Business Environment

Assignment – 2

Q.1. Define the term ‘financial environment’. Explain the components of

financial system.
Ans. A financial environment may be a part of an economy with the main
players being firms, investors, and markets. Essentially, this sector can
represent an outsized a part of a well-developed economy as individuals
who retain personal property have the power to grow their capital. Firms
are any business that provide goods or services to consumers. Mostly
Investors are individuals or businesses that invest their capital into
businesses for financial returns. Markets represent the financial
environment that creates this all possible.
Sources of capital include money from outside parties like investors.
Usually investors are individuals having excess money. Excess capital can
make individual gain more money by investing the funds in to a firm or
schemes that return a financial return.
Components of Financial System are:
The financial environment is made up of three key components:
1. Financial managers
2. Financial markets and
3. Investors (including creditors)
Financial Managers:
Financial managers of an organization are responsible for making
decisions how to invest a company’s funds to expand its business and how
to obtain funds (financing). The financial actions or decision taken by
financial managers for their respective firms are referred to as financial
management or managerial finance. Financial managers have to make
financial decisions that will increase the firm’s value and therefore increase
the value of the firm’s stock price.
Financial Managers controls how to invest a company’s funds to capitalize
on potential opportunities or project. They also control how to obtain the
money needed to finance their respective company’s investments.
Financial Markets:
Financial markets are a mechanism that facilitate the flow of funds among
investors, firms, and government units and agencies. Every financial
market is served by financial institutions that act as intermediaries. The
equity market promotes the sale of equity by firms to investors or between
investors.
Some financial institutions act as intermediaries by executing transactions
between willing buyers and sellers of stock at agreed-upon prices. The debt
markets allow firms to get debt financing from institutional, individual
investors or to transfer ownership of debt securities between investors.
And some financial institutions act as intermediaries by arrange the
exchange of funds in return for debt securities at an agreed upon price. It is
quite common for financial institution to act as the institutional investor
while another serves as the intermediary by executing the transaction that
transfers funds to a firm that needs financing.
Financial markets provide the flow of funds from the suppliers of funds to
organisation or governments who need funds. Financial institutions give
services as intermediaries by channeling the savings of individuals to firms
that need funds
Investors:
Investors can be an individuals or financial institutions that finance funds to
firms, government agencies, or individuals who need funds. Individual
investors usually provide funds to firms by buying their securities (stocks
and debt securities). The financial institutions that finance funds are known
to as institutional investors.
These institutions mainly focus on providing loans, whereas others mostly
purchase securities that are issued by firms.
Q.2. What is free market economy? Explain the strengths and weaknesses
of the market system.
Ans:
A market economy is where most resources are owned and controlled by
individuals and are allocated through voluntary market transactions control
by the interaction of supply and demand.
Resources are exchange by people, such as money, for other resources,
like goods or services, on a one’s free will in the market. The price value of
the resources exchanged is based upon how inadequate each resource is
and how many people want the resource. If the supply of a resource is
abundant, but the demand is high, the price will tend to be high. If the
resource demand is low and the supply is high, then the price will tend to
be low.
Growth and development of economy in a market economy is determined
by the relative risks and rewards/profit that particular economic activity
presents to individuals. If risks are too high and the profit are too low, then
certain activities probably will not be pursued.

There is a limited involvement of government in regulating market

transactions in a market economy to quiet much ensuring that the rules of
the market are enforced and applied fairly to all participants. Moreover,
involvement of government in planning, directing economic development
and growth is very limited. Practically, there is no such term as a pure
market economy because that would mean there would be no government
regulations and taxes on economic activities at all.

Advantages of a Market System

A market economy has vast advantages:
Efficiency increases due to competition because businesses that have low
costs are more competitive and make more profit or money.
Chance for wealth increases due to innovation, it provides a competitive
edge and increases the chance for wealth.
As businesses try to differentiate themselves in the market a large variety
of goods and services are available.
As we need money to live and need to engage in economic activity
(through employment or self-employment) to make money economic
activity is encouraged
Freedom of choice is possible to an individual to the extent that the market
gives you options for work, developing a business, and purchasing goods
and services as long as you can afford them.

Disadvantages of a Market System

Market economies are also not without disadvantages:
Inequality in wealth and versatility exists in market economies because
wealth tends to generate wealth. In other words, we can say it's easier for
wealthy individuals to become wealthier than it is for the poor to become
wealthy.
No government regulations result environmental damage because it will
become more expensive to produce in an environmentally regulated
manner, which reduces profits.
There will be no social safety net, programs like an unemployment
insurance, Social Security, and Medicare, because these programs are
supported by government levied taxation.
There will be poor working conditions due to least government regulations
because health and safety cost money, thus reducing their profits.
Q.3. What is meant by intellectual property rights? How is intellectual
property protected in India?
Ans: Intellectual Property Right refers to all the creations of the human
mind such as your ideas, knowledge, invention, innovations, creativity or
research, etc. The rights relating to intellectual property are known as
‘Intellectual Property Right” (IPR).
In current scenario of expanding multilateral trade and commerce, this
particular intellectual property rights becomes very important. These are
human mind creations they are not having physical presence in nature. You
cannot touch and feel them but they're someone’s property and it is to be to
be protected. It's unique and needs to be protected. Copying of all these
human mind creation is easy this should not be allowed.
As per IPR they shouldn’t be copied or allowed to be copied easily by
someone or replicated.
The intellectual property rights cover too many areas and the two main
areas are:
1. Indian Copyright Act.:
In Indian the Copyright Act of 1957 was amended by the Copyright
Amendment Act 2012 that governs the subject of copyright law in India.
The Act came to power from 21 January 1958. The copyright law in
India exists since its colonial era under the British Empire.

The rights of the authors or creators of literary and artistic works such as
books and other writings, musical component compositions, Paintings,
sculpture, computer programs and films etc. are protected under the
Indian Copyright Act. Any kind of creative work right from writing book
to music all these are someone’s creation and it is protected under
Indian Copyright Act.

2. Industrial Property Right:

Distinctive signs, symbol or name used in the goods and services of one
undertaking are protected under these right. Any Innovations, original
designs and the creation of technology, industrial designs and create
secrets also cover in this act. Industrial designs or industrial distinctive
product, marks or any picture or anything such that will distinguish the
 product of one particular organisation from the other, that is a protected
by Industrial Property Right.

This category also includes inventions which are protected by the

patent. So, anything that is protected by patents is also comes under the
purview of your Industrial Property Rights. We can say that industrial
property rights, such as your distinctive signs, in particular trademark,
which will distinguish the goods and services of one company from the
other that comes under this act.
The government of India has enacted several laws for the regulation of
industries in the country, and these enactments play a very important role
in the country's overall progress and economic development.
Because of these acts the company will function in a particular way as well
as protection is guaranteed for the company as well as for public welfare.
So, everybody needs to abide to this and then progressed so that overall
progress and economic development happens in the country.