
purchase fixed assets for starting a business or
to day business activities of the organization.
for expanding a business.
Duration
Working capital is usually a short term
Fixed capital in long-term investment i.e it is
investment for running of businesses day to
invested at the for long periods of time.
day operations.
Returns
Working capital is generally focused on
Fixed capital aims at long-term return to the
meeting the daily requirements for
organization.
operational activities of the organization.
Amount Required
Working capital required is considerably less
Fixed capital constitute a very large amount of
in amount when compared to Fixed Capital of
investments done by the organization.
the organization.
Assets
Working capital invested in current assets is
Fixed capital invested in long-term fixed assets
studied under "Working Capital
is studied under "Capital Budgeting".
Management".

 Factors Influencing Working Capital Management

Nature of the Industry / Business

The management of working capital is completely different from industry to industry. A

simple comparison of the service industry and manufacturing industry can clarify the point.
In a service industry, there is no inventory and therefore, one big component of working
capital is already avoided. So, the nature of the industry is a factor in determining the
working capital requirement.

Seasonality of Industry and Production Policy

Businesses based on seasons like manufacturing of ACs whose demand peaks in summer and
dips in winter. The requirement of working capital will be more in summer compared to
winter if they are produced in the fashion of their demand. The policy of producing
throughout the year can smoothen the fluctuation of working capital requirement.
Competition

If the industry is competitive, quick response to customer needs is compulsory and therefore
a higher level of inventory is maintained. Liberal credit terms are also mandatory with good
service to survive in the market. So, higher the competition, higher would be the requirement
of working capital.

Production Cycle Time

The production cycle time refers to the time required for converting the raw materials into
finished goods. Higher, this time, higher would be the time of blocking funds in the working
capital.

Credit Policy

Liberal credit policy demands a higher level of working capital and tight credit policy reduces
it.

Growth and Expansion

Some industries are static and others are growing. Obviously, growing industry grows the
requirement of working capital also as compared to static industry.

Raw Material Short Supply

If the raw material supply is not smooth for any reason, companies tend to store more of raw
materials than needed and that increased requirement of working capital.

Net Cash Profit

Profit or retained earnings are one of the sources of working capital for the business. It will
depend on net cash profits as to how much working capital financing is required from
external sources.

Taxes

Taxes are often paid in advance. This also blocks a part of working capital. Depending on the
tax environment of the industry, working capital needs are also affected.

Dividend Policy

Dividend policy determines the level of retained profits with the business and retained profits
are also used for working capital. This is how; dividend policy affects the need for working
capital.
Price Levels

The price levels of inventory and other expenses such as labour rates etc increase the working
capital requirement. If the company also is able to increase the price of their finished goods, it
reduces this impact.

 What is a Supermarket?

A supermarket is a large retailing shop where goods are displayed in such a way that
buyers select products for themselves. Buyers collect their product off the shelves invariably
in a trolley and get them billed by the counter clerk.

Features of a supermarket

A supermarket has the following characteristics:

1. It operates on self-service basis.

2. Prices are comparatively lower.

3. Credits are not extended to customers.

4. It offers large varieties of goods.

5. The profit margin is lower.

6. Customer service is minimum.

7. Sales are not compelled.

8. Neat display of goods is quite attractive.

Advantages of Supermarkets

Supermarkets suffer from the following limitations:

1. Supermarkets are located in busy centres

2. Buyers get quality goods at lower prices

3. Profit margin is lower

4. Customers get a wide assortment of goods

5. Shopping is convenient

6. There is no risk of bad debts.

Disadvantages of Supermarkets

1. As supermarkets are located at important centres, rent for its premises is higher.

2. Operating costs are higher.

3. Supermarket service may not be suitable to villages and small towns.

4. Huge capital is needed.

5. There is scope for mismanagement.

6. Due to low pay, employees leave the job in search of better prospects. High employee
turnover prevents the supermarkets from building personal relationship with customers.

7. All goods cannot be displayed. It is difficult to sell some goods in pieces.

8. People’s ignorance and lack of education act against the functioning of the supermarkets.